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<SEC-DOCUMENT>0001003297-03-000373.txt : 20030923
<SEC-HEADER>0001003297-03-000373.hdr.sgml : 20030923
<ACCEPTANCE-DATETIME>20030923073325
ACCESSION NUMBER:		0001003297-03-000373
CONFORMED SUBMISSION TYPE:	10KSB
PUBLIC DOCUMENT COUNT:		8
CONFORMED PERIOD OF REPORT:	20030630
FILED AS OF DATE:		20030923

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PRO DEX INC
		CENTRAL INDEX KEY:			0000788920
		STANDARD INDUSTRIAL CLASSIFICATION:	WHOLESALE-MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES [5047]
		IRS NUMBER:				841261240
		STATE OF INCORPORATION:			CO
		FISCAL YEAR END:			0630

	FILING VALUES:
		FORM TYPE:		10KSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-14942
		FILM NUMBER:		03905106

	BUSINESS ADDRESS:	
		STREET 1:		650 S. TAYKOR AVENUE
		STREET 2:		SUITE 20-A
		CITY:			LOUISVILLE
		STATE:			CO
		ZIP:			80027
		BUSINESS PHONE:		3034438165

	MAIL ADDRESS:	
		STREET 1:		1401 WALNUT STREET
		STREET 2:		SUITE 540
		CITY:			BOULDER
		STATE:			CO
		ZIP:			80302
</SEC-HEADER>
<DOCUMENT>
<TYPE>10KSB
<SEQUENCE>1
<FILENAME>pdex10k1.htm
<TEXT>
<html>

<head>


<title>Pro-Dex 10KSB</title>



</head>

<body lang=EN-US link=blue vlink=purple style='text-justify-trim:punctuation'>

&nbsp;<div align="left">
  <table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse' width="750">
 <tr>
  <td width=720 valign=top style='width:7.5in;padding:0in 0in 0in 0in'>
  <p align="center">
  <b>UNITED STATES <br>
  SECURITIES AND EXCHANGE COMMISSION</b></p>
  <p align=center style='text-align:center'><b>Washington, D.C. 20549</b></p>

  <p><b>&nbsp;&nbsp;</b></p>
  <p align=center style='text-align:center'><b><font size="5">FORM
  10-KSB</font></b></p>
  <p style='text-autospace:none'><b>&nbsp;&nbsp;[X]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  Annual Report Pursuant to Section 13
  or 15(d) of the Securities Exchange Act of 1934.</b></p>
  <p style='text-autospace:none' align="center"><b>&nbsp;For
  the fiscal year ended  June 30, 2003</b></p>
  <p align=center style='text-align:center'><b>&nbsp;OR</b></p>
  <p style='text-autospace:none'><b>&nbsp; [&nbsp;
  ]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Transition Report Pursuant to Section 13 or
  15(d) of the Securities Exchange Act of 1934.&nbsp;<br>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; For the transition period from&nbsp; <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>to&nbsp;
  <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; .</u></b></p>
  </td>
 </tr>
</table>

</div>

<p style='text-autospace:none'><b>&nbsp;</b></p>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=721
 style='width:541.0pt;border-collapse:collapse'>
 <tr>
  <td width=720 colspan=2 valign=top style='width:7.5in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>Commission
  File Number&nbsp;&nbsp;&nbsp; 0-14942 </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=720 colspan=2 valign=top style='width:7.5in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=720 colspan=2 valign=top style='width:7.5in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>
  <font size="5">PRO-DEX, INC.&nbsp;&nbsp;&nbsp; </font> </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=720 colspan=2 valign=top style='width:7.5in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>(Name
  of small business issuer in its charter)&nbsp;&nbsp;&nbsp;&nbsp; </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp; </b></p>
  </td>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp;&nbsp;&nbsp; </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b><u>Colorado </u></b></p>
  </td>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b><u>84-1261240
  </u></b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>(State
  or Other Jurisdiction of</b></p>
  </td>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>(IRS
  Employer Identification No.) </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>Incorporation
  or Organization)</b></p>
  </td>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp; </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp; </b></p>
  </td>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp;&nbsp;&nbsp; </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=720 colspan=2 valign=top style='width:7.5in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b><u>151
    E. Columbine Avenue,  Santa Ana,  California 92707</u></b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=720 colspan=2 valign=top style='width:7.5in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>(Address
  of Principal Executive Offices)&nbsp;&nbsp;&nbsp;&nbsp; </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp; </b></p>
  </td>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp; &nbsp; </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=720 colspan=2 valign=top style='width:7.5in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>Issuer's
  telephone number: (<u>714) 241-4411 </u></b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=720 colspan=2 valign=top style='width:7.5in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  <p align=center style='text-align:center;text-autospace:none'><b>Securities
  registered under Section 12(b) of the Exchange Act: &nbsp;</b></p>
  <p align=center style='text-align:center;text-autospace:none'></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>



<div align="center">
  <center>
  <table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
   style='border-collapse:collapse; text-align:center'>
   <tr>
    <td width=167 valign=top style='width:125.4pt;padding:0in 0in 0in 0in'>
    <p style='text-autospace:none'><b><font size="2">&nbsp;</font></b></p>
    </td>
    <td width=185 valign=top style='width:138.6pt;padding:0in 0in 0in 0in'>
    <p align=center style='text-align:center;text-autospace:
    none'><b><font size="2">Name of each exchange </font> </b></p>
    </td>
    <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
    <p align=center style='text-align:center;text-autospace:
    none'><b>&nbsp;</b></p>
    </td>
   </tr>
   <tr>
    <td width=167 valign=top style='width:125.4pt;padding:0in 0in 0in 0in'>
    <p align=center style='text-align:center;text-autospace:
    none'><b><u><font size="2">Title of each class </font> </u></b></p>
    </td>
    <td width=185 valign=top style='width:138.6pt;padding:0in 0in 0in 0in'>
    <p align=center style='text-align:center;text-autospace:
    none'><b><u><font size="2">on which registered </font> </u></b></p>
    </td>
    <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
    <p align=center style='text-align:center;text-autospace:
    none'><b>&nbsp;</b></p>
    </td>
   </tr>
   <tr>
    <td width=167 valign=top style='width:125.4pt;padding:0in 0in 0in 0in'>
    <p align=center style='text-align:center;text-autospace:
    none'><b><font size="2">None </font> </b></p>
    </td>
    <td width=185 valign=top style='width:138.6pt;padding:0in 0in 0in 0in'>
    <p align=center style='text-align:center;text-autospace:
    none'><b><font size="2">None </font> </b></p>
    </td>
    <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
    <p align=center style='text-align:center;text-autospace:
    none'><b>&nbsp;</b></p>
    </td>
   </tr>
  </table>
  </center>
</div>



<p align=center style='text-align:center;text-autospace:none'><b>Securities registered under Section 12(g) of the
Exchange Act: </b></p>



<p align=center style='text-align:center;text-autospace:none'><b>Common stock, no par value
<br>
</b>(Title of class) </p>



<p align=center style='text-align:center;text-autospace:none'>&nbsp;</p>



<p align=center style='text-align:center;text-autospace:none'>&nbsp;</p>



<p align=center style='text-align:center;text-autospace:none'>&nbsp;</p>



<p align=center style='text-align:center;text-autospace:none'>1</p>

<hr color="#000080"><P Style="page-break-after:always"></p>



<p align=center style='text-align:center;text-autospace:none'>&nbsp;</p>







<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Check whether the issuer (1) has filed all reports required by Section 13
or 15(d) of the Exchange Act during the past 12 months, and (2) has been
subject to such filing requirements for the past 90 days. </p>

<p align=center style='text-align:center;text-autospace:none'>Yes
[X]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No&nbsp; [&nbsp; ]</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, 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 amendment to this Form 10-KSB. [X]</p>



<p style='text-align:justify;text-autospace:none'>&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; Issuer's revenues for its
most recent fiscal year were $11,990,000. </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The aggregate market value of the voting stock held by non-affiliates
computed by reference to the closing price as of September 17, 2003 was $10,997,000. For the purpose of this calculation, shares owned by officers, directors
and 10% stockholders known to the registrant have been deemed to be owned by
affiliates. This determination of affiliate status is not a determination for
other purposes. </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock outstanding as of the latest practicable date:&nbsp; 8,776,600 shares of Common Stock, no par value, as
of September 17, 2003. </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>DOCUMENTS INCORPORATED BY REFERENCE: Part III incorporates by reference
certain information from the registrant's definitive proxy statement (the
&quot;Proxy Statement&quot;) for the 2003 Annual Meeting of Shareholders.&nbsp;
Certain exhibits are set forth in the Exhibit Index. The Exhibit Index begins
on sequentially numbered page 40. </p>



<p style='text-autospace:none'>Transitional Small Business
Disclosure Format:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Yes [&nbsp; ] No [X]</p>



<p style='text-align:justify;text-autospace:none'><b>Cautionary
statement pursuant to safe harbor provisions of the Private Securities
Litigation reform act of 1995. </b></p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>When used in this report on Form 10-KSB, the words &quot;expects,&quot;
&quot;anticipates,&quot; &quot;estimates,&quot; &quot;believes,&quot;
&quot;hopes,&quot; &quot;intends,&quot; &quot;forecasts&quot; and similar
expressions are intended to identify &quot;forward-looking statements.&quot;
These statements which are not historical or current facts are made pursuant to
the safe harbor provisions of Section 27a of the Securities Act of 1933, as
amended and Section 21e of the Securities Exchange Act of 1934, as amended, and
the Company intends that such forward-looking statements be subject to those
safe harbor provisions for such statements. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements,
which speak only as of the date of this report. While forward-looking
statements represent management's best judgment as to what may occur in the
future, they are subject to risks, uncertainties and important factors beyond
the control of the Company that could cause actual results and events to differ
materially from historical results of operations and events as well as those
presently anticipated or projected. These factors include adverse economic
conditions, entry of new and stronger competitors, capital availability, unexpected
costs, failure to capitalize upon access to new customers, and marketplace
delisting. Other risks and uncertainties which may affect forward-looking
statements about the Company's business and prospects include, but are not
limited to, the ramifications of the continued industry consolidation of dental
dealers and distributors, managed health care, increasingly limited acquisition
opportunities, the Company's ability to effectively integrate operations of
acquired companies, dealer acceptance and support of new products, maintaining
favorable supplier relationships, the inability to engage qualified human
resources as needed, the possibility of marketplace delisting, and general
economic conditions. The Company disclaims any obligations subsequently to revise
any forward-looking statements to reflect events or circumstances after the
date of such statement or to reflect the occurrence of anticipated or
unanticipated events.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>



<p style='text-align:center;text-autospace:
none'>2</p>

<hr color="#000080"><br clear=all
style='page-break-before:always'>


<p align=center style='text-align:center'><b>PART I</b></p>

<p><b>Item 1. &nbsp;&nbsp;&nbsp;&nbsp; Business</b></p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Except for the historical information contained herein, the matters
discussed in this Annual Report on Form 10-KSB, including discussions of the
Company's product development plans, business strategies and market factors
influencing the Company's results, are forward-looking statements that involve
certain risks and uncertainties. Actual results may differ from those
anticipated by the Company as a result of various factors, both foreseen and
unforeseen, including, but not limited to, the Company's ability to continue to
develop new products and increase systems sales in markets characterized by
rapid technological evolution, consolidation within the Company's target
marketplace and among the Company's competitors, and competition from larger,
better capitalized competitors. Many other economic, competitive, governmental
and technological factors could impact the Company's ability to achieve its
goals.&nbsp; Interested persons are urged to review the risks described herein, as
well as in the Company's other public disclosures and filings with the
Securities and Exchange Commission.</p>

<p><b>Company Overview</b></p>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Pro-Dex, Inc. (&quot;Pro-Dex&quot; or the &quot;Company&quot;) is a Colorado
corporation, organized in 1978, currently doing business through two wholly
owned operating subsidiaries, Micro Motors, Inc. (&quot;Micro Motors&quot;) and
Oregon Micro Systems, Inc. (&quot;OMS&quot;).&nbsp; Micro Motors, headquartered in
Santa Ana, California, designs, develops and manufactures electric, air, and
battery powered rotary drive systems for the medical device industry, electric
and air devices for the dental industry, and miniature pneumatic motors for
industrial applications.&nbsp; OMS is headquartered in Beaverton, Oregon, where it
designs and manufactures embedded multi-axis motion controllers used to
regulate the motion of servo and stepper motors, predominantly for the
semiconductor and medical analysis equipment industries. </p>



<p style='text-align:justify;text-indent:.5in'>Over the past
three years, the Company has evolved significantly in response to changing
market conditions.&nbsp; This evolution includes the strategic refocusing of the
Company's subsidiaries, the development of new products, technologies and
customer relationships, the re-casting of operational infrastructure, the
divestiture of segments of the Company's operations, and the consolidation of
the Company's executive offices and staff.&nbsp; In addition, the Company is
aggressively pursuing opportunities to lever the strategic synergies of the
subsidiaries, increasing the interaction between the subsidiaries and better
aligning the overall strategic direction of the Company.</p>



<p><b>Pro-Dex</b></p>



<p style='text-align:justify;text-indent:.5in'>Pro-Dex has
continued to evolve since the divestiture of the Company's Biotrol and
Challenge subsidiaries in June of 2001.&nbsp; The proceeds from that transaction
were used to retire all of the Company's then existing bank debt, leaving the
Company virtually debt free as of June 30, 2001, and less than half its former
size.&nbsp; In response to the reduction in the Company's operations, the Company's
executive operations in Colorado were consolidated into the Micro Motors
facilities in Santa Ana, California.&nbsp; This effort to reduce corporate overhead saved
the Company approximately $980,000 in fiscal year 2003 as compared to fiscal
year 2002.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The Company's principal headquarters are located at 151 E. Columbine
  Avenue, Santa Ana, California 92707 and its phone number is 714-241-4411.&nbsp;
The Company's internet address is <font color="#0000FF">www.pro-dex.com</font>.&nbsp;
The Company's annual reports on Form 10-KSB, quarterly reports on Form 10-QSB,
current reports on Form 8-K, amendments to those reports and other Securities
and Exchange Commission (&quot;SEC&quot;) filings are available free of charge through
our website as soon as reasonably practicable after such reports are
electronically filed with, or furnished to, the SEC.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>



<p style='text-align:center;text-autospace:
none'>3</p>



<b><hr color="#000080"><br clear=all
style='page-break-before:always'>
</b>

<p><b>Description of Business of the Subsidiaries</b></p>

<p><b>Micro Motors</b></p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Micro Motors, headquartered in Santa Ana, California, designs, develops
and manufactures electric, air, and battery powered rotary drive systems for
the medical device industry, electric and air devices for the dental industry,
and miniature pneumatic motors for industrial applications.&nbsp; Micro Motors also
distributes its own line of pneumatic and electric dental hand pieces sold
under the trademarks Dynatorq&trade;, Dynasurg&trade;, and Micro Handpiece&trade; through a
network of independent sales representatives across North America.&nbsp; In addition,
Micro Motors has developed and sells numerous private label rotary drive
systems for use in dental, cranial, spinal, arthroscopic and orthopedic
surgery. Micro Motors also designs and manufactures miniature pneumatic motors
for industrial applications in the automotive, aerospace, apparel and
entertainment industries.</p>



<p style='text-align:justify;text-indent:.5in'>Significant
aspects of the Micro Motors subsidiary have changed in the last three years.&nbsp;
Historically known as a precision manufacturer of dental hand pieces, Micro
Motors has shifted its focus to the development and exclusive supply of rotary
drive systems for strategic partners in the medical, dental and industrial
segments of the commercial marketplace.&nbsp; This new approach to the market has
proved to be effective in generating new revenue streams with gross margins
significantly higher than Micro Motor's historical business.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Company funded research and development supports the development of
rotary drive platforms.&nbsp; Micro Motors then seeks customer funded projects to
customize these platforms to specific customer requirements. Company funded
research and development projects generally are expected to convert to
customer-funded projects within six months,.&nbsp; </p>



<p align="justify">Company funded project costs are expensed as
incurred.&nbsp; In customer funded development projects, costs are capitalized and
recognized as a cost of goods sold as specific deliverables within the
development contracts are made, matching the costs to the revenue and reducing
the performance and collection risk to the Company.&nbsp; The results of the
development work are intended to provide the Company with long-term exclusive
manufacturing agreements and provide the customer with retention of the
intellectual property developed.&nbsp; The identity of the customer is generally
protected by a non-disclosure agreement.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Internally, Micro Motors has consolidated its operations and reduced the
expenses related to those operations, while continuing to grow overall sales
and develop new products.&nbsp; Since 1999, such measures include reducing its
workforce by 30% and consolidating its manufacturing operations to a 20,000
square foot facility from a 38,000 square foot facility.&nbsp; At the same time,
Micro Motors has increased the size of its Engineering and Product Development
Group, further enabling it to respond to market demands for new products and
new technologies.</p>



<p style='text-align:justify;text-indent:.5in'>Micro Motors'
revenue is derived from three main market segments.&nbsp; Micro Motors dental
products are sold to original equipment manufacturers and dental product
distributors.&nbsp; An independent dealer network was established in 2003 to market
its own branded line of dental products in a more effective manner.&nbsp; Micro
Motors medical products sales represent the manufacture of proprietary designs
developed by Micro Motors under exclusive design and supply agreements.&nbsp; Micro
Motors pneumatic motors for industrial applications are marketed directly to
end-users and through industrial supply distributors.&nbsp; The increase in the
percent of sales of medical products and the decrease in the percentage of
sales of dental product sales is a direct result of the shift in the focus of
the Company's research and development efforts away from dental products and
toward the Company's capabilities in the medical product market.&nbsp;&nbsp; The
proportion of Micro Motors total sales to each market segment is noted in the
table below;</p>





<p style='text-align:justify;text-indent:.5in'>&nbsp;</p>





<p style='text-align:center;'>4</p>





<hr color="#000080"><br clear=all
style='page-break-before:always'>




<div align=center>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='margin-left:-14.75pt;border-collapse:collapse'>
 <tr>
  <td width=224 valign=top style='width:168.1pt;border:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b><u>Micro Motors Market
  Segment </u></b></p>
  </td>
  <td width=47 valign=top style='width:35.4pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><b><u>2003
  </u></b></p>
  </td>
  <td width=43 valign=top style='width:32.45pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><b><u>2002
  </u></b></p>
  </td>
 </tr>
 <tr>
  <td width=224 valign=top style='width:168.1pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Dental</p>
  </td>
  <td width=47 valign=top style='width:35.4pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>56%
  </p>
  </td>
  <td width=43 valign=top style='width:32.45pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>68%
  </p>
  </td>
 </tr>
 <tr>
  <td width=224 valign=top style='width:168.1pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Medical</p>
  </td>
  <td width=47 valign=top style='width:35.4pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>31%</p>
  </td>
  <td width=43 valign=top style='width:32.45pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>15%
  </p>
  </td>
 </tr>
 <tr>
  <td width=224 valign=top style='width:168.1pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Industrial</p>
  </td>
  <td width=47 valign=top style='width:35.4pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>8%
  </p>
  </td>
  <td width=43 valign=top style='width:32.45pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>11%
  </p>
  </td>
 </tr>
 <tr>
  <td width=224 valign=top style='width:168.1pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Other</p>
  </td>
  <td width=47 valign=top style='width:35.4pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>5%</p>
  </td>
  <td width=43 valign=top style='width:32.45pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>6%</p>
  </td>
 </tr>
</table>

</div>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Of Micro Motors sales in 2003, over 30% were shipments of products
developed in the last 12 months and 45% were shipments of products developed in
the last 24 months as a result of Research and Development contracts with new
or existing customers. </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>In 2003, 20 customers accounted for 85% of Micro Motors sales, up from 79%
in 2002.&nbsp; Micro Motors' three largest customers accounted for 34% of such sales
and no single customer accounted for over 15% of sales.&nbsp; Micro Motors' larger
customers include Smith and Nephew and Medtronics.&nbsp; Disclosure of other larger
customer names is prohibited by confidentiality agreements with such entities.&nbsp;
Sales to medical customers tend to be to relatively larger companies, as
compared to customers for dental products that are typically to smaller
companies.&nbsp; Micro Motors has no plans to discontinue the sales relationships,
and has no knowledge that these customers have any plans to discontinue their
relationships with Micro Motors, although the relationships may change over
time to reflect a different mix of engineering and manufacturing.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>All of the raw materials used by Micro Motors in the manufacture of its
products are purchased from various suppliers and are available from several
sources. Precipart Corporation and Hi-Tech Electronic Manufacturing Inc. are
two of its key suppliers. Micro Motors considers its relationships with its
various suppliers and manufacturers to be good.&nbsp; Micro Motors does not intend
to terminate any relationship at this time, nor does management have knowledge
that any supplier or manufacturer will terminate its relationship with Micro Motors.&nbsp;
Micro Motors has no exclusive arrangements with any of its suppliers or
manufacturers.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Micro Motors' commitment to quality manufacturing is demonstrated by its
many independently verified certifications for maintaining quality processes
and products.&nbsp; Micro Motors holds the following certifications: ISO 9001:2000,
ISO 13485 revised 1998, and Medical Device Directive 93\42\EEC Annex II
company.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>At the present time, Micro Motors is generally able to fill orders within
sixty (60) days.&nbsp; At June 30, 2003, Micro Motors had backorders of $267,000 and
future orders of $4.3 million compared with backorders of $173,000 and future
orders of approximately $2.1 million at June 30, 2002.&nbsp; Micro Motors expects to
fill all of its future orders during the current fiscal year.&nbsp; Micro Motors
does not typically experience seasonal fluctuations in its orders. </p>



<p><b>Oregon Micro Systems</b></p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>OMS is headquartered in Beaverton, Oregon, where it designs and
manufactures embedded multi-axis motion controllers used to regulate the motion
of servo and stepper motors, predominantly for the semiconductor and medical
analysis equipment industries.&nbsp; OMS' motion controllers are used in a wide
range of applications including semiconductor wafer handling equipment, medical
diagnostic equipment, photon accelerators and observatories. The OMS
controllers support the platforms for PCI, VME, ISA, and cPCI busses as well as
standalone requirements.&nbsp; Other products sold by OMS include motors, drivers,
cables, software and a variety of accessories to meet most embedded motion
control requirements.</p>



<p style='text-align:justify;text-indent:.5in'>During the past five
years, OMS has benefited and suffered from the rapidly changing environment of
the semiconductor industry.&nbsp; It is characterized by dramatic changes in demand
for products.&nbsp; While recording two of its best operational performances in
fiscal years 1999 and 2000 with revenues in each year exceeding $7 million, OMS
was impacted severely by the downturn in the semiconductor industry beginning
in November of 2000.&nbsp; Comparatively, in the most recent fiscal years of 2002
and 2003, revenues for OMS have been $2.2 and $2.7 million, respectively.&nbsp; In
2003, OMS began to improve revenues both in the semiconductor and
non-semiconductor business as those markets have begun to regain strength. </p>



<p style='text-align:justify;text-indent:.5in'>&nbsp;</p>



<p style='text-align:justify;text-indent:.5in'>&nbsp;</p>



<p style='text-align:center;'>5</p>



<hr color="#000080"><P Style="page-break-after:always"></p>




<p style='text-align:justify;text-indent:.5in'>&nbsp;</p>



<p style='text-align:justify;text-indent:.5in'>In response to
the rapidly changing market conditions, OMS also significantly reduced its
number of employees, made deep cuts in operational expenses and focused on
maximizing the sales of existing product to existing customers.&nbsp; At the same
time, OMS accelerated the development of a new generation of motion control
technology, based on the PowerPC processor.&nbsp; This new servo/stepper controller
became available in fiscal year 2003 and will be expanded to create a full line
of new products.&nbsp; OMS continues to develop new customer relationships and sales
with companies outside the semiconductor industry.</p>



<p style='text-align:justify;text-indent:.5in'>OMS' revenue is
derived from predominately four market segments, including semiconductor
equipment, medical diagnostic equipment and instrumentation, distribution and
government.&nbsp; The semiconductor equipment markets have accounted for up to 60%
of OMS' sales in recent years, however due to the technology down cycle, OMS
has implemented sales strategies to penetrate other markets.&nbsp; The increase in
the percentage of semiconductor market sales in 2003 is due to resurgence in
demand in the semiconductor industry.&nbsp; The proportion of total sales to each
market segment is noted in the table below:</p>



<div align=center>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse'>
 <tr>
  <td width=190 valign=top style='width:142.2pt;border:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b><u>OMS Market Segment </u></b></p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><b><u>2003
  </u></b></p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><b><u>2002
  </u></b></p>
  </td>
  <td width=2 valign=top style='width:1.25pt;border:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=190 valign=top style='width:142.2pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Semiconductor </p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>38%
  </p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>29%
  </p>
  </td>
  <td width=2 valign=top style='width:1.25pt;border:none;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=190 valign=top style='width:142.2pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Medical</p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>21%</p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>30%
  </p>
  </td>
  <td width=2 valign=top style='width:1.25pt;border:none;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=190 valign=top style='width:142.2pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Distribution</p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>17%
  </p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>24%
  </p>
  </td>
  <td width=2 valign=top style='width:1.25pt;border:none;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=190 valign=top style='width:142.2pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Government</p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>15%
  </p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>6%
  </p>
  </td>
  <td width=2 valign=top style='width:1.25pt;border:none;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=190 valign=top style='width:142.2pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Other</p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>9%</p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>11%</p>
  </td>
  <td width=2 valign=top style='width:1.25pt;border:none;padding:0in 0in 0in 0in'>

  </td>
 </tr>
</table>

</div>



<p style='text-align:justify;text-indent:.5in'>OMS distributes
its product directly to original equipment manufacturers (OEM's) and through a
network of high technology distributors within the United States.&nbsp;
Internationally, OMS has agreements with foreign distributors of electronic and
motion control products.</p>



<p style='text-align:justify;text-indent:.5in'>OMS' largest
customer accounts for 13% of its sales, with the second through fourth-largest
customers accounting for the next 27% of sales. These relationships are well
established. OMS has no plans to discontinue the relationships, and has no
knowledge that these customers have any plans to discontinue their
relationships with OMS. </p>



<p style='text-align:justify;text-indent:.5in'>OMS purchases
raw printed circuit boards and electronic components used to manufacture its
products. OMS is a certified ISO9001:2000 company and uses only qualified
assemblers, component manufactures and distributors in the manufacture of its
products.&nbsp; Two of OMS' key suppliers are Insight Electronics, LLC and Avenet
Electronics Marketing.&nbsp; These relationships are well established, and OMS has
no current plans to discontinue the relationships, and has no knowledge that
these suppliers have any plans to discontinue their relationship with OMS.&nbsp; OMS
holds no franchises and has no exclusive arrangements with any of its suppliers
and manufacturers. </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>At the present time, OMS is generally able to fill orders within
forty-five (45) days.&nbsp; At June 30, 2003, OMS had no backorders and had future
orders of $914,000 compared with no backorders and future orders of $540,000 at
 June 30, 2002.&nbsp; OMS does not typically experience seasonal fluctuations in its
orders, although there are significant fluctuations in the market demand of
products in the industries it serves. </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>



<p style='text-align:center;text-autospace:
none'>6</p>



<b><hr color="#000080"><br clear=all
style='page-break-before:always'>
</b>

<p style='text-align:justify;line-height:normal'><b>Competition</b>&nbsp;
</p>

<p style='text-align:justify;line-height:normal'><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </i>The
markets for healthcare and semiconductor industries are intensely competitive,
and the Company faces significant competition from a number of different
sources.&nbsp; Several of the Company's competitors have significantly greater name
recognition as well as substantially greater financial, technical, product
development and marketing resources than the Company.</p>

<p style='margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Company competes in all of its markets with other major healthcare and
semiconductor related companies. Competitive pressures and other factors, such
as new product or new technology introductions by the Company or its
competitors, may result in price or market share erosion that could have a
material adverse effect on the Company's business, results of operations and
financial condition. Also, there can be no assurance that the Company's
products and services will achieve broad market acceptance or will successfully
compete with other products targeting the same customers.&nbsp; <b><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </i></b></p>

<p style='text-align:justify;text-autospace:none'><b>Research
and Development </b></p>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The Company maintains research and development programs in its two
subsidiaries. The Company considers these product development programs to be of
importance in both maintaining and improving its market position. The net
amounts spent on research and development activities in 2003 and 2002 were
approximately $1.46 million and $1.55 million, respectively. Micro Motors'
research and development effort involves the design and manufacture of products
that perform specific applications for its customers.&nbsp; During the year ended June 30, 2003, Micro Motors continued to successfully target its research and development
expenses to expanding its customer base in the medical device industry. Micro
Motors was also successful in increasing the amounts of its research and
development costs recovered by billing its customers for non-recurring engineering
expenses. The fees received for non-recurring engineering expenses do not
represent a significant portion of Micro Motors' revenue.&nbsp; OMS' research and
development investment was reduced, as the MAX product line was substantially
completed in 2003.&nbsp; The remaining investment was in general technical advances,
along with continued enhancements of current product lines.&nbsp; OMS makes no
specific billings for its research and development efforts.</p>

<p style='text-align:justify;text-autospace:none'><b>Employees </b></p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>At June 30, 2003, the Company had 85 full-time and 1 part-time employees
(excluding independent contractors) compared to 83 full-time and 3 part-time
employees at June 30, 2002.&nbsp; Micro Motors employed 71 persons, OMS employed 15
persons, and there were no employees assigned to corporate headquarters. </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>None of the Company's employees are a party to any collective bargaining
agreements with the Company. The Company considers its relations with its
employees to be good. </p>

<p style='text-align:justify;text-autospace:none'><b>Government
Regulations </b></p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The manufacture and distribution of dental and medical devices such as
the Micro Motors products are subject to a number of state and federal
regulatory bodies, including state dental boards and the Food and Drug
Administration (&quot;FDA&quot;). The statutes, regulations, administrative
orders, and advisories that affect the Company's businesses are complex and
subject to diverse, often conflicting, interpretations. While the management of
each of the Company's operating subsidiaries makes every effort to maintain
full compliance with all applicable laws and regulations, the Company is unable
to eliminate an ongoing risk that one or more of its activities may at some
point be determined to have been non-compliant. The penalties for
non-compliance could range from an administrative warning to termination of a
portion of the Company's business.&nbsp; Further, even if the Company is
subsequently determined to have fully complied with applicable law or
regulation, its costs to achieve such a determination and the intervening loss
of business could adversely affect or even terminate a portion of the Company's
business. Further, a change in such laws or regulations at any time may have an
adverse effect on the Company's operations. Notwithstanding the risks inherent
in the Company's business sectors, management believes that each of the Company's
subsidiaries is in compliance with applicable laws and regulations. </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>



<p style='text-align:center;text-autospace:
none'>7</p>



<hr color="#000080"><P Style="page-break-after:always"></p>




<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The FDA regulates Micro Motors dental and medical handpieces as Class 1
and Class 2 medical devices.&nbsp; The FDA has broad enforcement powers to recall
and prohibit the sale of products, which do not comply with federal
regulations, and to order the cessation of non-compliant processes. No claim
has been made to date by the FDA regarding any Micro Motors products or
processes. Nevertheless, as is common in the industry, certain of Micro Motors
products and processes have been the subject of routine governmental reviews
and investigations. While the Company's management is confident that Micro
Motors' products and processes fully comply with applicable laws and
regulations, the Company is unable to predict the outcome of any such
investigation or review, pending its completion. Management believes that Micro
Motors follows Good Manufacturing Practices (GMP). </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Management believes that OMS' business in the assembly and distribution
of multi-axis motion control circuit boards, including the processes and
materials, is conducted in a manner consistent with EPA regulations governing
disposition of industrial waste materials. Although the semiconductor and
computer chip industries are significantly impacted by EPA regulations
applicable to the processes and materials used in production of computer chips
and computer chip components, OMS' management has undertaken measures, where
possible, to reduce OMS' exposure to the risk of non-compliance. Most
significantly, OMS acquires pre-manufactured printed circuit boards as
platforms upon which to place OMS technology. While the Company's management is
confident that OMS products and processes fully comply with applicable laws and
regulations, the Company is unable to predict the outcome of any investigation
or review which may in the future be undertaken respecting OMS or its products
or processes. Management believes that OMS follows GMP. </p>

<p style='text-autospace:none'><b>Patents, Trademarks, and
Licensing Agreements </b></p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The Company holds patents relating to the multi-axis motion controllers
manufactured by OMS. In addition, Micro Motors holds patents relating to its
miniature pneumatic motor products. Patents held by the Company and Micro
Motors have varying expiration dates, beginning in 2005.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The Company conducted a limited review of the patents acquired in
connection with the OMS and Micro Motors acquisitions and believes that the use
of such patent is neither infringed upon by any third party, nor infringes on
any prior art of any third party. The Company is unable to assess the validity,
scope, or defensibility of its patents, and any challenge to or claim of
infringement relating to the Company's patents could materially and adversely
affect the Company's business and results of operations. </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The Company's Micro Motors subsidiary has certain trademarks relating to
its miniature pneumatic motor products, including Dynatorq&trade;, Dynasurg&trade;, and
Micro Handpiece&trade;. OMS has filed for federal trademark protection for OMS-EZ&trade;. </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Except as noted above, the Company has not entered into any licensing or
franchising agreements for revenue generating purposes.</p>



<p style='text-autospace:none'><b>Funds held in escrow, Net,
Business Divestitures and Discontinued Operations </b></p>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>On June 12, 2001, the Company sold substantially all of the assets of its
wholly owned subsidiaries, Biotrol International, Inc. and Challenge Products,
Inc. to Young Colorado, LLC (&quot;Young&quot;), for a purchase price of $9 million (the
&quot;Young Transaction&quot;). The assets sold comprised the Company's line of infection
control and preventive chemical products for the dental industry.&nbsp; The full
remaining escrow balance of $790,000, associated with such asset sale was
collected by October 2002, resulting in no additional gain or loss, and
completing the distribution of funds in escrow.&nbsp; </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>



<p style='text-align:center;text-autospace:
none'>8</p>



<hr color="#000080"><P Style="page-break-after:always"></p>


<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>During the year ended June 30, 2002, the Company received indemnification
notices from Young, to recover alleged losses and costs as they are incurred
for certain alleged breaches of representations and warranties contained in the
Young Transaction Asset Purchase Agreement related to compliance issues with
the Food, Drug, and Cosmetic Act (&quot;FDCA&quot;), Federal Insecticide, Fungicide and
Rodentcide Act (&quot;FIFRA&quot;), and other related laws.&nbsp; In February 2002, the
Company settled a complaint with the Environmental Protection Agency (&quot;EPA&quot;)
set forth in Young's indemnification notice for alleged violations of FIFRA and
FDCA.&nbsp; Pursuant to the settlement, the Company agreed to pay $150,000 to the
EPA, over a 15-month period, commencing March 2002.&nbsp; The full $150,000
settlement had been paid by April 30, 2003, leaving, in the opinion of
management, no additional liability under either Act.</p>

<p style='text-align:justify;line-height:normal'><b>RISK FACTORS</b></p>

<p style='text-align:justify;line-height:normal'><b>Competition</b>&nbsp;
</p>

<p style='text-align:justify;line-height:normal'><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </i>The
markets for healthcare and semiconductor industries are intensely competitive,
and the Company faces significant competition from a number of different
sources.&nbsp; Several of the Company's competitors have significantly greater name
recognition as well as substantially greater financial, technical, product
development and marketing resources than the Company.</p>

<p style='margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Company competes in all of its markets with other major healthcare and
semiconductor related companies. Competitive pressures and other factors, such
as new product or new technology introductions by the Company or its
competitors, may result in price or market share erosion that could have a
material adverse effect on the Company's business, results of operations and
financial condition. Also, there can be no assurance that the Company's
products and services will achieve broad market acceptance or will successfully
compete with other products.&nbsp; <b><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </i></b></p>

<p style='margin-bottom:6.0pt;text-align:justify'><b>Fluctuation
in Quarterly Operating Results</b>&nbsp; </p>

<p style='margin-bottom:6.0pt;text-align:justify'><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </i>The
Company's revenues have fluctuated in the past, and may fluctuate in the future
from quarter to quarter and period to period, as a result of a number of
factors including, without limitation: the size and timing of orders from
customers; the length of new product development cycles; market acceptance of
new technologies; changes in pricing policies or price reductions by the
Company or its competitors; the timing of new product announcements and product
introductions by the Company or its competitors; the financial stability of
major customers; the Company's success in expanding its sales and marketing
programs; deferrals of customer orders in anticipation of new products; changes
in Company strategy; personnel changes; and general market/economic factors. </p>

<p style='margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Because
a significant percentage of the Company's expenses are relatively fixed, a
variation in the timing of sales can cause significant variations in operating
results from quarter to quarter. As a result, the Company believes that interim
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
Further, the Company's historical operating results are not necessarily
indicative of future performance for any particular period.&nbsp; </p>

<p style='margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Due
to all of the foregoing factors, it is possible that in some future quarter(s)
the Company's operating results may be below the expectations of public market
analysts and investors. In such event, the price of the Company's Common Stock
would likely be materially adversely affected.</p>

<p style='margin-bottom:6.0pt;text-align:justify'>&nbsp;</p>

<p style='margin-bottom:6.0pt;text-align:center'>9</p>

<hr color="#000080"><P Style="page-break-after:always"></p>


<p style='margin-bottom:6.0pt;text-align:justify'>&nbsp;</p>

<p style='margin-bottom:6.0pt;text-align:justify'><b>Dependence
on Principal Product and New Product Development</b></p>

<p style='margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Company currently derives a substantial part of its net revenues from sales of
its core healthcare and motion control products and services. The Company
believes that a primary factor in the market acceptance of its product and
services is the value that is created for its customers by those products and
services. The Company's future financial performance will depend in large part
on the Company's ability to continue to meet the increasingly sophisticated
needs of its customers through the timely development, successful introduction
and implementation of new and enhanced products and services. The Company has
historically expended a significant percentage of its net revenues on product
development and believes that significant continued product development efforts
will be required to sustain the Company's growth. Continued investment in the
Company's sales and marketing efforts will also be required to support future
growth. </p>

<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; There can be no
assurance that the Company will be successful in its product development
efforts, that the market will continue to accept the Company's existing
products, or that new products or product enhancements will be developed and
implemented in a timely manner, meet the requirements of its customers, or
achieve market acceptance. If new products or product enhancements do not
achieve market acceptance, the Company's business, results of operations and
financial condition could be materially adversely affected. </p>



<p style='margin-bottom:6.0pt;text-align:justify'><b>Technological
Change</b></p>

<p style='margin-bottom:6.0pt;text-align:justify'><b><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </i></b>The
healthcare and semiconductor markets are generally characterized by rapid
technological change, changing customer needs, frequent new product
introductions, and evolving industry standards. The introduction of products
incorporating new technologies and the emergence of new industry standards
could render the Company's existing products obsolete and unmarketable. There
can be no assurance that the Company will be successful in developing and
marketing new products that respond to technological changes or evolving
industry standards.</p>

<p style='margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; New
product development depends upon significant research and development
expenditures that depend ultimately upon sales growth. Any material weakness in
revenues or research funding could impair the Company's ability to respond to
technological advances in the marketplace and to remain competitive. If the
Company is unable, for technological or other reasons, to develop and introduce
new products in a timely manner in response to changing market conditions or
customer requirements, the Company's business, results of operations and financial
condition may be materially adversely affected.</p>

<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In response to
increasing market demand, the Company is currently developing new products.
There can be no assurance that the Company will successfully develop these new
products or that these products will operate successfully, or that any such
development, even if successful, will be completed concurrently with or prior
to introduction of competing products. Any such failure or delay could
adversely affect the Company's competitive position or could make the Company's
current products obsolete.</p>



<p style='margin-bottom:6.0pt;text-align:justify'><b>Litigation</b></p>

<p style='margin-bottom:6.0pt;text-align:justify'><i>&nbsp;</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Company continually faces the possibility of litigation as either a plaintiff
or a defendant.&nbsp; It is not reasonably possible to estimate the awards or
damages, or the range of awards or damages, if any, that the Company might
incur in connection with such litigation. The uncertainty associated with
potential litigation may have an adverse impact on the Company's business. In
particular, such litigation could impair the Company's relationships with
existing customers and its ability to obtain new customers. Defending such
litigation may result in a diversion of management's time and attention away
from business operations, which could have a material adverse effect on the
Company's business, results of operations and financial condition. Such
litigation may also have the effect of discouraging potential acquirers from
bidding for the Company or reducing the consideration such acquirers would
otherwise be willing to pay in connection with an acquisition. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;</p>

<p style='margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; There
can be no assurance that such litigation will not result in liability in excess
of its insurance coverage, that the Company's insurance will cover such claims
or that appropriate insurance will continue to be available to the Company in the
future at commercially reasonable rates.</p>

<p style='margin-bottom:6.0pt;text-align:justify'><b>&nbsp;</b></p>

<p style='margin-bottom:6.0pt;text-align:center'>&nbsp;10</p>

<b><hr color="#000080"><br clear=all
style='page-break-before:always'>
</b>

<p style='margin-bottom:6.0pt;text-align:justify'><b>Proprietary
Technology </b></p>

<p style='margin-bottom:6.0pt;text-align:justify'><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </i>The
Company is dependent on the maintenance and protection of its intellectual
property and relies on exclusive development and supply agreements,
confidentiality procedures, and employee nondisclosure agreements to protect
its intellectual property. </p>

<p style='text-align:justify;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; There
can be no assurance that the legal protections and precautions taken by the
Company will be adequate to prevent misappropriation of the Company's
technology or that competitors will not independently develop technologies
equivalent or superior to the Company's. Further, the laws of some foreign
countries do not protect the Company's proprietary rights to as great an extent
as do the laws of the United States and are often not enforced as vigorously as
those in the United States.</p>

<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Company does not
believe that its operations or products infringe on the intellectual property
rights of others. However, there can be no assurance that others will not
assert infringement or trade secret claims against the Company with respect to
its current or future products or that any such assertion will not require the
Company to enter into a license agreement or royalty arrangement with the party
asserting the claim. </p>

<p style='margin-bottom:6.0pt;text-align:justify'><b>Ability to
Manage Growth</b><i> </i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>

<p style='margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Company has in the past experienced periods of growth that have placed, and may
continue to place, a significant strain on the Company's resources. The Company
also anticipates expanding its overall development, marketing, sales,
management and training capacity as market demand requires.&nbsp; In the event the
Company is unable to identify, hire, train and retain qualified individuals in
such capacities within a reasonable timeframe, such failure could have a
material adverse effect on the Company. </p>

<p style='margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In
addition, the Company's ability to manage future increases, if any, in the
scope of its operations or personnel will depend on significant expansion of
its research and development, marketing and sales, management, and
administrative and financial capabilities. The failure of the Company's
management to effectively manage expansion in its business could have a
material adverse effect on the Company's business, results of operations and
financial condition.</p>

<p style='margin-bottom:6.0pt;text-align:justify'><b>Dependence
Upon Key Personnel</b>&nbsp; </p>

<p style='margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Company's future performance also depends in significant part upon the
continued service of its key technical and senior management personnel, many of
who have been with the Company for a significant period of time.&nbsp; The Company
does not maintain key man life insurance on any of its employees. Because the
Company has a relatively small number of employees when compared to other
leading companies in the same industry, its dependence on maintaining its
relationship with key employees is particularly significant. The Company is
also dependent on its ability to attract and retain high quality personnel,
particularly in the areas of product development and operations management. </p>

<p style='margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A
high level of employee mobility and the aggressive recruiting of skilled
personnel characterize the healthcare and semiconductor industries.&nbsp; There can
be no assurance that the Company's current employees will continue to work for
the Company.&nbsp; Loss of services of key employees could have a material adverse
effect on the Company's business, results of operations and financial
condition. Furthermore, the Company may need to grant additional stock options
to key employees and provide other forms of incentive compensation to attract
and retain such key personnel.</p>

<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Company
experienced changes in some of its key management positions in the past two
years as it has streamlined its operations.&nbsp; In the year ended June 30, 2002, Kent Searl retired as President and Chief Executive Officer of the Company
and was replaced on an interim basis by Frank Zagar.&nbsp; Mr. Zagar completed a
substantial part of the corporate reorganization and in September 2002,
resigned his operating position, while remaining a Director through the
shareholder's meeting held in November 2002.&nbsp; Patrick Johnson, Micro Motors
President, assumed the role of the President and Chief Executive Officer of the
Company in addition to retaining his role as President of Micro Motors.&nbsp; In May
2002, George Isaac resigned his operating position as Treasurer and Chief
Financial Officer of the Company, while remaining Corporate Secretary and a
Director, and Jeffrey J. Ritchey assumed the role of the Treasurer and Chief
Financial Officer of the Company in addition to retaining his role as
Controller of Micro Motors.&nbsp; The Company believes that the new Chief Executive
Officer and Chief Financial Officer have the background and experience
necessary to be able to perform the duties required for these positions.</p>



<p style='margin-bottom:6.0pt;text-align:justify'>&nbsp;</p>



<p style='margin-bottom:6.0pt;text-align:center'>11</p>

<hr color="#000080"><P Style="page-break-after:always"></p>




<p style='margin-bottom:6.0pt;text-align:justify'>&nbsp;</p>



<p style='margin-bottom:6.0pt;text-align:justify'><b>Product
Liability</b><i> </i></p>

<p style='margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Company maintains insurance to protect against claims associated with the use
of its products, but there can be no assurance that its insurance coverage
would adequately cover any claim asserted against the Company. A successful
claim brought against the Company in excess of its insurance coverage could
have a material adverse effect on the Company's business, results of operations
and financial condition. Even unsuccessful claims could result in the Company's
expenditure of funds in litigation and management time and resources.</p>

<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; There can be no
assurance that the Company will not be subject to product liability claims,
that such claims will not result in liability in excess of its insurance
coverage, that the Company's insurance will cover such claims or that
appropriate insurance will continue to be available to the Company in the future
at commercially reasonable rates. Such claims could have a material adverse
affect on the Company's business, results of operations and financial
condition. </p>



<p style='text-autospace:none'><b>Marketplace Delisting</b></p>



<p style='text-align:justify;text-indent:.5in'>In June 2002,
the Company received a notice from NASDAQ indicating that unless its stock
price maintained a $1.00 per share closing bid price for ten consecutive
trading sessions, the Company's stock would be delisted on December 3, 2002.&nbsp; As the Company maintained $5,000,000 of stockholders' equity, meeting one of the
qualifications to remain listed, the Company received notice in December 2002
that the delisting was extended for 180 days.&nbsp; On March 24, 2003 the SEC approved a NASDAQ marketplace rule change that would extend the delisting date an
additional 90 days or until September 2, 2003 contingent upon the Company
continuing to meet the qualifications noted above.&nbsp; On June 19, 2003, the Company received notice from NASDAQ indicating that the stock price had
maintained a closing bid price of over $1.00 for at least 10 consecutive
trading days and had regained compliance with the listing requirements.&nbsp; There
is no assurance that the Company's shares will maintain a sufficiently high
price to eliminate future delisting notices and subsequent delisting.</p>

<p style='text-autospace:none'><b>Item 2.&nbsp;&nbsp;
Properties </b></p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The Company's executive office and Micro Motors' office and manufacturing
facility are located at 151 East Columbine Avenue, Santa Ana, California 92707.&nbsp;
On July 1, 2001, Micro Motors consolidated its operations at the Santa Ana
location into one of the two buildings it had been occupying.&nbsp; The building is
a two-story building of concrete tilt-up construction, approximately 25 years
old and in good condition.&nbsp; Micro Motors leased those buildings under a
previously existing lease from Mr. Ronald G. Coss, currently a director of the
Company, at a monthly rental of $29,816 that expired March 31, 2001 and continued to lease the buildings on a month-to-month basis until June 30, 2001. A new lease for one of those buildings commenced July 1, 2001 for five years at a monthly rent of $12,285, before yearly inflation adjustments.&nbsp; The building
was sold and the lease assigned to an unrelated third party in January, 2002.&nbsp;
The Company's management believes that the monthly rental is comparable to
rents charged for comparable properties in the market area. Micro Motors took
action in its fiscal year 2001 and fiscal year 2002 to remediate hazardous
waste contamination on the property, which was completed in June of 2002 at a
cost of approximately $60,000.&nbsp; Micro Motors and the Company require full
compliance by the lessor with applicable California and EPA environmental
standards. </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>OMS' offices and manufacturing facilities are located at 1800 N.W. 169th
  Place, Building C100, Beaverton, Oregon 97006. OMS leases the 11,000 square
foot facility from an unrelated third party, at a base monthly lease rate of
$9,100, which lease has been extended through October 2007.&nbsp; The building is a
one story suite in a 15-year-old industrial office complex and is in good
condition.</p>



<p style='text-align:center;text-autospace:
none'>12</p>

<hr color="#000080"><P Style="page-break-after:always"></p>




<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='text-autospace:none'><b>Item 3.&nbsp;&nbsp; Legal
Proceedings </b></p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The manufacture and distribution of certain products by subsidiaries of
the Company involves a risk of legal action, and, from time to time, the
Company and its subsidiaries are named as defendants in lawsuits. While the
Company's management believes that these matters will not have a material
adverse impact on the financial condition of the Company, there can be no
certainty that the Company may not ultimately incur liability or that such
liability will not be material and adverse. </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The Company is a party to various legal proceedings incidental to its
business, none of which are considered by the Company to be material at this
time.</p>

<p style='text-autospace:none'><b>Item 4.&nbsp;&nbsp;
Submission of Matters to a Vote of Security Holders During the Year Ended  June 30, 2003 </b></p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>No matter was submitted to a vote of the Company's shareholders during
the fourth quarter ended June 30, 2003.&nbsp; </p>



<p align=center style='text-align:center;text-autospace:none'><b>PART
II</b></p>



<p style='text-autospace:none'><b>Item 5.&nbsp;&nbsp; Market
for Registrant's Common Stock and Related Stockholder Matters </b></p>

<p style='text-autospace:none'><b>&nbsp;</b></p>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The Company's no par value common stock is quoted under the symbol
&quot;PDEX&quot; on the automated quotation system of the National Association
of Securities Dealers Small Cap Market (&quot;NASDAQ&quot;). The following
table sets forth for the quarters indicated the high and low sales prices as
reported by NASDAQ.&nbsp; The quotations reflect inter-dealer prices, without retail
markup, markdown, or commissions, and may not necessarily represent actual
transactions. </p>

<p style='text-autospace:none'><b>&nbsp;</b></p>

<div align=center>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse'>
 <tr>
  <td width=190 valign=top style='width:142.2pt;border:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b><u>Quarter Ended </u></b></p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><b><u>High
  </u></b></p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><b><u>Low
  </u></b></p>
  </td>
 </tr>
 <tr>
  <td width=190 valign=top style='width:142.2pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>September 30, 2001 </p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1.16
  </p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1.03
  </p>
  </td>
 </tr>
 <tr>
  <td width=190 valign=top style='width:142.2pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>December 31, 2001</p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1.10
  </p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>0.73
  </p>
  </td>
 </tr>
 <tr>
  <td width=190 valign=top style='width:142.2pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>March 31, 2002</p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1.34
  </p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>0.81
  </p>
  </td>
 </tr>
 <tr>
  <td width=190 valign=top style='width:142.2pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>June 30, 2002</p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1.15
  </p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>0.51
  </p>
  </td>
 </tr>
 <tr>
  <td width=190 valign=top style='width:142.2pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>September 30, 2002 </p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>0.70
  </p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>0.34
  </p>
  </td>
 </tr>
 <tr>
  <td width=190 valign=top style='width:142.2pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>December 31, 2002</p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>0.69
  </p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>0.38
  </p>
  </td>
 </tr>
 <tr>
  <td width=190 valign=top style='width:142.2pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>March 31, 2003</p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>0.76
  </p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>0.47
  </p>
  </td>
 </tr>
 <tr>
  <td width=190 valign=top style='width:142.2pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>June 30, 2003</p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1.32
  </p>
  </td>
  <td width=53 valign=top style='width:39.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>0.47
  </p>
  </td>
 </tr>
</table>

</div>

<p style='text-autospace:none'><b>&nbsp;</b></p>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>On September 17, 2003, the last sale price of the common stock as
reported by NASDAQ was $1.70 per share. </p>



<p style='text-align:justify;text-indent:.5in'>In June 2002,
the Company received a notice from NASDAQ indicating that unless its stock
price maintained a $1.00 per share closing bid price for ten consecutive
trading sessions, the Company's stock would be delisted on December 3, 2002.&nbsp; As the Company maintained $5,000,000 of stockholders' equity, meeting one of the
qualifications to remain listed, the Company received notice in December that
the delisting was extended for 180 days.&nbsp; On March 24, 2003 the SEC approved a NASDAQ marketplace rule change that would extend the delisting date an
additional 90 days or until September 2, 2003 contingent upon the Company
continuing to meet the qualifications noted above.&nbsp; On June 19, 2003, the Company received notice from NASDAQ indicating that the stock price had
maintained a closing bid price of over $1.00 for at least 10 consecutive
trading days and had regained compliance with the listing requirements.&nbsp; There
is no assurance that the Company's shares will maintain a sufficiently high
price to eliminate future delisting notices and subsequent delisting.</p>



<p style='text-align:justify;text-indent:.5in'>&nbsp;</p>



<p style='text-align:center;'>13</p>



<hr color="#000080"><P Style="page-break-after:always"></p>




<p style='text-align:justify;text-indent:.5in'>&nbsp;</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>At June 30, 2003, there were approximately 341 holders of record of the
Company's common stock. This number does not include beneficial owners
including holders whose shares are held in nominee or &quot;street&quot; name.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The Company has not paid a cash dividend with respect to its common
stock, and has no present intention to pay cash dividends in the foreseeable
future. The current policy of the Company's Board of Directors is to retain
earnings to provide funds for the operation and expansion of its business. The
Board of Directors, in light of the circumstances then existing, including the
Company's earnings and financial requirements and general business conditions,
will determine future dividends.&nbsp; There are no restrictions on the Company in
issuing dividends associated with the credit line with Wells Fargo Business
Credit, Inc. (WFBCI).&nbsp; </p>



<p style='text-autospace:none'><b>Equity Compensation Plan
Information</b></p>



<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0
 style='border-collapse:collapse;border:none'>
 <tr>
  <td width=184 valign=bottom style='width:137.7pt;border:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  <p style='text-autospace:none'>Plan Category</p>
  </td>
  <td width=184 valign=bottom style='width:137.7pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center;text-autospace:none'>Number
  of Shares to be<br>
&nbsp;Issued Upon Exercise</p>
  </td>
  <td width=184 valign=bottom style='width:137.7pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center;text-autospace:none'>Weighted
  Average<br>
&nbsp;Exercise Price</p>
  </td>
  <td width=184 valign=bottom style='width:137.7pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center;text-autospace:none'>Number
  of Securities<br>
&nbsp;Available for Issuance</p>
  </td>
 </tr>
 <tr>
  <td width=184 valign=bottom style='width:137.7pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p style='text-autospace:none'>Plans Approved by Stockholders</p>
  </td>
  <td width=184 valign=bottom style='width:137.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  <p align=center style='text-align:center;text-autospace:none'>1,363,405</p>
  </td>
  <td width=184 valign=bottom style='width:137.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  <p align=center style='text-align:center;text-autospace:none'>$1.11</p>
  </td>
  <td width=184 valign=bottom style='width:137.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  <p align=center style='text-align:center;text-autospace:none'>636,595</p>
  </td>
 </tr>
 <tr>
  <td width=184 valign=bottom style='width:137.7pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p style='text-autospace:none'>Plans Not Approved by
  Stockholders</p>
  </td>
  <td width=184 valign=bottom style='width:137.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  <p align=center style='text-align:center;text-autospace:none'>402,000</p>
  </td>
  <td width=184 valign=bottom style='width:137.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  <p align=center style='text-align:center;text-autospace:none'>1.45</p>
  </td>
  <td width=184 valign=bottom style='width:137.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  <p align=center style='text-align:center;text-autospace:none'>---</p>
  </td>
 </tr>
</table>

<p style='text-autospace:none'>&nbsp;<p style='text-autospace:none'>&nbsp;<p style='text-autospace:none'>&nbsp;<p style='text-autospace:none'>&nbsp;<p style='text-autospace:none' align="center">
14<hr color="#000080"><br clear=all style='page-break-before:
always'>
<b>Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations </b></p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The following discussion and analysis provides information that the
Company's management believes is relevant to an assessment and understanding of
the Company's results of operations and financial condition for each of the two
years ended June 30, 2002 and 2003, respectively.&nbsp; This discussion should be
read in conjunction with the Consolidated Financial Statements and the Notes
thereto included elsewhere in this Report. This Report contains certain
forward-looking statements and information. The cautionary statements included
herein should be read as being applicable to all related forward-looking
statements wherever they may appear.&nbsp; The Company's actual future results could
differ materially from those discussed herein.&nbsp; The Company's critical accounting
policies relate to inventory valuation for slow moving items, allowance for
funds in escrow, impairment of goodwill, and recoverability of deferred income
taxes.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Except for the historical information contained herein, the matters
discussed in this Annual Report on Form 10-KSB, including discussions of the
Company's product development plans, business strategies and market factors
influencing the Company's results, are forward-looking statements that involve
certain risks and uncertainties. Actual results may differ from those
anticipated by the Company as a result of various factors, both foreseen and
unforeseen, including, but not limited to, the Company's ability to continue to
develop new products and increase systems sales in markets characterized by
rapid technological evolution, consolidation within the Company's target
marketplace and among the Company's competitors, and competition from larger,
better capitalized competitors. Many other economic, competitive, governmental
and technological factors could impact the Company's ability to achieve its
goals.&nbsp; Interested persons are urged to review the risks described herein, as
well as in the Company's other public disclosures and filings with the
Securities and Exchange Commission.</p>



<p style='text-autospace:none'><b>Selected Financial Data </b></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The following table
sets forth selected financial data regarding the Company's financial position
and operating results. This data should be read in conjunction with the
Company's Consolidated Financial Statements and the Notes thereto and &quot;Management's
Discussion and Analysis of Financial Condition and Results of Operations.&quot;
</p>

<p align=center style='text-align:center;text-autospace:none'>(All
amounts in thousands) </p>



<div align=center>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=444
 style='width:332.75pt;margin-left:-1.25pt;border-collapse:collapse'>
 <tr>
  <td width=293 valign=top style='width:219.4pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=151 colspan=2 valign=top style='width:113.35pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>Year
  Ended June 30,</p>
  </td>
 </tr>
 <tr>
  <td width=293 valign=top style='width:219.4pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=78 valign=top style='width:58.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>2003</p>
  </td>
  <td width=73 valign=top style='width:54.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>2002</p>
  </td>
 </tr>
 <tr>
  <td width=293 valign=top style='width:219.4pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><u>Statement of Operations
  Data </u></p>
  </td>
  <td width=78 valign=top style='width:58.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=73 valign=top style='width:54.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=293 valign=top style='width:219.4pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Net sales </p>
  </td>
  <td width=78 valign=top style='width:58.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$11,990
  </p>
  </td>
  <td width=73 valign=top style='width:54.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$10,526&nbsp;
  </p>
  </td>
 </tr>
 <tr>
  <td width=293 valign=top style='width:219.4pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Cost of sales </p>
  </td>
  <td width=78 valign=top style='width:58.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>7,075</u></p>
  </td>
  <td width=73 valign=top style='width:54.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>6,426&nbsp;</u></p>
  </td>
 </tr>
 <tr>
  <td width=293 valign=top style='width:219.4pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>

  &nbsp;</td>
  <td width=78 valign=top style='width:58.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=73 valign=top style='width:54.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=293 valign=top style='width:219.4pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Gross profit </p>
  </td>
  <td width=78 valign=top style='width:58.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>4,915
  </p>
  </td>
  <td width=73 valign=top style='width:54.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>4,100&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=293 valign=top style='width:219.4pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>

  &nbsp;</td>
  <td width=78 valign=top style='width:58.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=73 valign=top style='width:54.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=293 valign=top style='width:219.4pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Operating expenses </p>
  </td>
  <td width=78 valign=top style='width:58.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>4,609
  </u></p>
  </td>
  <td width=73 valign=top style='width:54.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>6,235&nbsp;</u></p>
  </td>
 </tr>
 <tr>
  <td width=293 valign=top style='width:219.4pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>

  &nbsp;</td>
  <td width=78 valign=top style='width:58.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=73 valign=top style='width:54.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=293 valign=top style='width:219.4pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Net operating profit (loss) </p>
  </td>
  <td width=78 valign=top style='width:58.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>306
  </p>
  </td>
  <td width=73 valign=top style='width:54.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>(2,135)
  </p>
  </td>
 </tr>
 <tr>
  <td width=293 valign=top style='width:219.4pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Net other expense </p>
  </td>
  <td width=78 valign=top style='width:58.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>51
  </p>
  </td>
  <td width=73 valign=top style='width:54.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>240&nbsp;
  </p>
  </td>
 </tr>
 <tr>
  <td width=293 valign=top style='width:219.4pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Income tax expense (credit)</p>
  </td>
  <td width=78 valign=top style='width:58.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>122</u></p>
  </td>
  <td width=73 valign=top style='width:54.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>(1,210)</u></p>
  </td>
 </tr>
 <tr>
  <td width=293 valign=top style='width:219.4pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>

  &nbsp;</td>
  <td width=78 valign=top style='width:58.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=73 valign=top style='width:54.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=293 valign=top style='width:219.4pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Income (loss) from continuing
  operations </p>
  </td>
  <td width=78 valign=top style='width:58.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>133</p>
  </td>
  <td width=73 valign=top style='width:54.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>(1,165)
  </p>
  </td>
 </tr>
 <tr>
  <td width=293 valign=top style='width:219.4pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>(Loss) from discontinued
  operations </p>
  </td>
  <td width=78 valign=top style='width:58.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; --</u></p>
  </td>
  <td width=73 valign=top style='width:54.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>(401)
  </u></p>
  </td>
 </tr>
 <tr>
  <td width=293 valign=top style='width:219.4pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>

  &nbsp;</td>
  <td width=78 valign=top style='width:58.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=73 valign=top style='width:54.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=293 valign=top style='width:219.4pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Net income (loss)</p>
  </td>
  <td width=78 valign=top style='width:58.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$133
  </p>
  </td>
  <td width=73 valign=top style='width:54.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$(1,566)
  </p>
  </td>
 </tr>
</table>

</div>



<p style='text-autospace:none'>&nbsp;</p>



<p style='text-autospace:none'>&nbsp;</p>



<p style='text-autospace:none' align="center">15</p>

<hr color="#000080"><P Style="page-break-after:always"></p>




<p style='text-autospace:none'>&nbsp;</p>



<p style='text-autospace:none'><b>RESULTS OF OPERATIONS</b></p>

<p style='text-autospace:none'><b>Results of Operations for
Fiscal Year Ended  June 30, 2003, Compared to Fiscal Year Ended  June 30, 2002 </b></p>

<p><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b>The following table sets forth for the
periods indicated the percentage of net revenues represented by each item in
the Company's Consolidated Statements of Income. </p>



<div align=center>

<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0
 style='margin-left:9.9pt;border-collapse:collapse;border:none'>
 <tr style='page-break-inside:avoid'>
  <td width=405 colspan=2 rowspan=2 valign=top style='width:303.45pt;
  border-top:none;border-left:none;border-bottom:solid windowtext 1.0pt;
  border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=210 colspan=3 valign=top style='width:157.5pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center'>Year Ended June 30,</p>
  </td>
 </tr>
 <tr style='page-break-inside:avoid'>
  <td width=99 valign=top style='width:74.55pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center'>2003</p>
  </td>
  <td width=111 colspan=2 valign=top style='width:82.95pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center'>2002</p>
  </td>
 </tr>
 <tr>
  <td width=404 valign=top style='width:303.1pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Net Revenues: </p>
  </td>
  <td width=100 colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>&nbsp;100.0% </p>
  </td>
  <td width=110 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-6.3pt'>&nbsp;100.0% </p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=0><p align="center">&nbsp;</td>
 </tr>
 <tr>
  <td width=404 valign=top style='width:303.1pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  &nbsp;</td>
  <td width=100 colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td width=110 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=0><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=404 valign=top style='width:303.1pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Cost of Goods Sold </p>
  </td>
  <td width=100 colspan=2 valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>&nbsp;59.0</p>
  </td>
  <td width=110 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-6.3pt'>&nbsp;61.0</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=0><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=404 valign=top style='width:303.1pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Gross Profit </p>
  </td>
  <td width=100 colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>41.0</p>
  </td>
  <td width=110 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-6.3pt'>39.0</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=0><p>&nbsp;</td>
 </tr>
 <tr style='height:9.0pt'>
  <td width=404 valign=top style='width:303.1pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:9.0pt'>

  &nbsp;</td>
  <td width=100 colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td width=110 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=0><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=404 valign=top style='width:303.1pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Selling, General and
  Administrative Expenses </p>
  </td>
  <td width=100 colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>26.0</p>
  </td>
  <td width=110 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-6.3pt'>40.0</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=0><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=404 valign=top style='width:303.1pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Research and Development Costs </p>
  </td>
  <td width=100 colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>12.2</p>
  </td>
  <td width=110 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-6.3pt'>14.7</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=0><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=404 valign=top style='width:303.1pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Amortization</p>
  </td>
  <td width=100 colspan=2 valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>0.2</p>
  </td>
  <td width=110 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-6.3pt'>4.6</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=0><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=404 valign=top style='width:303.1pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Income (loss) from Operations</p>
  </td>
  <td width=100 colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>2.6</p>
  </td>
  <td width=110 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-6.3pt'>(20.3) </p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=0><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=404 valign=top style='width:303.1pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  &nbsp;</td>
  <td width=100 colspan=2 valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td width=110 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=0><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=404 valign=top style='width:303.1pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Net interest and other (loss) </p>
  </td>
  <td width=100 colspan=2 valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>&nbsp;(0.5)</p>
  </td>
  <td width=110 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-6.3pt'>(2.3)</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=0><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=404 valign=top style='width:303.1pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Net after tax (loss) from discontinued operations</p>
  </td>
  <td width=100 colspan=2 valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>&nbsp;--</p>
  </td>
  <td width=110 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-6.3pt'>(3.8)</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=0><p>&nbsp;</td>
 </tr>
 <tr style='height:9.4pt'>
  <td width=404 valign=top style='width:303.1pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:9.4pt'>

  &nbsp;</td>
  <td width=100 colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td width=110 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=0><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=404 valign=top style='width:303.1pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>(Provision) credit for Income Taxes </p>
  </td>
  <td width=100 colspan=2 valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>(1.0)</p>
  </td>
  <td width=110 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-6.3pt'>11.5</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=0><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=404 valign=top style='width:303.1pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p>Net Income (Loss)</p>
  </td>
  <td width=100 colspan=2 valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:.9pt'><u>1.1% </u></p>
  </td>
  <td width=110 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-6.3pt'><u>(14.9%) </u></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=0><p>&nbsp;</td>
 </tr>
 <tr height=0>
  <td width=404 style='border:none'></td>
  <td width=0 style='border:none' align="right"></td>
  <td width=99 style='border:none' align="right"></td>
  <td width=110 style='border:none' align="right"></td>
  <td width=0 style='border:none'></td>
 </tr>
</table>

</div>

<p style='text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b>Net Sales.</b>&nbsp; Consolidated sales increased 14% for the year ended June 30, 2003, compared to the year ended June 30, 2002, due to increased sales at both
Micro Motors and OMS.&nbsp; At Micro Motors, sales increased 12% due to increased
volume of medical product shipments that rose 133% compared to the previous
year. The increase in medical products more than offsets the decline of sales
in the other product lines.&nbsp; Revenue at Oregon Micro Systems increased 21% for
the year ended June 30, 2003 compared to the same period of the previous year.
The revenue increase at OMS was caused by the resurgence of orders from
customers in the semiconductor fabrication equipment industry, as they are
beginning to replenish inventories with new products. Sales to customers
outside the semiconductor industry were flat.&nbsp; Selective price increases and
decreases are implemented at Micro Motors and OMS in response to market
conditions.&nbsp; The majority of the sales growth and declines for each product
line is due to increased or decreased sales volume, not the effect of these
price changes. &nbsp; </p>



<p style='text-align:justify;text-autospace:none'>Net sales by
subsidiary and type of customer were as follows: </p>



<div align=center>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=528
 style='width:396.25pt;margin-left:-.25pt;border-collapse:collapse'>
 <tr>
  <td width=174 valign=top style='width:130.75pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=12 valign=top style='width:9.0pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:none;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=246 colspan=3 valign=bottom style='width:184.5pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>

  <p align=center style='text-align:center;text-autospace:none'>2003&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  2002</p>
  </td>
  <td width=96 valign=bottom style='width:1.0in;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>Increase/<br>
  (Decrease)</p>
  </td>
 </tr>
 <tr>
  <td width=174 valign=top style='width:130.75pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp; Dental</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>$</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.25pt;text-align:right;
  text-autospace:none'>5,213,000</p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>$</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.25pt;text-align:right;
  text-autospace:none'>5,594,000</p>
  </td>
  <td width=96 valign=top style='width:1.0in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>(7%)</p>
  </td>
 </tr>
 <tr>
  <td width=174 valign=top style='width:130.75pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp; Medical </p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.25pt;text-align:right;
  text-autospace:none'>2,851,000</p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.25pt;text-align:right;
  text-autospace:none'>1,226,000</p>
  </td>
  <td width=96 valign=top style='width:1.0in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>133% </p>
  </td>
 </tr>
 <tr>
  <td width=174 valign=top style='width:130.75pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp; Industrial</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.25pt;text-align:right;
  text-autospace:none'>730,000</p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.25pt;text-align:right;
  text-autospace:none'>949,000</p>
  </td>
  <td width=96 valign=top style='width:1.0in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>(23%)</p>
  </td>
 </tr>
 <tr>
  <td width=174 valign=top style='width:130.75pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp; Repair &amp; Other</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.25pt;text-align:right;
  text-autospace:none'><u>487,000</u></p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.25pt;text-align:right;
  text-autospace:none'><u>516,000</u></p>
  </td>
  <td width=96 valign=top style='width:1.0in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>(6%)</u></p>
  </td>
 </tr>
 <tr>
  <td width=174 valign=top style='width:130.75pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Micro Motors </p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.25pt;text-align:right;
  text-autospace:none'>9,281,000 </p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.25pt;text-align:right;
  text-autospace:none'>8,285,000 </p>
  </td>
  <td width=96 valign=top style='width:1.0in;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>12%</p>
  </td>
 </tr>
 <tr>
  <td width=174 valign=top style='width:130.75pt;border:solid windowtext 1.0pt;
  border-bottom:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-top:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;border-top:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=96 valign=top style='width:1.0in;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=174 valign=top style='width:130.75pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Oregon Micro Systems </p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.25pt;text-align:right;
  text-autospace:none'><u>2,709,000 </u></p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>2,241,000&nbsp;&nbsp;
  </u></p>
  </td>
  <td width=96 valign=top style='width:1.0in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>21%&nbsp;</u></p>
  </td>
 </tr>
 <tr>
  <td width=174 valign=top style='width:130.75pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Total</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.25pt;text-align:right;
  text-autospace:none'>11,990,000 </p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>10,526,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=96 valign=top style='width:1.0in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>14%&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><b>&nbsp;</b></p>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='text-align:center;text-autospace:
none'>16</p>

<b><hr color="#000080"><br clear=all
style='page-break-before:always'>
</b>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><b>Gross Profits</b>.&nbsp; The Company's consolidated gross profit for the
year ended June 30, 2003 increased $815,000 or 20% over the gross profit in the
previous year due to increased sales at both operating subsidiaries and higher
margins at OMS. Gross profit as a percentage of sales increased to 41% for the
year ended June 30, 2003 compared to 39% for the year ended June 30, 2002, as
the gains made by increased sales, the ongoing Company-wide cost reduction
efforts and a richer product mix favoring medical shipments at Micro Motors
were dampened by the initial costs associated with first run production for new
products.&nbsp; Gross Profit at Micro Motors decreased from 36% of sales in 2002 to
30% of sales in 2003 due to inefficiencies associated with the manufacturing of
certain new products.&nbsp; Gross Profit at OMS increased from 50% of sales in 2002
to 78% of sales in 2003 due to higher volume and a reduced cost base. </p>



<p style='text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Gross profits by subsidiary were as follows: </p>



<div align=center>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='margin-left:21.3pt;border-collapse:collapse'>
 <tr>
  <td width=173 valign=top style='width:1.8in;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-top:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=247 colspan=3 valign=top style='width:185.4pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=93 valign=top style='width:69.45pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>Increase/</p>
  </td>
 </tr>
 <tr>
  <td width=173 valign=top style='width:1.8in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=115 valign=top style='width:1.2in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>2003</p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>2002</p>
  </td>
  <td width=93 valign=top style='width:69.45pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>&nbsp;(Decrease)</p>
  </td>
 </tr>
 <tr>
  <td width=173 valign=top style='width:1.8in;border-top:none;border-left:solid windowtext 1.0pt;
  border-bottom:none;border-right:solid windowtext 1.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Micro Motors </p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=115 valign=top style='width:1.2in;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>2,808,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>2,982,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=93 valign=top style='width:69.45pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>(6%)&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=173 valign=top style='width:1.8in;border-top:none;border-left:solid windowtext 1.0pt;
  border-bottom:none;border-right:solid windowtext 1.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><u>Oregon Micro Systems

  </u></p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=115 valign=top style='width:1.2in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>2,107,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1,118,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=93 valign=top style='width:69.45pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>88%&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=173 valign=top style='width:1.8in;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Total</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=115 valign=top style='width:1.2in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>4,915,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>4,100,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=93 valign=top style='width:69.45pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>20%&nbsp;</p>
  </td>
 </tr>
</table>

</div>



<p style='text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Selling,
General and Administrative Costs (S, G&amp;A)</b>.&nbsp; S, G &amp; A expenses
decreased 33% to $3,152,000 for the year ended June 30, 2003 from $4,690,000 for year ended June 30, 2002.&nbsp; The decrease is mainly due to reduced
amortization and cost saving measures implemented at the corporate and
subsidiary level offset by increased selling expense at Micro Motors.&nbsp; The main
cost decreases at Corporate were equipment leasing costs that were reduced by
$370,000 and management expense which decreased $360,000.&nbsp; At OMS the largest
decrease was in reduced amortization of $400,000 in 2003. </p>



<p style='text-align:justify;text-autospace:none'>S, G &amp; A
expenses by subsidiary were as follows:&nbsp;&nbsp; </p>



<div align=center>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='margin-left:39.05pt;border-collapse:collapse'>
 <tr>
  <td width=175 valign=top style='width:131.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-top:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=246 colspan=3 valign=top style='width:184.5pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=96 valign=top style='width:1.0in;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>Increase/</p>
  </td>
 </tr>
 <tr>
  <td width=175 valign=top style='width:131.35pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>2003</p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>2002</p>
  </td>
  <td width=96 valign=top style='width:1.0in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>&nbsp;(Decrease)</p>
  </td>
 </tr>
 <tr>
  <td width=175 valign=top style='width:131.35pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Micro Motors </p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1,626,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1,543,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=96 valign=top style='width:1.0in;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>5%&nbsp;&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=175 valign=top style='width:131.35pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Oregon Micro Systems </p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>700,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1,344,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=96 valign=top style='width:1.0in;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>(48%)&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=175 valign=top style='width:131.35pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><u>Corporate </u></p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>826,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1,803,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=96 valign=top style='width:1.0in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>(54%)&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=175 valign=top style='width:131.35pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Total</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>3,152,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>4,690,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=96 valign=top style='width:1.0in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>(33%)&nbsp;</p>
  </td>
 </tr>
</table>

</div>



<p style='text-indent:.5in' align="justify">In 2002, in accordance with FAS
121 &quot;Accounting for the Impairment of Long-Lived Assets,&quot; management reviewed
the remaining goodwill recorded at OMS and determined that the remaining fair
value of the asset was impaired.&nbsp; Management's decision was based on the fact
that future cash flows at OMS will not exceed the carrying value of the asset
and that OMS generated current year losses.&nbsp; As such, management determined
that the carrying value should be zero; expensing the remaining $154,000 as
general and administrative expense in the statement of operations.&nbsp; The balance
of goodwill is related to the Micro Motors subsidiary and as of June 30, 2002, remaining goodwill net of accumulated amortization totaled
$1,110,000.&nbsp; </p>



<p style='text-indent:.5in' align="justify">On July 1, 2002 the Company adopted SFAS No. 142 &quot;Goodwill and Other Intangible Assets.&quot;&nbsp; SFAS No. 142 requires
that goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provisions of SFAS No. 142.&nbsp; The Company has compared the carrying
value of the Micro Motors subsidiary with the estimated fair value of the
reporting unit and determined that none of the goodwill recorded as of June 30, 2002 or as of April 1, 2003 was impaired.&nbsp; The Company's goodwill amortization
expense for the year ended June 30, 2003 was $0, and for the year ended June 30, 2002 was approximately $85,000, excluding the $154,000 that was written off in
fiscal year 2002.</p>



<p style='text-indent:.5in'>&nbsp;</p>



<p align="center">17</p>

<b><hr color="#000080"><br clear=all
style='page-break-before:always'>
</b>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><b>Research and Development Costs</b>.&nbsp; Research and development expenses
decreased to $1,458,000 for the year ended June 30, 2003 from $1,545,000 for the year ended June 30, 2002, a decrease of 6%. The decrease is due to cost
cutting at OMS concurrent with the completion of the MAX system product line
development.&nbsp; </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The Company engages in two types of research and development efforts.&nbsp;
The first is funded by the Company itself, intended to develop generic rotary
drive technologies and products that will subsequently be modified to meet the
needs of individual customers.&nbsp; In this initial phase, there are generally no
revenues generated and the associated costs are expensed as incurred.&nbsp; </p>



<p style='text-align:justify'>Company funded research and
development costs by subsidiary were as follows:</p>



<div align=center>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='margin-left:30.6pt;border-collapse:collapse'>
 <tr>
  <td width=177 valign=top style='width:133.05pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-top:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=246 colspan=3 valign=top style='width:184.5pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=99 valign=top style='width:74.55pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>Increase/</p>
  </td>
 </tr>
 <tr>
  <td width=177 valign=top style='width:133.05pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>2003</p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>2002</p>
  </td>
  <td width=99 valign=top style='width:74.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>&nbsp;(Decrease)</p>
  </td>
 </tr>
 <tr>
  <td width=177 valign=top style='width:133.05pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Micro Motors </p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>782,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>765,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=99 valign=top style='width:74.55pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>2%&nbsp;&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=177 valign=top style='width:133.05pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><u>Oregon Micro Systems

  </u></p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>675,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>780,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=99 valign=top style='width:74.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>(13%)&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=177 valign=top style='width:133.05pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Total</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1,457,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1,545,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=99 valign=top style='width:74.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>(6%)&nbsp;</p>
  </td>
 </tr>
</table>

</div>



<p style='text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
second type of research and development efforts are those performed for and
funded by specific customers under the terms of a formal development
agreement.&nbsp;&nbsp; These efforts are generally for specific modifications to the
generic products developed by the Company funded research.&nbsp; These projects are
usually performed under the terms of a development agreement and typically take
place within 12 months of the generic development work being completed.&nbsp; The
Company recognizes revenue under these research and development agreements as
certain deliverables are met as specified in each development contract.&nbsp; The research
and development costs associated with these efforts are capitalized and
recognized as costs of goods sold (COGS&quot;) when the contracted deliverable is
made.</p>



<p style='text-align:justify;text-autospace:none'>The following
table segments the Company's research and development efforts for the year
ended June 30, 2003 into two specific applications and three sub-categories of
the type of work performed.</p>



<div align=center>

<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 width=484
 style='width:363.35pt;margin-left:-6.35pt;border-collapse:collapse;border:
 none'>
 <tr>
  <td width=257 valign=top style='width:193.0pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=108 valign=top style='width:81.0pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>&nbsp;Motion
  Control Systems</p>
  </td>
  <td width=119 valign=top style='width:89.35pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>Rotary
  Drive Systems</p>
  </td>
 </tr>
 <tr>
  <td width=257 valign=top style='width:193.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Technology research and development
  </p>
  </td>
  <td width=108 valign=top style='width:81.0pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in' align="right">
  <p align=center style='text-align:center;text-autospace:none'>&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  371,000</p>
  </td>
  <td width=119 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=right style='text-align:right;text-autospace:none'>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;122,000&nbsp;&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=257 valign=top style='width:193.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Design development</p>
  </td>
  <td width=108 valign=top style='width:81.0pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in' align="right">
  <p align=center style='text-align:center;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  236,000</p>
  </td>
  <td width=119 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=center style='text-align:center;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  &nbsp;&nbsp;&nbsp;857,000</p>
  </td>
 </tr>
 <tr>
  <td width=257 valign=top style='width:193.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Process development</p>
  </td>
  <td width=108 valign=top style='width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in' align="right">
  <p style='text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;68,000&nbsp;&nbsp;</u></p>
  </td>
  <td width=119 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p style='text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  &nbsp;&nbsp;&nbsp;&nbsp;245,000&nbsp;&nbsp;</u></p>
  </td>
 </tr>
 <tr>
  <td width=257 valign=top style='width:193.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Total R&amp;D </p>
  </td>
  <td width=108 valign=top style='width:81.0pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in' align="right">
  <p style='text-autospace:none'>&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;675,000&nbsp;&nbsp;</p>
  </td>
  <td width=119 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=center style='text-align:center;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  1,224,000</p>
  </td>
 </tr>
 <tr>
  <td width=257 valign=top style='width:193.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Less R &amp; D recognized as
  COGS</p>
  </td>
  <td width=108 valign=top style='width:81.0pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in' align="right">
  <p align=center style='text-align:center;text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  ----</u></p>
  </td>
  <td width=119 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=center style='text-align:center;text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  (442,000)</u></p>
  </td>
 </tr>
 <tr>
  <td width=257 valign=top style='width:193.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Total Company funded R&amp;D</p>
  </td>
  <td width=108 valign=top style='width:81.0pt;border-top:none;border-left:
  none;border-bottom:double windowtext 1.5pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in' align="right">
  <p style='text-autospace:none'>&nbsp;&nbsp; $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 675,000&nbsp;&nbsp;</p>
  </td>
  <td width=119 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.5pt double windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=center style='text-align:center;text-autospace:none'>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  782,000</p>
  </td>
 </tr>
</table>

</div>



<p style='text-align:justify;text-autospace:none'>Disclosure of
customer names, project status and economic impact of those projects which are
fundamental to the Company's business strategy, is prohibited in each specific
case by confidentiality agreements.</p>



<p style='text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Net
Interest Expense. </b>&nbsp;Net interest expense was $87,000 in the year ended June 30, 2003 compared to $117,000 for the year ended June 30, 2002.&nbsp; The expense was lower as debts to a stockholder and a debt associated with the Company's
prior real estate holdings in Missouri were paid off in 2002 and early 2003. </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><b>Provision for Taxes</b>.&nbsp; The Company's effective tax rate on income
(loss) from operations is 48% for the year ended June 30, 2003, and was 39% in the year ended 2002.&nbsp; In 2002, the Company realized the benefit from the
resolution of tax contingencies of approximately $289,000.&nbsp; The Company's
effective tax rate for discontinued operations was approximately 39% for fiscal
2002.&nbsp; The Company's effective tax rate of 48% differs from the expected rate
of 39% due primarily to the change in tax asset valuation allowance.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>



<p style='text-align:center;text-autospace:
none'>18</p>

<hr color="#000080"><P Style="page-break-after:always"></p>




<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>For the year ended June 30, 2003, management has recorded a valuation
allowance of $227,000 against deferred tax assets. Management believes that it
is more likely than not that the deferred tax assets will be fully recovered.&nbsp;
A valuation allowance has been provided for state tax credits, as management
believes that the amount of future state taxable income necessary to utilize
these credits is not more likely than not to be realized.&nbsp; Net realizable
deferred tax assets could be reduced if estimates of future profitability are
reduced or if future changes in the ownership of the Company occur.</p>

<p style='text-align:justify;text-indent:.5in'>The
Company's consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States (GAAP). The
preparation of the Company's financial statements requires management to make
estimates and judgments that affect the reported amounts of assets,
liabilities, revenues, expenses and related disclosures. Estimates are based on
historical experience and various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. The significant accounting
policies that we believe are the most critical to aid in fully understanding
and evaluating our reported financial results include inventory valuations for
slow moving items, allowances for funds in escrow, impairment of goodwill and
the recovery of deferred income tax assets.</p>

<p style='text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; As
part of the process of preparing our consolidated financial statements, we are
required to estimate our income taxes in each of the jurisdictions in which we
operate. This process involves us estimating our actual current tax liabilities
together with assessing temporary differences resulting from differing
treatment of items for tax and accounting purposes.&nbsp; These differences result
in deferred tax assets and liabilities, which are included within our
consolidated balance sheet. The most significant tax assets are future
deductions from the amortization of intangibles over the next ten years.&nbsp; Tax
assets also result from net operating losses and research and development tax
credits. We must then assess the likelihood that our deferred tax assets will
be recovered from future taxable income and to the extent we believe that
recovery is not likely, we must establish a valuation allowance. To the extent
we establish a valuation allowance or increase this allowance in a period, the
impact will be included in the tax provision in the statement of operations.</p>



<p style='text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Net
Income.&nbsp; </b>The Company made a profit from continuing operations of $133,000
or $0.02 per share, basic and $0.01 per share diluted for the year ended June
30, 2003 compared to a (loss) from continuing operations of ($1,165,000) or
($0.13) per share basic and diluted for the year ended June 30, 2002. </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Net income (loss) for the year ended June 30, 2003 was $133,000 or $0.02
per share, basic and $0.01 per share diluted compared to ($1,566,000) or
($0.18) per share basic and diluted for the year ended June 30, 2002.&nbsp; Loss
from discontinued operations for the year ended June 30, 2002 was ($401,000) or ($0.05) per share.</p>

<p style='text-autospace:none'><b>Liquidity and Capital
Resources </b></p>

<p style='margin-bottom:6.0pt;text-align:justify'>The following
table presents selected financial statistics and information for the periods
indicated:</p>

<div align=center>

<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 width=510
 style='width:700;margin-left:27.9pt;border-collapse:collapse;border:medium none; '>
 <tr style='page-break-inside:avoid'>
  <td width=294 valign=top style='width:220.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=108 valign=top style='width:81.0pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:none;
  padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center'><font size="2">&nbsp;&nbsp;&nbsp; 2003</font></p>
  </td>
  <td width=108 valign=top style='width:81.0pt;border:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center'><font size="2">2002</font></p>
  </td>
 </tr>
 <tr>
  <td width=294 valign=top style='width:220.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p><font size="2">Cash and
  cash equivalents </font> </p>
  </td>
  <td width=108 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p align=right style='text-align:right'><font size="2">$795,000</font></p>
  </td>
  <td width=108 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; $236,000&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=294 valign=top style='width:220.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p><font size="2">Net cash provided by (used
  in) operations </font> </p>
  </td>
  <td width=108 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p align=right style='text-align:right'><font size="2">$503,000</font></p>
  </td>
  <td width=108 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p align=right style='text-align:right'><font size="2">($1,757,000)</font></p>
  </td>
 </tr>
 <tr>
  <td width=294 valign=top style='width:220.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p><font size="2">Working Capital</font></p>
  </td>
  <td width=108 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p align=right style='text-align:right'><font size="2">$4,584,000</font></p>
  </td>
  <td width=108 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p align=right style='text-align:right'><font size="2">$3,999,000&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=294 valign=top style='width:220.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p><font size="2">Credit Line outstanding
  balance </font> </p>
  </td>
  <td width=108 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p align=right style='text-align:right'><font size="2">$432,000</font></p>
  </td>
  <td width=108 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p align=right style='text-align:right'><font size="2">$638,000&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=294 valign=top style='width:220.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p><font size="2">Tangible book value/common
  share (undiluted)</font></p>
  </td>
  <td width=108 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; $0.72</font></p>
  </td>
  <td width=108 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; $0.70&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=294 valign=bottom style='width:220.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p><font size="2">Number of days of sales
  outstanding in accounts<br>
&nbsp;receivable at end of quarter </font> </p>
  </td>
  <td width=108 valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">

  <p><font size="2">50</font></p>
  </td>
  <td width=108 valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">

  <p><font size="2">57&nbsp;</font></p>
  </td>
 </tr>
</table>

</div>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The Company's working capital at June 30, 2003 increased to approximately
$4.6 million compared to approximately $4.0 million at June 30, 2002 as cash generated from operations was used to reduce accounts payable and accrued expenses
in 2003.&nbsp; Cash Flow provided by (used in) Operations was $503,000 in the year
ended June 30, 2003 compared to ($1,757,000) for the year ended June 30, 2002.&nbsp; Cash was provided through returning the Company to profitability and
improved working capital management.&nbsp; Management believes that the Company's
working capital needs over the next twelve months can be adequately supported
by current operations.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>



<p style='text-align:center;text-autospace:
none'>19</p>



<hr color="#000080"><P Style="page-break-after:always"></p>


<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The Company has increased its backlog and future orders to $5.5 million
at June 30, 2003 compared to $2.8 million at June 30, 2002.&nbsp; This increase is attributed to booking significant orders in the fourth quarter that were
related to production contracts from the previous year's development efforts.&nbsp;
The backlog and future orders are expected to be fully shipped over the next 12
months.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The subsidiaries of the Company entered into a credit facility with Wells
Fargo Business Credit Inc. (WFBCI) in May 2002 for borrowings up to the lesser
of $3,000,000 or the total of the eligible accounts receivable.&nbsp; The terms of
the credit facility expire May 2005 and require monthly interest payments at
the prime rate (4.00% at June 30, 2003) plus 1.00% to 1.75% based on
outstanding borrowings, with a minimum interest charge of $12,500 per quarter.&nbsp;
The outstanding borrowings are secured by all assets of the Company's two
subsidiaries, Micro Motors and OMS, and are guaranteed by the Company.&nbsp; The
outstanding balance under the terms of this credit facility as of June 30, 2003 was $432,000.&nbsp; The total additional eligible borrowing capacity based on the
receivables balances at June 30, 2002 was $562,000.&nbsp; There are certain
financial and non-financial covenants that the Company must meet to be in
compliance with the terms of the credit facility.&nbsp; There was one amendment to
the loan agreement made subsequent to June 30, where a technical correction was
made to the definition of &quot;Net Income&quot; as it applied to the covenant
calculations.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>As of June 30, 2003, Micro Motors and OMS were not in compliance with the
net income (loss) and tangible net worth covenants, for which it received a
waiver from WFBCI on September 17, 2003.</p>



<p style='text-align:justify;text-indent:.5in'>In September
2002, the Company's Board of Directors authorized the repurchase on the open
market of up to 500,000 shares of the Company's outstanding Common Stock,
subject to compliance with applicable laws and regulations. &nbsp;There is no
requirement that the Company repurchase all or any portion of such shares.&nbsp; The
maximum total value of the repurchase is not to exceed $500,000.&nbsp; This
repurchase is to be financed both with cash generated by operations and through
the utilization of the Company's credit facility.&nbsp; From the inception of the
repurchase authorization through the year end date of June 30, 2003, the Company repurchased 75,700 shares of Common Stock for $43,741, at an average
price of $0.58 per share.</p>

<p style='margin-top:6.0pt;text-align:justify;text-indent:.5in'>At
 June 30, 2003, the Company had cash and cash equivalents of $795,000.&nbsp; The
Company believes that its cash and cash equivalents on hand at June 30, 2003,
together with cash flows from operations, if any, and amounts available under
the credit facility will be sufficient to meet its working capital and capital
expenditure requirements for fiscal 2004. </p>

<p><b>Impact of Inflation and Changing Prices </b></p>

<p style='text-align:justify;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The industries in which the Company competes are labor intensive, often
involving personnel with high-level technical or sales skills. Wages and other
expenses increase during periods of inflation and when shortages in the
marketplace occur. In addition, suppliers pass along rising costs to the
Company's subsidiaries in the form of higher prices. To some extent, the Company's
subsidiaries have been able to offset increases in operating costs by
increasing charges, expanding services and implementing cost control measures.
Nevertheless, each of the Company's subsidiaries' ability to increase prices is
limited by market conditions, including international competition in many of
the Company's markets. </p>

<p style='text-align:justify;line-height:normal'>&nbsp;</p>

<p style='text-align:justify;line-height:normal'>&nbsp;</p>

<p style='text-align:center;line-height:normal'>20</p>

<b><hr color="#000080"><br clear=all
style='page-break-before:always'>
</b>

<p style='text-autospace:none'><b>Item 7.&nbsp;&nbsp; Financial
Statements and Supplemental Data</b></p>



<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse' height="114">
 <tr>
  <td width=480 valign=top style='width:5.0in;padding:0in 0in 0in 0in' height="19">
  <p style='text-autospace:none'><a href="#INDEPENDENT AUDITORS REPORT">Independent Auditor's
  Report </a>&nbsp;</p>
  </td>
  <td width=26 valign=top style='width:19.2pt;padding:0in 0in 0in 0in' height="19">
  <p align=center style='text-align:center;text-autospace:none'>23
  </p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top style='width:5.0in;padding:0in 0in 0in 0in' height="19">
  <p style='text-autospace:none'><a href="#CONSOLIDATED BALANCE SHEETS">Consolidated Balance Sheets</a> &nbsp;</p>
  </td>
  <td width=26 valign=top style='width:19.2pt;padding:0in 0in 0in 0in' height="19">
  <p align=center style='text-align:center;text-autospace:none'>24
  </p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top style='width:5.0in;padding:0in 0in 0in 0in' height="19">
  <p style='text-autospace:none'>
  <a href="#CONSOLIDATED STATEMENTS OF OPERATIONS">Consolidated
  Statements of Operations</a></p>
  </td>
  <td width=26 valign=top style='width:19.2pt;padding:0in 0in 0in 0in' height="19">
  <p align=center style='text-align:center;text-autospace:none'>25 </p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top style='width:5.0in;padding:0in 0in 0in 0in' height="19">
  <p style='text-autospace:none'>
  <a href="#CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY">Consolidated
  Statements of Shareholders' Equity</a> &nbsp;</p>
  </td>
  <td width=26 valign=top style='width:19.2pt;padding:0in 0in 0in 0in' height="19">
  <p align=center style='text-align:center;text-autospace:none'>26
  </p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top style='width:5.0in;padding:0in 0in 0in 0in' height="19">
  <p style='text-autospace:none'>
  <a href="#CONSOLIDATED STATEMENTS OF CASH FLOWS">Consolidated
  Statements of Cash Flows </a>&nbsp;</p>
  </td>
  <td width=26 valign=top style='width:19.2pt;padding:0in 0in 0in 0in' height="19">
  <p align=center style='text-align:center;text-autospace:none'>27
  </p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top style='width:5.0in;padding:0in 0in 0in 0in' height="19">
  <p style='text-autospace:none'>
  <a href="#NOTES TO CONSOLIDATED FINANCIAL STATEMENTS">Notes to
  Consolidated Financial Statements</a> &nbsp;</p>
  </td>
  <td width=26 valign=top style='width:19.2pt;padding:0in 0in 0in 0in' height="19">
  <p align=center style='text-align:center;text-autospace:none'>28
  </p>
  </td>
 </tr>
</table>

<p style='text-autospace:none'><b>&nbsp;</b></p>

<p style='text-autospace:none'><b>Item 8.&nbsp;&nbsp; Changes
and Disagreements with Accountants on Accounting and Financial Disclosures. </b></p>



<p style='text-autospace:none'>&nbsp;None.
</p>



<p style='text-autospace:none'><b>Item 8A.&nbsp;&nbsp; Controls
and Procedures.</b></p>

<p style='text-align:justify;text-indent:.5in'>Our Chief
Executive Officer and Chief Financial Officer (our principal executive officer
and principal financial officer, respectively) have concluded, based on their
evaluation as of June 30, 2003 (&quot;Evaluation Date&quot;), that the design
and operation of our &quot;disclosure controls and procedures&quot; (as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (&quot;Exchange Act&quot;)) are effective to ensure that information
required to be disclosed by the Company in the reports filed or submitted by us
under the Exchange Act is accumulated, recorded, processed, summarized and
reported to our management, including our principal executive officer and our
principal financial officer, as appropriate to allow timely decisions regarding
whether or not disclosure is required.</p>



<p style='text-autospace:none' align="justify">There were no significant
changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the Evaluation Date, nor were there any
significant deficiencies or material weaknesses in our internal controls. As a
result, no corrective actions were required or undertaken.</p>



<p style='text-autospace:none'>&nbsp;</p>



<p style='text-autospace:none'>&nbsp;</p>



<p style='text-autospace:none' align="center">21</p>

<b><hr color="#000080"><br clear=all
style='page-break-before:always'>
</b>

<p align=center style='text-align:center;text-autospace:none'><b>PART
III </b></p>

<p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>

<p style='text-autospace:none'><b>Item 9.&nbsp;&nbsp; Directors,
Executive Officers, Promoters, and Control Persons; Compliance with 16(a) of
the Securities Exchange Act of
1934 </b></p>

<p style='text-autospace:none' align="justify"><b>&nbsp;&nbsp;&nbsp; </b>&nbsp;&nbsp;&nbsp; Information concerning the Company's Directors and
Executive Officers is incorporated by reference from the information contained
in the Company's definitive Proxy Statement for the Company's 2003 Annual
Meeting of Shareholders to be filed with the Securities and Exchange Commission
(the &quot;Proxy Statement&quot;). </p>

<p style='text-autospace:none'><b>&nbsp;Item 10.&nbsp;&nbsp;
Executive Compensation </b></p>

<p style='text-autospace:none' align="justify"><b>&nbsp;&nbsp;&nbsp; </b>&nbsp;&nbsp;&nbsp; Information required by this Item is included by
reference from the section entitled &quot;Compensation of Executive Officers and
Management&quot; contained in the Proxy Statement. </p>



<p style='text-autospace:none'><b>Item 11.&nbsp;&nbsp; Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters</b></p>

<p style='text-autospace:none' align="justify"><b>&nbsp;</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Information required
by this Item is included by reference from the section entitled &quot;Security
Ownership of Certain Beneficial Owners and Management&quot; contained in the
Proxy Statement. </p>



<p style='text-autospace:none'><b>Item 12.&nbsp;&nbsp; Certain
Relationships and Related Transactions </b></p>

<p style='text-autospace:none' align="justify"><b>&nbsp;</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Information required
by this Item is included by reference from the information contained in the
section entitled &quot;Certain Relationships and Related Transactions&quot;
contained in the Proxy Statement. </p>



<p style='text-autospace:none'><b>Item 13.&nbsp;&nbsp;
Exhibits, and Reports on Form 8-K </b></p>

<p style='text-autospace:none' align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Exhibits (1)<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No reports on Form 8K were filed in the fourth quarter of the Company's
most recently completed fiscal year.</p>



<p style='text-autospace:none'>(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; See Exhibit Index</p>



<p style='text-autospace:none'>&nbsp;</p>



<p style='text-autospace:none'>&nbsp;</p>



<p style='text-autospace:none'>&nbsp;</p>



<p style='text-autospace:none' align="center">22</p>

<b><hr color="#000080"><br clear=all
style='page-break-before:always'>
</b>

<p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>

<p align=center style='text-align:center;text-autospace:none'><b>
<a name="INDEPENDENT AUDITORS REPORT">INDEPENDENT
AUDITOR'S REPORT </a> </b></p>



<p style='text-autospace:none'>To the Board of Directors <br>
Pro-Dex, Inc. <br>
Santa Ana, California </p>



<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; We have audited the accompanying consolidated
balance sheet of Pro-Dex, Inc. and Subsidiaries (the &quot;Company&quot;) as of
 June 30, 2003, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the two years in the period
ended June 30, 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. </p>



<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; We conducted our audits in accordance with auditing
standards generally accepted in the United States of America. 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 audits provide a reasonable basis for our opinion. </p>



<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the
financial position of the Company as of June 30, 2003, and the results of their
operations and their cash flows for each of the two years in the period ended
June 30, 2003, in conformity with accounting principles generally accepted in
the United States of America. </p>



<p align="justify">As described in Note 2 to the financial statements,
effective July 1, 2002, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 142, &quot;Goodwill and Other Intangible Assets&quot;</p>



<p style='text-autospace:none'>/s/ McGladrey &amp; Pullen, LLP </p>



<p style='text-autospace:none'>McGladrey &amp; Pullen, LLP <br>
August 8, 2003, except as to the last paragraph of Note 3 as to which the date is September 17, 2003. </p>



<p style='text-autospace:none'>Irvine, California </p>



<p style='text-autospace:none'>&nbsp;</p>



<p style='text-autospace:none'>&nbsp;</p>



<p style='text-autospace:none'>&nbsp;</p>



<p style='text-autospace:none' align="center">23</p>

<hr color="#000080"><br clear=all
style='page-break-before:always'>




<p align=center style='text-align:center;text-autospace:none'><b>PRO-DEX,
INC. AND SUBSIDIARIES <br>
<a name="CONSOLIDATED BALANCE SHEETS">CONSOLIDATED
BALANCE SHEETS</a><br>
June 30, 2003</b></p>



<div align="left">
  <table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="width: 730; border-collapse: collapse; margin-left: -.75pt">
    <tr style="height:9.0pt">
      <td nowrap valign="bottom" style="border-top:1px solid #000000; width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="188" valign="bottom" style="border-top:1px solid #000000; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><b><font size="2">ASSETS</font></b></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">Current&nbsp;assets:</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash&nbsp;and&nbsp;cash&nbsp;equivalents&nbsp;</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;795,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts&nbsp;receivable,&nbsp;net&nbsp;of&nbsp;allowance&nbsp;for&nbsp;doubtful&nbsp;accounts</font></td>
      <td width="188" valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of&nbsp;$30,000</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,620,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories,&nbsp;net&nbsp;</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,835,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid&nbsp;expenses&nbsp;</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;81,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred&nbsp;taxes</font></td>
      <td width="188" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;770,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total&nbsp;current&nbsp;assets&nbsp;</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6,101,000&nbsp;</font></td>
    </tr>
    <tr style="height:9.0pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      Equipment&nbsp;and&nbsp;leasehold&nbsp;improvements,&nbsp;net&nbsp;</font></td>
      <td width="188" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,040,000&nbsp;</font></td>
    </tr>
    <tr style="height:9.0pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">Other&nbsp;assets:</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other&nbsp;</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred&nbsp;taxes</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;833,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill&nbsp;</font></td>
      <td width="188" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,110,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total&nbsp;other&nbsp;assets&nbsp;</font></td>
      <td width="188" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,963,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total&nbsp;assets</font></td>
      <td width="188" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  2.25pt double windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;9,104,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><b><font size="2">&nbsp;&nbsp;</font></b></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><b><font size="2">
      LIABILITIES&nbsp;AND&nbsp;SHAREHOLDERS'&nbsp;EQUITY</font></b></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">Current&nbsp;liabilities:</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current&nbsp;portion&nbsp;of&nbsp;long&nbsp;term&nbsp;debt&nbsp;to&nbsp;shareholder</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;65,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit&nbsp;line&nbsp;payable</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;432,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts&nbsp;payable</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;642,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued&nbsp;expenses</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;349,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income&nbsp;taxes&nbsp;payable&nbsp;</font></td>
      <td width="188" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;29,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total&nbsp;current&nbsp;liabilities&nbsp;</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,517,000&nbsp;</font></td>
    </tr>
    <tr style="height:9.0pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      Long-term&nbsp;debt&nbsp;to&nbsp;a&nbsp;shareholder,&nbsp;net&nbsp;of&nbsp;current&nbsp;portion</font></td>
      <td width="188" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;145,000&nbsp;</font></td>
    </tr>
    <tr style="height:9.0pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">Total&nbsp;liabilities</font></td>
      <td width="188" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,662,000&nbsp;</font></td>
    </tr>
    <tr style="height:9.0pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">Commitments&nbsp;and&nbsp;contingencies&nbsp;</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">Shareholders'&nbsp;equity:</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;Series&nbsp;A&nbsp;convertible&nbsp;preferred&nbsp;shares;&nbsp;no&nbsp;par&nbsp;value;&nbsp;liquidation&nbsp;preference&nbsp;of&nbsp;</font></td>
      <td width="188" valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$3.60&nbsp;per&nbsp;share;&nbsp;10,000,000&nbsp;shares&nbsp;authorized;&nbsp;78,129&nbsp;shares&nbsp;issued&nbsp;and&nbsp;outstanding</font></td>
      <td width="188" valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;283,000&nbsp;</font></td>
    </tr>
    <tr style="height:9.0pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="188" valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;Common&nbsp;shares;&nbsp;no&nbsp;par&nbsp;value;&nbsp;50,000,000&nbsp;shares&nbsp;authorized;&nbsp;8,711,600&nbsp;shares&nbsp;issued</font></td>
      <td width="188" valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and&nbsp;outstanding,</font></td>
      <td width="188" valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,999,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;Accumulated&nbsp;deficit&nbsp;</font></td>
      <td width="188" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7,789,000)</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7,493,000&nbsp;</font></td>
    </tr>
    <tr style="height:9.0pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">Receivable&nbsp;for&nbsp;stock&nbsp;purchase&nbsp;</font></td>
      <td width="188" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(51,000)</font></td>
    </tr>
    <tr style="height:9.0pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total&nbsp;shareholders'&nbsp;equity</font></td>
      <td width="188" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7,442,000&nbsp;</font></td>
    </tr>
    <tr style="height:9.0pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="188" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total&nbsp;liabilities&nbsp;and&nbsp;shareholders'&nbsp;equity</font></td>
      <td width="188" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  2.25pt double windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;9,104,000&nbsp;</font></td>
    </tr>
    <tr style="height:13.5pt">
      <td nowrap valign="bottom" style="width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="188" valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="bottom" style="border-bottom:1px solid #000000; width: 603; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      </td>
      <td width="188" valign="bottom" style="border-bottom:1px solid #000000; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
  </table>
</div>




<p align=center style='text-align:center;text-autospace:none'>&nbsp;</p>



<p align=center style='text-align:center'><i>&nbsp;</i></p>

<p align=center style='text-align:center'><i>See notes to consolidated financial statements.</i></p>

<p align=center style='text-align:center'>&nbsp;</p>

<p align=center style='text-align:center'>24</p>

<b><hr color="#000080"><br clear=all
style='page-break-before:always'>
</b>

<p align=center style='text-align:center;text-autospace:none'><b>PRO-DEX,
INC. AND SUBSIDIARIES <br>
<a name="CONSOLIDATED STATEMENTS OF OPERATIONS">CONSOLIDATED
STATEMENTS OF OPERATIONS</a><br>
Years ended  June 30, 2003 and 2002</b></p>



<table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="width: 730; border-collapse: collapse; margin-left: -.75pt">
  <tr style="height:12.75pt">
    <td valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in; border-top-style:solid; border-top-width:1">
    </td>
    <td valign="top" style="width: 108; border-left: medium none; border-right: medium none; border-bottom: 1.0pt solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in; border-top-style:solid; border-top-width:1">
    <p class="MsoNormal" align="center"><i><font size="2">2003</font></i></td>
    <td valign="top" style="width: 38; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in; border-top-style:solid; border-top-width:1">
    <p class="MsoNormal"><i><font size="2">&nbsp;</font></i></td>
    <td valign="top" style="width: 107; border-left: medium none; border-right: medium none; border-bottom: 1.0pt solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in; border-top-style:solid; border-top-width:1">
    <p class="MsoNormal" align="center"><i><font size="2">2002</font></i></td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <font size="2">&nbsp;</font></td>
    <td valign="top" style="width: 108; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    </td>
    <td valign="top" style="width: 38; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    </td>
    <td valign="top" style="width: 107; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    </td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">Net&nbsp;sales&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11,990,000&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,526,000&nbsp;</font></td>
  </tr>
  <tr style="height:6.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <font size="2">&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    </td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">
    Cost&nbsp;of&nbsp;sales&nbsp;(includes&nbsp;rent&nbsp;paid&nbsp;to&nbsp;a&nbsp;director&nbsp;of&nbsp;$62,000&nbsp;in&nbsp;2002)</font></td>
    <td valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7,075,000&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6,426,000&nbsp;</font></td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">Gross&nbsp;profit&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,915,000&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,100,000&nbsp;</font></td>
  </tr>
  <tr style="height:9.0pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <font size="2">&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    </td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">Operating&nbsp;expenses:&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    </td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;710,000&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;551,000&nbsp;</font></td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General&nbsp;and&nbsp;administrative&nbsp;expenses&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,410,000&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,650,000&nbsp;</font></td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research&nbsp;and&nbsp;development&nbsp;costs&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,457,000&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,545,000&nbsp;</font></td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization</font></td>
    <td valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;32,000&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;489,000&nbsp;</font></td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">Total&nbsp;operating&nbsp;expenses&nbsp;</font></td>
    <td valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,609,000&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6,235,000&nbsp;</font></td>
  </tr>
  <tr style="height:9.0pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <font size="2">&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    </td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">Income&nbsp;(loss)&nbsp;from&nbsp;operations&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;306,000&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2,135,000)</font></td>
  </tr>
  <tr style="height:9.0pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <font size="2">&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    </td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">Other&nbsp;income&nbsp;(expense):&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    </td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other&nbsp;income,&nbsp;net&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;36,000&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;36,000&nbsp;</font></td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest&nbsp;(expense)&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(87,000)</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(117,000)</font></td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss&nbsp;on&nbsp;disposal&nbsp;of&nbsp;equipment&nbsp;and&nbsp;leasehold&nbsp;improvements&nbsp;</font></td>
    <td valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(159,000)</font></td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">Total</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(51,000)</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(240,000)</font></td>
  </tr>
  <tr style="height:9.0pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <font size="2">&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    </td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">
    Income&nbsp;(loss)&nbsp;from&nbsp;continuing&nbsp;operations&nbsp;before&nbsp;provision&nbsp;for</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    </td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">&nbsp;income&nbsp;taxes&nbsp;(credits)</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;255,000&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2,375,000)</font></td>
  </tr>
  <tr style="height:9.0pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <font size="2">&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    </td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">Provision&nbsp;for&nbsp;income&nbsp;taxes&nbsp;(credits)</font></td>
    <td valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;122,000&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,210,000)</font></td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">Income&nbsp;(Loss)&nbsp;from&nbsp;continuing&nbsp;operations</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;133,000&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,165,000)</font></td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">
    (Loss)&nbsp;on&nbsp;disposal&nbsp;of&nbsp;discontinued&nbsp;operations&nbsp;net&nbsp;of&nbsp;</font></td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    </td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    </td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">&nbsp;(tax&nbsp;credits)&nbsp;of&nbsp;&nbsp;($267,000)</font></td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</font></td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(401,000)</font></td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">Net&nbsp;Income&nbsp;(loss)</font></td>
    <td valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;133,000&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,566,000)</font></td>
  </tr>
  <tr style="height:8.25pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal">&nbsp;</td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    </td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">
    Net&nbsp;Income&nbsp;(loss)&nbsp;per&nbsp;share&nbsp;from&nbsp;continuing&nbsp;operations:</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    </td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal" style="text-indent:10.0pt"><font size="2">Basic&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.02&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.13)</font></td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="bottom" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal" style="text-indent:10.0pt"><font size="2">
    Diluted&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.01&nbsp;</font></td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.13)</font></td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">
    Net&nbsp;Income&nbsp;(loss)&nbsp;per&nbsp;share&nbsp;from&nbsp;discontinued&nbsp;operations:</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    </td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal" style="text-indent:10.0pt"><font size="2">Basic&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.05)</font></td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="bottom" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal" style="text-indent:10.0pt"><font size="2">
    Diluted&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;</font></td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.05)</font></td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">Net&nbsp;Income&nbsp;(loss)&nbsp;per&nbsp;share:</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    </td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="top" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal" style="text-indent:10.0pt"><font size="2">Basic&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.02&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.18)</font></td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="bottom" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal" style="text-indent:10.0pt"><font size="2">
    Diluted&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.01&nbsp;</font></td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.18)</font></td>
  </tr>
  <tr style="height:9.0pt">
    <td nowrap valign="bottom" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <font size="2">&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    </td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="bottom" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">
    Weighted&nbsp;average&nbsp;shares&nbsp;outstanding&nbsp;-&nbsp;basic</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,743,575&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,787,300&nbsp;</font></td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="bottom" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    <p class="MsoNormal"><font size="2">
    Weighted&nbsp;average&nbsp;shares&nbsp;outstanding&nbsp;-&nbsp;diluted</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,040,893&nbsp;</font></td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,787,300&nbsp;</font></td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="bottom" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    </td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    </td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    </td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="bottom" style="width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    </td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="108">
    </td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="38">
    </td>
    <td valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right" width="107">
    </td>
  </tr>
  <tr style="height:12.75pt">
    <td nowrap valign="bottom" style="border-bottom:1px solid #000000; width: 427; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
    </td>
    <td nowrap valign="bottom" style="border-bottom:1px solid #000000; width: 108; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" align="right">
    </td>
    <td nowrap valign="bottom" style="border-bottom:1px solid #000000; width: 38; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" align="right">
    </td>
    <td nowrap valign="bottom" style="border-bottom:1px solid #000000; width: 107; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" align="right">
    </td>
  </tr>
</table>

<p align=center style='text-align:center;text-autospace:none'>&nbsp;</p>



<p align=center style='text-align:center'><i>See notes to consolidated financial statements.</i></p>



<p align=center style='text-align:center'>&nbsp;</p>



<p align=center style='text-align:center'>&nbsp;</p>



<p align=center style='text-align:center'>25</p>

<hr color="#000080"><br clear=all
style='page-break-before:always'>






<div align="left">






<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0
 style='border-collapse:collapse;border:none' width="775">
 <tr style='height:62.55pt'>
  <td colspan=13 valign=top style='border:medium none;
  padding:0in;'>
  <p align=center style='text-align:center;text-autospace:none'><b>
  <font size="2">PRO-DEX, INC. AND SUBSIDIARIES </font> </b></p>
  <p align=center style='text-align:center;text-autospace:none'><b>
  <font size="2"><a name="CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY">&nbsp;CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
  </a><br>
  Years Ended  June 30, 2003 and 2002 </font></b></p>
  <p align=center style='text-align:center;text-autospace:none'><b>
  <font size="2">&nbsp;</font></b></p>

  </td>
 </tr>
 <tr style='height:9.8pt'>
  <td valign=top style='width:119;border:medium none;padding:0in;
  height:9.8pt'>

  </td>
  <td valign=top style='width:7;border:medium none;padding:0in;
  height:9.8pt'>

  </td>
  <td width=134 colspan=2 valign=top style='width:1.4in;border:none;padding:
  0in 0in 0in 0in;height:9.8pt'>
  <p align=center style='text-align:center;text-autospace:none'><u>
  <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  Preferred Shares&nbsp;</font></u></p>
  </td>
  <td width=38 valign=top style='width:28.5pt;border:none;padding:0in 0in 0in 0in;
  height:9.8pt'>

  </td>
  <td width=163 colspan=3 valign=top style='width:122.45pt;border:none;
  padding:0in 0in 0in 0in;height:9.8pt'>
  <p align=center style='text-align:center;text-autospace:none'><u>
  <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  Common Shares&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </font> </u></p>
  </td>
  <td width=71 colspan=2 valign=top style='width:53.25pt;border:none;
  padding:0in 0in 0in 0in;height:9.8pt'>

  </td>
  <td width=71 colspan=2 valign=top style='width:52.95pt;border:none;
  padding:0in 0in 0in 0in;height:9.8pt'>

  </td>
  <td width=71 valign=top style='width:53.5pt;border:none;padding:0in 0in 0in 0in;
  height:9.8pt'>

  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=top style='width:119;border:medium none;padding:0in;
  height:10.55pt'>

  </td>
  <td valign=top style='width:7;border:medium none;padding:0in;
  height:10.55pt'>

  </td>
  <td width=63 valign=top style='width:47.55pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>

  </td>
  <td width=71 valign=top style='width:53.25pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>

  </td>
  <td width=38 valign=top style='width:28.5pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>

  </td>
  <td width=92 colspan=2 valign=top style='width:69.2pt;border:none;padding:
  0in 0in 0in 0in;height:10.55pt'>

  </td>
  <td width=71 valign=top style='width:53.25pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>

  </td>
  <td width=71 colspan=2 valign=top style='width:53.25pt;border:none;
  padding:0in 0in 0in 0in;height:10.55pt'>

  </td>
  <td width=71 colspan=2 valign=top style='width:52.95pt;border:none;
  padding:0in 0in 0in 0in;height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">Receivable
  </font> </p>
  </td>
  <td width=71 valign=top style='width:53.5pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>

  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=top style='width:119;border:medium none;padding:0in;
  height:10.55pt'>

  </td>
  <td valign=top style='width:7;border:medium none;padding:0in;
  height:10.55pt'>

  </td>
  <td width=63 valign=top style='width:47.55pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">Number</font></p>
  </td>
  <td width=71 valign=top style='width:53.25pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>

  </td>
  <td width=38 valign=top style='width:28.5pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>

  </td>
  <td width=92 colspan=2 valign=top style='width:69.2pt;border:none;padding:
  0in 0in 0in 0in;height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">Number</font></p>
  </td>
  <td width=71 valign=top style='width:53.25pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>

  </td>
  <td width=71 colspan=2 valign=top style='width:53.25pt;border:none;
  padding:0in 0in 0in 0in;height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">Accumulated
  </font> </p>
  </td>
  <td width=71 colspan=2 valign=top style='width:52.95pt;border:none;
  padding:0in 0in 0in 0in;height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">for Stock
  </font> </p>
  </td>
  <td width=71 valign=top style='width:53.5pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>

  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=top style='width:119;border:medium none;padding:0in;
  height:10.55pt'>

  </td>
  <td valign=top style='width:7;border:medium none;padding:0in;
  height:10.55pt'>

  </td>
  <td width=63 valign=top style='width:47.55pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">of Shares</font></p>
  </td>
  <td width=71 valign=top style='width:53.25pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">Amount
  </font> </p>
  </td>
  <td width=38 valign=top style='width:28.5pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>

  </td>
  <td width=92 colspan=2 valign=top style='width:69.2pt;border:none;padding:
  0in 0in 0in 0in;height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">of Shares</font></p>
  </td>
  <td width=71 valign=top style='width:53.25pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">Amount
  </font> </p>
  </td>
  <td width=71 colspan=2 valign=top style='width:53.25pt;border:none;
  padding:0in 0in 0in 0in;height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">Deficit
  </font> </p>
  </td>
  <td width=71 colspan=2 valign=top style='width:52.95pt;border:none;
  padding:0in 0in 0in 0in;height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">Purchase
  </font> </p>
  </td>
  <td width=71 valign=top style='width:53.5pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">Total
  </font> </p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=top style='width:119;border:medium none;padding:0in;
  height:10.55pt'>

  </td>
  <td valign=top style='width:7;border:medium none;padding:0in;
  height:10.55pt'>

  </td>
  <td colspan=11 valign=top style='border:medium none;
  padding:0in;'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">&nbsp;&nbsp;&nbsp;
  ____________________________________________________________________________________
  </font>
  </p>
  </td>
 </tr>
 <tr style='height:20.35pt'>
  <td valign=top style='width:119;border:medium none;padding:0in;
  height:20.35pt'>
  <p style='text-autospace:none'><font size="2">Balance,
  June 30, 2001</font></p>
  </td>
  <td valign=top style='width:7;border:medium none;padding:0in;
  height:20.35pt'>

  </td>
  <td width=63 valign=top style='width:47.55pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">78,129
  </font> </p>
  </td>
  <td width=71 valign=top style='width:53.25pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">$283,000
  </font> </p>
  </td>
  <td width=38 valign=top style='width:28.5pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>

  </td>
  <td width=91 valign=top style='width:68.1pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">8,787,300
  </font> </p>
  </td>
  <td width=72 colspan=2 valign=top style='width:54.35pt;border:none;
  padding:0in 0in 0in 0in;height:20.35pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">$15,020,000
  </font> </p>
  </td>
  <td width=71 colspan=2 valign=top style='width:53.25pt;border:none;
  padding:0in 0in 0in 0in;height:20.35pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">($6,356,000)
  </font> </p>
  </td>
  <td width=71 colspan=2 valign=top style='width:52.95pt;border:none;
  padding:0in 0in 0in 0in;height:20.35pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">($101,000)
  </font> </p>
  </td>
  <td width=71 valign=top style='width:53.5pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">$8,846,000
  </font> </p>
  </td>
 </tr>
 <tr style='height:21.1pt'>
  <td valign=top style='width:119;border:medium none;padding:0in;
  height:21.1pt'>
  <p style='text-autospace:none'><font size="2">Stock
  based Compensation </font> </p>
  </td>
  <td valign=top style='width:7;border:medium none;padding:0in;
  height:21.1pt'>

  </td>
  <td width=63 valign=top style='width:47.55pt;border:none;padding:0in 0in 0in 0in;
  height:21.1pt'>

  <p align=center style='text-align:center;text-autospace:none'><font size="2">--
  </font> </p>
  </td>
  <td width=71 valign=top style='width:53.25pt;border:none;padding:0in 0in 0in 0in;
  height:21.1pt'>

  <p align=center style='text-align:center;text-autospace:none'><font size="2">--
  </font> </p>
  </td>
  <td width=38 valign=top style='width:28.5pt;border:none;padding:0in 0in 0in 0in;
  height:21.1pt'>

  </td>
  <td width=91 valign=top style='width:68.1pt;border:none;padding:0in 0in 0in 0in;
  height:21.1pt'>

  <p align=center style='text-align:center;text-autospace:none'><font size="2">--</font></p>
  </td>
  <td width=72 colspan=2 valign=top style='width:54.35pt;border:none;
  padding:0in 0in 0in 0in;height:21.1pt'>

  <p align=right style='text-align:right;text-autospace:none'><font size="2">13,000
  </font> </p>
  </td>
  <td width=71 colspan=2 valign=top style='width:53.25pt;border:none;
  padding:0in 0in 0in 0in;height:21.1pt'>

  <p align=center style='text-align:center;text-autospace:none'><font size="2">--</font></p>
  </td>
  <td width=71 colspan=2 valign=top style='width:52.95pt;border:none;
  padding:0in 0in 0in 0in;height:21.1pt'>

  <p align=center style='text-align:center;text-autospace:none'><font size="2">--</font></p>
  </td>
  <td width=71 valign=top style='width:53.5pt;border:none;padding:0in 0in 0in 0in;
  height:21.1pt'>

  <p align=right style='text-align:right;text-autospace:none'><font size="2">13,000
  </font> </p>
  </td>
 </tr>
 <tr style='height:20.35pt'>
  <td valign=top style='width:119;border:medium none;padding:0in;
  height:20.35pt'>
  <p style='text-autospace:none'><font size="2">Services
  Received</font></p>
  </td>
  <td valign=top style='width:7;border:medium none;padding:0in;
  height:20.35pt'>

  </td>
  <td width=63 valign=top style='width:47.55pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--</font></p>
  </td>
  <td width=71 valign=top style='width:53.25pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--</font></p>
  </td>
  <td width=38 valign=top style='width:28.5pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>

  </td>
  <td width=91 valign=top style='width:68.1pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--</font></p>
  </td>
  <td width=72 colspan=2 valign=top style='width:54.35pt;border:none;
  padding:0in 0in 0in 0in;height:20.35pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--</font></p>
  </td>
  <td width=71 colspan=2 valign=top style='width:53.25pt;border:none;
  padding:0in 0in 0in 0in;height:20.35pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--</font></p>
  </td>
  <td width=71 colspan=2 valign=top style='width:52.95pt;border:none;
  padding:0in 0in 0in 0in;height:20.35pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 25,000</font></p>
  </td>
  <td width=71 valign=top style='width:53.5pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 25,000</font></p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=top style='width:119;border:medium none;padding:0in;
  height:10.55pt'>
  <p style='text-autospace:none'><font size="2">Net
  (loss) </font> </p>
  </td>
  <td valign=top style='width:7;border:medium none;padding:0in;
  height:10.55pt'>

  </td>
  <td width=63 valign=top style='width:47.55pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--
  </font> </p>
  </td>
  <td width=71 valign=top style='width:53.25pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--
  </font> </p>
  </td>
  <td width=38 valign=top style='width:28.5pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>

  </td>
  <td width=91 valign=top style='width:68.1pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--
  </font> </p>
  </td>
  <td width=72 colspan=2 valign=top style='width:54.35pt;border:none;
  padding:0in 0in 0in 0in;height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--
  </font> </p>
  </td>
  <td width=71 colspan=2 valign=top style='width:53.25pt;border:none;
  padding:0in 0in 0in 0in;height:10.55pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">(1,566,000)
  </font> </p>
  </td>
  <td width=71 colspan=2 valign=top style='width:52.95pt;border:none;
  padding:0in 0in 0in 0in;height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--
  </font> </p>
  </td>
  <td width=71 valign=top style='width:53.5pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">(1,566,000)</font></p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=top style='width:119;border:medium none;padding:0in;
  height:10.55pt'>

  </td>
  <td valign=top style='width:7;border:medium none;padding:0in;
  height:10.55pt'>

  </td>
  <td colspan=11 valign=top style='border:medium none;
  padding:0in;'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">_____________________________________________________________________________________
  </font>
  </p>
  </td>
 </tr>
 <tr style='height:21.1pt'>
  <td valign=top style='width:119;border:medium none;padding:0in;
  height:21.1pt'>
  <p style='text-autospace:none'><font size="2">Balance,
  June 30, 2002 </font> </p>
  </td>
  <td valign=top style='width:7;border:medium none;padding:0in;
  height:21.1pt'>

  </td>
  <td width=63 valign=top style='width:47.55pt;border:none;padding:0in 0in 0in 0in;
  height:21.1pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">78,129
  </font> </p>
  </td>
  <td width=71 valign=top style='width:53.25pt;border:none;padding:0in 0in 0in 0in;
  height:21.1pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">283,000
  </font> </p>
  </td>
  <td width=38 valign=top style='width:28.5pt;border:none;padding:0in 0in 0in 0in;
  height:21.1pt'>

  </td>
  <td width=92 colspan=2 valign=top style='width:69.2pt;border:none;padding:
  0in 0in 0in 0in;height:21.1pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">8,787,300
  </font> </p>
  </td>
  <td width=71 valign=top style='width:53.25pt;border:none;padding:0in 0in 0in 0in;
  height:21.1pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">15,033,000
  </font> </p>
  </td>
  <td width=70 valign=top style='width:52.7pt;border:none;padding:0in 0in 0in 0in;
  height:21.1pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">(7,922,000)
  </font> </p>
  </td>
  <td width=71 colspan=3 valign=top style='width:53.5pt;border:none;padding:
  0in 0in 0in 0in;height:21.1pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">(76,000)
  </font> </p>
  </td>
  <td width=71 valign=top style='width:53.5pt;border:none;padding:0in 0in 0in 0in;
  height:21.1pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">7,318,000
  </font> </p>
  </td>
 </tr>
 <tr style='height:20.35pt'>
  <td valign=top style='width:119;border:medium none;padding:0in;
  height:20.35pt'>
  <p style='text-autospace:none'><font size="2">Stock
  based Compensation </font> </p>
  </td>
  <td valign=top style='width:7;border:medium none;padding:0in;
  height:20.35pt'>

  </td>
  <td width=63 valign=top style='width:47.55pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>

  <p align=center style='text-align:center;text-autospace:none'><font size="2">--
  </font> </p>
  </td>
  <td width=71 valign=top style='width:53.25pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>

  <p align=center style='text-align:center;text-autospace:none'><font size="2">--
  </font> </p>
  </td>
  <td width=38 valign=top style='width:28.5pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>

  </td>
  <td width=91 valign=top style='width:68.1pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>

  <p align=center style='text-align:center;text-autospace:none'><font size="2">--</font></p>
  </td>
  <td width=72 colspan=2 valign=top style='width:54.35pt;border:none;
  padding:0in 0in 0in 0in;height:20.35pt'>

  <p align=right style='text-align:right;text-autospace:none'><font size="2">10,000
  </font> </p>
  </td>
  <td width=70 valign=top style='width:52.7pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>

  <p align=center style='text-align:center;text-autospace:none'><font size="2">--&nbsp;
  </font> </p>
  </td>
  <td width=71 colspan=3 valign=top style='width:53.5pt;border:none;padding:
  0in 0in 0in 0in;height:20.35pt'>

  <p align=center style='text-align:center;text-autospace:none'><font size="2">--</font></p>
  </td>
  <td width=71 valign=top style='width:53.5pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>

  <p align=right style='text-align:right;text-autospace:none'><font size="2">10,000
  </font> </p>
  </td>
 </tr>
 <tr style='height:21.1pt'>
  <td valign=top style='width:119;border:medium none;padding:0in;
  height:21.1pt'>
  <p style='text-autospace:none'><font size="2">Treasury
  stock purchased</font></p>
  </td>
  <td valign=top style='width:7;border:medium none;padding:0in;
  height:21.1pt'>

  </td>
  <td width=63 valign=top style='width:47.55pt;border:none;padding:0in 0in 0in 0in;
  height:21.1pt'>

  <p align=center style='text-align:center;text-autospace:none'><font size="2">--
  </font> </p>
  </td>
  <td width=71 valign=top style='width:53.25pt;border:none;padding:0in 0in 0in 0in;
  height:21.1pt'>

  <p align=center style='text-align:center;text-autospace:none'><font size="2">--
  </font> </p>
  </td>
  <td width=38 valign=top style='width:28.5pt;border:none;padding:0in 0in 0in 0in;
  height:21.1pt'>

  </td>
  <td width=91 valign=top style='width:68.1pt;border:none;padding:0in 0in 0in 0in;
  height:21.1pt'>

  <p align=right style='text-align:right;text-autospace:none'><font size="2">(75,700)</font></p>
  </td>
  <td width=72 colspan=2 valign=top style='width:54.35pt;border:none;
  padding:0in 0in 0in 0in;height:21.1pt'>

  <p align=right style='text-align:right;text-autospace:none'><font size="2">(44,000)</font></p>
  </td>
  <td width=70 valign=top style='width:52.7pt;border:none;padding:0in 0in 0in 0in;
  height:21.1pt'>

  </td>
  <td width=71 colspan=3 valign=top style='width:53.5pt;border:none;padding:
  0in 0in 0in 0in;height:21.1pt'>

  </td>
  <td width=71 valign=top style='width:53.5pt;border:none;padding:0in 0in 0in 0in;
  height:21.1pt'>

  <p align=right style='text-align:right;text-autospace:none'><font size="2">(44,000)</font></p>
  </td>
 </tr>
 <tr style='height:20.35pt'>
  <td valign=top style='width:119;border:medium none;padding:0in;
  height:20.35pt'>
  <p style='text-autospace:none'><font size="2">Services
  Received</font></p>
  </td>
  <td valign=top style='width:7;border:medium none;padding:0in;
  height:20.35pt'>

  </td>
  <td width=63 valign=top style='width:47.55pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--</font></p>
  </td>
  <td width=71 valign=top style='width:53.25pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--</font></p>
  </td>
  <td width=38 valign=top style='width:28.5pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>

  </td>
  <td width=92 colspan=2 valign=top style='width:69.2pt;border:none;padding:
  0in 0in 0in 0in;height:20.35pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--</font></p>
  </td>
  <td width=71 valign=top style='width:53.25pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--</font></p>
  </td>
  <td width=70 valign=top style='width:52.7pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--</font></p>
  </td>
  <td width=71 colspan=3 valign=top style='width:53.5pt;border:none;padding:
  0in 0in 0in 0in;height:20.35pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">&nbsp;25,000
  </font> </p>
  </td>
  <td width=71 valign=top style='width:53.5pt;border:none;padding:0in 0in 0in 0in;
  height:20.35pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">25,000
  </font> </p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=top style='width:119;border:medium none;padding:0in;
  height:10.55pt'>
  <p style='text-autospace:none'><font size="2">Net
  income </font> </p>
  </td>
  <td valign=top style='width:7;border:medium none;padding:0in;
  height:10.55pt'>

  </td>
  <td width=63 valign=top style='width:47.55pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--
  </font> </p>
  </td>
  <td width=71 valign=top style='width:53.25pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--
  </font> </p>
  </td>
  <td width=38 valign=top style='width:28.5pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>

  </td>
  <td width=91 valign=top style='width:68.1pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--
  </font> </p>
  </td>
  <td width=72 colspan=2 valign=top style='width:54.35pt;border:none;
  padding:0in 0in 0in 0in;height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--
  </font> </p>
  </td>
  <td width=70 valign=top style='width:52.7pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">133,000
  </font> </p>
  </td>
  <td width=71 colspan=3 valign=top style='width:53.5pt;border:none;padding:
  0in 0in 0in 0in;height:10.55pt'>
  <p align=center style='text-align:center;text-autospace:none'><font size="2">--
  </font> </p>
  </td>
  <td width=71 valign=top style='width:53.5pt;border:none;padding:0in 0in 0in 0in;
  height:10.55pt'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">133,000</font></p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=top style='width:119;border:medium none;padding:0in;
  height:10.55pt'>

  </td>
  <td valign=top style='width:7;border:medium none;padding:0in;
  height:10.55pt'>

  </td>
  <td colspan=11 valign=top style='border:medium none;
  padding:0in;'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">_____________________________________________________________________________________
  </font>
  </p>
  </td>
 </tr>
 <tr style='height:.2in'>
  <td valign=top style='border-left:medium none; border-right:medium none; border-top:medium none; width:119;border-bottom:1.5pt double windowtext;
  padding:0in;height:.2in'>
  <p style='text-autospace:none'><font size="2">Balance,
  June 30, 2003</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-right:medium none; border-top:medium none; width:7;border-bottom:1.5pt double windowtext;
  padding:0in;height:.2in'>

  </td>
  <td width=63 valign=top style='width:47.55pt;border:none;border-bottom:double windowtext 1.5pt;
  padding:0in 0in 0in 0in;height:.2in'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">78,129
  </font> </p>
  </td>
  <td width=71 valign=top style='width:53.25pt;border:none;border-bottom:double windowtext 1.5pt;
  padding:0in 0in 0in 0in;height:.2in'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">$283,000
  </font> </p>
  </td>
  <td width=38 valign=top style='width:28.5pt;border:none;border-bottom:double windowtext 1.5pt;
  padding:0in 0in 0in 0in;height:.2in'>

  </td>
  <td width=92 colspan=2 valign=top style='width:69.2pt;border:none;border-bottom:
  double windowtext 1.5pt;padding:0in 0in 0in 0in;height:.2in'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">8,711,600
  </font> </p>
  </td>
  <td width=71 valign=top style='width:53.25pt;border:none;border-bottom:double windowtext 1.5pt;
  padding:0in 0in 0in 0in;height:.2in'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">$14,999,000
  </font> </p>
  </td>
  <td width=71 colspan=2 valign=top style='width:53.25pt;border:none;
  border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;height:.2in'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">($7,789,000)
  </font> </p>
  </td>
  <td width=64 valign=top style='width:48.1pt;border:none;border-bottom:double windowtext 1.5pt;
  padding:0in 0in 0in 0in;height:.2in'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">($51,000)
  </font> </p>
  </td>
  <td width=78 colspan=2 valign=top style='width:58.35pt;border:none;
  border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;height:.2in'>
  <p align=right style='text-align:right;text-autospace:none'><font size="2">$7,442,000
  </font> </p>
  </td>
 </tr>
 <tr height=0>
  <td width=119 style='border:none'></td>
  <td width=7 style='border:none'></td>
  <td width=63 style='border:none'></td>
  <td width=71 style='border:none'></td>
  <td width=38 style='border:none'></td>
  <td width=91 style='border:none'></td>
  <td width=1 style='border:none'></td>
  <td width=71 style='border:none'></td>
  <td width=70 style='border:none'></td>
  <td width=1 style='border:none'></td>
  <td width=64 style='border:none'></td>
  <td width=6 style='border:none'></td>
  <td width=71 style='border:none'></td>
 </tr>
</table>

</div>

<p style='text-autospace:none'><b>&nbsp;</b></p>



<p align=center style='text-align:center'><i>See notes to consolidated financial statements.</i></p>



<p align=center style='text-align:center'>&nbsp;</p>



<p align=center style='text-align:center'>&nbsp;</p>



<p align=center style='text-align:center'>&nbsp;</p>



<p align=center style='text-align:center'>26</p>

<b><hr color="#000080"><br clear=all
style='page-break-before:always'>
</b>



<p align=center style='text-align:center;text-autospace:none'><b>PRO-DEX,
INC. AND SUBSIDIARIES <br>
<a name="CONSOLIDATED STATEMENTS OF CASH FLOWS">CONSOLIDATED STATEMENTS
OF CASH FLOWS</a><br>
Years ended  June 30, 2003 and 2002</b></p>



<p align=center style='text-align:center;text-autospace:none'>&nbsp;</p>



<div align="left">
  <table class="MsoNormalTable" border="0" cellspacing="0" cellpadding="0" style="width: 730; border-collapse: collapse; margin-left: -.75pt">
    <tr style="height:9.0pt">
      <td nowrap valign="bottom" style="border-top:1px solid #000000; width: 445; height: 9.0pt; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in; border-bottom-style:solid; border-bottom-width:1">
      <font size="2">&nbsp;</font></td>
      <td nowrap valign="bottom" style="border-top:1px solid #000000; width: 115; height: 9.0pt; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in; border-bottom-style:solid; border-bottom-width:1">
      </td>
      <td nowrap valign="bottom" style="border-top:1px solid #000000; width: 16; height: 9.0pt; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in; border-bottom-style:solid; border-bottom-width:1">
      </td>
      <td nowrap valign="bottom" style="border-top:1px solid #000000; width: 118; height: 9.0pt; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in; border-bottom-style:solid; border-bottom-width:1">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; height: 12.75pt; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      </td>
      <td nowrap valign="top" style="width: 115; height: 12.75pt; border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal" align="center" style="text-align:center"><i>
      <font size="2">2003</font></i></td>
      <td nowrap valign="top" style="width: 16; height: 12.75pt; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal" align="center" style="text-align:center"><i>
      <font size="2">&nbsp;</font></i></td>
      <td nowrap valign="top" style="width: 118; height: 12.75pt; border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1.0pt solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal" align="center" style="text-align:center"><i>
      <font size="2">2002</font></i></td>
    </tr>
    <tr style="height:9.0pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td nowrap valign="top" style="width: 115; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      </td>
      <td nowrap valign="top" style="width: 16; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      </td>
      <td nowrap valign="top" style="width: 118; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">Cash&nbsp;Flows&nbsp;from&nbsp;Operating&nbsp;Activities:&nbsp;</font></td>
      <td nowrap valign="top" style="width: 115; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      </td>
      <td nowrap valign="top" style="width: 16; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      </td>
      <td nowrap valign="top" style="width: 118; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">Net&nbsp;Income&nbsp;(loss)</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;133,000&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,566,000)</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      Adjustments&nbsp;to&nbsp;reconcile&nbsp;net&nbsp;income&nbsp;(loss)&nbsp;to&nbsp;net&nbsp;cash&nbsp;provided&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;by&nbsp;(used&nbsp;in)&nbsp;operating&nbsp;activities:</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;Depreciation&nbsp;and&nbsp;amortization&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;375,000&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;865,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;&nbsp;(Gain)&nbsp;loss&nbsp;on&nbsp;disposal&nbsp;of&nbsp;discontinued&nbsp;operations</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;401,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;&nbsp;Loss&nbsp;on&nbsp;sale&nbsp;of&nbsp;real&nbsp;estate&nbsp;available&nbsp;for&nbsp;sale</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;37,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;&nbsp;Loss&nbsp;on&nbsp;disposal&nbsp;of&nbsp;equipment&nbsp;and&nbsp;leasehold&nbsp;improvements</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;159,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;Impairment&nbsp;of&nbsp;intangible&nbsp;assets</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;154,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Recovery)&nbsp;Provision&nbsp;for&nbsp;doubtful&nbsp;accounts&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,000&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(18,000)</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">Non-cash&nbsp;compensation&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;35,000&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;38,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">Deferred&nbsp;taxes&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;177,000&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(902,000)</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">Changes&nbsp;in:</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Increase)&nbsp;in&nbsp;accounts&nbsp;receivable&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4,000)</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(216,000)</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease&nbsp;in&nbsp;inventories&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;89,000&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;83,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease&nbsp;in&nbsp;prepaid&nbsp;expenses&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,000&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">Decrease&nbsp;in&nbsp;other&nbsp;assets</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17,000&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;75,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Decrease)&nbsp;in&nbsp;accounts&nbsp;payable&nbsp;and&nbsp;accrued&nbsp;expense&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(584,000)</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(549,000)</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Increase)&nbsp;decrease&nbsp;in&nbsp;income&nbsp;taxes&nbsp;receivable</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;330,000&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(330,000)</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Decrease)&nbsp;in&nbsp;income&nbsp;taxes&nbsp;payable&nbsp;</font></td>
      <td width="115" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(72,000)</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</font></td>
    </tr>
    <tr style="height:9.0pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      Net&nbsp;Cash&nbsp;provided&nbsp;by&nbsp;(used&nbsp;in)&nbsp;Operating&nbsp;Activities&nbsp;</font></td>
      <td width="115" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;503,000&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,757,000)</font></td>
    </tr>
    <tr style="height:9.0pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">Cash&nbsp;Flows&nbsp;From&nbsp;Investing&nbsp;Activities:&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;Proceeds&nbsp;from&nbsp;sale&nbsp;of&nbsp;discontinued&nbsp;operations&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;790,000&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;875,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;Proceeds&nbsp;from&nbsp;sale&nbsp;of&nbsp;real&nbsp;estate&nbsp;available&nbsp;for&nbsp;sale</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;434,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;Proceeds&nbsp;from&nbsp;sale&nbsp;of&nbsp;equipment</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6,000&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;Payments&nbsp;related&nbsp;to&nbsp;sale&nbsp;from&nbsp;discontinued&nbsp;operations</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(168,000)</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;Purchases&nbsp;of&nbsp;equipment&nbsp;and&nbsp;leasehold&nbsp;improvements&nbsp;</font></td>
      <td width="115" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(364,000)</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(296,000)</font></td>
    </tr>
    <tr style="height:9.0pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      Net&nbsp;Cash&nbsp;provided&nbsp;by&nbsp;Investing&nbsp;Activities&nbsp;</font></td>
      <td width="115" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;432,000&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;845,000&nbsp;</font></td>
    </tr>
    <tr style="height:9.0pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">Cash&nbsp;Flows&nbsp;from&nbsp;Financing&nbsp;Activities:</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;&nbsp;Principal&nbsp;payments&nbsp;on&nbsp;long-term&nbsp;borrowings&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(126,000)</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(188,000)</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      &nbsp;&nbsp;&nbsp;&nbsp;Net&nbsp;borrowings&nbsp;(payments)&nbsp;on&nbsp;line&nbsp;of&nbsp;credit&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(206,000)</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;638,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;Common&nbsp;stock&nbsp;repurchases&nbsp;</font></td>
      <td width="115" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(44,000)</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</font></td>
    </tr>
    <tr style="height:9.0pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      Net&nbsp;Cash&nbsp;provided&nbsp;by&nbsp;(used&nbsp;in)&nbsp;Financing&nbsp;Activities</font></td>
      <td width="115" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(376,000)</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;450,000&nbsp;</font></td>
    </tr>
    <tr style="height:9.0pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      Net&nbsp;Increase&nbsp;(decrease)&nbsp;in&nbsp;Cash&nbsp;and&nbsp;Cash&nbsp;Equivalents&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;559,000&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(462,000)</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      Cash&nbsp;and&nbsp;Cash&nbsp;Equivalents,&nbsp;beginning&nbsp;of&nbsp;period&nbsp;</font></td>
      <td width="115" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;236,000&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  1.0pt solid windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;698,000&nbsp;</font></td>
    </tr>
    <tr style="height:9.0pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">&nbsp;</td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">&nbsp;</td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">&nbsp;</td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">&nbsp;</td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      Cash&nbsp;and&nbsp;Cash&nbsp;Equivalents,&nbsp;end&nbsp;of&nbsp;period&nbsp;</font></td>
      <td width="115" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  2.25pt double windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;795,000&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:
  2.25pt double windowtext;padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;236,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="bottom" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal" align="center" style="text-align:center"><i>
      <font size="2">Supplemental&nbsp;Information</font></i></td>
      <td width="115" valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="16" valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:9.0pt">
      <td nowrap valign="bottom" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="115" valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="16" valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">Cash&nbsp;payments&nbsp;for&nbsp;interest</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;110,000&nbsp;</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;117,000&nbsp;</font></td>
    </tr>
    <tr style="height:9.0pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <font size="2">&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="top" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      <p class="MsoNormal"><font size="2">
      Cash&nbsp;payments&nbsp;(refunds)&nbsp;for&nbsp;income&nbsp;taxes&nbsp;</font></td>
      <td width="115" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(313,000)</font></td>
      <td width="16" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      </td>
      <td width="118" valign="top" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <p class="MsoNormal"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;387,000&nbsp;</font></td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="bottom" style="width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      </td>
      <td width="115" valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in">
      </td>
      <td width="16" valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in">
      </td>
      <td width="118" valign="bottom" style="padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td nowrap valign="bottom" style="border-bottom:1px solid #000000; width: 445; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in">
      </td>
      <td width="115" valign="bottom" style="border-bottom:1px solid #000000; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in">
      </td>
      <td width="16" valign="bottom" style="border-bottom:1px solid #000000; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in">
      </td>
      <td width="118" valign="bottom" style="border-bottom:1px solid #000000; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in">
      </td>
    </tr>
  </table>
</div>



<p><i>&nbsp;</i></p>

<p align=center style='text-align:center'><i>See notes to consolidated financial statements.</i></p>



<p align=center style='text-align:center'>&nbsp;</p>



<p align=center style='text-align:center'>27</p>



<b><hr color="#000080"><br clear=all
style='page-break-before:always'>
</b>

<p align=center style='text-align:center;text-autospace:none'><b>PRO-DEX,
INC. AND SUBSIDIARIES <br>
<a name="NOTES TO CONSOLIDATED FINANCIAL STATEMENTS">NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS </a> <br>
June 30, 2003 and 2002</b></p>

<p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>

<p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>

<p style='text-autospace:none'><b>NOTE 1 - DESCRIPTION OF
BUSINESS </b></p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Pro-Dex, Inc. (&quot;Pro-Dex&quot; or the &quot;Company&quot;) is a Colorado
corporation, organized in 1978, currently doing business through two wholly
owned operating subsidiaries, Micro Motors, Inc. (&quot;Micro Motors&quot;) and
Oregon Micro Systems, Inc. (&quot;OMS&quot;).&nbsp; Micro Motors, headquartered in
Santa Ana, California, designs, develops and manufactures electric, air, and
battery powered rotary drive systems for the medical device industry, electric
and air devices for the dental industry, and miniature pneumatic motors for
industrial applications.&nbsp; OMS is headquartered in Beaverton, Oregon, where it
designs and manufactures embedded multi-axis motion controllers used to
regulate the motion of servo and stepper motors, predominantly for the
semiconductor and medical analysis equipment industries. </p>



<p style='text-autospace:none'><b>NOTE 2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES </b></p>



<p style='text-autospace:none'><b>Principles of Consolidation </b></p>



<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The consolidated
financial statements include the accounts of the Company and all of its
subsidiaries. All significant inter-company accounts and transactions have been
eliminated. </p>



<p style='text-autospace:none'><b>Basis of Presentation</b></p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The accompanying consolidated financial statements have been prepared in
accordance with accounting principals generally accepted in the United States
  of America. </p>



<p style='text-autospace:none'><b>Revenue Recognition </b></p>



<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Revenue on product
sales is recognized upon shipment to the customer. The Company sells some of
its products with a warranty that provides for repairs or replacement of any
defective parts for a period after the sale. At the time of the sale, the
Company accrues an estimate of the cost of providing the warranty based on
prior experience.&nbsp; The Company recognizes revenue under research and
development agreements as certain deliverables are met as specified in each
development contract. </p>



<p align="justify">&nbsp;&nbsp;&nbsp; &nbsp;Management recognizes shipping costs as incurred as a
part of the costs of goods sold.&nbsp; The Company incurred shipping charges of
approximately $112,000 and $111,000 for the years ended June 30, 2003 and 2002, respectively.&nbsp; </p>



<p style='text-autospace:none'><b>Cash and Cash Equivalents </b></p>



<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Company considers
highly liquid investments with a maturity of three months or less when
purchased to be cash equivalents.</p>



<p style='text-autospace:none'><b>Accounts Receivable </b></p>



<p style='text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Trade receivables are carried at original invoice amount less an estimate made
for doubtful receivables based on a review of all outstanding amounts on a
monthly basis.&nbsp; Management determines the allowance for doubtful accounts by
identifying troubled accounts and using historical experience applied to an
aging of accounts.&nbsp; Trade receivables are written off when deemed
uncollectable.&nbsp; Recoveries of trade receivables previously written off are
recorded when received.</p>



<p style='text-align:justify;text-autospace:none'>&nbsp;</p>



<p style='text-align:center;text-autospace:none'>28</p>



<hr color="#000080"><P Style="page-break-after:always"></p>




<p style='text-align:justify;text-autospace:none'>&nbsp;</p>



<p style='text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A
trade receivable is considered to be past due if any portion of the receivable
balance is outstanding for more than 90 days.&nbsp; Interest is not typically
charged on trade receivables.&nbsp; Changes in allowance for doubtful accounts as of
 June 30, 2003 and 2002 were as follows:</p>



<div align=center>

<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 width=455
 style='width:341.5pt;margin-left:.05pt;border-collapse:collapse;border:none'>
 <tr>
  <td width=251 valign=top style='width:188.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=102 valign=bottom style='width:76.5pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>2003</u></p>
  </td>
  <td width=102 valign=bottom style='width:76.5pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>2002</u></p>
  </td>
 </tr>
 <tr>
  <td width=251 valign=top style='width:188.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Balance at the beginning of
  the year</p>
  </td>
  <td width=102 valign=bottom style='width:76.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>$&nbsp;&nbsp;&nbsp;&nbsp; 26,000 </p>
  </td>
  <td width=102 valign=bottom style='width:76.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>$&nbsp;&nbsp;&nbsp;&nbsp; 44,000 </p>
  </td>
 </tr>
 <tr>
  <td width=251 valign=top style='width:188.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Provision charged to income,
  net of<br>
  recoveries of $19,000 in 2003, and<br>
  $18,000 in 2002 </p>
  </td>
  <td width=102 valign=bottom style='width:76.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>&nbsp;&nbsp;&nbsp; &nbsp; 4,000</u></p>
  </td>
  <td width=102 valign=bottom style='width:76.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>&nbsp;&nbsp;&nbsp; &nbsp; (18,000)</u></p>
  </td>
 </tr>
 <tr>
  <td width=251 valign=top style='width:188.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Balance at the end of the year</p>
  </td>
  <td width=102 valign=bottom style='width:76.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>$&nbsp;&nbsp;&nbsp;&nbsp; 30,000</u></p>
  </td>
  <td width=102 valign=bottom style='width:76.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>$&nbsp;&nbsp;&nbsp;&nbsp; 26,000</u></p>
  </td>
 </tr>
</table>

</div>

<p style='text-autospace:none'><b>&nbsp;Stock Options and Warrants</b></p>



<p style='text-align:justify;text-autospace:none'>Accounting
for Stock-based Compensation</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The Company accounts for stock-based employee compensation under the
requirements of Accounting Principles Board (APB) Opinion No. 25, which does
not require compensation to be recorded if the consideration to be received is
at least equal to fair value at the measurement date.&nbsp; Nonemployee stock-based
transactions are accounted for under the requirements of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
123, <i>Accounting for Stock-Based Compensation</i>, which requires
compensation to be recorded based on the fair value of the securities issued or
the services received, whichever is more reliably measurable.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>SFAS No. 123 requires the disclosure of pro forma net income and earnings
per share had the Company adopted the fair value method.&nbsp; Under SFAS No. 123, the
fair value of stock-based awards to employees is calculated through the use of
option pricing models, even though such models were developed to estimate the
fair value of freely tradable, fully transferable options with vesting
restrictions which significantly differ from the Company's stock option
awards.&nbsp; These models require subjective assumptions, including future stock
price volatility and expected time to exercise, which greatly affect the
calculated value.&nbsp; The Company's calculations for the options granted were made
using the Black-Scholes option-pricing model.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The calculations are based on a single-option valuation approach and
forfeitures are recognized as they occur.&nbsp; The following table illustrates the
effect on net income and earnings per share had compensation cost for employee
stock-based compensation been determined based on the grant date fair values of
awards for the year ended June 30, 2003 and 2002, respectively.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The fair value of each grant is estimated at the grant date using the
Black-Scholes option-pricing model with the following weighted-average
assumptions: no dividend rate for all years; price volatility of 67% to 73% in
2003, of 62% to 69% in 2002; risk-free interest rates of approximately 2.8% to
4.1% in 2003 and 4.3% to 4.6% in 2002; and expected lives of five years.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>



<p style='text-align:center;text-autospace:
none'>29</p>



<hr color="#000080"><br clear=all
style='page-break-before:always'>




<div align=left>

<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 width=615
 style='width:700;margin-left:26.25pt;border-collapse:collapse;border:
 medium none; '>
 <tr>
  <td width=175 valign=top style='width:131.15pt;border:none;border-bottom:
  solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=228 valign=top style='width:171.0pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=102 valign=top style='width:76.5pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center'>2003</p>
  </td>
  <td width=110 valign=top style='width:1.15in;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center'>2002</p>
  </td>
 </tr>
 <tr>
  <td width=175 valign=top style='width:131.15pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Net
  income (loss) As reported:</p>
  </td>
  <td width=228 valign=top style='width:171.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=102 valign=top style='width:76.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 133,000</p>
  </td>
  <td width=110 valign=top style='width:1.15in;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  <p>$ (1,566,000)</p>
  </td>
 </tr>
 <tr>
  <td width=175 valign=top style='width:131.15pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=228 valign=top style='width:171.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Add stock-based
  employee compensation expense included in reported net income, net of related
  tax effects</p>
  </td>
  <td width=102 valign=top style='width:76.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>



  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; ---</p>
  </td>
  <td width=110 valign=top style='width:1.15in;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  <p align="center">---</p>

  </td>
 </tr>
 <tr>
  <td width=175 valign=top style='width:131.15pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=228 valign=top style='width:171.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>(Deduct) total
  stock-based employee compensation expense determined under fair value based
  method for all awards, net of related tax effects</p>
  </td>
  <td width=102 valign=top style='width:76.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;</p>
  <p><br>
  <u>&nbsp;&nbsp;&nbsp;&nbsp; (196,000)</u></p>
  </td>
  <td width=110 valign=top style='width:1.15in;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center'>&nbsp;</p>
  <p align=center style='text-align:center'><br>
  <u>&nbsp; (223,000)&nbsp;</u></p>
  </td>
 </tr>
 <tr>
  <td width=175 valign=top style='width:131.15pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro-forma net (loss):</p>
  </td>
  <td width=228 valign=top style='width:171.0pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;</p>
  </td>
  <td width=102 valign=top style='width:76.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p><u>$&nbsp;&nbsp;&nbsp;&nbsp; (63,000)</u></p>
  </td>
  <td width=110 valign=top style='width:1.15in;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p><u>$ (1,789,000)</u></p>
  </td>
 </tr>
 <tr>
  <td width=175 valign=top style='width:131.15pt;border:solid windowtext 1.0pt;
  border-bottom:none;padding:0in 5.4pt 0in 5.4pt'>
  <p>Basic earnings (loss) per </p>
  </td>
  <td width=228 valign=top style='width:171.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=102 valign=top style='width:76.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=110 valign=top style='width:1.15in;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
 </tr>
 <tr>
  <td width=175 valign=top style='width:131.15pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>share:</p>
  </td>
  <td width=228 valign=top style='width:171.0pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>As reported</p>
  </td>
  <td width=102 valign=top style='width:76.5pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.02</p>
  </td>
  <td width=110 valign=top style='width:1.15in;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp; (0.18)</p>
  </td>
 </tr>
 <tr>
  <td width=175 valign=bottom style='width:131.15pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=228 valign=top style='width:171.0pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Pro forma</p>
  </td>
  <td width=102 valign=top style='width:76.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp; (0.01)</p>
  </td>
  <td width=110 valign=top style='width:1.15in;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp; (0.20)</p>
  </td>
 </tr>
 <tr>
  <td width=175 valign=top style='width:131.15pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Diluted earnings (loss) </p>
  </td>
  <td width=228 valign=top style='width:171.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;</p>
  </td>
  <td width=102 valign=top style='width:76.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;</p>
  </td>
  <td width=110 valign=top style='width:1.15in;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=175 valign=top style='width:131.15pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>per share:</p>
  </td>
  <td width=228 valign=top style='width:171.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>As reported</p>
  </td>
  <td width=102 valign=top style='width:76.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.01</p>
  </td>
  <td width=110 valign=top style='width:1.15in;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp; (0.18)</p>
  </td>
 </tr>
 <tr>
  <td width=175 valign=bottom style='width:131.15pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=228 valign=top style='width:171.0pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Pro forma</p>
  </td>
  <td width=102 valign=top style='width:76.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp; (0.01)</p>
  </td>
  <td width=110 valign=top style='width:1.15in;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp; (0.20)</p>
  </td>
 </tr>
</table>

</div>

<p style='text-autospace:none'><b>&nbsp;</b></p>

<p style='text-autospace:none'><b>Inventories</b></p>



<p style='text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Inventories are stated at the lower of cost (the first-in, first-out method) or
market and consist of the following: </p>



<div align=center>

<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 width=393
 style='width:294.8pt;margin-left:-24.25pt;border-collapse:collapse;border:
 none'>
 <tr>
  <td width=243 valign=top style='width:182.3pt;border:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Raw materials </p>
  </td>
  <td width=150 valign=top style='width:112.5pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>$&nbsp;&nbsp;&nbsp;&nbsp; 1,443,000 </p>
  </td>
 </tr>
 <tr>
  <td width=243 valign=top style='width:182.3pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Work in process </p>
  </td>
  <td width=150 valign=top style='width:112.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>340,000</p>
  </td>
 </tr>
 <tr>
  <td width=243 valign=top style='width:182.3pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Development costs under
  contract</p>
  </td>
  <td width=150 valign=top style='width:112.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>181,000</p>
  </td>
 </tr>
 <tr>
  <td width=243 valign=top style='width:182.3pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Finished goods </p>
  </td>
  <td width=150 valign=top style='width:112.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,263,000 </u></p>
  </td>
 </tr>
 <tr>
  <td width=243 valign=top style='width:182.3pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp; Total
  </p>
  </td>
  <td width=150 valign=top style='width:112.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>3,227,000 </p>
  </td>
 </tr>
 <tr>
  <td width=243 valign=top style='width:182.3pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Reserve for slow moving items </p>
  </td>
  <td width=150 valign=top style='width:112.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (392,000) </u></p>
  </td>
 </tr>
 <tr>
  <td width=243 valign=top style='width:182.3pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp; Total
  inventories, net </p>
  </td>
  <td width=150 valign=top style='width:112.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>$&nbsp;&nbsp; &nbsp; 2,835,000 </u></p>
  </td>
 </tr>
</table>

</div>

<p style='text-align:justify;text-autospace:none'>Changes in
reserve for slow moving inventory as of June 30, 2003 were as follows:</p>



<div align=center>

<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 width=353
 style='width:265.0pt;border-collapse:collapse;border:none'>
 <tr>
  <td width=251 valign=top style='width:188.5pt;border:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Balance at the beginning of
  the year</p>
  </td>
  <td width=102 valign=top style='width:76.5pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>$&nbsp;&nbsp;&nbsp;&nbsp; 592,000 </p>
  </td>
 </tr>
 <tr>
  <td width=251 valign=top style='width:188.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Inventory disposed</p>
  </td>
  <td width=102 valign=top style='width:76.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>&nbsp;(200,000)</u></p>
  </td>
 </tr>
 <tr>
  <td width=251 valign=top style='width:188.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Balance at the end of the year</p>
  </td>
  <td width=102 valign=top style='width:76.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>$&nbsp;&nbsp;&nbsp;&nbsp; 392,000</u></p>
  </td>
 </tr>
</table>

</div>



<p>Changes in allowance for warranty expense as of June 30, 2003 and 2002 were as follows:</p>



<div align=center>

<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 width=455
 style='width:341.5pt;margin-left:1.25pt;border-collapse:collapse;border:none'>
 <tr>
  <td width=251 valign=top style='width:188.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=102 valign=top style='width:76.5pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>2003</u></p>
  </td>
  <td width=102 valign=top style='width:76.5pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>2002</u></p>
  </td>
 </tr>
 <tr>
  <td width=251 valign=top style='width:188.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Balance at the beginning of
  the year</p>
  </td>
  <td width=102 valign=top style='width:76.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>$&nbsp;&nbsp;&nbsp;&nbsp; 28,000 </p>
  </td>
  <td width=102 valign=top style='width:76.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>$&nbsp;&nbsp;&nbsp;&nbsp; 21,000 </p>
  </td>
 </tr>
 <tr>
  <td width=251 valign=top style='width:188.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Provision charged to income </p>
  </td>
  <td width=102 valign=top style='width:76.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>&nbsp;&nbsp;&nbsp; &nbsp; 2,000</u></p>
  </td>
  <td width=102 valign=top style='width:76.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>&nbsp;&nbsp;&nbsp; &nbsp; 7,000</u></p>
  </td>
 </tr>
 <tr>
  <td width=251 valign=top style='width:188.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Balance at the end of the year</p>
  </td>
  <td width=102 valign=top style='width:76.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>$&nbsp;&nbsp;&nbsp;&nbsp; 30,000</u></p>
  </td>
  <td width=102 valign=top style='width:76.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>$&nbsp;&nbsp;&nbsp;&nbsp; 28,000</u></p>
  </td>
 </tr>
</table>

</div>

<p style='text-autospace:none'><b>&nbsp;</b></p>

<p style='text-autospace:none'>&nbsp;</p>

<p style='text-autospace:none'>&nbsp;</p>

<p style='text-autospace:none' align="center">30</p>

<b><hr color="#000080"><br clear=all
style='page-break-before:always'>
</b>

<p style='text-autospace:none'><b>Equipment and Leasehold
Improvements</b></p>

<p style='text-autospace:none'><b>&nbsp;</b></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Equipment and
leasehold improvements are recorded at cost and consist of the following: </p>



<div align=center>

<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 width=360
 style='width:270.25pt;border-collapse:collapse;border:none'>
 <tr>
  <td width=210 valign=bottom style='width:157.75pt;border:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Equipment </p>
  </td>
  <td width=150 valign=bottom style='width:112.5pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>$&nbsp;&nbsp;&nbsp;&nbsp; 3,541,000 </p>
  </td>
 </tr>
 <tr>
  <td width=210 valign=bottom style='width:157.75pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Leasehold Improvements</p>
  </td>
  <td width=150 valign=bottom style='width:112.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>&nbsp;&nbsp;&nbsp; &nbsp; 106,000 </u></p>
  </td>
 </tr>
 <tr>
  <td width=210 valign=bottom style='width:157.75pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Total Cost </p>
  </td>
  <td width=150 valign=bottom style='width:112.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>3,647,000 </p>
  </td>
 </tr>
 <tr>
  <td width=210 valign=bottom style='width:157.75pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=150 valign=bottom style='width:112.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=210 valign=bottom style='width:157.75pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Accumulated Depreciation</p>
  </td>
  <td width=150 valign=bottom style='width:112.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:3.5pt;text-align:right;
  text-autospace:none'><u>&nbsp;&nbsp; (2,607,000) </u></p>
  </td>
 </tr>
 <tr>
  <td width=210 valign=bottom style='width:157.75pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Total Equipment and leasehold
  improvements, net </p>
  </td>
  <td width=150 valign=bottom style='width:112.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:3.5pt;text-align:right;
  text-autospace:none'><u>$&nbsp;&nbsp;&nbsp; 1,040,000 </u></p>
  </td>
 </tr>
</table>

</div>



<p style='text-indent:.5in;text-autospace:none' align="justify">Depreciation is
provided using the straight-line method over the estimated useful lives of the
assets as follows: equipment -- 3-10 years; leasehold improvements -- 7 years.
Leasehold improvements are depreciated over the shorter of the term of the
lease or their estimated useful lives.</p>

<p style='text-autospace:none'><b>Goodwill </b></p>



<p style='text-autospace:ideograph-numeric ideograph-other' align="justify">On
 July 1, 2002 the Company adopted SFAS No. 142 &quot;Goodwill and Other Intangible
Assets.&quot;&nbsp; SFAS No. 142 requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually in accordance with the provisions of SFAS No.
142.&nbsp; Amortization expense related to the Company's goodwill for the year ended
 June 30, 2002 was $85,000.</p>



<p style='text-align:justify;text-indent:.5in'>Management has
determined that each of the Company's subsidiaries is a reporting unit.&nbsp; Upon
adoption of SFAS No. 142, The Company assigned all the assets and liabilities
to the reporting units and has recorded no impairment charge in 2003.&nbsp; The
Company prepares its annual impairment testing on April 1 of each year.&nbsp; The
Company has compared the estimated carrying value of the Micro Motors subsidiary
with the estimated fair value of the subsidiary and determined that none of the
goodwill recorded as of June 30, 2002 and as of April 1, 2003 was impaired.</p>



<p style='text-align:justify;text-indent:.5in'>In accordance
with FAS 121 &quot;Accounting for the Impairment of Long-Lived Assets,&quot; management
reviewed the remaining goodwill recorded at OMS as of June 30, 2002 and determined that the remaining fair value of the asset was impaired.&nbsp; Management's
decision was based on the fact that future cash flows at OMS will not exceed
the carrying value of the asset and that OMS generated year losses in 2002.&nbsp; As
such, management determined that the carrying value should be zero; expensing
the remaining $154,000 as general and administrative expense in the statement
of operations.&nbsp; </p>



<p style='text-align:justify;text-indent:.5in'>A reconciliation
of previously reported net income (loss) applicable to common stock and basic
income (loss) per share to the amounts adjusted for the exclusion of the
amortization of goodwill follows (the amortization of goodwill was not
deductible for tax purposes and as such, has not been shown net of tax on the
schedule):</p>



<p style='text-align:justify;text-indent:.5in'>&nbsp;</p>



<p style='text-align:justify;text-indent:.5in'>&nbsp;</p>



<p style='text-align:justify;text-indent:.5in'>&nbsp;</p>



<p style='text-align:center;'>31</p>



<hr color="#000080"><br clear=all
style='page-break-before:always'>




<div align=center>

<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 width=448
 style='width:335.8pt;margin-left:12.75pt;border-collapse:collapse;border:none'>
 <tr>
  <td width=206 valign=top style='width:154.65pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center'>2003</p>
  </td>
  <td width=128 valign=top style='width:95.65pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center'>2002</p>
  </td>
 </tr>
 <tr>
  <td width=206 valign=top style='width:154.65pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Reported
  net income (loss) applicable to common stock</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  <p><br>
  $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 133,000</p>
  </td>
  <td width=128 valign=top style='width:95.65pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  <p><br>
  $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (1,566,000)</p>
  </td>
 </tr>
 <tr>
  <td width=206 valign=top style='width:154.65pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Add
  back:</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=128 valign=top style='width:95.65pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
 </tr>
 <tr>
  <td width=206 valign=top style='width:154.65pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  <p>Goodwill
  amortization </p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  --</u></p>
  </td>
  <td width=128 valign=top style='width:95.65pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  85,000</u></p>
  </td>
 </tr>
 <tr>
  <td width=206 valign=top style='width:154.65pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Adjusted net income (loss) applicable to common stock</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p><u><br>
  $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 133,000</u></p>
  </td>
  <td width=128 valign=top style='width:95.65pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p><u><br>
  $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (1,481,000)</u></p>
  </td>
 </tr>
 <tr>
  <td width=206 valign=top style='width:154.65pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;</p>
  </td>
  <td width=128 valign=top style='width:95.65pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=206 valign=top style='width:154.65pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Net income (loss) per share applicable to common stock: </p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=128 valign=top style='width:95.65pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
 </tr>
 <tr>
  <td width=206 valign=top style='width:154.65pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Basic</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.02</p>
  </td>
  <td width=128 valign=top style='width:95.65pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (0.18)</p>
  </td>
 </tr>
 <tr>
  <td width=206 valign=top style='width:154.65pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p>Diluted</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.01</p>
  </td>
  <td width=128 valign=top style='width:95.65pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (0.18)</p>
  </td>
 </tr>
 <tr>
  <td width=206 valign=top style='width:154.65pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Add back:</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=128 valign=top style='width:95.65pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
 </tr>
 <tr>
  <td width=206 valign=top style='width:154.65pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;&nbsp;&nbsp; Goodwill amortization</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; --</u></p>
  </td>
  <td width=128 valign=top style='width:95.65pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.01</u></p>
  </td>
 </tr>
 <tr>
  <td width=206 valign=top style='width:154.65pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Adjusted net income (loss) per common share:</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;</p>
  </td>
  <td width=128 valign=top style='width:95.65pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=206 valign=top style='width:154.65pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Basic</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.02</p>
  </td>
  <td width=128 valign=top style='width:95.65pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (0.17)</p>
  </td>
 </tr>
 <tr>
  <td width=206 valign=top style='width:154.65pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p>Diluted</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p><u>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.01</u></p>
  </td>
  <td width=128 valign=top style='width:95.65pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p><u>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (0.17)</u></p>
  </td>
 </tr>
</table>

</div>



<p style='text-autospace:ideograph-numeric ideograph-other'><b>Stock Repurchase Plan</b></p>



<p style='text-align:justify;text-indent:.5in'>In September
2002, the Company's Board of Directors authorized the repurchase on the open
market of up to 500,000 shares of the Company's outstanding Common Stock,
subject to compliance with applicable laws and regulations.&nbsp; There is no
requirement that the Company repurchase all or any portion of such shares.&nbsp; The
maximum total value of the repurchase is not to exceed $500,000.&nbsp; This
repurchase is to be financed both with cash generated by operations and through
the utilization of the Company's credit facility.&nbsp; From the inception of the
repurchase authorization through the year end date of June 30, 2003, the Company repurchased 75,700 shares of Common Stock for $43,741, at an average
price of $0.58 per share.</p>



<p><b>Income Taxes</b></p>



<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred income taxes are provided on a
liability method whereby deferred tax assets are recognized for deductible
temporary differences, operating losses, and tax credit carry forwards.
Deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of
assets and liabilities and their tax bases. Deferred tax assets are reduced by
a valuation allowance when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment. </p>



<p style='text-autospace:none'><b>Use of Estimates</b></p>



<p style='text-indent:.5in' align="justify">The preparation of financial
statements requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. </p>



<p style='text-indent:.5in'>&nbsp;</p>



<p style='text-indent:.5in'>&nbsp;</p>



<p align="center">32</p>



<hr color="#000080"><P Style="page-break-after:always"></p>




<p style='text-indent:.5in'>&nbsp;</p>



<p style='text-indent:.5in' align="justify">The Company's operations are
affected by numerous factors including market acceptance, changes in
technologies and new laws and government regulations and policies. The Company
cannot predict what impact, if any, the occurrence of these or other events
might have on the Company's operations. Significant estimates and assumptions
made by management are used for, but not limited to, the allowance for doubtful
accounts, the reserve for slow moving or obsolete inventories, the carrying
value of long-lived and intangible assets, goodwill, and the recoverability of
deferred tax assets.</p>



<p style='text-indent:.5in' align="justify">Significant management judgment
is required to determine the provision for income taxes and the recoverability
of deferred tax assets. It is based on estimates of future taxable income by
jurisdiction in which the Company operates and the period over which deferred
tax assets will be recoverable. In the event that actual results differ from
these estimates or adjustments are made to these estimates in future periods,
there may need to be an adjustment in the valuation allowance which could
result in an additional tax provision up to the net carrying value of the
deferred tax assets.</p>



<p style='text-autospace:none'><b>Earnings per Share</b></p>

<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Basic earnings per common share data has been
computed on the basis of the weighted-average number of common shares
outstanding during each period presented.&nbsp; Diluted per share amounts assume the
conversion, exercise or issuance of all potential common stock instruments
unless the effect is to reduce a loss or increase the income per common share
from continuing operations. </p>

<p style='text-autospace:none'><b>Fair Value of Financial
Instruments</b></p>



<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The method and assumptions used to estimate
the fair value of notes payable, which approximates the carrying value, is
based on interest rates for instruments with similar terms and remaining
maturities. </p>



<p style='text-autospace:none'><b>Research and Development </b></p>



<p align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Company recognizes revenue under research
and development agreements as certain deliverables are met as specified in each
development contract.&nbsp; The Company accounts for research and development
expenses in two methods.&nbsp; If the development work is customer funded and
associated with future deliverables, the costs are capitalized and recognized
as costs of goods sold when the contracted deliverable is made.&nbsp; All other
research and development costs are expensed as incurred. </p>

<p style='text-autospace:none'><b>NOTE 3 - LINE OF CREDIT </b></p>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The subsidiaries of the Company entered into a credit facility with Wells
Fargo Business Credit Inc. (WFBCI) in May 2002 for borrowings up to the lesser
of $3,000,000 or the total of the eligible accounts receivable.&nbsp; The terms of
the credit facility expire May 2005 and require monthly interest payments at
the prime rate (4.00% at June 30, 2003) plus 1.00% to 1.75% based on
outstanding borrowings, with a minimum interest charge of $12,500 per quarter.&nbsp;
The outstanding borrowings are secured by all assets of the Company's two
subsidiaries, Micro Motors and OMS, and are guaranteed by the Company.&nbsp; The
outstanding balance under the terms of this credit facility as of June 30, 2003 was $432,000.&nbsp; The total additional eligible borrowing capacity based on the
receivables balances at June 30, 2003 was $562,000.&nbsp; There are certain
financial and non-financial covenants that the Company must meet to be in
compliance with the terms of the credit facility.&nbsp; There was one amendment to
the loan agreement made subsequent to June 30, where a technical correction was
made to the definition of &quot;Net Income&quot; as it applied to the covenant
calculations.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>As of June 30, 2003, Micro Motors and OMS were not in compliance with the
net income (loss) and tangible net worth covenants, for which they received a
waiver from WFBCI on September 17, 2003.&nbsp; Had the waiver not been received,
under Section 7.2 of the loan agreement, WFBCI had the right to terminate its
commitment and declare the loan immediately due.&nbsp; If this was to occur, the
Company had sufficient cash reserves on hand as of June 30, 2003 to repay the outstanding amount of the loan in full, satisfying its obligation without
disrupting the operations of the Company.&nbsp;&nbsp;&nbsp; </p>

<p style='text-autospace:none' align="center">33</p>



<hr color="#000080"><P Style="page-break-after:always"></p>


<p style='text-autospace:none'>&nbsp;</p>



<p style='text-autospace:none'><b>NOTE 4 - LONG TERM DEBT </b></p>



<p style='text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Long-term debt is comprised of a $600,000 Not to Compete liability offset by a
$365,000 Note Receivable asset. The interest rate on both is 7% annually.&nbsp; The
Note Receivable is collateralized by the Not to Compete liability.&nbsp; The
following tables summarize the remaining net principal values of these
instruments classified as long-term debt:</p>



<div align=left>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='width:590;margin-left:in;border-collapse:collapse'>
 <tr>
  <td valign=top style='width:327;border:1.0pt solid windowtext;
  padding:0in; '>
  <p style='text-autospace:none'>Total Not to Compete payable</p>
  </td>
  <td valign=top style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:0in; ' align="right">
  <p style='text-autospace:none' align="center">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  600,000</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:327;border-top:medium none;padding:0in; '>
  <p style='text-autospace:none'>Less: interest portion </p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=center style='text-align:center;text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  63,000</u></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:327;border-top:medium none;padding:0in; '>
  <p style='text-autospace:none'>Net Not to Compete payable</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=center style='text-align:center;text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; $&nbsp;&nbsp;&nbsp;&nbsp; 537,000</u></p>
  </td>
 </tr>
</table>

</div>



<p style='text-autospace:none'>&nbsp;</p>



<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='width:591;margin-left:in;border-collapse:collapse'>
 <tr>
  <td valign=top style='width:329;border:1.0pt solid windowtext;
  padding:0in; '>
  <p style='text-autospace:none'>Total Note Receivable</p>
  </td>
  <td valign=top style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none;padding:0in' align="right">
  <p style='text-autospace:none' align="center">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 365,000&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:329;border-top:medium none;padding:0in; '>
  <p style='text-autospace:none'>Less: interest portion </p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in' align="right">
  <p align=center style='text-align:center;text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  38,000&nbsp;</u></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:329;border-top:medium none;padding:0in; '>
  <p style='text-autospace:none'>Net Note Receivable</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in' align="right">
  <p align=center style='text-align:center;text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp; 327,000</u></p>
  </td>
 </tr>
</table>



<p style='text-autospace:none'>&nbsp;</p>



<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='width:589;border-collapse:collapse'>
 <tr>
  <td valign=top style='width:331;border:1.0pt solid windowtext;
  padding:0in; '>
  <p style='text-autospace:none'>Net Not to Compete payable</p>
  </td>
  <td width=258 valign=top style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:0in; ' align="right">
  <p style='text-autospace:none' align="center">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 537,000&nbsp;&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:331;border-top:medium none;padding:0in; '>
  <p style='text-autospace:none'>Less: Net Note Receivable</p>
  </td>
  <td width=258 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=center style='text-align:center;text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;327,000</u></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:331;border-top:medium none;padding:0in; '>
  <p style='text-autospace:none'>Total Net Debt to shareholder</p>
  </td>
  <td width=258 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=center style='text-align:center;text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$&nbsp; &nbsp;&nbsp;&nbsp; 210,000</u></p>
  </td>
 </tr>
</table>

<p style='text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The following
table is a summary of the remaining net principal values of these instruments
classified as long-term debt:</p>



<div align=center>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=560
 style='width:419.9pt;margin-left:-104.65pt;border-collapse:collapse'>
 <tr>
  <td width=437 valign=bottom style='width:327.65pt;border:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Unsecured Net Debt to a
  shareholder, bearing interest at 7%, payments of $19,600 quarterly, including
  interest to June 30, 2006</p>
  </td>
  <td width=123 valign=bottom style='width:92.25pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>

  <p align=right style='text-align:right;text-autospace:none'>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  210,000</p>
  </td>
 </tr>
 <tr>
  <td width=437 valign=top style='width:327.65pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Less net current portion </p>
  </td>
  <td width=123 valign=top style='width:92.25pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>65,000</u></p>
  </td>
 </tr>
 <tr>
  <td width=437 valign=top style='width:327.65pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Net Long-term debt </p>
  </td>
  <td width=123 valign=top style='width:92.25pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  145,000</u></p>
  </td>
 </tr>
</table>

</div>

<p style='text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>

<p style='text-indent:.5in;text-autospace:none'>This debt is
subordinated to the line of credit with WFBCI.</p>

<p style='text-autospace:none'><b>NOTE 5 - COMMITMENTS AND
CONTINGENCIES </b></p>



<p style='text-indent:.5in' align="justify">Micro Motors leased office and
warehouse facilities from the Company's largest shareholder until January 2002.
The Company and their subsidiaries lease its existing office and warehouse
facilities from unrelated parties under lease agreements expiring through
October 2007. These leases generally require the Company to pay insurance,
taxes, and other expenses related to the leased space. Total rent expense in
2003 and 2002 was $264,000 and $257,000, respectively, including approximately
$74,000 paid to the Company's largest shareholder for the year ended June 30, 2002. Future minimum lease payments for the years ending June 30, are: </p>

<table class=MsoTableGrid border=1 cellspacing=0 cellpadding=0
 style='margin-left:203.4pt;border-collapse:collapse;border:none'>
 <tr>
  <td width=96 valign=top style='width:1.0in;border:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>2004</p>
  </td>
  <td width=96 valign=top style='width:1.0in;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 5.4pt 0in 5.4pt' align="right">
  <p>$265,000</p>
  </td>
 </tr>
 <tr style='height:10.75pt'>
  <td width=96 valign=top style='width:1.0in;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt;height:10.75pt'>
  <p>2005</p>
  </td>
  <td width=96 valign=top style='width:1.0in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:10.75pt' align="right">
  <p>&nbsp;264,000</p>
  </td>
 </tr>
 <tr>
  <td width=96 valign=top style='width:1.0in;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p>2006</p>
  </td>
  <td width=96 valign=top style='width:1.0in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="right">
  <p>&nbsp;264,000</p>
  </td>
 </tr>
 <tr>
  <td width=96 valign=top style='width:1.0in;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p>2007</p>
  </td>
  <td width=96 valign=top style='width:1.0in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="right">
  <p style='margin-right:'>113,000</p>
  </td>
 </tr>
 <tr>
  <td width=96 valign=top style='width:1.0in;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p>2008</p>
  </td>
  <td width=96 valign=top style='width:1.0in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="right">
  <p>&nbsp;&nbsp;&nbsp; <u>38,000</u></p>
  </td>
 </tr>
 <tr>
  <td width=96 valign=top style='width:1.0in;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p>Total</p>
  </td>
  <td width=96 valign=top style='width:1.0in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="right">
  <p>$944,000</p>
  </td>
 </tr>
</table>



<p style='text-autospace:none' align="justify">The manufacture and distribution
of certain products by subsidiaries of the Company involves a risk of legal
action, and, from time to time, the Company and its subsidiaries are named as
defendants in lawsuits. While the Company's management believes that these
matters will not have a material adverse impact on the financial condition of
the Company, there can be no certainty that the Company may not ultimately
incur liability or that such liability will not be material and adverse.</p>



<p style='text-autospace:none'>&nbsp;</p>



<p style='text-autospace:none' align="center">34</p>

<hr color="#000080"><P Style="page-break-after:always"></p>




<p style='text-autospace:none'>&nbsp;</p>

<p style='text-autospace:none'><b>NOTE 6 - INCOME TAXES</b></p>



<p style='text-indent:.5in;text-autospace:none'>The provision
for income taxes (credits) for the years ended June 30, 2003 and 2002 is as follows: </p>



<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse'>
 <tr>
  <td width=253 valign=top style='width:189.6pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=17 valign=top style='width:12.9pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:none;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=88 valign=top style='width:66.1pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:none;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><u>2003
  </u></p>
  </td>
  <td width=11 valign=top style='width:7.9pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:none;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>&nbsp;</p>
  </td>
  <td width=105 valign=top style='width:79.0pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><u>2002
  </u></p>
  </td>
 </tr>
 <tr>
  <td width=253 valign=top style='width:189.6pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Current taxes provision
  (credits) </p>
  </td>
  <td width=17 valign=top style='width:12.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=88 valign=top style='width:66.1pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>(55,000)</p>
  </td>
  <td width=11 valign=top style='width:7.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=105 valign=top style='width:79.0pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>(308,000)
  </p>
  </td>
 </tr>
 <tr>
  <td width=253 valign=top style='width:189.6pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Deferred taxes provision
  (credits) </p>
  </td>
  <td width=17 valign=top style='width:12.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=88 valign=top style='width:66.1pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>&nbsp;
  177,000&nbsp;</u></p>
  </td>
  <td width=11 valign=top style='width:7.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=105 valign=top style='width:79.0pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>&nbsp;
  (902,000) </u></p>
  </td>
 </tr>
 <tr>
  <td width=253 valign=top style='width:189.6pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='line-height:normal;text-autospace:none'>Provision
  (credits) for income taxes</p>
  </td>
  <td width=17 valign=top style='width:12.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=88 valign=top style='width:66.1pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>122,000&nbsp;</p>
  </td>
  <td width=11 valign=top style='width:7.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=105 valign=top style='width:79.0pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>(1,210,000)
  </p>
  </td>
 </tr>
</table>



<p style='text-indent:.5in;text-autospace:none'>A
reconciliation of expected tax (credit) to the amount computed by applying the
federal statutory income tax rates to income (loss) before income taxes
(credits) is as follows: </p>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse'>
 <tr>
  <td width=421 valign=top style='width:316.0pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=11 valign=top style='width:7.9pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:none;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=95 valign=top style='width:71.1pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:none;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><u>2003
  </u></p>
  </td>
  <td width=11 valign=top style='width:7.9pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:none;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>&nbsp;</p>
  </td>
  <td width=84 valign=top style='width:63.2pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><u>2002
  </u></p>
  </td>
 </tr>
 <tr>
  <td width=421 valign=top style='width:316.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Federal income taxes
  (credits), </p>
  </td>
  <td width=11 valign=top style='width:7.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=95 valign=top style='width:71.1pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=11 valign=top style='width:7.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=84 valign=top style='width:63.2pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=421 valign=top style='width:316.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp;&nbsp; Computed at
  the statutory rate </p>
  </td>
  <td width=11 valign=top style='width:7.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=95 valign=top style='width:71.1pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>87,000
  </p>
  </td>
  <td width=11 valign=top style='width:7.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=84 valign=top style='width:63.2pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>(807,000)
  </p>
  </td>
 </tr>
 <tr>
  <td width=421 valign=top style='width:316.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>State income taxes (credits) </p>
  </td>
  <td width=11 valign=top style='width:7.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=95 valign=top style='width:71.1pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>13,000
  </p>
  </td>
  <td width=11 valign=top style='width:7.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=84 valign=top style='width:63.2pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>(69,000)
  </p>
  </td>
 </tr>
 <tr>
  <td width=421 valign=top style='width:316.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Non-deductible items,
  primarily goodwill in 2002</p>
  </td>
  <td width=11 valign=top style='width:7.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=95 valign=top style='width:71.1pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>4,000
  </p>
  </td>
  <td width=11 valign=top style='width:7.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=84 valign=top style='width:63.2pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>90,000
  </p>
  </td>
 </tr>
 <tr>
  <td width=421 valign=top style='width:316.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Tax credits, primarily
  research and development</p>
  </td>
  <td width=11 valign=top style='width:7.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=95 valign=top style='width:71.1pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>--</p>
  </td>
  <td width=11 valign=top style='width:7.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=84 valign=top style='width:63.2pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>(135,000)</p>
  </td>
 </tr>
 <tr>
  <td width=421 valign=top style='width:316.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Favorable resolution of tax
  contingency</p>
  </td>
  <td width=11 valign=top style='width:7.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=95 valign=top style='width:71.1pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>--</p>
  </td>
  <td width=11 valign=top style='width:7.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=84 valign=top style='width:63.2pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>&nbsp;
  (289,000) </p>
  </td>
 </tr>
 <tr>
  <td width=421 valign=top style='width:316.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Other</p>
  </td>
  <td width=11 valign=top style='width:7.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=95 valign=top style='width:71.1pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>18,000</u></p>
  </td>
  <td width=11 valign=top style='width:7.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=84 valign=top style='width:63.2pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  --</u></p>
  </td>
 </tr>
 <tr>
  <td width=421 valign=top style='width:316.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=11 valign=top style='width:7.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=95 valign=top style='width:71.1pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>122,000</u>
  </p>
  </td>
  <td width=11 valign=top style='width:7.9pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=84 valign=top style='width:63.2pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>(1,210,000)
  </u></p>
  </td>
 </tr>
</table>



<p style='text-autospace:none'>Deferred income tax assets and
liabilities in the accompanying balance sheet at June 30, 2003 consisted of the following: </p>



<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=492
 style='width:369.0pt;border-collapse:collapse'>
 <tr>
  <td width=354 valign=top style='width:265.5pt;border:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Assets:</p>
  </td>
  <td width=24 valign=top style='width:.25in;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=354 valign=top style='width:265.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp;&nbsp; Accrued
  expenses </p>
  </td>
  <td width=24 valign=top style='width:.25in;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>67,000
  </p>
  </td>
 </tr>
 <tr>
  <td width=354 valign=top style='width:265.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp;&nbsp; Intangible
  assets </p>
  </td>
  <td width=24 valign=top style='width:.25in;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1,013,000
  </p>
  </td>
 </tr>
 <tr>
  <td width=354 valign=top style='width:265.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp;&nbsp; Inventories
  </p>
  </td>
  <td width=24 valign=top style='width:.25in;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>233,000
  </p>
  </td>
 </tr>
 <tr>
  <td width=354 valign=top style='width:265.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp;&nbsp; Net
  operating loss carry forward</p>
  </td>
  <td width=24 valign=top style='width:.25in;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>70,000</p>
  </td>
 </tr>
 <tr>
  <td width=354 valign=top style='width:265.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp;&nbsp; Income tax credit carry
  forward</p>
  </td>
  <td width=24 valign=top style='width:.25in;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>&nbsp;&nbsp;
  633,000</u></p>
  </td>
 </tr>
 <tr>
  <td width=354 valign=top style='width:265.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  Total</p>
  </td>
  <td width=24 valign=top style='width:.25in;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>2,016,000</p>
  </td>
 </tr>
 <tr>
  <td width=354 valign=top style='width:265.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp;&nbsp; Less Valuation Allowance</p>
  </td>
  <td width=24 valign=top style='width:.25in;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>(227,000)</u></p>
  </td>
 </tr>
 <tr>
  <td width=354 valign=top style='width:265.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  Total deferred tax assets </p>
  </td>
  <td width=24 valign=top style='width:.25in;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>1,789,000
  </u></p>
  </td>
 </tr>
 <tr style='height:17.5pt'>
  <td width=354 valign=top style='width:265.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in;height:17.5pt'>

  &nbsp;</td>
  <td width=24 valign=top style='width:.25in;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in;height:17.5pt'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in;height:17.5pt'>

  </td>
 </tr>
 <tr>
  <td width=354 valign=top style='width:265.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Liabilities; Equipment</p>
  </td>
  <td width=24 valign=top style='width:.25in;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>&nbsp;&nbsp;&nbsp;
  (186,000) </u></p>
  </td>
 </tr>
 <tr>
  <td width=354 valign=top style='width:265.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>

  &nbsp;</td>
  <td width=24 valign=top style='width:.25in;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=354 valign=top style='width:265.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Net deferred tax assets </p>
  </td>
  <td width=24 valign=top style='width:.25in;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>1,603,000
  </u></p>
  </td>
 </tr>
</table>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The Company has net operating loss carry forwards of $27,000 for Federal
and $2,012,000 for State income tax purposes.&nbsp; Federal loss carry forwards
expire in 2023 and State carry forwards expire in 2012.&nbsp; Tax credit carry
forwards totaling $421,000 for federal tax purposes and $213,000 for state tax
purposes do not expire.&nbsp; The components giving rise to the net deferred tax assets
described above have been included in the accompanying balance sheet as of June 30, 2003 and 2002 as follows:</p>



<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=282
 style='width:211.25pt;margin-left:94.75pt;border-collapse:collapse'>
 <tr>
  <td width=168 valign=top style='width:1.75in;border:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Non-current assets </p>
  </td>
  <td width=114 valign=top style='width:85.25pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$&nbsp;&nbsp;&nbsp;
  833,000 </p>
  </td>
 </tr>
 <tr>
  <td width=168 valign=top style='width:1.75in;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Current assets&nbsp;</p>
  </td>
  <td width=114 valign=top style='width:85.25pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>&nbsp;
  770,000 </u></p>
  </td>
 </tr>
 <tr>
  <td width=168 valign=top style='width:1.75in;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Net deferred tax assets</p>
  </td>
  <td width=114 valign=top style='width:85.25pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>$&nbsp;&nbsp;&nbsp;
  1,603,000 </u></p>
  </td>
 </tr>
</table>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Management believes that it is more likely than not that deferred tax
assets other than state credits will be fully recovered.&nbsp; A valuation allowance
has been provided for State tax credits, as management believes that the amount
of future state taxable income necessary to utilize these credits is not more
likely than not to be realized.&nbsp; Net realizable deferred tax assets could be
reduced if estimates of future profitability are reduced or if future changes
in the ownership of the Company occur.</p>

<p style='text-autospace:none'><b>&nbsp;</b></p>

<p style='text-autospace:none' align="center">35</p>

<hr color="#000080"><P Style="page-break-after:always"></p>


<p style='text-autospace:none'>&nbsp;</p>

<p style='text-autospace:none'><b>NOTE 7 - SHAREHOLDERS' EQUITY
</b></p>

<p style='text-autospace:none'><b>Stock Options </b></p>



<p style='text-align:justify;text-autospace:none'>The Board of
Directors and the shareholders of the Company have approved and adopted two
plans, pursuant to which options to purchase an aggregate of 2,000,000 shares
of common stock that can be granted to officers, directors, and employees
expected to provide significant services to the Company. There are 636,595 shares
remaining in the option plans which are available for grant in future years.&nbsp; </p>

<p style='text-autospace:none'>Transactions involving the
Company's stock options are summarized as follows: </p>



<div align="left">



<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse' width="700">
 <tr>
  <td width=216 valign=top style='width:2.25in;padding:0in 0in 0in 0in'>

  </td>
  <td width=210 colspan=2 valign=top style='width:157.5pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  2003&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </u></p>
  </td>
  <td width=234 colspan=2 valign=top style='width:175.5pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  2002&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </u></p>
  </td>
 </tr>
 <tr>
  <td width=216 valign=bottom style='width:2.25in;padding:0in 0in 0in 0in'>

  <p align=center style='text-align:center;text-autospace:none'>Fixed
  Options </p>
  </td>
  <td width=78 valign=bottom style='width:58.5pt;padding:0in 0in 0in 0in'>

  <p align=center style='text-align:center;text-autospace:none'>Shares
  </p>
  </td>
  <td width=132 valign=bottom style='width:99.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>Weighted-Average
  <br>
  Exercise
  Price
  </p>
  </td>
  <td width=108 valign=bottom style='width:81.0pt;padding:0in 0in 0in 0in'>

  <p align=center style='text-align:center;text-autospace:none'>Shares
  </p>
  </td>
  <td width=126 valign=bottom style='width:94.5pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>Weighted-Average
  <br>
  Exercise
  Price
  </p>
  </td>
 </tr>
 <tr>
  <td colspan=5 valign=top style='padding:0in; '>
  <p align=right style='text-align:right;text-autospace:none'>_____________________________________________________________________________
  </p>
  </td>
 </tr>
 <tr>
  <td width=216 valign=top style='width:2.25in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Outstanding at beginning of
  year </p>
  </td>
  <td width=78 valign=top style='width:58.5pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1,619,505
  </p>
  </td>
  <td width=132 valign=top style='width:99.0pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$1.28
  </p>
  </td>
  <td width=108 valign=top style='width:81.0pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1,284,361
  </p>
  </td>
  <td width=126 valign=top style='width:94.5pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$2.16
  </p>
  </td>
 </tr>
 <tr>
  <td width=216 valign=top style='width:2.25in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp;&nbsp; Granted </p>
  </td>
  <td width=78 valign=top style='width:58.5pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>460,000
  </p>
  </td>
  <td width=132 valign=top style='width:99.0pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>0.64
  </p>
  </td>
  <td width=108 valign=top style='width:81.0pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1,066,000
  </p>
  </td>
  <td width=126 valign=top style='width:94.5pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>0.85
  </p>
  </td>
 </tr>
 <tr>
  <td width=216 valign=top style='width:2.25in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp;&nbsp; Exercised </p>
  </td>
  <td width=78 valign=top style='width:58.5pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>-
  - </p>
  </td>
  <td width=132 valign=top style='width:99.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>-
  - </p>
  </td>
  <td width=108 valign=top style='width:81.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>-
  -</p>
  </td>
  <td width=126 valign=top style='width:94.5pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>-
  -</p>
  </td>
 </tr>
 <tr>
  <td width=216 valign=top style='width:2.25in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp;&nbsp; Forfeited </p>
  </td>
  <td width=78 valign=top style='width:58.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>(716,100)
  </p>
  </td>
  <td width=132 valign=top style='width:99.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1.13&nbsp;
  </p>
  </td>
  <td width=108 valign=top style='width:81.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>(730,856)
  </p>
  </td>
  <td width=126 valign=top style='width:94.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>2.17&nbsp;
  </p>
  </td>
 </tr>
 <tr>
  <td width=216 valign=top style='width:2.25in;padding:0in 0in 0in 0in'>

  &nbsp;</td>
  <td width=444 colspan=4 valign=top style='width:333.0pt;border:none;
  padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=216 valign=top style='width:2.25in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Outstanding at end of year </p>
  </td>
  <td width=78 valign=top style='width:58.5pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1,363,405
  </p>
  </td>
  <td width=132 valign=top style='width:99.0pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$1.11
  </p>
  </td>
  <td width=108 valign=top style='width:81.0pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1,619,505
  </p>
  </td>
  <td width=126 valign=top style='width:94.5pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$1.28
  </p>
  </td>
 </tr>
 <tr>
  <td width=216 valign=top style='width:2.25in;padding:0in 0in 0in 0in'>

  &nbsp;</td>
  <td width=444 colspan=4 valign=top style='width:333.0pt;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=216 valign=top style='width:2.25in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Exercisable at end of year </p>
  </td>
  <td width=78 valign=top style='width:58.5pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>843,063
  </p>
  </td>
  <td width=132 valign=top style='width:99.0pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$1.22
  </p>
  </td>
  <td width=108 valign=top style='width:81.0pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>586,005
  </p>
  </td>
  <td width=126 valign=top style='width:94.5pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$1.96
  </p>
  </td>
 </tr>
 <tr>
  <td width=216 valign=top style='width:2.25in;padding:0in 0in 0in 0in'>

  &nbsp;</td>
  <td width=444 colspan=4 valign=top style='width:333.0pt;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=216 valign=top style='width:2.25in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Weighted-average fair value
  per </p>
  </td>
  <td width=78 valign=top style='width:58.5pt;padding:0in 0in 0in 0in'>

  </td>
  <td width=132 valign=top style='width:99.0pt;border:none;border-top:double windowtext 1.5pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=108 valign=top style='width:81.0pt;border:none;border-top:double windowtext 1.5pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=126 valign=top style='width:94.5pt;border:none;border-top:double windowtext 1.5pt;
  padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr style='height:.2in'>
  <td width=216 valign=top style='width:2.25in;padding:0in 0in 0in 0in;
  height:.2in'>
  <p style='text-autospace:none'>&nbsp;&nbsp;&nbsp; Option
  granted during the year </p>
  </td>
  <td width=78 valign=top style='width:58.5pt;padding:0in 0in 0in 0in;
  height:.2in'>

  </td>
  <td width=132 valign=top style='width:99.0pt;padding:0in 0in 0in 0in;
  height:.2in'>
  <p align=right style='text-align:right;text-autospace:none'><u>&nbsp;&nbsp;&nbsp;
  $0.20 </u></p>
  </td>
  <td width=108 valign=top style='width:81.0pt;padding:0in 0in 0in 0in;
  height:.2in'>

  </td>
  <td width=126 valign=top style='width:94.5pt;padding:0in 0in 0in 0in;
  height:.2in'>
  <p align=right style='text-align:right;text-autospace:none'><u>&nbsp;&nbsp;&nbsp;
  $0.48 </u></p>
  </td>
 </tr>
</table>



</div>



<p style='text-autospace:none'>A further summary concerning
fixed options outstanding June 30, 2003, is as follows: </p>



<div align="left">



<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse' width="700">
 <tr>
  <td width=102 valign=top style='width:76.5pt;padding:0in 0in 0in 0in'>

  </td>
  <td width=300 colspan=3 valign=top style='width:225.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  Options
  Outstanding&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </u></p>
  </td>
  <td width=220 colspan=2 valign=top style='width:164.75pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  Options Exercisable&nbsp;</u></p>
  </td>
 </tr>
 <tr>
  <td width=102 valign=bottom style='width:76.5pt;padding:0in 0in 0in 0in'>


  <p align=center style='text-align:center;text-autospace:none'>Range
  of <br>
  Exercise
  Price </p>
  </td>
  <td width=101 valign=bottom style='width:75.95pt;padding:0in 0in 0in 0in'>


  <p align=center style='text-align:center;text-autospace:none'>Number <br>
  Outstanding
  </p>
  </td>
  <td width=111 valign=bottom style='width:83.35pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>Weighted- <br>
  Average <br>
  Remaining <br>
  Contractual
  Life
  </p>
  </td>
  <td width=88 valign=bottom style='width:65.7pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>Weighted <br>
  Average <br>
  Exercise <br>
  Price
  </p>
  </td>
  <td width=124 valign=bottom style='width:93.25pt;padding:0in 0in 0in 0in'>


  <p align=center style='text-align:center;text-autospace:none'>Number <br>
  Exercisable
  </p>
  </td>
  <td width=95 valign=bottom style='width:71.5pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>Weighted- <br>
  Average <br>
  Exercise <br>
  Price
  </p>
  </td>
 </tr>
 <tr>
  <td colspan=6 valign=top style='padding:0in; '>
  <p align=right style='text-align:right;text-autospace:none'>______________________________________________________________________________
  </p>
  </td>
 </tr>
 <tr>
  <td width=102 valign=top style='width:76.5pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>$0.35
  to $0.66 </p>
  </td>
  <td width=101 valign=top style='width:75.95pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>360,000
  </p>
  </td>
  <td width=111 valign=top style='width:83.35pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>9.1
  years </p>
  </td>
  <td width=88 valign=top style='width:65.7pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  0.42 </p>
  </td>
  <td width=124 valign=top style='width:93.25pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>280,000
  </p>
  </td>
  <td width=95 valign=top style='width:71.5pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  0.40 </p>
  </td>
 </tr>
 <tr>
  <td width=102 valign=top style='width:76.5pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>$0.80
  to $1.12 </p>
  </td>
  <td width=101 valign=top style='width:75.95pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>569,900
  </p>
  </td>
  <td width=111 valign=top style='width:83.35pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>8.5
  years </p>
  </td>
  <td width=88 valign=top style='width:65.7pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>0.85
  </p>
  </td>
  <td width=124 valign=top style='width:93.25pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>244,558
  </p>
  </td>
  <td width=95 valign=top style='width:71.5pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>0.86
  </p>
  </td>
 </tr>
 <tr>
  <td width=102 valign=top style='width:76.5pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>$1.40
  to $2.06 </p>
  </td>
  <td width=101 valign=top style='width:75.95pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>180,000
  </p>
  </td>
  <td width=111 valign=top style='width:83.35pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>7.7
  years </p>
  </td>
  <td width=88 valign=top style='width:65.7pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1.58
  </p>
  </td>
  <td width=124 valign=top style='width:93.25pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>70,000
  </p>
  </td>
  <td width=95 valign=top style='width:71.5pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1.84
  </p>
  </td>
 </tr>
 <tr>
  <td width=102 valign=top style='width:76.5pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>$2.12
  to $2.99 </p>
  </td>
  <td width=101 valign=top style='width:75.95pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>253,505
  </p>
  </td>
  <td width=111 valign=top style='width:83.35pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>5.2
  years </p>
  </td>
  <td width=88 valign=top style='width:65.7pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>2.32
  </p>
  </td>
  <td width=124 valign=top style='width:93.25pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>248,505
  </p>
  </td>
  <td width=95 valign=top style='width:71.5pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>2.32
  </p>
  </td>
 </tr>
 <tr>
  <td width=102 valign=top style='width:76.5pt;padding:0in 0in 0in 0in'>

  &nbsp;</td>
  <td width=101 valign=top style='width:75.95pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>_________
  </p>
  </td>
  <td width=111 valign=top style='width:83.35pt;padding:0in 0in 0in 0in'>

  </td>
  <td width=307 colspan=3 valign=top style='width:230.45pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp; __________________________________ </p>
  </td>
 </tr>
 <tr>
  <td width=102 valign=top style='width:76.5pt;padding:0in 0in 0in 0in'>

  </td>
  <td width=101 valign=top style='width:75.95pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1,363,405
  </p>
  </td>
  <td width=111 valign=top style='width:83.35pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>7.9
  years</p>
  </td>
  <td width=88 valign=top style='width:65.7pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  1.11 </p>
  </td>
  <td width=124 valign=top style='width:93.25pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>843,063
  </p>
  </td>
  <td width=95 valign=top style='width:71.5pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  1.21 </p>
  </td>
 </tr>
</table>

</div>

<p style='text-align:justify;text-autospace:none'>The option
plans are substantially similar, call for vesting as approved by the Board of
Directors, and allow for the options to be outstanding for a period of ten
years. </p>

<p style='text-autospace:none'><b>&nbsp;</b></p>

<p style='text-autospace:none'><b>&nbsp;</b></p>

<p style='text-autospace:none' align="center">&nbsp;36</p>

<hr color="#000080"><P Style="page-break-after:always"></p>


<p style='text-autospace:none'><b>Stock Warrants </b></p>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>In prior years, the Company issued warrants to acquire shares of common
stock. At June 30, 2003, warrants to acquire 402,000 shares of common stock
were outstanding. These warrants are fully vested, have a weighted-average
exercise price of $1.45, and a weighted-average remaining life 2.9 years.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>During the year ended June 30, 2003, the Company granted 165,000 warrants
to acquire common shares of stock incurring a charge of $10,000.&nbsp; The fair
value of the warrants was estimated at the grant date using the Black-Scholes
option-pricing model with the following weighted-average assumptions: no
dividend rate for all years; price volatility of 72%; a risk-free interest rate
of approximately 2.75%; and expected life of three to five years.&nbsp; The warrants
were fully vested as of October 31, 2002. </p>



<p style='text-autospace:none'><b>Preferred Shares </b></p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Holders of Series A preferred shares have no voting, dividend, or
redemption rights. In the event of liquidation or dissolution, preferred
shareholders are entitled to receive $3.60 per share. Each preferred share is
convertible into one common share at the option of the holder. </p>



<p style='text-autospace:none'><b>NOTE 8 -BUSINESS DIVESTITURES
AND DISCONTINUED OPERATIONS </b></p>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>On June 12, 2001, the Company sold substantially all of the assets of its
wholly owned subsidiaries, Biotrol International, Inc. and Challenge Products,
Inc. to Young Colorado, LLC, for a purchase price of $9 million. The assets
sold comprised the Company's line of infection control and preventive chemical
products for the dental industry.&nbsp; The $401,000 loss from discontinued
operations in 2002 was due to reductions in the expected net proceeds from the
sale due to various claims by Young resolved in 2002.&nbsp; The full remaining
escrow balance of $790,000 was received by the Company by October 2002,
resulting in no additional gain or loss, completing the distribution of funds
in escrow.&nbsp; </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>During the year ended June 30, 2002, the Company received indemnification
notices from Young, to recover alleged losses and costs as they are incurred
for certain alleged breaches of representations and warranties contained in the
Young Asset Purchase Agreement related to compliance issues with the Food,
Drug, and Cosmetic Act (&quot;FDCA&quot;), Federal Insecticide, Fungicide and Rodentcide
Act (&quot;FIFRA&quot;), and other related laws.&nbsp; In February 2002, the Company settled a
complaint with the Environmental Protection Agency (&quot;EPA&quot;) set forth in Young's
indemnification notice for alleged violations of FIFRA.&nbsp; Pursuant to the
settlement, the Company agreed to pay $150,000 to the EPA, over a 15-month
period, commencing March 2002.&nbsp; The full $150,000 settlement had been paid by April 30, 2003, leaving, in managements' opinion, no additional liability under either
Act.</p>

<p style='text-autospace:none'><b>NOTE 9 - SEGMENT INFORMATION </b></p>



<p style='text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Company's reportable segments are strategic business units that offer different
products and services.&nbsp; They are managed separately as each business requires
different technology and marketing strategies.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>There are two reportable segments within Pro-Dex: Micro Motors and Oregon
Micro Systems. The accounting policies applied to determine the segment
information are the same as those described in the summary of significant
accounting policies. Interest expense is allocated based upon the specific
identification of debt incurred by the individual segment. Corporate overhead,
the provision for income taxes, and loss from discontinued operations are
included in corporate profit, and are not allocated to the individual reported
segments.&nbsp; Intersegment sales and transfers are accounted for at amounts that
management believes provides the transferring segment with fair compensation
for the products transferred, considering their condition, market demand, and,
where appropriate, a reasonable profit that recognizes which segment will be
responsible for marketing costs.&nbsp; Management evaluates the performance of each
segment based on operating income (loss) before interest and income taxes. </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>



<p style='text-align:center;text-autospace:
none'>37</p>



<hr color="#000080"><P Style="page-break-after:always"></p>




<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>



<p style='text-indent:0in'>Operating Segment data for
2003 and 2002 is as follows (in thousands): </p>



<div align=left>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=619
 style='width:700;border-collapse:collapse'>
 <tr>
  <td width=204 valign=bottom style='width:153.0pt;border:solid windowtext 1.0pt;
  border-bottom:none;padding:0in 0in 0in 0in'>

  <p align=center style='text-align:center;text-autospace:none'>2003</p>
  </td>
  <td width=84 valign=bottom style='width:63.25pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>Micro<br>
  Motors </p>
  </td>
  <td width=132 valign=bottom style='width:99.0pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>Oregon<br>
  Micro
  Systems </p>
  </td>
  <td width=103 valign=bottom style='width:77.35pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  <p align=center style='text-align:center;text-autospace:none'>Corporate
  </p>
  </td>
  <td width=96 valign=bottom style='width:1.0in;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  <p align=center style='text-align:center;text-autospace:none'>Total</p>
  </td>
 </tr>
 <tr>
  <td width=204 valign=top style='width:153.0pt;border:solid windowtext 1.0pt;
  border-bottom:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Sales to external customers </p>
  </td>
  <td width=84 valign=top style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>$9,281</p>
  </td>
  <td width=132 valign=top style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>$2,709 </p>
  </td>
  <td width=103 valign=top style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=right style='margin-right:5.35pt;text-align:right;
  text-autospace:none'>--</p>
  </td>
  <td width=96 valign=top style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=right style='margin-right:5.35pt;text-align:right;
  text-autospace:none'>$11,990 </p>
  </td>
 </tr>
 <tr>
  <td width=204 valign=top style='width:153.0pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Depreciation and amortization </p>
  </td>
  <td width=84 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>298</p>
  </td>
  <td width=132 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>77</p>
  </td>
  <td width=103 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:5.35pt;text-align:right;
  text-autospace:none'>--</p>
  </td>
  <td width=96 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:5.35pt;text-align:right;
  text-autospace:none'>375</p>
  </td>
 </tr>
 <tr>
  <td width=204 valign=top style='width:153.0pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Interest expense </p>
  </td>
  <td width=84 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>87</p>
  </td>
  <td width=132 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>--</p>
  </td>
  <td width=103 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:5.35pt;text-align:right;
  text-autospace:none'>--</p>
  </td>
  <td width=96 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:5.35pt;text-align:right;
  text-autospace:none'>87 </p>
  </td>
 </tr>
 <tr>
  <td width=204 valign=top style='width:153.0pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Segment operating profit
  (loss)</p>
  </td>
  <td width=84 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>400</p>
  </td>
  <td width=132 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>732 </p>
  </td>
  <td width=103 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:5.35pt;text-align:right;
  text-autospace:none'>(826) </p>
  </td>
  <td width=96 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:5.35pt;text-align:right;
  text-autospace:none'>306 </p>
  </td>
 </tr>
 <tr>
  <td width=204 valign=top style='width:153.0pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Segment assets </p>
  </td>
  <td width=84 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>5,918</p>
  </td>
  <td width=132 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>1,376 </p>
  </td>
  <td width=103 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:5.35pt;text-align:right;
  text-autospace:none'>1,810</p>
  </td>
  <td width=96 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:5.35pt;text-align:right;
  text-autospace:none'>9,104 </p>
  </td>
 </tr>
 <tr>
  <td width=204 valign=top style='width:153.0pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Goodwill</p>
  </td>
  <td width=84 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.15pt;text-align:right;
  text-autospace:none'>1,110</p>
  </td>
  <td width=132 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>--</p>
  </td>
  <td width=103 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:7.6pt;text-align:right;
  text-autospace:none'>--</p>
  </td>
  <td width=96 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:3.0pt;text-align:right;
  text-autospace:none'>1,110</p>
  </td>
 </tr>
 <tr>
  <td width=204 valign=top style='width:153.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Expenditure for segment assets
  </p>
  </td>
  <td width=84 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>298 </p>
  </td>
  <td width=132 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>66 </p>
  </td>
  <td width=103 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=right style='margin-right:5.35pt;text-align:right;
  text-autospace:none'>--</p>
  </td>
  <td width=96 valign=top style='border-top:medium none;border-left:medium none;
  border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=right style='margin-right:5.35pt;text-align:right;
  text-autospace:none'>364</p>
  </td>
 </tr>
</table>

</div>



<div align=left>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=624
 style='width:700;border-collapse:collapse'>
 <tr>
  <td width=204 valign=bottom style='width:152.95pt;border:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  <p align=center style='text-align:center;text-autospace:none'>2002</p>
  </td>
  <td width=90 valign=bottom style='width:67.45pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>Micro<br>
  Motors </p>
  </td>
  <td width=126 valign=bottom style='width:94.6pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>Oregon<br>
  Micro
  Systems </p>
  </td>
  <td width=106 valign=bottom style='width:79.85pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>

  <p align=center style='text-align:center;text-autospace:none'>Corporate</p>
  </td>
  <td width=96 valign=bottom style='width:71.9pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>

  <p align=center style='text-align:center;text-autospace:none'>Total</p>
  </td>
  <td width=2 valign=top style='width:1.25pt;border:none;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=204 valign=top style='width:152.95pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Sales to external customers</p>
  </td>
  <td width=90 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.15pt;text-align:right;
  text-autospace:none'>$8,285 </p>
  </td>
  <td width=126 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>$2,241 </p>
  </td>
  <td width=106 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:7.6pt;text-align:right;
  text-autospace:none'>--</p>
  </td>
  <td width=96 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:3.0pt;text-align:right;
  text-autospace:none'>$10,526 </p>
  </td>
  <td width=2 valign=top style='width:1.25pt;border:none;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=204 valign=top style='width:152.95pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Depreciation and amortization </p>
  </td>
  <td width=90 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.15pt;text-align:right;
  text-autospace:none'>371 </p>
  </td>
  <td width=126 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>454 </p>
  </td>
  <td width=106 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:7.6pt;text-align:right;
  text-autospace:none'>40</p>
  </td>
  <td width=96 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:3.0pt;text-align:right;
  text-autospace:none'>865 </p>
  </td>
  <td width=2 valign=top style='width:1.25pt;border:none;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=204 valign=top style='width:152.95pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Interest expense </p>
  </td>
  <td width=90 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.15pt;text-align:right;
  text-autospace:none'>75</p>
  </td>
  <td width=126 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>--</p>
  </td>
  <td width=106 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:7.6pt;text-align:right;
  text-autospace:none'>42</p>
  </td>
  <td width=96 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:3.0pt;text-align:right;
  text-autospace:none'>117</p>
  </td>
  <td width=2 valign=top style='width:1.25pt;border:none;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=204 valign=top style='width:152.95pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Segment operating profit
  (loss) </p>
  </td>
  <td width=90 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.15pt;text-align:right;
  text-autospace:none'>678 </p>
  </td>
  <td width=126 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>(1,005) </p>
  </td>
  <td width=106 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:7.6pt;text-align:right;
  text-autospace:none'>(1,808) </p>
  </td>
  <td width=96 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:3.0pt;text-align:right;
  text-autospace:none'>(2,135) </p>
  </td>
  <td width=2 valign=top style='width:1.25pt;border:none;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=204 valign=top style='width:152.95pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Segment assets </p>
  </td>
  <td width=90 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.15pt;text-align:right;
  text-autospace:none'>5,505 </p>
  </td>
  <td width=126 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>1,070 </p>
  </td>
  <td width=106 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:7.6pt;text-align:right;
  text-autospace:none'>3,393 </p>
  </td>
  <td width=96 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:3.0pt;text-align:right;
  text-autospace:none'>9,968 </p>
  </td>
  <td width=2 valign=top style='width:1.25pt;border:none;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=204 valign=top style='width:152.95pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Goodwill</p>
  </td>
  <td width=90 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.15pt;text-align:right;
  text-autospace:none'>1,110</p>
  </td>
  <td width=126 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>--</p>
  </td>
  <td width=106 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:7.6pt;text-align:right;
  text-autospace:none'>--</p>
  </td>
  <td width=96 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:0in; ' align="right">
  <p align=right style='margin-right:3.0pt;text-align:right;
  text-autospace:none'>1,110</p>
  </td>
  <td width=2 valign=top style='width:1.25pt;border:none;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=204 valign=top style='width:152.95pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Expenditure for segment assets
  </p>
  </td>
  <td width=90 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=right style='margin-right:4.15pt;text-align:right;
  text-autospace:none'>266 </p>
  </td>
  <td width=126 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>30 </p>
  </td>
  <td width=106 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=right style='margin-right:7.6pt;text-align:right;
  text-autospace:none'>--</p>
  </td>
  <td width=96 valign=top style='border-top:medium none;border-left:medium none;
  border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="right">
  <p align=right style='margin-right:3.0pt;text-align:right;
  text-autospace:none'>296</p>
  </td>
  <td width=2 valign=top style='width:1.25pt;border:none;padding:0in 0in 0in 0in'>

  </td>
 </tr>
</table>

</div>

<p style='text-align:justify'><b>Note 10 - NET INCOME (LOSS) PER SHARE </b></p>

<p style='margin-top:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
following table reconciles the weighted average shares outstanding for basic
and diluted net income per share for the periods indicated.</p>

<div align=left>

<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 width=630
 style='width:700;margin-left:0pt;border-collapse:collapse;border:medium none; '>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=129 valign=top style='width:96.6pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:none;
  padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center'>2003</p>
  </td>
  <td width=126 valign=top style='width:94.5pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center'>2002</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=129 valign=top style='width:96.6pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=126 valign=top style='width:94.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Net
  income (loss)</p>
  </td>
  <td width=129 valign=top style='width:96.6pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 133,000</p>
  </td>
  <td width=126 valign=top style='width:94.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (1,566,000)</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Basic net income (loss) per common share:</p>
  </td>
  <td width=129 valign=top style='width:96.6pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">

  </td>
  <td width=126 valign=top style='width:94.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">

  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;&nbsp; Weighted average of common shares outstanding </p>
  </td>
  <td width=129 valign=top style='width:96.6pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,743,575</p>
  </td>
  <td width=126 valign=top style='width:94.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">
  <p align=center style='text-align:center'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,787,300</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Basic net income (loss) per common share </p>
  </td>
  <td width=129 valign=top style='width:96.6pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.02</p>
  </td>
  <td width=126 valign=top style='width:94.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.18)</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  &nbsp;</td>
  <td width=129 valign=top style='width:96.6pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">

  </td>
  <td width=126 valign=top style='width:94.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">

  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Diluted net income
  (loss) per share:</p>
  </td>
  <td width=129 valign=top style='width:96.6pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">

  </td>
  <td width=126 valign=top style='width:94.5pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">

  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;&nbsp; Weighted average of common shares outstanding </p>
  </td>
  <td width=129 valign=top style='width:96.6pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,743,575</p>
  </td>
  <td width=126 valign=top style='width:94.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">
  <p align="center">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,787,300</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effect of potentially dilutive securities (options) </p>
  </td>
  <td width=129 valign=top style='width:96.6pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp; 194,940</p>
  </td>
  <td width=126 valign=top style='width:94.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; --</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effect of potentially dilutive securities (warrants)
  </p>
  </td>
  <td width=129 valign=top style='width:96.6pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;24,249</p>
  </td>
  <td width=126 valign=top style='width:94.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; --</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effect of potentially dilutive securities
  (convertible<br>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Preferred Shares) </p>
  </td>
  <td width=129 valign=top style='width:96.6pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  <br>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  78,129</p>
  </td>
  <td width=126 valign=top style='width:94.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; --&nbsp;&nbsp; </p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Weighted average number of common shares outstanding -
  Diluted</p>
  </td>
  <td width=129 valign=bottom style='width:96.6pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,040,893</p>
  </td>
  <td width=126 valign=bottom style='width:94.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">
  <p align="center">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,787,300</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p>Diluted net income (loss) per common share </p>
  </td>
  <td width=129 valign=top style='width:96.6pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.01</p>
  </td>
  <td width=126 valign=top style='width:94.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt' align="center">
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (0.18)</p>
  </td>
 </tr>
</table>

</div>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Common shares issuable upon conversion of 78,129 shares of preferred
stock have not been included in the 2002 computation because their inclusion
would have been anti-dilutive.&nbsp; In addition, the dilutive effect of 78,100 and
224 shares of stock options and warrants, respectively, have not been included
in the 2002 computation because the inclusion would have also been
anti-dilutive.&nbsp; </p>

<p style='text-align:justify'><b>&nbsp;</b></p>

<p style='text-align:justify'>&nbsp;</p>

<p style='text-align:center'>38</p>

<hr color="#000080"><P Style="page-break-after:always"></p>


<p style='text-align:justify'>&nbsp;</p>

<p style='text-align:justify'><b>Note 11 - MAJOR CUSTOMER</b></p>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The Company had one Major Customer (defined as a customer that represents
greater than 10% of the Company's total revenues) during the year ended June 30, 2003.&nbsp; Net sales to this customer amounted to $1,323,000 and at June 30, 2003 the
accounts receivable include a balance of $14,000 due form this customer.&nbsp; There
were no major customers for the year ended June 30, 2002. </p>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='text-align:center;text-autospace:
none'>39</p>

<b><hr color="#000080"><br clear=all
style='page-break-before:always'>
</b>

<p style='text-autospace:none'><b>PRO-DEX, INC. AND
SUBSIDIARIES </b></p>

<p align=center style='text-align:center;text-autospace:none'><b>EXHIBIT
INDEX </b></p>



<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse'>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>Exhibit
  No. </b></p>
  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>Document
  </b></p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>2.2</p>
  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Merger
  Agreement between Pro-Dex, Inc., Micro Systems Acquisition Corporation, and
  Micro Motors, Inc., dated July 26, 1995&nbsp; (incorporated herein by reference to the Company's
  Form 8-K dated July 26, 1996)</p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>2.3</p>
  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Acquisition
  Agreement between Pro-Dex, Inc., Oregon Micro Systems, Inc. and L. Wayne
  Hunter dated July 26, 1996 (incorporated herein by reference to Exhibit 7.2 to
  the Company's Form 8-K dated July 26,
   1996). </p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>

  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>

  &nbsp;</td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>3.1</p>
  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Articles
  of Incorporation (incorporated herein by reference to Exhibit 3.1 to Pro-Dex,
  Inc. Registration Statement No. 33-74397). </p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>3.2</p>
  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Bylaws
  (incorporated herein by reference to Exhibit 3.2 to Pro-Dex, Inc.
  Registration Statement No. 33-74397). </p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>

  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>

  &nbsp;</td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>10.16</p>
  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Prophy
  Ring Patent License Agreement dated and effective July 1, 1993 between
  Challenge Products, Inc. and Charles L. Bull (incorporated herein by
  reference to Exhibit 10.17 to Pro-Dex, Inc. Registration Statement No.
  33-74397). </p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>10.17*<sup>x</sup></p>
  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>1994
  Employees Stock Option Plan&nbsp; </p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>10.18*<sup> x</sup></p>
  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>1994
  Directors Stock Option Plan as amended</p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>10.26</p>
  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Audit
  Committee Charter (incorporated herein by reference to Company's Form 10-KSB
  filed October 1, 2002).</p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>10.27</p>
  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Real
  Property Sale by Challenge subsidiary (PDMI subsidiary C) Settlement
  Statement (incorporated herein by reference to Company's Form 10-KSB filed October 1, 2002). </p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>10.28</p>
  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Acquisition
  Agreement between Pro-Dex, Inc., Oregon Micro Systems, Inc. and L. Wayne
  Hunter dated July 26, 1996 (incorporated herein by reference to Exhibit 7.2 to
  the Company's Form 8-K dated July 26,
   1996).</p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>10.29</p>

  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Asset
  Sale Agreement dated June 12, 2001, by and among Young Colorado, LLC, Pro-Dex, Inc.,
  Pro-Dex Management, Inc., Biotrol International, Inc., and Challenge
  Products, Inc. (incorporated herein by reference to the Form 8-K filed July 30, 2001).</p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>10.30</p>
  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Micro
  Motors Credit and Security Agreements with WFBCI (incorporated herein by
  reference to Company's Form 10-KSB filed October 1, 2002).
  </p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>10.31</p>
  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>OMS
  Credit and Security Agreements with WFBCI (incorporated herein by reference
  to Company's Form 10-KSB filed October
   1, 2002). </p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>10.32<sup> x</sup></p>
  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Promissory
  Note receivable from Ronald G. Coss</p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>

  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>

  &nbsp;</td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>21.00</p>
  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>The
  Company has the following subsidiaries incorporated in the following states:
  PDMI subsidiary B, a Delaware corporation; Micro Motors, Inc., a Colorado
  corporation; Oregon Micro Systems, Inc., an Oregon corporation. </p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>

  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>

  &nbsp;</td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>23.1<sup> x</sup></p>
  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Consent
  Letter of McGladrey &amp; Pullen LLP</p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>

  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>

  &nbsp;</td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>31.1<sup> x</sup></p>
  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Certification
  of the Chief Executive Officer Required by Rule 13a-14(a) of the Securities
  Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the
  Sarbanes-Oxley Act of 2002 </p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>31.2<sup> x</sup></p>
  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Certification
  of the Chief Financial Officer Required by Rule 13a-14(a) of the Securities
  Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the
  Sarbanes-Oxley Act of 2002</p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top style='width:63.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>32.1<sup> x</sup></p>
  </td>
  <td width=636 valign=top style='width:477.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Certification
  of the Chief Executive Officer and Chief Financial Officer Pursuant to 18
  U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
  Act of 2002</p>
  </td>
 </tr>
</table>



<p style='text-autospace:none'>*
Denotes management contract or compensatory arrangement required to be filed as
an exhibit to the Form 10-KSB. <br>
<sup>x</sup> Filed Herewith</p>



<p style='text-autospace:none'>&nbsp;</p>



<p style='text-autospace:none'>&nbsp;</p>



<p style='text-autospace:none' align="center">40</p>

<hr color="#000080"><br clear=all style='page-break-before:
always'>
SIGNATURES </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>In accordance with 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. </p>



<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse'>
 <tr>
  <td width=305 valign=top style='width:229.1pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>PRO-DEX INC. </p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=305 valign=top style='width:229.1pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>By: / s / Patrick Johnson </p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=305 valign=top style='width:229.1pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>----------------------------- </p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=305 valign=top style='width:229.1pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Patrick Johnson </p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=305 valign=top style='width:229.1pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Chief Executive Officer</p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=305 valign=top style='width:229.1pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>and President </p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>

  </td>
 </tr>
</table>



<p style='text-align:justify;text-autospace:none'>In accordance
with 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 and on the dates indicated.</p>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=744
 style='width:558.05pt;border-collapse:collapse'>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>

  <p style='text-autospace:none'>/
  s / Patrick Johnson&nbsp;</p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>

  <p style='text-autospace:none'>September 23, 2003</p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>---------------------------------&nbsp;
  </p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;------------------------------------
  </p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Patrick
   Johnson&nbsp;</p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Date
  </p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>President
  and Chief Executive Officer</p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>

  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=24><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>(Principal
  Executive Officer)</p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>

  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=24><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp; </p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp; </p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>/
  s / Jeffrey J. Ritchey&nbsp; </p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>September 23, 2003</p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>---------------------------------&nbsp;
  </p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;-------------------------------------
  </p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Jeffrey
  J. Ritchey&nbsp;</p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Date
  </p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Treasurer
  and Chief Financial Officer</p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>

  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=24><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>(Principal
  Financial and Accounting Officer) </p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>

  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=24><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp; </p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp; </p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>/
  s / George J. Isaac&nbsp; </p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>September 23, 2003</p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>----------------------------------&nbsp;&nbsp;
  </p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>----------------------------------------
  </p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>George J. Isaac&nbsp;</p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;Date
  </p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Secretary
  and a Director </p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>

  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=24><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  &nbsp;</td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>

  &nbsp;</td>
  <td style='border:none;padding:0in 0in 0in 0in' width=24>&nbsp;</td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>


  <p style='text-autospace:none'>/
  s / Ronald G. Coss&nbsp;</p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>

  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=24><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>---------------------------------&nbsp;
  </p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>September 23, 2003</p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Ronald
  G. Coss&nbsp;</p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;----------------------------------------
  </p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Director</p>


  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Date</p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  &nbsp;</td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  &nbsp;</td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  &nbsp;</td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>/
  s / Mark P. Murphy&nbsp;<br>
  ---------------------------------&nbsp;<br>
  Mark
  P. Murphy&nbsp;</p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>September 23, 2003</p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Director</p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;----------------------------------------
  </p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=24><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  &nbsp;</td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  &nbsp;</td>
  <td style='border:none;padding:0in 0in 0in 0in' width=24>&nbsp;</td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>


  <p style='text-autospace:none'>/
  s / Michael Mesenbrink&nbsp;</p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>

  September 23, 2003</td>
  <td style='border:none;padding:0in 0in 0in 0in' width=24><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>---------------------------------&nbsp;
  </p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;</p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Michael
  Mesenbrink&nbsp;</p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;----------------------------------------
  </p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Director</p>


  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Date</p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  &nbsp;</td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  &nbsp;</td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  &nbsp;</td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>/
  s / Valerio Giannini&nbsp;<br>
  ---------------------------------&nbsp;<br>
  Valerio
  Gianinni&nbsp;</p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>September 23, 2003<br>
  <br>
  ----------------------------------------</p>

  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Director</p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;Date</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=24><p>&nbsp;</td>
 </tr>
</table>

<p>&nbsp;</p>
<p align="center">41</p>

<hr color="#000080">



</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.17
<SEQUENCE>3
<FILENAME>ex10-17.htm
<TEXT>
<html>

<head>
<title>ex10.17</title>
</head>

<body>

<p>&nbsp;</p>

<p><b>EXHIBIT 10.17</b></p>

<p align=center style='text-align:center'><b>PRO-DEX, INC.&nbsp;</b></p>

<p align=center style='text-align:center'><b>1994 AMENDED STOCK OPTION PLAN</b></p>

<p align=center style='text-align:center'><b>&nbsp;</b></p>



<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; This
Stock Option Plan (the &quot;Plan&quot;) is adopted in consideration for services
rendered and to be rendered to Pro-Dex, Inc. and related companies.</p>



<p style='text-align:justify;text-indent:
60'>1.&nbsp;&nbsp;&nbsp; <u>Definitions</u>.&nbsp; The terms used in this Plan shall, unless otherwise
indicated or required by the particular
context, have the following meanings:</p>



<p style='text-align:justify; text-indent:60'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Board</u>:&nbsp; &nbsp;&nbsp;
The Board of Directors of Pro-Dex, Inc.</p>



<p style='text-align:justify; text-indent:60'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Code</u>:&nbsp;&nbsp; &nbsp;&nbsp;
The Internal Revenue Code of 1986, as amended.</p>



<p style='text-align:justify; text-indent:60'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Common Stock</u>:&nbsp;&nbsp;&nbsp;
The no par value common stock of Pro-Dex, Inc.</p>



<p style='text-align:justify; text-indent:60'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Company</u>:&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro-Dex, Inc., a corporation incorporated under the laws of California, and any successors in
interest by merger, operation of law, assignment or purchase of all or
substantially all of the property, assets or business of the Company.</p>



<p style='text-align:justify; text-indent:60'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>
Date of Grant</u>:&nbsp;&nbsp;&nbsp; The date on which an Option (see below) is granted under the
Plan.</p>



<p style='text-align:justify; text-indent:60'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Disinterested
Person</u>:&nbsp; A director who has not been granted or awarded equity securities
pursuant to any plan of the Company or of any Related Company of the Company
during one year prior to that director's service as an administrator of the
Plan, except as otherwise provided in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the &quot;Exchange Act&quot;) with respect
to (a) participation in formula plans or ongoing securities acquisitions plans,
and (b) an election to receive securities for an annual retainer fee.</p>



<p style='text-align:justify; text-indent:60'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Employee</u>:&nbsp;&nbsp;&nbsp;
An Employee is an employee of the Company or any Related Company.</p>



<p style='text-align:justify; text-indent:60'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Fair
Market Value</u>:&nbsp;&nbsp; The Fair Market Value of the Option Shares.&nbsp; Such Fair
Market Value as of any date shall be determined by the Option Committee as of
the last business day for which the prices or quotes discussed in this sentence
are available prior to the date an Option is granted and shall mean (a) the
average (on that date) of the high and low prices of the Common Stock on the
principal national securities exchange by which the Common Stock is traded, if
the stock is then traded on a national securities exchange; or, (b) the last
reported sale price (on that date) of the Common Stock on NASDAQ, if the stock
is not then traded on a national securities exchange; or (c) the closing bid
price (or average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the stock is not reported
on NASDAQ.&nbsp; However, if the Common Stock is not publicly-traded at the time an
Option is granted under the Plan, Fair Market Value shall be deemed to be the
fair value of the stock as determined in good faith by the Board or the Option
Committee, and a written record of the method of determining such value shall
be maintained.</p>



<p style='text-align:justify; text-indent:60'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>
Incentive Stock Options</u> (&quot;ISOs&quot;):&nbsp; &quot;Incentive Stock Options&quot; as that term is defined
in Section 422A of the Code.</p>



<p style='text-align:justify; text-indent:60'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Key
Employee</u>:&nbsp;&nbsp;&nbsp;&nbsp; A person designated by the Option Committee who either is
employed by the Company or a Related Company (see below) and upon whose
judgment, initiative and efforts the Company or a Related Company is largely
dependent for the successful conduct of its business; provided, however, that
Key Employees shall not include those members of the Board who are not
employees of the Company or a Related Company.</p>



<p style='text-align:center'>-1-</p>



<hr color="#000080">



<p style='text-align:justify'>&nbsp;</p>



<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Non-Incentive
Stock Options (&quot;Non-ISOs&quot;</u>):&nbsp;&nbsp;&nbsp;&nbsp; Options which are not intended to qualify
as &quot;Incentive Stock Options&quot; under Section 422A of the Code.</p>



<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Option</u>:&nbsp;&nbsp;&nbsp;&nbsp;
The rights granted to an Employee to purchase Common Stock pursuant to the
terms and conditions of an Option Agreement (see below).</p>



<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Option
Agreement</u>:&nbsp;&nbsp;&nbsp;&nbsp; The written agreement (and any amendment or supplement
thereto) between the Company and an Employee designating the terms and
conditions of an Option.</p>



<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Option
Committee</u>:&nbsp;&nbsp;&nbsp;&nbsp; With respect to grants of Options to Employees who are not
also Officers and/or Directors of the Company, the Plan shall be administered
by an Option Committee (&quot;Option Committee&quot;) composed of the Board or at least
two members of the Board.&nbsp; With respect to grants of Options to Employees who
are also Officers or Directors, the Plan shall be administered by a committee,
selected by the Board, consisting of two or more persons, each of whom is a
Disinterested Person.&nbsp; Such committee may also be deemed an Option Committee.</p>



<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Option
Shares</u>:&nbsp;&nbsp;&nbsp;&nbsp; The shares of Common Stock underlying an Option granted to an
Employee.</p>



<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Optionee</u>:&nbsp;&nbsp;&nbsp;&nbsp;
An Employee who has been granted an Option.</p>



<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Related
Company</u>:&nbsp;&nbsp;&nbsp;&nbsp; Any corporation that is a &quot;parent corporation&quot; or a
&quot;subsidiary corporation&quot; with respect to the Company, as those terms are
defined in Section 425 of the Code.&nbsp; The determination of whether a corporation
is a Related Company shall be made without regard to whether the corporation or
the relationship between the corporation and the Company now exists or comes
into existence hereinafter.</p>



<p style='margin-left:1.0in;text-align:justify;'>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Purpose and Scope</u>.</p>



<p style='margin-left:1.0in;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)&nbsp;&nbsp;&nbsp; The
purpose of this Plan is to advance the interests of the Company and
its shareholders by affording Employees an opportunity for investment in the
Company and the incentive advantages inherent in stock ownership in this
Company.</p>

<p style='margin-left:1in;text-align:justify;'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)&nbsp;&nbsp; &nbsp;&nbsp;This
Plan authorizes the Option Committee to grant Options to purchase shares
of Common Stock to Employees selected by the Option Committee while considering
criteria such as employment position or other relationship with the Company,
duties and responsibilities, ability, productivity, length of service or
association, morale, interest in the Company, recommendations by supervisors,
and other matters.</p>



<p style='text-align:justify;text-indent:
1in'>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Administration of the Plan.&nbsp; The Plan shall be administered by the
Option Committee.&nbsp; The Option Committee
shall have the authority granted to it under this section and under each other
section of the Plan.</p>



<p style='text-align:justify; text-indent:1in'>In accordance
with and subject to the provisions of the Plan, the Option Committee shall select the
Optionees, shall determine (a) the number of shares of Common Stock to be
subject to each Option, (b) the time at which each Option is to be granted, (c)
whether an Option shall be granted in exchange for the cancellation and
termination of a previously granted option or options under the Plan or
otherwise, (d) the purchase price for the Option Shares, (e) the option period,
and (f) the manner in which the Option becomes exercisable.&nbsp; In addition, the
Option Committee shall fix such other terms of each Option as the Option
Committee may deem necessary or desirable.&nbsp; The Option Committee shall
determine the form of Option Agreement to evidence each Option.</p>



<p style='text-align:center'>-2-</p>



<hr color="#000080">



<p style='text-align:justify'>&nbsp;</p>



<p style='text-align:justify; text-indent:1in'>The Option
Committee from time to time may adopt such rules and regulations for carrying out the
purposes of the Plan as it may deem proper and in the best interests of the
Company.&nbsp; The Option Committee shall keep minutes of its meetings and those
minutes shall be distributed to every member of the Board.</p>



<p style='text-align:justify; text-indent:1in'>The Board may
from time to time make such changes in and additions to the Plan as it may
deem proper and in the best interest of the Company; provided, however, that no
such change or addition shall impair any Option previously granted under the
Plan, and that the approval by the affirmative vote of the holders of a
majority of the Company's securities entitled to vote and represented at a
meeting duly held in accordance with the applicable laws of the State of
California, shall be required for any amendment which would:</p>



<p style='text-align:justify; text-indent:1in'>(a)&nbsp;&nbsp;&nbsp; modify
the eligibility requirements for receiving Options under the Plan;</p>

<p style='text-align:justify;text-indent:
1in'>(b)&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;increase
the benefits accruing to Employees under the Plan; or</p>



<p style='text-align:justify;text-indent:
1in'>(c)&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;increase
the number of shares of Common Stock that may be issued under the
Plan.</p>



<p style='margin-left:1in;text-align:justify'>All actions
taken and all interpretations and determinations made by the Option Committee in good
faith (including determinations of Fair Market Value) shall be final and
binding upon all Employees, the Company and all other interested persons.&nbsp; No
member of the Option Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan,
and all members of the Option Committee shall, in addition to rights they may
have as Directors of the Company be fully protected by the Company with respect
to any such action, determination or interpretation.</p>



<p style='text-align:justify;text-indent:
1in'>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Number of Shares</u>.&nbsp; The Board is authorized to appropriate, issue
and sell for the purposes of the Plan, and
the Option Committee is authorized to grant Options with respect to, a total
number, not in excess of 1,500,000 shares of Common Stock, either treasury or
authorized but unissued, or the number and kind of shares of stock or other
securities which in accordance with Section 9 shall be substituted for the
1,500,000 shares or into which such 1,500,000 shares shall be adjusted.&nbsp; All or
any unsold shares subject to an Option that for any reason expires or otherwise
terminates, may again be made subject to Options under the Plan.</p>



<p style='text-align:justify;text-indent:
1in'>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Eligibility</u>.&nbsp; Options which are intended to qualify as ISOs will
be granted only to Key Employees.&nbsp; Key
Employees and other Employees may hold more than one Option under the Plan and
may hold Options under the Plan and options granted pursuant to other plans or
otherwise.</p>



<p style='text-align:justify;text-indent:
1in'>6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Option Price</u>.&nbsp; The Option Committee shall determine the purchase
price for the Options Shares, provided
that the purchase price to be paid by Optionees for the Option Shares which are
intended to qualify as ISOs shall not be less than 100 percent of the Fair
Market Value of the Option Shares at the time the ISO is granted.&nbsp; The purchase
price to be paid by Optionees for Option Shares which are not intended to
qualify as ISOs may be less than the Fair Market Value of the Option Shares at
the time the Non-ISO is granted.&nbsp; The purchase price for the Option Shares
shall be a fixed, and cannot be a fluctuating, price.</p>



<p style='text-align:center;'>-3-</p>



<hr color="#000080">



<p style='text-align:justify;'>&nbsp;</p>



<p style='text-align:justify;text-indent:
1in'>7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Duration and Exercise of Options</u>.</p>



<p style='margin-left:1in;text-align:justify'>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Each
Option granted under the Plan shall be exercisable on such date or dates
and during such period and for such number of shares as shall be determined
pursuant to the provisions of the instrument evidencing such Option.&nbsp; The
Option Committee shall have the right to accelerate the date of exercise of any
Option, provided that the Option Committee shall not accelerate the exercise of
any ISO granted if such acceleration would violate the annual vesting
limitation contained in Section 422(d) (1) of the Code.</p>



<p style='margin-left:1in;text-align:justify;'>(b)&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;Except
as otherwise permitted under Section 11, during the lifetime of
the Optionee, the Option shall be exercisable only by the Optionee; provided,
that in the event of the legal disability of an Optionee, the guardian or
personal representative of the Optionee may exercise the Option.&nbsp; However, if
the Option is an ISO it may be exercised by the guardian or personal
representative of the Optionee only if such guardian or personal representative
obtains a ruling from the Internal Revenue Service or an opinion of counsel to
the effect that neither the grant nor the exercise of such power is violative
of Section 422A(b) (5) of the Code.&nbsp; Any opinion of counsel must be both from
counsel arid in a form acceptable to the Option Committee.</p>





<p style='margin-left:1in;text-align:justify;'>(c)&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;The
Option Committee may determine whether any Option shall be exercisable
as provided in Paragraph (a) of this Section 7 or whether the Options shall be
exercisable in installments only; if the Option Committee determines the
latter, it shall determine the number of installments and the percentage of the
Option exercisable at each installment date.&nbsp; All such installments shall be
cumulative.</p>



<p style='margin-left:1in;text-align:justify;'>(d)&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;If
the Optionee ceases to be employed by either the Company or a Related
Company because of the death or permanent and total disability (as defined in
Section 22(e) (3) of the Code) of the Optionee, any Option held by the Optionee
at the time his employment ceases may be exercised within 90 days after the
date his employment ceased, but only to the extent that the Option was
exercisable according to its terms on the date the Optionee's employment
ceased.&nbsp; After such 90-day period, any unexercised portion of an Option shall
expire.</p>





<p style='margin-left:1in;text-align:justify;'>(e)&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
the provisions of Paragraph (d) of this Section 7, if an
Optionee's employment by the Company or a Related Company ceases for any reason
other than the Optionee's death or permanent and total disability, any unexercised
portion of any Option held by the Optionee at the time his employment ceases
may be exercised within 30 days after the date his employment ceased, but only
to the extent that the Option was exercisable according to its terms on the
date the Optionee's employment ceased.&nbsp; After such date, any unexercised
portion of an Option shall expire.</p>



<p style='margin-left:1in;text-align:justify;'>(f)&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;Each
Option shall be exercised in whole or part by delivering to the office of
the Treasurer of the Company written notice of the number of shares with respect
to which the Option is to be exercised and by paying in full the purchase price
for the Option Shares purchased as set forth in Section 8; provided, that an
Option may not be exercised in part unless the purchase price for the Option
Shares purchased is at least $2,000.</p>





<p style='margin-left:1in;text-align:justify;'>(g)&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;To
the extent required to qualify for the exemption provided by Rule 16b-3
under the Exchange Act, and any successor provision, at least six months must
elapse from the date of acquisition of an Option by any person who is subject
to the reporting requirements of Section 16(a) of the Exchange Act to the date
of exercise of such Option or disposition of the Option Shares.</p>



<p style="text-align: center">-4-</p>
<hr color="#000080">





<p style='text-align:justify'>&nbsp;</p>



<p style='text-align:justify;text-indent:
1in'>8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Payment for Option Shares</u>.&nbsp; If the purchase price of the Option
Shares purchased by any Optionee at one
time exceeds $2,000, the Option Committee may permit all or part of the
purchase price for the Option Shares to be paid by the Optionee by (a)
delivering to the Company shares of the Company's common Stock previously owned
by the Optionee with a Fair Market Value as of the date of payment equal to the
portion of the purchase price for the Option Shares that the Optionee does not
pay in cash, (b) having shares withheld from the amount of shares to be
received by the Optionee, (c) delivering an irrevocable subscription agreement
obligating the Optionee to take and pay for the shares to be purchased within
one year of the date of such exercise, or (d) complying with any other payment
mechanisms as the Option Committee may approve from time to time.&nbsp; As a
condition to the exercise of any Option granted under this Plan, the Optionee
shall make such arrangements as the Option Committee may require for the
satisfaction of any federal, state or withholding tax obligations which may
arise in connection with such exercise.&nbsp; The issuance, transfer or delivery of
certificates of shares of Common Stock pursuant to the exercise or Options may
be delayed, at the discretion of the Option Committee, until the Option
Committee is satisfied that the applicable requirements of federal and state
securities laws and the withholding provisions of the Code have been met.&nbsp;
Until such person has been issued a certificate or certificates for the Option
Shares so purchased, he or she shall possess no rights of a recordholder with
respect to any of such shares.</p>



<p style='text-align:justify;text-indent:
1in'>9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Change in Stock, Adjustments, Inc</u>.</p>

<p style='margin-left:1in;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In the
event that each of the outstanding shares of Common Stock (other than
shares held by dissenting shareholders which are not changed or exchanged)
should be changed into, or exchanged for, a different number or kind of shares
of stock or other securities of the Company, or, if further changes or
exchanges of any stock or other securities into which the Common Stock shall
have been changed, or for which it shall have been exchanged, shall be made
(whether by reason of merger, consolidation reorganization, recapitalization,
stock dividends, reclassification, split-up, combination or shares or
otherwise(, then there shall be substituted for each share of Common Stock that
is subject to the Plan but not subject to an outstanding Option thereunder, the
number and kind of shares of stock or other securities into which each
outstanding share of Common Stock (other than shares held by dissenting
shareholders which are not changed or exchanged) shall be so changed or for
which each outstanding share of Common Stock (other than shares held by
dissenting shareholders) shall be exchanged.&nbsp; Any securities so substituted
shall be subject to similar successive adjustments.</p>



<p style='margin-left:1in;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In the event
of any such changes or exchanges, the Option Committee shall determine whether,
in order to prevent dilution or enlargement of rights, an adjustment should be
made in the number, or kind, or Option price of the shares or other securities
then subject to an Option or Options granted pursuant to the Plan and the
Option Committee shall make any such adjustment, and such adjustments shall be
made and shall be effective and binding for all purposes of the Plan.</p>



<p style='margin-left:1in;text-align:justify;'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;The
Company completed a Plan of Reorganization and Merger (&quot;Reorganization&quot;)
whereby P-D Acquiring Corp., a California corporation, merged with and into the
Company in exchange for shares of Pro-Dex Holdings, Inc., a Colorado
corporation.&nbsp; Post Reorganization, the Plan is the Plan of Pro-Dex, Inc.</p>



<p style='text-align:justify;text-indent:
1in'>10.&nbsp; <u>Relationship
to Employment</u>.&nbsp; Nothing contained in the Plan, or in any Option granted pursuant to the
Plan, shall confer upon any Optionee any right with respect to continuance of
employment by the Company, or interfere in any way with the right of the
Company to terminate the Optionee's employment at any time.</p>



<p style='text-align:center;'>-5-</p>



<hr color="#000080">



<p style='text-align:justify;text-indent:
1in'>11.&nbsp; <u>Nontransferability
of Option</u>.&nbsp; No Option granted under the Plan shall be transferable by the Optionee,
either voluntarily or involuntarily, except by will or the laws of descent and
distribution, pursuant to a qualified domestic relations order as defined in
the Code, or pursuant to the Employee Retirement Income Security Act or rules
promulgated thereunder; except that (a) Optionees who are not subject to
Section 16(b) of the Exchange Act may upon written notice transfer an Option
(i) to an Optionee's spouse, parents, siblings, or lineal descendants, or (ii)
to a trust for the benefit of the Optionee or any of the Optionee's spouse,
parents, siblings, or lineal descendants, or (iii) to any corporation or
partnership controlled by the Optionee; and (b) Optionees who are subject to
Section 16(b) of the Exchange Act may transfer Options to immediate family
members and family trusts.&nbsp; No Option shall be subject to execution, attachment
or similar process.&nbsp; Except as specifically provided herein, any attempt to
transfer the Option shall void the Option.</p>



<p style='text-align:justify;text-indent:
1in'>12.&nbsp; <u>Rights
as a Shareholder</u>.&nbsp; No person shall have any rights as a shareholder with respect to any shares
covered by an Option until that person shall become the holder of record of
such shares and, except as provided in Section 9, no adjustments shall be made
for dividends or other distributions or other rights as to which there is an
earlier record date.</p>



<p style='text-align:justify;text-indent:
1in'>13.&nbsp; <u>Securities
Laws Requirements</u>.&nbsp; No Option Shares shall be issued unless and until, in the opinion of the
Company, any applicable registration requirements of the Securities Act of
1933, as amended (&quot;Securities Act&quot;), any applicable listing requirements of any
securities exchange on which stock of the same class is then listed, and any other
requirements of law or of any regulatory bodies having jurisdiction over such
issuance and delivery, have been fully complied with.&nbsp; Each Option and each
Option Share certificate may be imprinted with legends reflecting federal and
state securities laws, restrictions and conditions, and the Company may comply
therewith and issue &quot;stop transfer&quot; instructions to its transfer agent and
registrar in good faith without liability.</p>



<p style='text-align:justify;text-indent:
1in'>14.&nbsp; <u>Disposition
of Shares</u>.&nbsp; Each Optionee, as a condition of exercise, shall represent, warrant and agree, in
a form of written certificate approved by the Company, as follows:&nbsp; (a) that
all Option Shares are being acquired solely for his own account and not on
behalf of any other person or entity; (b) that no Option Shares will be sold or
otherwise distributed in violation of the Securities Act, or any other
applicable federal or state securities laws; (c) that if he is subject to
reporting requirements under Section 16(a) of the Exchange Act, he will (i) not
violate Section 16(b) of the Exchange Act, (ii) furnish the Company with a copy
of each Form 4 and Form 5 filed by him, and (iii) timely file all reports
required under the federal securities laws; and (d) that he will report all
sales of Option Shares to the Company in writing on a form prescribed by the
Company.</p>



<p style='text-align:justify;text-indent:
1in'>15.&nbsp; <u>Effective
Date of Plan; Termination Date of Plan</u>.&nbsp; The Plan shall be effective on the date of the
approval of the Plan by the affirmative vote of the holders of a majority of
the Company's securities entitled to vote and represented at a meeting duly
held in accordance with applicable law.&nbsp; The Plan shall terminate on May 25, 2004, except as to Options previously granted and outstanding under the Plan at
that time.&nbsp; No Options shall be granted after the date on which the Plan
terminates.&nbsp; The Plan may be abandoned or terminated at any earlier time by the
Board, except with respect to any Options then outstanding under the Plan.</p>



<p style='text-align:justify;text-indent:
1in'>16.&nbsp; <u>Limitation
on Amount of Option</u>.&nbsp; With respect to ISOs, the aggregate Fair Market Value (determined as of
the time the ISO is granted) of the stock as to which an ISO may first become
exercisable in a particular calendar year may not exceed $100,000.</p>



<p style='text-align:justify;text-indent:
1in'>17.&nbsp; <u>Ten
Percent Shareholder Rule</u>.&nbsp; With respect to ISOs, no Option may be granted to a Key Employee who, at
the time the Option is granted, owns stock possessing more than 10 percent of
the total combined voting power of all classes of stock of the Company or of
any &quot;parent corporation&quot; or &quot;subsidiary corporation&quot; as those terms are defined
in Section 425 of the Code, unless at the time the Option is granted the
purchase price for the Option shares is at least 110 percent of the Fair Market
Value of the Option Shares at the time the ISO is granted and such Option by
its terms is not exercisable after the&nbsp; expiration of five years from the Date
of Grant.&nbsp; For purposes of the preceding sentence, stock ownership shall be
determined as provided in Section 425 of the Code.</p>



<p style='text-align:center;'>-6-</p>



<hr color="#000080">



<p style='text-align:justify;text-indent:
1in'>18.&nbsp; <u>Withholding
Taxes</u>.&nbsp; The Company, or any Related Company, may take such steps as it may deem necessary
or appropriate for the withholding of any taxes which the Company, or any
Related Company, is required by any law or regulation or any governmental
authority, whether federal, state or local, domestic or foreign, to withhold in
connection with any Option including, but riot limited to, the withholding of
all or any portion of any payment or the withholding of issuance of Option
Shares to be issued upon the exercise of any Option.</p>



<p style='text-align:justify;text-indent:
1in'>19.&nbsp; <u>Change
in Control, Stock Dividends, Reorganization and Other Extraordinary Actions</u>.</p>



<p style='margin-left:1in;text-align:justify'>(a)&nbsp;&nbsp;&nbsp;&nbsp; If (i)
the company shall at any time be involved in a transaction described n
Section 424(a) of the Code (or any successor provision) or any &quot;corporate
transaction&quot; described in the regulations thereunder; (ii) the Company shall
declare dividends payable in, or shall subdivide or combine, its Common Stock
or (iii) any other event with substantially the same effect shall occur, the
Option Committee shall, with respect to each outstanding Option,
proportionately adjust the number of Option Shares and/or the exercise price
per share so as to preserve the rights of the Optionee substantially
proportionate to the rights of the Optionee prior to such event, and to the
extent that such action shall include an increase or decrease in the number of
Option Shares subject to outstanding Options, the number of shares available
under this Plan shall automatically be increased or decreased, as this case may
be, proportionately, without further action on the part of the Option
Committee, the Company or the Company's shareholders.</p>



<p style='margin-left:1in;text-align:justify;'>(b)&nbsp;&nbsp;&nbsp;&nbsp; If the Company is liquidated or dissolved, the Option Committee
may allow the holders of any outstanding Options to exercise all or any part of
the unvested portion of the Options held by them; provided, however, that such
Options must be exercised prior to the effective date of such liquidation or
dissolution.&nbsp; If the Option Holders do not exercise their Options prior to such
effective date, each outstanding Option shall terminate as of the effective
date of the liquidation or dissolution.</p>



<p style='margin-left:1in;text-align:justify;'>(c)&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;The
grant of an Option shall not affect in any way the right or power of the Company
to make adjustments, reclassifications, reorganizations or&nbsp; changes of its
capital or business structure, to merge, consolidate or dissolve, to liquidate
or to sell or transfer all or part of its business or assets.</p>



<p style='margin-left:1in;text-align:justify;'>(d)&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;In
the event of a Change in Control (as defined below) of the Company, the
Option Committee may, in its discretion, accelerate all outstanding Options so
that they immediately become fully vested and immediately exercisable for the
duration of the Option Term.&nbsp; For purposes of this subsection (d), &quot;Change in
Control&quot; shall mean either one of the following:&nbsp; (i) when any &quot;person,&quot; as
such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than a
shareholder of the Company on the date of this Plan), the Company, a subsidiary
or a Company Employee Benefit Plan, (including any trustee of such Plan acting
as trustee) becomes, after the date of this Plan, the &quot;beneficial owner&quot; (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 35% or more of the combined voting power
of the Company's then outstanding securities; or (ii) the occurrence of a
transaction requiring shareholder approval, arid involving the sale of all or
substantially all of the assets of the Company or the merger of the Company
with or into another corporation.</p>



<p style='text-align:center;'>-7-</p>



<hr color="#000080">



<p style='margin-left:1in;text-align:justify;'>(e)&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;If
at any time the Company declares an Extraordinary Dividend, as defined
below, all Options shall accelerate and thereupon become fully vested and
immediately exercisable for the duration of the Option Term.&nbsp; For purposes of
this subsection (e), &quot;Extraordinary Dividend&quot; shall mean a cash dividend
payable to holders of record of the Common Stock in an amount in excess of 10%
of the then Fair Market Value of the Company's Common Stock.</p>



<p style='text-align:justify;text-indent:
1in'>20.&nbsp; <u>Other
Provisions</u>.</p>

<p style='margin-left:1in;text-align:justify;'>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;The use of a masculine gender in the Plan shall also include within its
meaning the feminine, and the singular may include the plural, and the plural
may include the singular, unless the context clearly indicates to the contrary.</p>



<p style='margin-left:1in;text-align:justify;'>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any expenses of administering the Plan shall be borne by the Company.</p>



<p style='margin-left:1in;text-align:justify;'>(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This Plan shall be construed to be in addition to any and all other compensation plans
or programs.&nbsp; Neither the adoption of the Plan by the Board nor the submission
of the Plan to the shareholders of the Company shall be construed as creating
any limitations on the power of authority of the Board to adopt such other
additional incentive or other compensation arrangements as the Board may deem
necessary or desirable.</p>



<p style='margin-left:1in;text-align:justify;'>(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The validity, construction, interpretation, administration and effect of the Plan and
its rules and regulations, and the rights of any and all personnel having or
claiming to have an interest therein or thereunder shall be governed by and
determined exclusively and solely in accordance with the laws of the State of
California; provided, however, if the Reorganization described in Section 9(b)
hereof shall be consummated, the laws of the State of Colorado shall govern and
determine construction, etc. of this Plan.</p>





<p align=center style='text-align:center'>*********</p>



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<p>&nbsp;</p>


<p><b>EXHIBIT 10.18</b></p>

<p align=center style='text-align:center'><b>PRO-DEX, INC.</b></p>

<p align=center style='text-align:center'><b>&nbsp;DIRECTORS' STOCK OPTION PLAN</b></p>

<p align=center style='text-align:center'><b>&nbsp;</b></p>



<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; This
Directors' Stock Option Plan (the &quot;Plan&quot;) adopted by Pro0Dex, Inc. (the
&quot;Company&quot;) on May 25, 1994, is amended this 27<sup>th</sup> day of February
1996.</p>



<p style='text-align:justify;text-indent:.5in'>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Definitions</u>.</p>

<p style='text-align:justify;text-indent:1in'>Unless
otherwise indicated or required by the particular context, the terms used in this Plan shall have the
following meanings:&nbsp; </p>



<p style='text-align:justify; text-indent:1in'><u>Board</u>:&nbsp; &nbsp;&nbsp;
The Board of Directors of Pro-Dex, Inc.</p>



<p style='text-align:justify; text-indent:1in'><u>Code</u>:&nbsp;&nbsp; &nbsp;&nbsp;
The Internal Revenue Code of 1986, as amended.</p>



<p style='text-align:justify; text-indent:1in'><u>Common Stock</u>:&nbsp;&nbsp;&nbsp;
The no par value common stock of Pro-Dex, Inc.</p>



<p style='text-align:justify; text-indent:1in'><u>Company</u>:&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro-Dex, Inc., a corporation incorporated under the laws of California, and any successors in
interest by merger, operation of law, assignment or purchase of all or
substantially all of the property, assets or business of the Company.</p>



<p style='text-align:justify; text-indent:1in'> <u>Date
of Grant</u>:&nbsp;&nbsp;&nbsp; The date on which an Option (see below) is granted under the
Plan.</p>



<p style='text-align:justify; text-indent:1in'> <u>Fair
Market Value</u>:&nbsp;&nbsp; If, at any time an Option is granted under the Plan, the
Company's Common Stock is publicly traded,&nbsp; Fair Market Value shall be
determined as of the last business day for which the prices or quotes discussed
in this sentence are available prior to the date an Option is granted and shall
mean (a) the average (on that date) of the high and low prices of the Common
Stock on the principal national securities exchange by which the Common Stock
is traded, if the stock is then traded on a national securities exchange; or,
(b) the last reported sale price (on that date) of the Common Stock on NASDAQ,
if the stock is not then traded on a national securities exchange; or (c) the
closing bid price (or average of bid prices) last quoted (on that date) by an
established quotation service for over-the-counter securities, if the stock is
not reported on NASDAQ.&nbsp; However, if the Common Stock is not publicly-traded at
the time an Option is granted under the Plan, Fair Market Value shall be as
determined in good faith by the Board after such consultation with outside
legal, accounting and other experts as the Board may deem advisable.</p>



<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Nonemployee
Director:</u> A person who is a member of the Board of Directors and who is not
an employee of the Company.</p>



<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Option:</u>&nbsp;&nbsp;
The rights to purchase Common Stock granted pursuant to the terms and
conditions of an Option Agreement (defined below</p>

<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Option
Agreement</u>:&nbsp;&nbsp;&nbsp;&nbsp; The written agreement (including any amendments or
supplements thereto) between the Company and a Nonemployee Director designating
the terms and conditions of an Option.</p>



<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Option
Shares</u>:&nbsp; The shares of Common Stock underlying an Option granted to an
Employee.</p>



<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Optionee</u>:&nbsp;&nbsp;&nbsp;&nbsp;
A Nonemployee Director who has been granted an Option.</p>



<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>



<p style='text-align:center'>1</p>

<hr color="#000080"><p><br clear=all
style='page-break-before:always'></p>




<p style='text-align:justify'>&nbsp;</p>

<p style='margin-left:.75in;text-align:justify;text-indent:
- -.25in'>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;<u>Purpose and Scope</u>.</p>



<p style='margin-left:1.0in;text-align:justify'>(a)&nbsp;&nbsp;&nbsp; The
purpose of this Plan is to advance the interests of the Company and its
shareholders by affording Nonemployee Directors, whose participation and
guidance contribute to the successful operation of the Company, and affording
them an opportunity for investment in the Company and the incentive advantages
inherent in stock ownership in this Company.</p>



<p style='margin-left:1.0in;text-align:justify'>(b)&nbsp; This Plan
authorizes that Options be granted to Nonemployee Directors according to the
formula set forth in Section 3 of this Plan.</p>



<p style='margin-left:.75in;text-align:justify;text-indent:
- -.25in'>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;<u>Operation of the Plan</u>.&nbsp; </p>



<p style='margin-left:1in;text-align:justify;'>(a)&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;<u>Grant
of Options:&nbsp; Amount and Timing.</u>&nbsp; Options to purchase 20,000 in shares of
Common Stock shall be granted under the Plan to each Nonemployee Director at
the later to occur of (i) the date this Plan is adopted by the Company's
shareholders, or (ii) the date he or she is first elected or appointed a
Nonemployee Director of the Company.&nbsp; In addition, effective on the second and
third anniversary dates of commencement of service on the Board, options to
purchase an additional 15,000 shares shall automatically be granted to the
Optionee provided that, at that time, he or she is a Nonemployee Director.&nbsp; All
Options shall be exercisable only as set forth in Sections 3(c) and 6 below and
shall be subject to the other terms and conditions set forth in this Plan or
otherwise established by the Company.</p>



<p style='margin-left:1in;text-align:justify;'>(b)&nbsp;&nbsp; &nbsp;&nbsp;<u>Option
Purchase Price.</u>&nbsp; The exercise price for each Option Share shall be the
Fair Market Value of the Company's Common Stock on the Date of Grant.</p>



<p style='margin-left:1in;text-align:justify;'>(c)&nbsp;&nbsp;&nbsp;&nbsp; <u>Term.</u>&nbsp; Each Option shall expire ten years after the Date of Grant, except that an
Option will expire, if not exercised, 90 days after the Optionee ceases to be a
director of the Company.</p>



<p style='margin-left:1.0in;text-align:justify'>(d)&nbsp;&nbsp;&nbsp; <u>Amendments.</u>&nbsp;&nbsp;&nbsp;
This Plan may be changed or modified from time to time provided, however, that,
(A) no such change or modification shall impair any Option previously granted
under the Plan; (B) the provisions relating to the amount, price and timing of
the Options shall not be amended more than once every six months other than to
comport with changes in the Code, the Employee Retirement Income Security Act,
or rules promulgated thereunder; and (C) the approval by the affirmative vote
of the holders of a majority of shares of the Company's securities present, or
represented, and entitled to vote at a meeting duly held in accordance with the
applicable laws of the State of Colorado, shall be required for any amendment
which would do any of the following:</p>



<p style='margin-left:1.0in;text-align:justify'>(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; modify
the eligibility requirements for receiving Options under the Plan;</p>

<p style='margin-left:1.0in;text-align:justify'>(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; except
as provided in Section 8 relative to capital changes, the number of shares
purchasable pursuant to the granting of any Option hereunder or the exercise
price of each Option;</p>



<p style='margin-left:1.0in;text-align:justify'>(iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the
maximum term of Options granted;</p>



<p style='text-align:justify; margin-left:1in'>(iv)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the minimum price at which Options may be granted;</p>



<p style='margin-left:1in;text-align:justify;'>(v)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the dollar amount pursuant to which Options may be granted at any&nbsp;one
time;</p>



<p style='margin-left:1.0in;text-align:justify'>(vi)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the
timing of Option Grants; or</p>



<p style='margin-left:1.0in;text-align:justify'>(vii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the
term of the Plan.</p>



<p style='margin-left:1.0in;text-align:justify'>&nbsp;</p>



<p style='text-align:center'>2</p>



<hr color="#000080"><p><br clear=all
style='page-break-before:always'></p>




<p style='text-align:justify'>&nbsp;</p>



<p style='margin-left:.75in;text-align:justify;text-indent:
- -.25in'>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;<u>Number of Shares</u>.&nbsp; </p>

<p style='text-align:justify; text-indent:1in'>The Board is
authorized to appropriate, issue and sell for the purposes of the Plan, an aggregate maximum of 500,000
shares of Common Stock, including both treasury and newly issued shares, or the
number and kind of shares of stock or other securities which in accordance with
Section 8 shall be substituted for the 500,000 shares or into which such
500,000 shares shall be adjusted.&nbsp; All or any unsold shares subject to an
Option that for any reason expires or otherwise terminates before it has been
exercised, again may be made subject to other Options granted under the Plan.</p>



<p style='margin-left:.75in;text-align:justify;text-indent:
- -.25in'>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Eligibility</u>.&nbsp; </p>

<p style='text-align:justify; text-indent:1in'>Options shall be granted under
the Plan only to Nonemployee Directors provided that any Nonemployee Director
may waive his right to participate in the Plan.&nbsp; </p>



<p style='margin-left:.75in;text-align:justify;text-indent:
- -.25in'>6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Exercise of Options</u>.&nbsp; </p>



<p style='margin-left:1in;text-align:justify;'>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Each Option granted pursuant to this Plan shall be exercisable in full
commencing six months after the Date of Grant. </p>

<p style='margin-left:1in;text-align:justify;'>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Except as otherwise provided in Section 9, during the lifetime of the Optionee, the Option shall be exercisable only by the Optionee; provided that,
in the event of the legal disability of an Optionee, the guardian or personal
representative of the Optionee may exercise the Option.</p>



<p style='margin-left:1in;text-align:justify;'>(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Each Option shall be exercised in whole or in part by delivering to the
office of the Treasurer of the Company written notice of the number of shares
with respect to which the Option is to be exercised and by paying in full the
purchase price for the Option Shares as set forth in Section 7 herein;
provided, that an Option may not be exercised in part unless the purchase price
for the Option Shares purchased is at least $2,000.</p>



<p style='margin-left:1in;text-align:justify;'>(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No Option may be exercised, and no Option Shares may be sold,
transferred or otherwise disposed of for a period of at least six months
following the Date of Grant of the Option.</p>



<p style='margin-left:.75in;text-align:justify;text-indent:
- -.25in'>7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Payment for Option Shares.</u></p>



<p style='text-align:justify;text-indent:
1in'>Upon exercise of any Option, the aggregate exercise price shall be paid
to the Company in cash or by certified or cashier's check.&nbsp; For any single
purchase by an Optionee of Option Shares at a total purchase price in excess of
$2,000, the Company, in its sole discretion, upon request by the Optionee, may
permit all or part of the purchase price for the Option Shares to be paid by
(a) delivery to the Company for cancellation shares of the Common Stock
previously owned by the Optionee (&quot;Previously Owned Shares&quot;) with a Fair Market
Value as of the date of the payment equal to the portion of the purchase price
for the Option Shares that the Optionee does not pay in cash; (b) having shares
withheld from the amount of shares to be received by the Optionee; (c)
delivering an irrevocable subscription agreement obligating the Optionee to
take and pay for the shares to be purchased within one year of the date of such
exercise; or (d) complying with any other payment mechanism as the Company may
approve from time to time.&nbsp; Notwithstanding the above, an Optionee shall be
permitted to exercise his Option by delivering Previously Owned Shares only if
he has held, and provides appropriate evidence of such, the Previously Owned
Shares for more than six months prior to the date of exercise.&nbsp; This period
(the &quot;Holding Period&quot;) may be extended by the Company acting in its sole
discretion as is necessary, in the opinion of the Company, so that, under
generally accepted accounting principles, no compensation shall be considered
to have been or to be paid to the Optionee as a result of the exercise of the
Option in this manner.&nbsp; At the time the Option is exercised, the Optionee shall
provide an affidavit, and such other evidence and documents as the Company
shall request, to establish the Optionee's Holding Period.&nbsp; As indicated above,
an Optionee may deliver shares of Common Stock as part of the purchase price
only if the Company, in its sole discretion agrees, on a case by case basis, to
permit this form of payment.</p>



<p style='text-align:center;'>3</p>



<hr color="#000080"><p><br clear=all
style='page-break-before:always'></p>




<p style='margin-left:51.0pt;text-align:justify;text-indent:
21.0pt'>&nbsp;</p>



<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Change
in Stock, Adjustments, Etc.</u></p>

<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In the
event that each of the outstanding shares of Common Stock (other than shares held
by dissenting shareholders which are not changed or exchanged) should be
changed into, or exchanged for, a different number or kind of shares of stock
or other securities of the Company, or if further changes or exchanges of any
stock or other securities into which the Common Stock shall have been changed,
or for which it shall have been exchanged, shall be made (whether by reason of
merger, consolidation, reorganization, recapitalization, stock dividends,
reclassification, split-up, combination of shares or otherwise) then there
shall be substituted for each share of Common Stock that is subject to the Plan
but not subject to an outstanding Option hereunder, the number and kind of shares
of stock or other securities into which each outstanding shares of Common Stock
(other than shares held by dissenting shareholders which are not changed or
exchanged) shall be so changed or for which each outstanding share of Common
Stock (other than shares held by dissenting shareholders) shall be so changed
or for which each such share shall be exchanged.&nbsp; Any securities so substituted
shall be subject to similar successive adjustments.</p>



<p style='text-align:justify; text-indent:1in'>In
the event of any such changes or exchanges, (a) the number, or kind, or
exercise price of the Option Shares or other securities that are then subject
to an Option or Options granted pursuant to the Plan shall be deemed
automatically adjusted in order to prevent dilution or enlargement of rights
and (b) such adjustments shall be effective and binding for all purposes or the
Plan.</p>



<p style='margin-left:.5in;text-align:justify'>9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Nontransferability
of Option.</u></p>

<p style='text-align:justify; text-indent:1in'>Except
as herein provided, no Option granted under the Plan shall be transferable by
the Optionee, either voluntarily or involuntarily, except by will, by the laws
of descent and distribution, or pursuant to a qualified domestic relations
order as defined in the Code or the Employee Retirement Income Security Act or
rules promulgated thereunder; and no Option shall be subject to execution,
attachment or similar process.&nbsp; Any attempt to transfer an Option except as
otherwise herein provided shall void the Option.&nbsp; Notwithstanding anything
herein to the contrary, an Option may be transferred to an immediate family
member or a family trust if such transfer is then permitted by the rules
adopted under Section 16(b) of the Securities Exchange Act of 1934, as amended.</p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'>10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Rights as a Shareholder.</u></p>

<p style='text-align:justify; text-indent:1in'>No person shall
have any rights as a shareholder with respect to any shares covered by an
Option until that person becomes the holder of record of such shares and,
except as provided in Section 8, no adjustments shall be made for dividends or
other distributions or other rights as to which there is an earlier record
date.</p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'>11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Securities Laws Requirements.</u></p>

<p style='text-align:justify; text-indent:1in'>No Option
Shares shall be issued unless and until, in the opinion of the Company, any
applicable registration requirements of the Securities Act of 1933, as amended
(&quot;Securities Act&quot;), any applicable listing requirements of any securities
exchange on which stock of the same class is then listed, and any other
requirement of law or of any regulatory bodies having jurisdiction over such
issuance and delivery, have been fully complied with.&nbsp; Each Option Agreement
and each Option Share certificate may be imprinted with legends reflecting
federal and state securities laws restrictions and conditions, and the Company
may comply therewith and issue &quot;stop transfer&quot; instructions to its transfer
agent and registrar in good faith without liability.</p>



<p style='text-align:center'>4</p>



<hr color="#000080"><p><br clear=all
style='page-break-before:always'></p>


<p style='margin-left:.5in;text-align:justify'>&nbsp;</p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'>12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Disposition of Shares.</u></p>

<p style='text-align:justify; text-indent:1in'>To the extent
reasonably requested by the Company, each Optionee, as a condition of
exercise, shall represent, warrant and agree, in a form of written certificate
approved by the Company, as follows:&nbsp; (a) that all Option Shares are being
acquired solely for his/her own account and not on behalf of any other person
or entity; (b) that no Option Shares will be sold or otherwise distributed in
violation of the Securities Act or any other applicable federal or state
securities laws; (c) that he/she will report all sales of Option Shares to the
Company in writing on a form prescribed by the Company; and (d) that if he/she
is subject to the reporting requirements under Section 16(a) of the Exchange
Act (i) he will not violate Section 16(b) of the Exchange Act, (ii) he will
furnish the Company with a copy of each Form 4 and Form 5 filed by him, and
(iii) he will timely file all reports required under the federal securities
laws.</p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'>13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Effective Date of Plan; Termination Date of Plan</u>.&nbsp; </p>

<p style='text-align:justify;text-indent:1in'>The
Plan shall be effective on the date of&nbsp; the Plan has been approved by the Board
of Directors and the shareholders of the Company and shall terminate at
midnight on a date which is ten years after the effective date, except as to
Options previously granted and outstanding under the Plan at that time. No Options
shall be granted after the date on which the Plan terminates.&nbsp; The Plan may be
abandoned or terminated at any earlier time by the affirmative vote of the
holders of a majority of the shares of Common Stock present, or represented,
and entitled to vote at a meeting duly held in accordance with the applicable
laws of the State of California, except with respect to any Options then
outstanding under the Plan.</p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'>14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Withholding Taxes</u>. </p>

<p style='text-align:justify;text-indent:1in'>The
Option Agreement shall provide that the Company may take such steps as it may
deem necessary or appropriate for the withholding of any taxes which the
Company is required by any law or regulation or any governmental authority,
whether federal, state or local, domestic or foreign, to withhold in connection
with any Option including, but riot limited to, the withholding of all or any
portion of any payment or the withholding of issuance of Option Shares upon the
exercise of any Option.</p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'>15.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Other Provisions.</u></p>



<p style='margin-left:1in;text-align:justify; text-indent:0in'>The following
provisions are also in effect under the Plan:</p>



<p style='margin-left:1in;text-align:justify; text-indent:0in'>(a)&nbsp;&nbsp;&nbsp;&nbsp; The
use of a masculine gender in the Plan shall also include within its meaning the
feminine, and the singular may include the plural, and the plural may include
the singular, unless the context clearly indicates to the contrary. </p>



<p style='margin-left:1in;text-align:justify;text-indent:
0in'>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Any expenses of administering the plan shall be borne by the
Company.</p>



<p style='margin-left:1in;text-align:justify;text-indent:
0in'>(c)&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;This
Plan shall be construed to be in addition to any and all other &nbsp;compensation
plans or programs.&nbsp; The adoption of the Plan by the shareholders of the Company
shall not be construed as creating any limitations on the power or authority of
the Board to adopt such other additional incentive or other compensation
arrangements as the Board may deem necessary or desirable. </p>



<p style='margin-left:1in;text-align:justify; text-indent:0in'>(d)&nbsp;&nbsp;&nbsp; The
validity, construction, interpretation, administration and effect of the Plan and
of its rules and regulations, and the rights of any and all persons having or
claiming to have an interest therein or thereunder shall be governed by and
determined exclusively and solely in accordance with the laws of the State of
Colorado. </p>





<p align=center style='text-align:center'>*********</p>



<hr color="#000080">
<p><br clear=all
style='page-break-before:always'></p>






</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.32
<SEQUENCE>5
<FILENAME>ex10-32.htm
<TEXT>
<html>

<head>
<title>ex10-32</title>
</head>

<body>

<p>&nbsp;</p>




<p><b>EXHIBIT 10.32</b></p>

<p><b>&nbsp;</b></p>

<p align="center"><b><u>Promissory
Note</u></b></p>

<p align=center style='text-align:center'><b>&nbsp;</b></p>

<p align=center style='text-align:center'><b>&nbsp;</b></p>

<p><b><u>$326,482.28</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>September 12, 2003</u></b></p>





<p style='text-align:justify'>FOR VALUE RECEIVED, (receipt of which is herewith
acknowledged), Ronald G. Coss, (Debtor), the undersigned jointly and severally
promise to pay to the order of Micro Motors, (Creditor) at 151 E Columbine Ave,
CA 92707, the sum of Three Hundred Twenty-Six Thousand, Four-Hundred Eighty Two
and 28/100 Dollars ($326,482.28), together with interest thereon at the rate of
7% per annum on any unpaid balance.&nbsp; The effective date of this note is June 30, 2003.</p>



<p style='text-align:justify'>Said sum, inclusive of interest, shall be paid in
quarterly installments of $30,400.00 each (see attachment A), with a first
payment due September 30, 2003, and a like amount on the same day of each
quarter ending thereafter until the full amount of this note and accrued
interest shall be fully paid.&nbsp; All payments shall be first applied to accrued
interest and the balance to principal. The undersigned reserves the right to
pre-pay this note in whole or in part with payment of all remaining interest as
if the note was held to its full term.&nbsp; This note completely replaces prior
note dated January 1,
 1999, as amended March 16, 1999.</p>



<p style='text-align:justify'>This note shall be fully payable upon demand of any holder in the event the
undersigned shall default in making any payments due under this note within 30
days of its due date.&nbsp; In the event of any default, the undersigned agreed
to pay all reasonable attorney fees and costs of collection to the extent
permitted by law. This note shall take effect as a sealed instrument and be
enforced in accordance with the laws of the payee's state.</p>



<p style='text-align:justify'>The payment of this note shall be fully secured by the
debtor's Not to Compete agreement with Micro Motors.</p>



<p style='text-align:justify'><tt>&nbsp;</tt></p>

<div align="left">

<table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="700" id="AutoNumber1">
  <tr>
    <td width="271"><tt><font face="Times New Roman">Date ___September 12, 2003_</font></tt></td>
    <td width="502">

<p><tt><font face="Times New Roman">Name &amp; Address of Borrower:&nbsp;</font></tt></p>

    </td>
  </tr>
  <tr>
    <td width="271">&nbsp;</td>
    <td width="502">

<tt><font face="Times New Roman">&nbsp;</font></tt><font face="Times New Roman">Ronald G. Coss</font></td>
  </tr>
  <tr>
    <td width="271">&nbsp;</td>
    <td width="502">

<p><font face="Times New Roman">3 Overlook Drive,</font></p>

    </td>
  </tr>
  <tr>
    <td width="271">&nbsp;</td>
    <td width="502">

<p><font face="Times New Roman">Newport Coast, CA 92657</font></p>

    </td>
  </tr>
</table>

</div>

<p><br>
<tt>_____</tt>/ s / Ronald
G. Coss&nbsp;<tt>
_________</tt><br>
<tt>Signature of Borrower</tt></p>

<p><tt>&nbsp;</tt></p>

<p>
<tt><font face="Times New Roman">Date ___September
12, 2003_</font></tt></p>

<p><tt>&nbsp;</tt></p>

<p>&nbsp;&nbsp;&nbsp; <u>/<font face="Times New Roman">s/
 JEFFREY J. RITCHEY</font></u><font face="Times New Roman"> _______</font><tt><font face="Times New Roman">__</font></tt><font face="Times New Roman"><br>
</font>
<tt><font face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature
of Creditor<br>
&nbsp;&nbsp;&nbsp;&nbsp;
Micro Motors Inc.</font></tt></p>



<p>Attachment A</p>



<p>&nbsp;</p>



<p>&nbsp;</p>



<hr color="#000080">



<p>&nbsp;</p>



<p>&nbsp;</p>



<p>Final Accounting<br>
Schedule of Payments</p>

<p>&nbsp;</p>



<div class="Section1">
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      &nbsp;</td>
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      &nbsp;</td>
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      &nbsp;</td>
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    <tr style="height:19.5pt">
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      &nbsp;</td>
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      &nbsp;</td>
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      &nbsp;</td>
      <td width="83" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
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      </td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="16">
      </td>
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      </td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="16">
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      <td width="83" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="16">
      </td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="16">
      </td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="16">
      </td>
      <td width="76" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="16">
      </td>
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    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="29" valign="bottom" style="border-left: medium none purple; border-right: medium none; border-top: medium none purple; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="114" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: 1px solid #000000; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="87" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: 1px solid #000000; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
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      <p class="MsoNormal" align="center" style="text-align:center"><b>
      <font size="2">Enter Values</font></b></td>
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      </td>
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      </td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="76" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
    </tr>
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      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="29" valign="bottom" style="border-left: medium none purple; border-right: medium none; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal"><font size="2">Loan Amount</font></td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in; background: #FFFFFF; " height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$326,482.28 </font></td>
      <td width="83" valign="bottom" style="border-left: medium none; border-right: medium none purple; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="76" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
    </tr>
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      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="29" valign="bottom" style="border-left: medium none purple; border-right: medium none; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal"><font size="2">Annual Interest Rate</font></td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in; background: #FFFFFF; " height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">7.00%</font></td>
      <td width="83" valign="bottom" style="border-left: medium none; border-right: medium none purple; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="76" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
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      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="29" valign="bottom" style="border-left: medium none purple; border-right: medium none; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal"><font size="2">Loan Period in Years</font></td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in; background: #FFFFFF; " height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">3</font></td>
      <td width="83" valign="bottom" style="border-left: medium none; border-right: medium none purple; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="76" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
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      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="29" valign="bottom" style="border-left: medium none purple; border-right: medium none; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal"><font size="2">Start Date of Loan</font></td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in; background: #FFFFFF; " height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">7/1/2003</font></td>
      <td width="83" valign="bottom" style="border-left: medium none; border-right: medium none purple; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
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      </td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="76" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
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      </td>
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      </td>
      <td width="114" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid #000000; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="87" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid #000000; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
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      </td>
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      </td>
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      </td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
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      </td>
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      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="29" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="83" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="76" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
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      <td width="29" valign="bottom" style="border-left: medium none purple; border-right: medium none; border-top: medium none purple; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="114" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none purple; border-bottom: 1px solid #000000; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="87" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none purple; border-bottom: 1px solid #000000; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="82" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none purple; border-bottom: 1px solid #000000; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="83" valign="bottom" style="border-left: medium none; border-right: medium none purple; border-top: medium none purple; border-bottom: 1px solid #000000; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="76" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="29" valign="bottom" style="border-left: medium none purple; border-right: medium none; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal"><font size="2">Monthly Payment</font></td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$30,400.00 </font></td>
      <td width="83" valign="bottom" style="border-left: medium none; border-right: medium none purple; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="76" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="29" valign="bottom" style="border-left: medium none purple; border-right: medium none; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal"><font size="2">Number of Payments</font></td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">12</font></td>
      <td width="83" valign="bottom" style="border-left: medium none; border-right: medium none purple; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="76" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="29" valign="bottom" style="border-left: medium none purple; border-right: medium none; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal"><font size="2">Total Interest</font></td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$38,317.69 </font></td>
      <td width="83" valign="bottom" style="border-left: medium none; border-right: medium none purple; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="76" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="29" valign="bottom" style="border-left: medium none purple; border-right: medium none; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal"><font size="2">Total Principal</font></td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$326,482.31 </font></td>
      <td width="83" valign="bottom" style="border-left: medium none; border-right: medium none purple; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="76" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="29" valign="bottom" style="border-left: medium none purple; border-right: medium none; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal"><font size="2">Total payments</font></td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$364,800.00 </font></td>
      <td width="83" valign="bottom" style="border-left: medium none; border-right: medium none purple; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="76" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="29" valign="bottom" style="border-left: medium none purple; border-right: medium none; border-top: medium none; border-bottom: medium none purple; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="114" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid #000000; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="87" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid #000000; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="82" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid #000000; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="83" valign="bottom" style="border-left: medium none; border-right: medium none purple; border-top: medium none; border-bottom: 1px solid #000000; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="76" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="29" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="83" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="76" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="29" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="83" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td width="76" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
    </tr>
    <tr style="height:33.0pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="30">
      </td>
      <td width="29" valign="bottom" style="border-left: medium none windowtext; border-right: medium none; border-top: medium none windowtext; border-bottom: 1px solid #000000; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="30">
      <p class="MsoNormal" align="right"><b><font size="2">No.</font></b></td>
      <td width="114" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none windowtext; border-bottom: 1px solid #000000; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="30">
      <p class="MsoNormal" style="text-indent:10.05pt" align="right"><b><font size="2">Payment
      Date</font></b></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none windowtext; border-bottom: 1px solid #000000; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="30" width="87">
      <p class="MsoNormal"  align="center"><b><font size="2">
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Beginning<br>
      &nbsp;&nbsp;
      Balance</font></b></td>
      <td width="82" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none windowtext; border-bottom: 1px solid #000000; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="30">
      <p class="MsoNormal" style="text-indent:20.1pt"><b><font size="2">Payment</font></b></td>
      <td width="83" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none windowtext; border-bottom: 1px solid #000000; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="30">
      <p class="MsoNormal" style="text-indent:20.1pt"><b><font size="2">
      Principal</font></b></td>
      <td width="77" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none windowtext; border-bottom: 1px solid #000000; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="30">
      <p class="MsoNormal" style="text-indent:20.1pt"><b><font size="2">Interest</font></b></td>
      <td width="74" valign="bottom" style="border-left: medium none; border-right: medium none purple; border-top: medium none windowtext; border-bottom: 1px solid #000000; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="30">
      <p class="MsoNormal" style="text-indent:10.05pt"><b><font size="2">Ending<br>
&nbsp;&nbsp;&nbsp;
      Balance</font></b></td>
      <td valign="bottom" style="border-left: medium none; border-right: medium none windowtext; border-top: medium none windowtext; border-bottom: 1px solid #000000; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="30" width="76">
      <p class="MsoNormal"  align="center"><b><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Monthly<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; interest</font></b></td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td valign="bottom" style="border-left: medium none windowtext; border-right: medium none; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" align="center">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">1</font></td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">9/30/2003</font></td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$326,482.28 </font></td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$30,400.00 </font></td>
      <td width="83" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">($24,686.56)</font></td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$5,713.44 </font></td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$301,795.72 </font></td>
      <td width="76" valign="bottom" style="border-left: medium none; border-right: medium none windowtext; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$1,904.48 </font></td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td valign="bottom" style="border-left: medium none windowtext; border-right: medium none; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" align="center">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">2</font></td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">12/31/2003</font></td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$301,795.72 </font></td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$30,400.00 </font></td>
      <td width="83" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">($25,118.57)</font></td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$5,281.43 </font></td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$276,677.15 </font></td>
      <td width="76" valign="bottom" style="border-left: medium none; border-right: medium none windowtext; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$1,760.48 </font></td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td valign="bottom" style="border-left: medium none windowtext; border-right: medium none; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" align="center">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">3</font></td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">3/31/2004</font></td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$276,677.15 </font></td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$30,400.00 </font></td>
      <td width="83" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">($25,558.15)</font></td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$4,841.85 </font></td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$251,119.00 </font></td>
      <td width="76" valign="bottom" style="border-left: medium none; border-right: medium none windowtext; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$1,613.95 </font></td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td valign="bottom" style="border-left: medium none windowtext; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" align="center">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">4</font></td>
      <td width="114" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">6/30/2004</font></td>
      <td width="87" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$251,119.00 </font></td>
      <td width="82" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$30,400.00 </font></td>
      <td width="83" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">($26,005.41)</font></td>
      <td width="77" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$4,394.58 </font></td>
      <td width="74" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$225,113.59 </font></td>
      <td width="76" valign="bottom" style="border-left: medium none; border-right: medium none windowtext; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$1,464.86 </font></td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td valign="bottom" style="border-left: medium none windowtext; border-right: medium none; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" align="center">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">5</font></td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">9/30/2004</font></td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$225,113.59 </font></td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$30,400.00 </font></td>
      <td width="83" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">($26,460.51)</font></td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$3,939.49 </font></td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$198,653.08 </font></td>
      <td width="76" valign="bottom" style="border-left: medium none; border-right: medium none windowtext; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$1,313.16 </font></td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td valign="bottom" style="border-left: medium none windowtext; border-right: medium none; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" align="center">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">6</font></td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">12/31/2004</font></td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$198,653.08 </font></td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$30,400.00 </font></td>
      <td width="83" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">($26,923.57)</font></td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$3,476.43 </font></td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$171,729.51 </font></td>
      <td width="76" valign="bottom" style="border-left: medium none; border-right: medium none windowtext; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$1,158.81 </font></td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td valign="bottom" style="border-left: medium none windowtext; border-right: medium none; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" align="center">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">7</font></td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">3/31/2005</font></td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$171,729.51 </font></td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$30,400.00 </font></td>
      <td width="83" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">($27,394.73)</font></td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$3,005.27 </font></td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$144,334.78 </font></td>
      <td width="76" valign="bottom" style="border-left: medium none; border-right: medium none windowtext; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$1,001.76 </font></td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td valign="bottom" style="border-left: medium none windowtext; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" align="center">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">8</font></td>
      <td width="114" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">6/30/2005</font></td>
      <td width="87" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$144,334.78 </font></td>
      <td width="82" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$30,400.00 </font></td>
      <td width="83" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">($27,874.14)</font></td>
      <td width="77" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$2,525.86 </font></td>
      <td width="74" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$116,460.64 </font></td>
      <td width="76" valign="bottom" style="border-left: medium none; border-right: medium none windowtext; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$841.95 </font></td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td valign="bottom" style="border-left: medium none windowtext; border-right: medium none; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" align="center">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">9</font></td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">9/30/2005</font></td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$116,460.64 </font></td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$30,400.00 </font></td>
      <td width="83" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">($28,361.94)</font></td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$2,038.06 </font></td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$88,098.71 </font></td>
      <td width="76" valign="bottom" style="border-left: medium none; border-right: medium none windowtext; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$679.35 </font></td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td valign="bottom" style="border-left: medium none windowtext; border-right: medium none; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" align="center">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">10</font></td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">12/31/2005</font></td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$88,098.71 </font></td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$30,400.00 </font></td>
      <td width="83" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">($28,858.27)</font></td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$1,541.73 </font></td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$59,240.44 </font></td>
      <td width="76" valign="bottom" style="border-left: medium none; border-right: medium none windowtext; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$513.91 </font></td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td valign="bottom" style="border-left: medium none windowtext; border-right: medium none; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" align="center">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">11</font></td>
      <td width="114" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">3/31/2006</font></td>
      <td width="87" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$59,240.44 </font></td>
      <td width="82" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$30,400.00 </font></td>
      <td width="83" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">($29,363.29)</font></td>
      <td width="77" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$1,036.71 </font></td>
      <td width="74" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$29,877.15 </font></td>
      <td width="76" valign="bottom" style="border-left: medium none; border-right: medium none windowtext; border-top: medium none; border-bottom: medium none; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$345.57 </font></td>
    </tr>
    <tr style="height:12.75pt">
      <td width="2" valign="bottom" style="border-style:none; border-width:medium; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      </td>
      <td valign="bottom" style="border-left: medium none windowtext; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" align="center">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">12</font></td>
      <td width="114" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">6/30/2006</font></td>
      <td width="87" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$29,877.15 </font></td>
      <td width="82" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$30,400.00 </font></td>
      <td width="83" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">($29,877.15)</font></td>
      <td width="77" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$522.85 </font></td>
      <td width="74" valign="bottom" style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$0.00 </font></td>
      <td width="76" valign="bottom" style="border-left: medium none; border-right: medium none windowtext; border-top: medium none; border-bottom: 1px solid windowtext; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; padding-bottom: 0in" height="19">
      <p class="MsoNormal" align="right" style="text-align:right">
      <font size="2">$174.28 </font></td>
    </tr>
  </table>
</div>

<p class="MsoNormal" align="right">&nbsp;</p>
<p class="MsoNormal" align="right">&nbsp;</p>
<p class="MsoNormal" align="right">&nbsp;</p>
<p class="MsoNormal" align="right">&nbsp;</p>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>6
<FILENAME>ex23-1.htm
<TEXT>
<html>

<head>
<title>EXHIBIT 23.1</title>
</head>

<body>

<p>&nbsp;</p>
<p>&nbsp;</p>


<p style='line-height:12.0pt;text-autospace:none'><b>EXHIBIT 23.1</b></p>









<p style='line-height:12.0pt;text-autospace:none'>&nbsp;</p>









<p align=center style='text-align:center'>INDEPENDENT AUDITOR'S CONSENT</p>





<p style='line-height:12.0pt;text-autospace:none' align="justify">We consent to the incorporation
by reference in Registration Statement No. 333-107044 of <br>
Pro-Dex, Inc. &amp; Subsidiaries on Form S-8 of our report, dated August 8,
2003, except as to the last paragraph of Note 3 as to which the date is
September 17, 2003 appearing in this Annual Report on Form 10-KSB of Pro-Dex,
Inc. &amp; Subsidiaries for the year ended June 30, 2003.</p>





<p style='line-height:12.0pt;text-autospace:none' align="justify">&nbsp;</p>





<p style='line-height:12.0pt;text-autospace:none'>/S/ McGLADREY &amp; PULLEN, LLP</p>





<p style='line-height:12.0pt;text-autospace:none'>&nbsp;</p>





<p style='line-height:12.0pt;text-autospace:none'>McGladrey &amp; Pullen, LLP<br>
Irvine, California<br>
September 22, 2003</p>





<p style='line-height:12.0pt;text-autospace:none'>&nbsp;</p>





<p style='line-height:12.0pt;text-autospace:none'>&nbsp;</p>





<p style='line-height:12.0pt;text-autospace:none'>&nbsp; </p>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>7
<FILENAME>ex31-1.htm
<TEXT>
<html>

<head>
<title>EXHIBIT 31.1</title>
</head>

<body>


<p>&nbsp;</p>



<p>&nbsp;</p>



<p><b>EXHIBIT 31.1</b></p>



<p>I, Patrick L. Johnson,
certify that:</p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; I have reviewed this Form 10-KSB of
Pro-Dex, Inc.;</p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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; </p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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 registrant as of, and for, the periods presented in this
report; </p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The registrant'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)) [language omitted pursuant to SEC Release 34-47986]&nbsp; for the
registrant and have:</p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'>a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision,&nbsp; to ensure that material information
relating to the registrant, 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;</p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'>b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Omitted pursuant to SEC
Release 34-47986];</p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'>c) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Evaluated the
effectiveness of the registrant'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 valuation; and </p>

<p style='margin-left:.75in;text-align:justify;text-indent:
- -.25in'>d)&nbsp;&nbsp;Disclosed in this report any change
in the registrant's internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal control
over financial reporting;&nbsp; and</p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing the
equivalent functions):</p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'>a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; All significant
deficiencies and material weaknesses in the design or operation of internal
controls over financial reporting which are reasonably likely to adversely
affect the registrant's ability to record, process, summarize and report
financial information; and</p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'>b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any fraud, whether or not
material, that involves management or other employees who have a significant
role in the registrant's internal control over financial reporting.</p>



<p>Date: September 23, 2003&nbsp;&nbsp;&nbsp;</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>
/s/&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; PATRICK L. JOHNSON<br>
</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Patrick
L. Johnson<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Chief
Executive Officer</p>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>8
<FILENAME>ex31-2.htm
<TEXT>
<html>

<head>
<title>EXHIBIT 31.2</title>
</head>

<body>


<p>&nbsp;</p>



<p>&nbsp;</p>



<p><b>EXHIBIT 31.2</b></p>



<p>I, Jeffrey J. Ritchey,
certify that: </p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I have reviewed this Form 10-KSB of
Pro-Dex, Inc.;</p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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; </p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 registrant as of, and for, the periods presented in this
report; </p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant'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)) [language omitted pursuant to SEC Release 34-47986]&nbsp; for the
registrant and have:</p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'>a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision,&nbsp; to ensure that material information
relating to the registrant, 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;</p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'>b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Omitted pursuant to SEC
Release 34-47986];</p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'>c) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Evaluated the
effectiveness of the registrant'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 valuation; and </p>

<p style='margin-left:.75in;text-align:justify;text-indent:
- -.25in'>e)&nbsp;&nbsp;&nbsp;Disclosed in this report any
change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal control
over financial reporting;&nbsp; and</p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing the
equivalent functions):</p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'>a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All significant deficiencies
and material weaknesses in the design or operation of internal controls over
financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial
information; and</p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'>b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any fraud, whether or not
material, that involves management or other employees who have a significant
role in the registrant's internal control over financial reporting.</p>







<p>Date: September 23, 2003&nbsp;&nbsp;&nbsp;</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>/s/
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; JEFFREY J. RITCHEY<br>
</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Jeffrey
J. Ritchey<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Chief
Financial Officer</p>



</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>9
<FILENAME>ex32-11.htm
<TEXT>
<html>

<head>




<title>EXHIBIT 32</title>
</head>

<body>

<p>&nbsp;</p>





<p><b>EXHIBIT 32.1</b></p>





<p align=center><b>CERTIFICATIONS
OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER<br>
PURSUANT
TO 18 U.S.C. SECTION 1350, <br>
AS ADOPTED PURSUANT TO <br>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</b></p>

<p align=center><b>&nbsp;</b></p>

<p align=center><b>&nbsp;</b></p>

<p align=center><b>Certifications
of Chief Executive Officer and Chief Financial Officer</b></p>

<p align=center><b>&nbsp;</b></p>

<p>In connection with the
annual report on Form 10-KSB of Pro-Dex Inc. (the &quot;Company&quot;) for the annual
period ended June 30, 2003 (the &quot;Report&quot;), the undersigned hereby certify in
their capacities as Chief Executive Officer and Chief Financial Officer of the
Company, respectively, pursuant to 18 U.S.C.section1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, , that:</p>

<p>1.&nbsp;&nbsp; The Report fully
complies with the requirements of Section 13(a) or Section 15(d), of the
Securities Exchange Act of 1934, as amended; and</p>

<p>2.&nbsp;&nbsp; The information
contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.</p>



<div align="left">
  <table border="0" cellpadding="0" cellspacing="0" bordercolor="#111111" width="864" id="AutoNumber1">
    <tr>
      <td width="393" valign="top">Dated:
September 23, 2003&nbsp;</td>
      <td width="504">



<p>By:<u> /s/ &nbsp;&nbsp; PATRICK L. JOHNSON&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<br>
</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Patrick L. Johnson<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Chief Executive Officer and President</p>

      </td>
    </tr>
    <tr>
      <td width="393">&nbsp;</td>
      <td width="504">&nbsp;</td>
    </tr>
    <tr>
      <td width="393">&nbsp;</td>
      <td width="504">&nbsp;</td>
    </tr>
    <tr>
      <td width="393">Dated:
September 23,
2003</td>
      <td width="504">



<p>By:<u> /s/ &nbsp;&nbsp; JEFFREY J.RITCHEY&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</u></p>

      </td>
    </tr>
    <tr>
      <td width="393">&nbsp;</td>
      <td width="504">



<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Jeffrey J. Ritchey</p>

      </td>
    </tr>
    <tr>
      <td width="393">&nbsp;</td>
      <td width="504">



<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Chief Financial Officer</p>

      </td>
    </tr>
    <tr>
      <td width="393">&nbsp;</td>
      <td width="504">

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

</p>

      </td>
    </tr>
    <tr>
      <td width="393">&nbsp;</td>
      <td width="504">

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

</p>







      </td>
    </tr>
  </table>
</div>

<p align="justify"><u><br>
</u>A
signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signatures
that appear in typed form within the electronic version of this written
statement required by Section 906, has been provided to the Company and will be
retained by the Company and furnished to the Securities and Exchange Commission
or its staff upon request.</p>







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