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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0001003297-04-000230.txt : 20040504
<SEC-HEADER>0001003297-04-000230.hdr.sgml : 20040504
<ACCEPTANCE-DATETIME>20040504160836
ACCESSION NUMBER:		0001003297-04-000230
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20040504
ITEM INFORMATION:		
ITEM INFORMATION:		Financial statements and exhibits
FILED AS OF DATE:		20040504

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:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-14942
		FILM NUMBER:		04777911

	BUSINESS ADDRESS:	
		STREET 1:		MICRO MOTORS, INC.
		STREET 2:		151 EAST COLUMBINE
		CITY:			SANTA ANA
		STATE:			CA
		ZIP:			92707
		BUSINESS PHONE:		714-241-4411

	MAIL ADDRESS:	
		STREET 1:		MICRO MOTORS INC.
		STREET 2:		151 EAST COLUMBINE
		CITY:			SANTA ANA
		STATE:			CA
		ZIP:			92707
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>pdex8k2.htm
<TEXT>
<html>

<head>


<title>Pro-Dex 8K</title>



</head>

<body lang=EN-US link=blue vlink=purple>

<p align="center">&nbsp;</p>

<p align="center">&nbsp;</p>

<p align="center"><font face="Arial" size="2"><b>UNITED STATES<br>
SECURITIES AND EXCHANGE COMMISSION</b></font></p>

<p align=center style='text-align:center'><font face="Arial" size="2"><b>&nbsp;Washington,

 D.C.&nbsp; 20549</b></font></p>





<p align=center style='text-align:center'><font face="Arial" size="2"><b>FORM 8-K</b></font></p>

<p align="center"><font face="Arial" size="2"><b>&nbsp;CURRENT REPORT</b></font></p>



<p align=center style='text-align:center'><font face="Arial" size="2">Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934</font></p>



<p align="center"><font face="Arial" size="2"><b>May 4, 2004<br>
</b>Date of Report <br>
(Date of earliest event reported)</font></p>



<p align=center style='text-align:center'><font face="Arial" size="2"><b>PRO-DEX, INC.<br>
</b>(Exact name of registrant as specified in its charter)</font></p>



<p align="center"><font face="Arial" size="2"><b>COLORADO<br>
</b>(State or other jurisdiction of incorporation)</font></p>





<div align="left">
  <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="750" id="AutoNumber1">
    <tr>
      <td width="383">





<p align="center"> <font face="Arial" size="2"> <b>&nbsp;0-14942</b></font></p>

      </td>
      <td width="375">
      <p align="center"> <font face="Arial" size="2"> <b>84-1261240</b></font></td>
    </tr>
    <tr>
      <td width="383">

<p align="center"><font face="Arial" size="2">(Commission File
No.)</font></p>

      </td>
      <td width="375">
      <p align="center"><font face="Arial" size="2">(IRS Employer Identification
Number)</font></td>
    </tr>
  </table>
</div>

<p align=center style='text-align:center'><font face="Arial" size="2"><b>151 East Columbine Avenue<br>
Santa Ana,  California 92707<br>
</b>(Address of Principal Executive Offices)</font></p>



<p align=center style='text-align:center'><font face="Arial" size="2"><b>(949) 241-4411<br>
</b>(Registrant's Telephone Number, Including Area Code)</font></p>

&nbsp;<p>&nbsp;</p>
<p>&nbsp;</p>
<hr color="#000080">
<p>

<font face="Arial" size="2">

<b><u><br
clear=all style='page-break-before:always'>
</u></b>

</font>

</p>



<p><font face="Arial" size="2"><b><u>Item 7.</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Financial Statements and
Exhibits</u></b></font></p>



<p><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Exhibits.</font></p>



<p align=left style='margin-left:93.0pt;text-align:
left;text-indent:-21.0pt'><font face="Arial" size="2">99.1&nbsp;&nbsp;&nbsp;&nbsp; Press Release dated May 4, 2004.</font></p>

<p style='margin-top:12.0pt'><font face="Arial" size="2"><b><u>Item
12.</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Results of
Operations and Financial Condition</u></b></font></p>

<p style='margin-top:12.0pt;margin-right:0in;
margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-indent:.5in' align="justify">
<font face="Arial" size="2">The
information in this Form 8-K and the Exhibits attached hereto shall not be
deemed &quot;filed&quot; for purposes of Section 18 of the Securities Exchange Act of
1934, as amended (the &quot;Exchange Act&quot;), nor shall it be deemed incorporated by reference
in any filing under the Securities Act of 1933, as amended, or the Exchange
Act, except as shall be expressly set forth by specific reference in such a
filing. </font> </p>

<p style='margin-top:12.0pt;margin-right:0in;
margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-indent:.5in' align="justify">
<font face="Arial" size="2">On May
4, 2004, Pro-Dex, Inc. issued a press release announcing its financial performance
for the period ended March 31, 2004.&nbsp; On that same date, Pro-Dex, Inc.
conducted a conference call concerning its performance for the period ended March
31, 2004.&nbsp; A copy of the press release is attached to this Form&nbsp;8-K as
Exhibit&nbsp;99.1.</font></p>

<p style='margin-top:12.0pt;margin-right:0in;
margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-indent:.5in'>&nbsp;</p>

<p style='margin-top:12.0pt;margin-right:0in;
margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-indent:.5in'>&nbsp;</p>

<p style='margin-top:12.0pt;margin-right:0in;
margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-indent:.5in'>&nbsp;</p>

<p style='margin-top:12.0pt;margin-right:0in;
margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-indent:.5in'>&nbsp;</p>

<p style='margin-top:12.0pt;margin-right:0in;
margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-indent:.5in'>&nbsp;</p>

<p style='margin-top:12.0pt;margin-right:0in;
margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-indent:.5in'>&nbsp;</p>

<p style='margin-top:12.0pt;margin-right:0in;
margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;' align="center">
<font face="Arial" size="2">2</font></p>

<p style='margin-top:12.0pt;margin-right:0in;
margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;' align="center">&nbsp;</p>

<hr color="#000080"><font face="Arial" size="2"><br clear=all
style='page-break-before:always'>


</font>


<p align=center style='text-align:center'><font face="Arial" size="2"><b>SIGNATURES</b></font></p>





<p align="justify"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.</font></p>





<p><font face="Arial" size="2">Date:&nbsp; May 4, 2004&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>PRO-DEX, Inc.</b></font></p>





<p style='margin-left:3.25in'>&nbsp;</p>





<p style='margin-left:3.25in'><font face="Arial" size="2">By:
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>/s/&nbsp;  Patrick Johnson&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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; Patrick Johnson<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Chief Executive Officer</font></p>

<p style="margin-left: 3.25in">&nbsp;</p>
<p style="margin-left: 3.25in">&nbsp;</p>
<p style="margin-left: 3.25in">&nbsp;</p>
<p style="margin-left: 3.25in">&nbsp;</p>
<p style="margin-left: 3.25in">&nbsp;</p>
<p style="margin-left: 3.25in">&nbsp;</p>
<p align="center"><font face="Arial" size="2">3</font></p>

<hr color="#000080"><font face="Arial" size="2"><br clear=all
style='page-break-before:always'>


</font>


<p align=center style='text-align:center'><font face="Arial" size="2"><b>INDEX TO EXHIBITS</b></font></p>

<p><font face="Arial" size="2"><b>&nbsp;</b></font></p>

<p><font face="Arial" size="2"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b>
</font></p>

<p><font face="Arial" size="2">&nbsp;<b>&nbsp;  Exhibit</b><br>
<b><u>&nbsp; Number&nbsp; </u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Description&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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></b>
</font></p>



<p style='margin-left:1.0in;text-indent:-.75in'><font face="Arial" size="2">99.1 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Press
Release dated May 4, 2004.</font></p>



<p style='margin-left:1.0in;text-indent:-.75in'>&nbsp;</p>



<p style='margin-left:1.0in;text-indent:-.75in'>&nbsp;</p>



<p style='margin-left:1.0in;text-indent:-.75in'>&nbsp;</p>



<p style='margin-left:1.0in;text-indent:-.75in'>&nbsp;</p>



<p style='margin-left:1.0in;text-indent:-.75in'>&nbsp;</p>



<p style='margin-left:1.0in;text-indent:-.75in'>&nbsp;</p>



<p style='margin-left:1.0in;text-indent:-.75in'>&nbsp;</p>



<p align="center"><font face="Arial" size="2">4</font></p>



</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>ex991.htm
<TEXT>
<html>

<head>


<title>Exhibit 99.1</title>



</head>

<body lang=EN-US link=blue vlink=purple>

<p style='margin-left:0.0in;line-height:normal'>
<font size="2" face="Arial">
<img width=101
height=41 src="image001.jpg" align="left"></font><p align="right">
<font size="2" face="Arial"><br clear=ALL>
&nbsp;</font></p>

<div align="left">
  <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="750" id="AutoNumber1">
    <tr>
      <td valign="top" width="497">
      <p align="right">
<font size="2" face="Arial">Contact:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font>
      </td>
      <td width="253" valign="top"><p align="left">
<font size="2" face="Arial">Patrick
Johnson, President &amp; CEO<br>
(714)
241-4411</font></p>

      </td>
    </tr>
    <tr>
      <td valign="top" width="497">&nbsp;</td>
      <td width="253" valign="top"><font size="2" face="Arial">&nbsp; </font></td>
    </tr>
    <tr>
      <td width="497" valign="top"><b><i><font size="2" face="Arial">For
Immediate Release</font></i></b></td>
      <td width="253" valign="top">

<p style='text-align:left'><font size="2" face="Arial">Jim
White, Investor Relations<br>
Kehoe,
White &amp; Co., Inc.<br>
(562)
437-0655</font></p>

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

<p>&nbsp;</p>

<p align="center"><b><font size="2" face="Arial">PRO-DEX, INC. ANNOUNCES CONTINUED STRONG SALES
AND PROFIT GROWTH <br>
IN FISCAL 2004 THIRD QUARTER OPERATING RESULTS</font></b></p>



<p align="center"><b><font size="2" face="Arial">YEAR TO DATE SALES INCREASE 28% FROM PRIOR YEAR<br>
YEAR TO DATE EARNINGS INCREASE $662,000 FROM PRIOR YEAR AND 14% FROM
PREVIOUS QUARTER</font></b></p>





<p style='text-align:justify;text-indent:.5in'><font face="Arial"><b><font size="2">SANTA ANA, CA,</font></b><font size="2"> May 4,
2004 - PRO-DEX, INC. (NASDAQ: PDEX) today announced financial results for the
third quarter ended March 31, 2004.&nbsp; The Company reported net income for
the three months ended March 31, 2004 of $261,000 or $0.03 per share on a basic
and a diluted basis, as compared to a net income of $56,000 or $0.01 per share
on a basic and diluted basis, for the three months ended March 31, 2003.&nbsp; This
represents an increase of $205,000 or 366% over the previous year and a
sequential increase of $61,000 or 14% over the previous quarter, producing the
seventh consecutive increase in quarterly net profit.&nbsp;
The Company also reported net income for the nine months ended March 31,
2004 of $683,000 or $0.08 per share on a basic and $0.07 per share on a diluted
basis, as compared to a net income of $21,000 or $0.00 per share on a basic and
a diluted basis, for the nine months ended March 31, 2003.&nbsp; This represents an
increase of $663,000 over the previous year.</font></font></p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><font size="2" face="Arial">Commenting on the Company's financial results,
Pro-Dex's President and CEO, Patrick Johnson said, &quot;We knew heading into the
third quarter that it was going to be a challenge to deliver another quarter of
improved financial performance, particularly given the transition from a
revenue stream to a royalty stream on the Healozone project.&nbsp; We are now
pleased to report that despite the impact of that transition, we have delivered
another quarter of solid financial performance including growth in sales, gross
profit, and earnings.&nbsp; Sales were up over the previous year and gross
margin improved in total dollars and as a percent of sales both sequentially
and year over year.&nbsp; This combined with significantly reduced corporate
expenses for the quarter produced increased net income compared to last year
and last quarter.&quot;&nbsp; </font> </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><font size="2" face="Arial">As reported in January of 2003, the Company's Micro Motors subsidiary
renegotiated its exclusive manufacturing agreement with Curozone USA, agreeing
to a long-term royalty agreement in exchange for its exclusive manufacturing
rights.&nbsp; Curozone USA is the distributor of the innovative Healozone, a device
that painlessly treat dental caries with the delivery of ozone gas, eliminating
the traditional &quot;drill and fill&quot; treatment.&nbsp; During the three months ended
March 31, 2004, the Company received $40,000 in royalty payments from Curozone
USA for sales made during the quarter, compared to $373,000 in revenue derived
from Healozone sales to Curozone USA in the previous three month period.&nbsp; As
the royalty payments began during the first quarter of the year and are paid in
arrears, the royalty payments received represent only two months of sales
activities. Revenue from royalty payments is reported below the operating
income line as Other income on the Company's Consolidated Income Statement.
</font> </p>



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



<b><hr color="#000080">
<p><font size="2" face="Arial"><br clear="all" style="page-break-before:always">
</font></b></p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><font size="2" face="Arial">Consolidated net sales increased $223,000 or 7.8% to $3,302,000 for the
three months ended March 31, 2004, compared to the three months ended March 31,
2003.&nbsp; On a sequential basis, consolidated sales decreased $402,000 or 11% for
the three months ended March 31, 2004 compared to the previous three month
period.&nbsp; When excluding the impact of the transition of the Healozone project
from sales revenue to a royalty stream, sequential sales decreased by less than
1%.&nbsp; This produced the Company's first sequential
decrease in sales in ten straight quarters.&nbsp; For the nine months ended March
31, 2004, consolidated net sales increased 2,421,000 or 28% compared to the
same period in the prior year.</font></p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><font size="2" face="Arial">Revenue from the Company's Oregon Micro Systems (OMS) subsidiary
increased $167,000 or 25% to $847,000 for the three months ended March 31, 2004
compared to the same period in the previous year.&nbsp; OMS's sales increased
$197,000 or 30% for the three months ended March 31, 2004 compared to the
previous three month period.&nbsp; &quot;Over the course of the last two years, we have
put a lot of effort into repositioning OMS given the down-turn in the
semi-conductor industry,&quot; stated Mr. Johnson.&nbsp; &quot;This has included the
development of the new MAX product line of &quot;servo-motor&quot; multi-axis motion
controllers, the planned diversification of the OMS's sales outside the semi-conductor
industry and the right-sizing of OMS's operations to current sales volume.&nbsp;
We believe that these efforts are now paying off in increased bookings and
sales, sales of new products, sales to new customers outside the semi-conductor
market and strong operating profit.&nbsp; This combined with the resurgence of
the semi-conductor market has produced accelerated growth in both sales and
profits at OMS.&quot;&nbsp; At the Company's Micro Motors subsidiary, sales increased
$56,000 or 2.3% to $2,456,000 for the three months ended March 31, 2004, compared to the
same period of the prior year.&nbsp; </font> </p>



<p style='text-align:justify;text-indent:.5in'><font size="2" face="Arial">The Company's
consolidated gross profit for the three months ended March 31, 2004 increased
36% or $424,000 compared to the same three months in the previous year.&nbsp; For
the nine months ended March 31, 2004, consolidated gross profit increased
$1,263,000 or 35% compared to the same period in the prior year.&nbsp; Gross profit
as a percentage of sales increased significantly to 48.5% for the three months
ended March 31, 2004 compared to 38.3% for the three months ended March 31,
2003 and compared favorably to a gross margin percentage of 46% for the
previous quarter.&nbsp;&nbsp;&nbsp; &quot;This gross profit improvement is coming from increased
sales, an improved product mix, operational efficiencies and the diligent
management of manufacturing expense, noted Mr. Johnson.&quot;&nbsp; &quot;As both of our
operating subsidiaries are fully absorbing manufacturing overhead at current
production levels, increased levels of production, which will only require the
addition of direct labor, should result in continued improvement in gross
profitability.&quot; </font> </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><font size="2" face="Arial">Total operating expenses increased 12%
to $1,204,000 for the three months ended March 31, 2004 from $1,074,000 for the
three months ended March 31, 2003.&nbsp; This increase is attributed to increased
sales, marketing and product development activities at both of the Company's
operating subsidiaries.&nbsp; In addition, on a sequential basis operating expenses
decreased by $110,000 or 16.3% compared to the previous quarter.&nbsp; This decrease
was primarily due to a sharp reduction in corporate expenses, related to the
previous quarter's transition cost of changing auditors and restructuring the
Board of Directors.&nbsp; For the nine months ended March 31, 2004, operating
expense increased $232,000 or 6.6% compared to the same nine month period in
the prior year.&nbsp; </font> </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><font size="2" face="Arial">Addressing the Company's on-going operations,
Mr. Johnson noted, &quot;The Company remains on track through the first three
quarters of the year, producing increased sales, increased gross profit and increased
net profit.&nbsp; During the third quarter, we generated over $1,000,000 in free
cash flow (Cash from Operating Activities (less)/plus Cash from Financing
Activities)&nbsp; and continued to manage the business substantially debt-free.&nbsp;
Commenting on the Company's near term prospects, Mr. Johnson said, &quot;We have
really stepped up our product development efforts at both of our operating
subsidiaries.&nbsp; Currently, Micro Motors is engaged in nine new product
development projects, including clinical research at a major U.S. University,
with the majority of those projects being funded by customers committed to
initial purchases once the projects are completed.&nbsp; As a result of sales
activities at the recent Chicago Dental Society Mid-Winter meeting, Micro
Motors has made proposals for new business in excess of $3,000,000, a
significant portion of which it expects to secure in the next 12 months.&nbsp; At
the same time, new order bookings have remained strong at OMS as we moved into
the fourth quarter, with further large orders expected from customers both
inside and outside the semi-conductor industry.&nbsp; All in all, the quarter and
the year have gone according to plan and our focus now is to finish the year in
the same fashion.&quot;&nbsp;&nbsp;&nbsp; </font> </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>



<b><hr color="#000080">
<p><font size="2" face="Arial"><br clear="all" style="page-break-before:always">
</font></b></p>



<p style='text-align:justify;text-indent:.5in'><font size="2" face="Arial">Investors and
all others are invited to listen to a conference call discussing the third
quarter and the outlook for the balance of fiscal 2004, today at 4:30 p.m.
Eastern Time. The call will be broadcast over the Internet and can be accessed
by visiting the Company's website at <u><font color="#0000FF">www.pro-dex.com</font></u>.&nbsp;
An online replay will be available for 30 days.&nbsp; Additionally, a telephone
replay will be available two hours after the call for 48-hours by dialing (877)
519-4471 for domestic callers and (973) 341-3080 for international callers;
enter conference ID# 4722194.</font></p>



<p style='text-align:justify;text-indent:.5in'><font size="2" face="Arial">Pro-Dex, Inc., is a California-based
holding company with the following wholly-owned operating subsidiaries: Micro
Motors, Inc., located in Santa Ana, California, manufactures miniature
electric, pneumatic and battery powered rotary drive systems for use in the
high tech medical, dental and industrial industries; and Oregon Micro Systems,
Inc., located in Beaverton, Oregon, manufactures motion control products used
in factory automation and the semiconductor industries. </font> </p>



<p style='text-align:justify;text-indent:.5in'><font size="2" face="Arial">For more information, visit the
Company's website at <u><font color="#0000FF">www.pro-dex.com</font>. </u>
</font> </p>



<p align="justify"><font size="1" face="Arial">Statements
herein concerning the Company's plans, growth and strategies may include
'forward-looking statements' within the context of the federal securities laws.
Statements regarding the Company's future events, developments and future
performance, as well as management's expectations, beliefs, plans, estimates or
projections relating to the future, are forward-looking statements within the
meaning of these laws. The Company's actual results may differ materially from
those suggested as a result of various factors. Interested parties should refer
to the disclosure concerning the operational and business concerns of the
Company set forth in the Company's filings with the Securities and Exchange
Commission.</font></p>



<p align=center style='text-align:center'><font size="2" face="Arial">(tables follow)</font></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'><font size="2" face="Arial">&nbsp;</font></p>



<b><hr color="#000080">
<p><font size="2" face="Arial"><br clear="all" style="page-break-before:always">
</font></b></p>

<p><b><font size="2" face="Arial">Item 1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Financial Statements</font></b></p>
<p align="center" style="text-align:center;text-autospace:none"><b>
<font size="2" face="Arial">PRO-DEX, INC. AND SUBSIDIARIES <br>
CONSOLIDATED BALANCE SHEETS </font></b></p>
<div align="left">
  <table class="MsoNormalTable" border="1" cellspacing="0" cellpadding="0" width="624" style="width:725;margin-left:0pt;border-collapse:collapse;border:medium none; ">
    <tr style="page-break-inside:avoid">
      <td width="380" valign="top" style="width:284.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt"><b><font size="2" face="Arial">&nbsp;</font></b></td>
      <td valign="top" style="border-top:1.0pt solid windowtext;
  border-left: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="center">
      <p align="center" style="text-align:center"><i>
      <font size="2" face="Arial">March 31,
      2004</font></i></td>
      <td valign="top" style="border-top:1.0pt solid windowtext;
  border-left: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="center">
      <p align="center" style="text-align:center"><i>
      <font size="2" face="Arial">June 30,
      2003</font></i></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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 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="center">
      <p align="center" style="text-align:center"><i>
      <font size="2" face="Arial">&nbsp;(unaudited)</font></i></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-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="center">
      <p align="center" style="text-align:center"><i>
      <font size="2" face="Arial">&nbsp;(audited)</font></i></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><b><font size="2" face="Arial">ASSETS</font></b></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt"></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt"></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">Current assets:</font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt"></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt"></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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 style="text-autospace:none"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;
      Cash and cash equivalents </font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right">
      <p><font size="2" face="Arial">$&nbsp;&nbsp;&nbsp;&nbsp; 1,306,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      795,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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 style="text-autospace:none"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;
      Accounts receivable, net of allowance for doubtful </font></td>
      <td width="125" valign="bottom" style="width:93.9pt;border:none;border-right:
  solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="119" valign="bottom" style="width:89.35pt;border:none;border-right:
  solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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 style="text-autospace:none"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      accounts of $40,000 and $30,000 </font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right">
      <p><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,888,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,620,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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 style="text-autospace:none"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;
      Inventories, net </font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      2,601,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      2,835,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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 style="text-autospace:none"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;
      Prepaid expenses </font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      143,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      81,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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 style="text-autospace:none"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;
      Deferred taxes</font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;750,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      770,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Total current assets </font></td>
      <td width="125" valign="top" style="width:93.9pt;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="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      6,688,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;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="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      6,101,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">Equipment and leasehold
      improvements, net&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      </font></td>
      <td width="125" valign="top" style="width:93.9pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,000,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,040,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">Other assets:</font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp; Goodwill</font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,110,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,110,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp; Deferred
      taxes </font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      833,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      833,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp; Other
      </font></td>
      <td width="125" valign="top" style="width:93.9pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      11,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      20,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Total other assets </font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,954,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,963,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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="125" valign="top" style="width:93.9pt;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"></td>
      <td width="119" valign="top" style="width:89.35pt;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">&nbsp;</td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">Total assets</font></td>
      <td width="125" valign="top" style="width:93.9pt;border-top:none;border-left:
  none;border-bottom:double windowtext 1.5pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">$&nbsp;&nbsp;&nbsp;&nbsp;
      9,642,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;border-top:none;border-left:
  none;border-bottom:double windowtext 1.5pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">$&nbsp;&nbsp;&nbsp;&nbsp;
      9,104,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt"><b><font size="2" face="Arial">&nbsp; </font></b><p><b>
      <font size="2" face="Arial">LIABILITIES AND SHAREHOLDERS' EQUITY</font></b></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt"><font size="2" face="Arial">Current liabilities:</font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt"><font size="2" face="Arial">&nbsp;&nbsp; Current portion of
      long term debt to shareholder </font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      69,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      65,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp; Credit line payable
      </font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&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="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      432,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp; Accounts
      payable </font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      205,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;642,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp; Accrued expenses
      </font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      576,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      349,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp; Income taxes payable
      </font></td>
      <td width="125" valign="top" style="width:93.9pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      485,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      29,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Total current liabilities </font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,335,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,517,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">Long-term debt to a shareholder,
      net of current portion</font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;&nbsp;&nbsp;93,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      145,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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="125" valign="top" style="width:93.9pt;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"></td>
      <td width="119" valign="top" style="width:89.35pt;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"></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">Total liabilities</font></td>
      <td width="125" valign="top" style="width:93.9pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,428,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,662,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">Commitments and contingencies
      </font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">Shareholders' equity:</font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp; Series A
      convertible preferred shares; no par value; liquidation&nbsp;&nbsp;
      preference of $3.60 per share; 10,000,000 shares authorized; 78,129 shares
      issued and outstanding </font></td>
      <td width="125" valign="bottom" style="width:93.9pt;border:none;border-right:
  solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt" align="right">
      <font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      283,000&nbsp;</font></td>
      <td width="119" valign="bottom" style="width:89.35pt;border:none;border-right:
  solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt" align="right">
      <font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      283,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp; Common shares;
      no par value; 50,000,000 shares authorized; 8,858,600 and 8,711,600 shares
      issued and outstanding, respectively </font></td>
      <td width="125" valign="bottom" style="width:93.9pt;border:none;border-right:
  solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt" align="right">
      <font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp; 15,069,000&nbsp;</font></td>
      <td width="119" valign="bottom" style="width:89.35pt;border:none;border-right:
  solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt" align="right">
      <font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp; 14,999,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp; Accumulated
      deficit </font></td>
      <td width="125" valign="top" style="width:93.9pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      (7,106,000)</font></td>
      <td width="119" valign="top" style="width:89.35pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      (7,789,000)</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      8,245,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      7,493,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp; Receivable for stock
      purchase </font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(32,000)</font></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      (51,000)</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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="125" valign="top" style="width:93.9pt;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"></td>
      <td width="119" valign="top" style="width:89.35pt;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"></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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"><font size="2" face="Arial">Total shareholders' equity</font></td>
      <td width="125" valign="top" style="width:93.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      8,214,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      7,442,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;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="125" valign="top" style="width:93.9pt;border-top:medium none;border-left:
  medium none;border-bottom:medium none 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="119" valign="top" style="width:89.35pt;border-top:medium none;border-left:
  medium none;border-bottom:medium none windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right"></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:medium none windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in">
      <font size="2" face="Arial">Total liabilities and
      shareholders' equity</font></td>
      <td width="125" valign="top" style="width:93.9pt;border-top:medium none;border-left:
  medium none;border-bottom:3px double windowtext;border-right:medium none windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <font size="2" face="Arial">$&nbsp;&nbsp;&nbsp;&nbsp;
      9,642,000&nbsp;</font></td>
      <td width="119" valign="top" style="width:89.35pt;border-top:medium none;border-left:
  medium none;border-bottom:3px double windowtext;border-right:medium none windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="right">
      <font size="2" face="Arial">$&nbsp;&nbsp;&nbsp;&nbsp;
      9,104,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="380" valign="top" style="width:284.75pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt">&nbsp;</td>
      <td width="125" valign="top" style="width:93.9pt;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"></td>
      <td width="119" valign="top" style="width:89.35pt;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"></td>
    </tr>
  </table>
</div>
<p><i><font size="2" face="Arial">&nbsp;</font></i></p>
<p><i><font size="2" face="Arial">See notes to consolidated financial statements.</font></i></p>
<p style="text-autospace:none" align="center"><font size="2" face="Arial">&nbsp;1</font></p>
<b><hr color="#000080">
<p><font size="2" face="Arial"><br clear="all" style="page-break-before:always">
</font></b></p>
<p style="text-autospace:none">&nbsp;</p>
<p align="center" style="text-align:center;text-autospace:none"><b>
<font size="2" face="Arial">PRO-DEX, INC. AND SUBSIDIARIES <br>
CONSOLIDATED
STATEMENTS OF INCOME<br>
(Unaudited)</font></b></p>
<div align="left">
  <table class="MsoNormalTable" border="1" cellspacing="0" cellpadding="0" width="561" style="width:725;margin-left:0in;border-collapse:collapse;border:medium none; ">
    <tr style="page-break-inside:avoid">
      <td width="348" rowspan="2" valign="top" style="width:261.0pt;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 colspan="2" valign="top" style="border-top:1.0pt solid windowtext;
  border-left: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="center">
      <p align="center" style="text-align:center"><i>
      <font size="2" face="Arial">Three Months
      Ended March 31,</font></i></td>
    </tr>
    <tr style="page-break-inside:avoid">
      <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="center">
      <p align="center" style="text-align:center"><i>
      <font size="2" face="Arial">2004</font></i></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-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="center">
      <p align="center" style="text-align:center"><i>
      <font size="2" face="Arial">2003</font></i></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt"></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">Net sales </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">$&nbsp;&nbsp;&nbsp;&nbsp;
      3,302,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">$&nbsp;&nbsp;&nbsp;&nbsp;
      3,079,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">Cost of sales</font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,698,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,899,000&nbsp;</font></td>
    </tr>
    <tr style="height:4.5pt">
      <td width="348" valign="top" style="width:261.0pt;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:4.5pt"><font size="2" face="Arial">Gross profit </font>
      </td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:4.5pt" align="right">
      <font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,604,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:4.5pt" align="right">
      <font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,180,000&nbsp;</font></td>
    </tr>
    <tr style="height:4.5pt">
      <td width="348" valign="top" style="width:261.0pt;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:4.5pt">&nbsp;</td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:4.5pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:4.5pt" align="right"></td>
    </tr>
    <tr style="height:4.5pt">
      <td width="348" valign="top" style="width:261.0pt;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:4.5pt"><font size="2" face="Arial">Operating expenses:
      </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:4.5pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:4.5pt" align="right"></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp; Selling
      </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      231,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      229,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp; General
      and administrative expenses </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      501,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      547,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp; Research
      and development costs </font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      472,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      298,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">Total operating expenses </font>
      </td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,204,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,074,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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="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 5.4pt 0in 5.4pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;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"></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">Income from operations </font>
      </td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      400,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      106,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">Other income (expense): </font>
      </td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp; Royalty
      income </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      40,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&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>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp; Other
      income, net </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;4,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;8,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp; Interest
      (expense) </font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      (9,000)</font></td>
      <td width="105" valign="top" style="width:78.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      (21,000)</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">Total</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      35,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      (13,000)</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">Income before provision for income
      taxes (credits)</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      435,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      93,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">Provision for income taxes</font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      174,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      37,000&nbsp;</font></td>
    </tr>
    <tr style="height:9.0pt">
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">Net Income</font></td>
      <td width="108" valign="top" style="width:81.0pt;border-top:none;border-left:
  none;border-bottom:double windowtext 2.25pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:9.0pt" align="right">
      <font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      261,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border-top:none;border-left:
  none;border-bottom:double windowtext 2.25pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:9.0pt" align="right">
      <font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      56,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">Net Income per share:</font></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 5.4pt 0in 5.4pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;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"></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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 style="margin-left:17.1pt"><font size="2" face="Arial">Basic </font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.03&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.01&nbsp;</font></td>
    </tr>
    <tr style="height:13.9pt">
      <td width="348" valign="bottom" style="width:261.0pt;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:13.9pt">
      <p style="margin-left:17.1pt"><font size="2" face="Arial">Diluted&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      </font></td>
      <td width="108" valign="bottom" style="width:81.0pt;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;height:13.9pt" align="right">
      <font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.03&nbsp;</font></td>
      <td width="105" valign="bottom" style="width:78.75pt;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:13.9pt" align="right">
      <font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.01&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" style="width:261.0pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="348" style="width:261.0pt;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">
      <font size="2" face="Arial">Weighted average shares outstanding - basic</font></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 5.4pt 0in 5.4pt" align="right">
      <p><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;
      8,797,325&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;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><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;
      8,723,700&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" style="width:261.0pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="348" style="width:261.0pt;border:solid windowtext 1.0pt;border-top:
  none;padding:0in 5.4pt 0in 5.4pt"><font size="2" face="Arial">Weighted average shares
      outstanding - diluted</font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      9,398,688&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      8,910,899&nbsp;</font></td>
    </tr>
  </table>
</div>
<p align="center" style="text-align:center"><i><font size="2" face="Arial">See notes to
consolidated financial statements.</font></i></p>
<p align="center" style="text-align:center"><font size="2" face="Arial">2</font></p>
<b><hr color="#000080">
<p><font size="2" face="Arial"><br clear="all" style="page-break-before:always">
</font></b></p>
<p align="center" style="text-align:center;text-autospace:none"><b>
<font size="2" face="Arial">PRO-DEX, INC. AND SUBSIDIARIES <br>
CONSOLIDATED
STATEMENTS OF INCOME<br>
(Unaudited)</font></b></p>
<div align="left">
  <table class="MsoNormalTable" border="1" cellspacing="0" cellpadding="0" width="561" style="width:725;margin-left:0in;border-collapse:collapse;border:medium none; ">
    <tr style="page-break-inside:avoid">
      <td width="348" rowspan="2" valign="top" style="width:261.0pt;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 colspan="2" valign="top" style="border-top:1.0pt solid windowtext;
  border-left: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="center">
      <p align="center" style="text-align:center"><i>
      <font size="2" face="Arial">Nine Months
      Ended March 31,</font></i></td>
    </tr>
    <tr style="page-break-inside:avoid">
      <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="center">
      <p align="center" style="text-align:center"><i>
      <font size="2" face="Arial">2004</font></i></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-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="center">
      <p align="center" style="text-align:center"><i>
      <font size="2" face="Arial">2003</font></i></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt"></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">Net sales </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">$&nbsp; &nbsp;10,534,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">$&nbsp;&nbsp;&nbsp;&nbsp;
      8,678,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">Cost of sales </font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;&nbsp;5,683,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      5,090,000&nbsp;</font></td>
    </tr>
    <tr style="height:4.5pt">
      <td width="348" valign="top" style="width:261.0pt;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:4.5pt"><font size="2" face="Arial">Gross profit </font>
      </td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:4.5pt" align="right">
      <font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      4,851,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:4.5pt" align="right">
      <font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      3,588,000&nbsp;</font></td>
    </tr>
    <tr style="height:4.5pt">
      <td width="348" valign="top" style="width:261.0pt;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:4.5pt">&nbsp;</td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:4.5pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:4.5pt" align="right"></td>
    </tr>
    <tr style="height:4.5pt">
      <td width="348" valign="top" style="width:261.0pt;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:4.5pt"><font size="2" face="Arial">Operating expenses:
      </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:4.5pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:4.5pt" align="right"></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp; Selling
      </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;629,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      540,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp; General
      and administrative expenses </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,796,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,849,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp; Research
      and development costs </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,299,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,071,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;
      Amortization</font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      ---&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      32,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">Total operating expenses </font>
      </td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      3,724,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      3,492,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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="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 5.4pt 0in 5.4pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;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"></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">&nbsp;Income from operations </font>
      </td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,127,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      96,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">Other income (expense): </font>
      </td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp; Royalty
      income </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      40,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&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>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp; Other
      income, net </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      16,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;4,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp; Interest
      (expense) </font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      (44,000)</font></td>
      <td width="105" valign="top" style="width:78.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      (65,000)</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">Total</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      12,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      (61,000)</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">Income before provision for income
      taxes</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      1,139,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      35,000&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">Provision for income taxes</font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      456,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      14,000&nbsp;</font></td>
    </tr>
    <tr style="height:9.0pt">
      <td width="348" valign="top" style="width:261.0pt;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"><font size="2" face="Arial">Net Income</font></td>
      <td width="108" valign="top" style="width:81.0pt;border-top:none;border-left:
  none;border-bottom:double windowtext 2.25pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:9.0pt" align="right">
      <font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      683,000&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;border-top:none;border-left:
  none;border-bottom:double windowtext 2.25pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:9.0pt" align="right">
      <font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;21,000&nbsp;</font></td>
    </tr>
    <tr style="height:13.9pt">
      <td width="348" valign="top" style="width:261.0pt;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:13.9pt"><font size="2" face="Arial">Net Income per
      share:</font></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 5.4pt 0in 5.4pt;height:13.9pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;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:13.9pt" align="right"></td>
    </tr>
    <tr style="height:13.9pt">
      <td width="348" valign="top" style="width:261.0pt;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:13.9pt">
      <p style="text-indent:17.1pt"><font size="2" face="Arial">Basic </font></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 5.4pt 0in 5.4pt;height:13.9pt" align="right">
      <font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.08&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;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:13.9pt" align="right">
      <font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.00&nbsp;</font></td>
    </tr>
    <tr style="height:13.9pt">
      <td width="348" valign="bottom" style="width:261.0pt;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:13.9pt">
      <p style="text-indent:17.1pt"><font size="2" face="Arial">Diluted&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      </font></td>
      <td width="108" valign="bottom" style="width:81.0pt;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;height:13.9pt" align="right">
      <font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.07&nbsp;</font></td>
      <td width="105" valign="bottom" style="width:78.75pt;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:13.9pt" align="right">
      <font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.00&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" style="width:261.0pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="348" style="width:261.0pt;border:solid windowtext 1.0pt;border-top:
  none;padding:0in 5.4pt 0in 5.4pt"><font size="2" face="Arial">Weighted average shares
      outstanding - basic</font></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 5.4pt 0in 5.4pt" align="right">
      <p><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;
      8,779,913&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;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><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;
      8,752,374&nbsp;</font></td>
    </tr>
    <tr>
      <td width="348" style="width:261.0pt;border:none;border-left:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt">&nbsp;</td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="105" valign="top" style="width:78.75pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right">&nbsp;</td>
    </tr>
    <tr>
      <td width="348" style="width:261.0pt;border:solid windowtext 1.0pt;border-top:
  none;padding:0in 5.4pt 0in 5.4pt"><font size="2" face="Arial">Weighted average shares
      outstanding - diluted</font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      9,288,056&nbsp;</font></td>
      <td width="105" valign="top" style="width:78.75pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      8,892,995&nbsp;</font></td>
    </tr>
  </table>
</div>
<p align="center" style="text-align:center;text-autospace:none">
<font face="Arial"><i>
<font size="2">See notes to consolidated financial statements.</font></i><font size="2"><br clear="all" style="page-break-before:always">
</font></font></p>
<p align="center" style="text-align:center;text-autospace:none">
<font size="2" face="Arial">3</font></p>
<b><hr color="#000080">
<p><font size="2" face="Arial"><br clear="all" style="page-break-before:always">
</font></b></p>
<p align="center" style="text-align:center;text-autospace:none"><b>
<font size="2" face="Arial">PRO-DEX, INC. AND SUBSIDIARIES <br>
CONSOLIDATED STATEMENTS OF CASH FLOWS<br>
(Unaudited)</font></b></p>
<div align="left">
  <table class="MsoNormalTable" border="1" cellspacing="0" cellpadding="0" style="margin-left:0pt;border-collapse:collapse;border:none" width="725">
    <tr style="page-break-inside:avoid">
      <td width="414" rowspan="2" valign="top" style="width:310.5pt;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 colspan="2" valign="top" style="border-top:1.0pt solid windowtext;
  border-left: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="center">
      <p align="center" style="text-align:center"><i>
      <font size="2" face="Arial">Nine Months
      Ended March 31,</font></i></td>
    </tr>
    <tr style="page-break-inside:avoid">
      <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="center">
      <p align="center" style="text-align:center"><i>
      <font size="2" face="Arial">2004</font></i></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-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in" align="center">
      <p align="center" style="text-align:center"><i>
      <font size="2" face="Arial">2003</font></i></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt"></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt"></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">Cash Flows from Operating
      Activities: </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt"></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt"></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">Net Income</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      683,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      21,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp; Adjustments to
      reconcile net income to net&nbsp;<br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;cash used in operating activities:</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Depreciation and amortization </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">273,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">285,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Provision for doubtful accounts </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">10,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">49,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Reserve for obsolete inventory </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">(116,000)&nbsp;&nbsp;&nbsp;</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">--&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Non-cash compensation </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">19,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">19,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Deferred taxes </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">20,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">--&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Changes in:</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      (Increase) in accounts receivable </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">(278,000)&nbsp;&nbsp;&nbsp;</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">(575,000)&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      (Increase) decrease in inventories </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">350,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">(19,000)&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      (Increase) in prepaid expenses </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">(29,000)&nbsp;&nbsp;&nbsp;</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">(22,000)&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Decrease in other assets</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">9,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">3,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      (Decrease) in accounts payable and accrued expense </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">(237,000)&nbsp;&nbsp;&nbsp;</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">(76,000)&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Increase in income taxes payable </font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">456,000&nbsp;&nbsp;&nbsp;&nbsp;</font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">15,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr style="height:6.25pt">
      <td width="414" valign="top" style="width:310.5pt;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:6.25pt">&nbsp;</td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:6.25pt" align="right"></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:6.25pt" align="right"></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">Net Cash provided by (used in)
      Operating Activities </font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">1,160,000&nbsp;&nbsp;&nbsp;&nbsp;</font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">(300,000)&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr style="height:10.75pt">
      <td width="414" valign="top" style="width:310.5pt;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:10.75pt"><font size="2" face="Arial">Cash Flows From
      Investing Activities: </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:10.75pt" align="right"></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:10.75pt" align="right"></td>
    </tr>
    <tr style="height:10.75pt">
      <td width="414" valign="top" style="width:310.5pt;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:10.75pt"><font size="2" face="Arial">&nbsp;&nbsp;
      Proceeds from sale of discontinued operations </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:10.75pt" align="right">
      <font size="2" face="Arial">---&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:10.75pt" align="right">
      <font size="2" face="Arial">790,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">&nbsp;&nbsp; Net additions to
      equipment and leasehold improvements </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">(233,000)&nbsp;&nbsp;&nbsp;</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">(262,000)&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr style="height:5.35pt">
      <td width="414" valign="top" style="width:310.5pt;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:5.35pt">&nbsp;</td>
      <td width="108" valign="top" style="width:81.0pt;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;height:5.35pt" align="right"></td>
      <td width="108" valign="top" style="width:81.0pt;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;height:5.35pt" align="right"></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">Net Cash provided by (used in)
      Investing Activities </font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;(233,000)&nbsp;&nbsp;&nbsp;</font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;528,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">Cash Flows from Financing
      Activities:</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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 style="text-autospace:none"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp; Principal
      payments on long-term borrowings </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">(54,000)&nbsp;&nbsp;&nbsp;</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">(97,000)&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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 style="text-autospace:none"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp; Net
      payments on line of credit </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">(432,000)&nbsp;&nbsp;&nbsp;</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">(11,000)&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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 style="text-autospace:none"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;
      Additional paid in capital </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">70,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">---&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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 style="text-autospace:none"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp; Stock
      repurchases </font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">---&nbsp;&nbsp;&nbsp;&nbsp;</font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">(32,000)&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right">&nbsp;</td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">Net Cash (used in) Financing
      Activities</font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">(416,000)&nbsp;&nbsp;&nbsp;</font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">(140,000)&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">Net Increase in Cash and Cash
      Equivalents </font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">511,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">88,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">Cash and Cash Equivalents,
      beginning of period </font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;795,000&nbsp;&nbsp;&nbsp;&nbsp;</font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">&nbsp;236,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right">&nbsp;</td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right">&nbsp;</td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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"><font size="2" face="Arial">Cash and Cash Equivalents, end of
      period </font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">$&nbsp;&nbsp; &nbsp;1,306,000&nbsp;&nbsp;&nbsp;&nbsp;</font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      324,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt">&nbsp;</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 5.4pt 0in 5.4pt"></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 5.4pt 0in 5.4pt"></td>
    </tr>
  </table>
</div>
<p align="center" style="text-align:center"><i><font size="2" face="Arial">Supplemental
Information</font></i></p>
<div align="left">
  <table class="MsoNormalTable" border="1" cellspacing="0" cellpadding="0" style="margin-left:0pt;border-collapse:collapse;border:none" width="725">
    <tr>
      <td width="414" valign="top" style="width:310.5pt;border:solid windowtext 1.0pt;
  border-bottom:none;padding:0in 5.4pt 0in 5.4pt"><font size="2" face="Arial">Cash payments
      for interest</font></td>
      <td width="108" valign="top" style="width:81.0pt;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" align="right"><font size="2" face="Arial">$42,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
      <td width="108" valign="top" style="width:81.0pt;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" align="right"><font size="2" face="Arial">$68,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;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="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
      <td width="108" valign="top" style="width:81.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt" align="right"></td>
    </tr>
    <tr>
      <td width="414" valign="top" style="width:310.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt"><font size="2" face="Arial">Cash payments for
      income taxes </font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">$6,000&nbsp;&nbsp;&nbsp;&nbsp;</font></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 5.4pt 0in 5.4pt" align="right"><font size="2" face="Arial">$2,000&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    </tr>
  </table>
</div>
<p><i><font size="2" face="Arial">&nbsp;</font></i></p>
<p align="center" style="text-align:center"><i><font size="2" face="Arial">See notes to
consolidated financial statements.</font></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'><font size="2" face="Arial">4</font></p>

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