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Originator-Name: webmaster@www.sec.gov
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<SEC-DOCUMENT>0001003297-05-000018.txt : 20050214
<SEC-HEADER>0001003297-05-000018.hdr.sgml : 20050214
<ACCEPTANCE-DATETIME>20050214160851
ACCESSION NUMBER:		0001003297-05-000018
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20041231
FILED AS OF DATE:		20050214
DATE AS OF CHANGE:		20050214

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PRO DEX INC
		CENTRAL INDEX KEY:			0000788920
		STANDARD INDUSTRIAL CLASSIFICATION:	MISC INDUSTRIAL & COMMERCIAL MACHINERY & EQUIPMENT [3590]
		IRS NUMBER:				841261240
		STATE OF INCORPORATION:			CO
		FISCAL YEAR END:			0630

	FILING VALUES:
		FORM TYPE:		10QSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-14942
		FILM NUMBER:		05610265

	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>10QSB
<SEQUENCE>1
<FILENAME>pdex10qsb1.htm
<TEXT>
<html>

<head>


<title>ProDex Form 10QSB by EDGAR2.com</title>



</head>

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















<p align="center" style="text-autospace: none">&nbsp;</p>
  <p align="center"><b>UNITED STATES <br>
	SECURITIES AND EXCHANGE COMMISSION</b></p>
  <p align=center style='text-align:center'><b><font size="3">Washington, D.C. 20549</font></b></p>

  <p align="center" style="text-autospace: none"><b><font size="5">FORM
  10-QSB</font></b></p>
<div align="center">



<table class=MsoNormalTable border=0 cellpadding=0
 style='border-collapse:collapse' width="740">
 <tr>
  <td width=720 valign=top style='width:7.5in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  <p style='margin-left:.75in;text-indent:-.75in;text-autospace:
  none'><b>[X]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  Quarterly Report Pursuant to Section
  13 or 15(d) of the Securities Exchange Act of 1934.</b></p>
  <p align=center style='text-align:center;text-autospace:none'><b>For
  the quarterly period ended December 31, 2004</b></p>
  <p align=center style='text-align:center'><b>OR</b></p>
  <p style='margin-left:.75in;text-indent:-.75in;text-autospace:
  none'><b>[&nbsp; ]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  Transition Report Pursuant to Section
  13 or 15(d) of the Securities Exchange Act of 1934.&nbsp;&nbsp;
  For the transition period from&nbsp; <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>to&nbsp;
  <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; .</u></b></p>
  </td>
  <td width=0 valign=top style='width:0in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>

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

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=721
 style='width:740px;border-collapse:collapse'>
 <tr>
  <td width=720 colspan=2 valign=top style='width:7.5in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>Commission
  File Number&nbsp;&nbsp;&nbsp; 0-14942 </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=720 colspan=2 valign=top style='width:7.5in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=720 colspan=2 valign=top style='width:7.5in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>
	<font size="5">PRO-DEX, INC.&nbsp;&nbsp;&nbsp; </font> </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=720 colspan=2 valign=top style='width:7.5in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>(Exact
  name of small business issuer as specified in its
  charter)&nbsp;&nbsp;&nbsp;&nbsp; </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp;&nbsp;&nbsp; </b></p>
  </td>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp;&nbsp;&nbsp; </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b><u>Colorado </u></b></p>
  </td>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b><u>84-1261240
  </u></b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>(State
  or Other Jurisdiction of&nbsp;&nbsp;&nbsp; </b></p>
  </td>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>(IRS
  Employer Identification No.) </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>Incorporation
  or Organization)&nbsp;&nbsp;&nbsp; </b></p>
  </td>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp; </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp;&nbsp;&nbsp; </b></p>
  </td>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp;&nbsp;&nbsp; </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=720 colspan=2 valign=top style='width:7.5in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b><u>151 E. Columbine Avenue, Santa Ana, California 92707&nbsp;&nbsp;&nbsp;
  </u></b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=720 colspan=2 valign=top style='width:7.5in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>(Address
  of Principal Executive Offices)&nbsp;&nbsp;&nbsp;&nbsp; </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp;&nbsp;&nbsp; </b></p>
  </td>
  <td width=360 valign=top style='width:3.75in;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp; &nbsp; </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=720 colspan=2 valign=top style='width:7.5in;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>Issuer's
  telephone number: <u>714-241-4411&nbsp;&nbsp;&nbsp; </u></b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>





</div>





<p style='text-align:justify;text-autospace:none'>Indicate by check mark whether the Registrant (1) has
filed all reports required by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past ninety days.&nbsp;&nbsp;&nbsp; Yes [X] No [ ] </p>



<p style='text-autospace:none'>Indicate
the number of shares outstanding of each of the Registrant's classes of Common
Stock outstanding as of the latest practicable date:&nbsp; 9,187,596 shares of
Common Stock, no par value, as of February 7, 2005. </p>



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



<div align="center">



<table class=MsoNormalTable border=0 cellpadding=0 width=722
 style='width:740px;border-collapse:collapse'>
 <tr style='height:9.15pt'>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-1-</p>
  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>

<div class=MsoNormal align=center style='text-align:center'>

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

<hr size=2 width="100%" noshade color=navy align=center>

</div>



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










<p><b>Item 1. &nbsp;&nbsp;&nbsp;&nbsp; Financial
Statements</b></p>

<div align="left">



<table class=MsoNormalTable border=0 cellpadding=0
 style='width:740px;margin-left:4.65pt;border-collapse:collapse' id="table1">
 <tr style='height:15.75pt'>
  <td colspan=5 valign=bottom style='padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">
  <p class=MsoNormal align=center style='text-align:center'><b><font size="2">PRO-DEX, INC.
  and SUBSIDIARIES</font></b></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td colspan=5 valign=bottom style='padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">
  <p class=MsoNormal align=center style='text-align:center'><b><font size="2">CONSOLIDATED
  BALANCE SHEETS</font></b></p>
  </td>
 </tr>
 <tr style='height:10.5pt'>
  <td nowrap valign=bottom style='width:377px;height:10.5pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal align=center style='text-align:center'><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td nowrap colspan=2 valign=bottom style='width:192px;height:10.5pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td nowrap colspan=2 valign=bottom style='width:165px;height:10.5pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
 </tr>
 <tr style='height:27.0pt'>
  <td nowrap valign=top style='width:376px;height:27.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td colspan=2 valign=top style='border-left:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-right:medium none; height:27.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">
  <p class=MsoNormal align=center style='text-align:center'><i><font size="2">December 31,2004
	<br>
	(unaudited)</font></i></p>
  </td>
  <td colspan=2 valign=top style='border:1.0pt solid windowtext;
  height:27.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">
  <p class=MsoNormal align=center style='text-align:center'><i><font size="2">June 30,2004
	<br>
	(audited)</font></i></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; width:375px;border-bottom:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><b><font size="2">ASSETS</font></b></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Current assets:</font></p>
  </td>
  <td nowrap colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; width:191px;border-right:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td nowrap colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; width:164px;border-right:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;
  Cash and cash equivalents </font> </p>
  </td>
  <td width=9 valign=top style='padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td width=179 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">2,544,000&nbsp;</font></p>
  </td>
  <td width=9 valign=top style='padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td width=154 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">2,070,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;
  Accounts receivable, net of allowance for doubtful </font> </p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  accounts of $45,000 at Dec. 31 and $40,000 at June 30</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,604,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">2,370,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;
  Inventories, net </font> </p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">2,976,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">2,542,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;
  Prepaid expenses </font> </p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">223,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">76,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;
  Deferred income taxes</font></p>
  </td>
  <td colspan=2 valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">793,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">793,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total current
  assets </font> </p>
  </td>
  <td colspan=2 valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">8,140,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">7,851,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Equipment and leasehold
  improvements, net&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	</font> </p>
  </td>
  <td colspan=2 valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,055,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,030,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Other assets:</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Goodwill</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,110,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,110,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Deferred income taxes</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">788,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">788,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;
  Other </font> </p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">37,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">16,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total other assets
  </font>
  </p>
  </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:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,935,000&nbsp;</font></p>
  </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:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,914,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td colspan=2 valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Total assets</font></p>
  </td>
  <td width=9 valign=top style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td width=179 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">11,130,000&nbsp;</font></p>
  </td>
  <td width=9 valign=top style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td width=154 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">10,795,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><b><font size="2">LIABILITIES AND
  SHAREHOLDERS' EQUITY</font></b></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Current liabilities:</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Accounts payable</font></p>
  </td>
  <td width=9 valign=top style='padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td width=179 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">447,000&nbsp;</font></p>
  </td>
  <td width=9 valign=top style='padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td width=154 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">397,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Current portion of
  long term debt to shareholder</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">-&nbsp;</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">70,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Accrued expenses</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">452,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">780,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Income taxes payable
	</font> </p>
  </td>
  <td colspan=2 valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">580,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">809,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total current
  liabilities </font> </p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,479,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">2,056,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Long-term debt to a
  shareholder, net of current portion</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">-&nbsp;</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">75,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Total liabilities</font></p>
  </td>
  <td colspan=2 valign=top style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,479,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=top style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">2,131,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Commitments and
  contingencies </font> </p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Shareholders' equity:</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Series A convertible
  preferred shares; no par value; liquidation</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; preference of
  $3.60 per share; 10,000,000 shares authorized;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 78,129 shares
  issued and outstanding</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">283,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">283,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Common shares; no par
  value; 50,000,000 shares authorized;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,039,217 shares
  issued and outstanding,</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">15,404,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">15,075,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Accumulated deficit
	</font> </p>
  </td>
  <td colspan=2 valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(6,023,000)</font></p>
  </td>
  <td colspan=2 valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(6,669,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">9,664,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">8,689,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:9.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:9.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Receivable for stock
  purchase </font> </p>
  </td>
  <td colspan=2 valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(13,000)</font></p>
  </td>
  <td colspan=2 valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(25,000)</font></p>
  </td>
 </tr>
 <tr style='height:9.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:9.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total shareholders'
  equity</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">9,651,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">8,664,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:9.75pt'>
  <td nowrap valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:375px;border-top:medium none;height:9.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td colspan=2 valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:375px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:2.25pt double windowtext;
  border-right:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and
  shareholders' equity</font></p>
  </td>
  <td width=9 valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:2.25pt double windowtext;
  border-right:medium none;padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td width=179 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">11,130,000&nbsp;</font></p>
  </td>
  <td width=9 valign=top style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td width=154 valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">10,795,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:377px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td colspan=2 valign=top style='padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=top style='padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:377px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><i><font size="2">See notes to consolidated
  financial statements.</font></i></p>
  </td>
  <td colspan=2 valign=bottom style='padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=bottom style='padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:377px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><i><font size="2">&nbsp;</font></i></p>
  </td>
  <td colspan=2 valign=bottom style='padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=bottom style='padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:377px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td colspan=2 valign=bottom style='padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=bottom style='padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:377px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td colspan=2 valign=bottom style='padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td colspan=2 valign=bottom style='padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

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







</div>

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

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



<div align="center">



<table class=MsoNormalTable border=0 cellpadding=0 width=722
 style='width:740px;border-collapse:collapse'>
 <tr style='height:9.15pt'>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-2-</p>
  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>

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

<div class=MsoNormal align=center style='text-align:center'>

<hr size=2 width="100%" noshade color=navy align=center>

</div>



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










<div align="left">







<table class=MsoNormalTable border=0 cellpadding=0 width=560
 style='width:740px;margin-left:4.65pt;border-collapse:collapse' id="table2">
 <tr style='height:15.75pt'>
  <td colspan=3 valign=bottom style='height:15.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">
  <p class=MsoNormal align=center style='text-align:center'><b><font size="2">PRO-DEX, INC.
  and SUBSIDIARIES</font></b></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td colspan=3 valign=bottom style='height:15.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">
  <p class=MsoNormal align=center style='text-align:center'><b><font size="2">CONSOLIDATED
  STATEMENTS OF OPERATIONS</font></b></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td colspan=3 valign=bottom style='height:15.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">
  <p class=MsoNormal align=center style='text-align:center'><b><font size="2">Three months
  ended December 31 (unaudited)</font></b></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:381px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td nowrap colspan=2 valign=top style='width:355px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal align=center style='text-align:center'><i><font size="2">&nbsp;</font></i></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:380px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-right:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">
  <p class=MsoNormal align=center style='text-align:center'><i><font size="2">2004</font></i></p>
  </td>
  <td valign=top style='border:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">
  <p class=MsoNormal align=center style='text-align:center'><i><font size="2">2003</font></i></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:379px;border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:medium none;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:192px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td nowrap valign=top style='width:158px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Net sales </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	2,894,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,704,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Cost of sales </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  1,275,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  1,997,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Gross profit </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  1,619,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  1,707,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Operating expenses: </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Selling </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  278,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;193,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; General and
  administrative expenses </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  581,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  682,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Research and
  development costs </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  457,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  439,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Total operating expenses </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,316,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  1,314,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Income from operations </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  303,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  393,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Other income (expense): </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Other income, net
	</font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  5,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Interest expense
	</font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  (2,000)</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  (16,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Total</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  3,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  (10,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Income before provision for
  income taxes</font></p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  306,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;383,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:13.5pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Provision for income taxes</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:13.5pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  123,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:13.5pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  153,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Net income</font></p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 183,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 230,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	</font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Net Income per share:</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </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;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Basic</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.02&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.03&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Diluted</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.02&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.02&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </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;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:379px;border-left:
  1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Weighted average shares
  outstanding - basic</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,993,849&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,776,600&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:379px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">Weighted average shares
  outstanding - diluted</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,584,276&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,307,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:381px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td nowrap valign=bottom style='width:193px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td nowrap valign=bottom style='width:159px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:381px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><i><font size="2">&nbsp;</font></i></p>
  </td>
  <td nowrap valign=bottom style='width:193px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td nowrap valign=bottom style='width:159px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:381px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td nowrap valign=bottom style='width:193px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td nowrap valign=bottom style='width:159px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

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







</div>

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





<table class=MsoNormalTable border=0 cellpadding=0 width=722
 style='width:740px;border-collapse:collapse'>
 <tr style='height:9.15pt'>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-3-</p>
  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>

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

<div class=MsoNormal align=center style='text-align:center'>

<hr size=2 width="100%" noshade color=navy align=center>

</div>



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










<div align="left">







<table class=MsoNormalTable border=0 cellpadding=0 width=560
 style='width:740px;margin-left:4.65pt;border-collapse:collapse' id="table3">
 <tr style='height:15.75pt'>
  <td colspan=3 valign=bottom style='height:15.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">
  <p class=MsoNormal align=center style='text-align:center'><b><font size="2">PRO-DEX, INC.
  and SUBSIDIARIES</font></b></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td colspan=3 valign=bottom style='height:15.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">
  <p class=MsoNormal align=center style='text-align:center'><b><font size="2">CONSOLIDATED
  STATEMENTS OF OPERATIONS</font></b></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td colspan=3 valign=bottom style='height:15.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">
  <p class=MsoNormal align=center style='text-align:center'><b><font size="2">Six months ended
  December 31 (unaudited)</font></b></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
  <td width=272 nowrap colspan=2 valign=top style='width:204.0pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>
  <p class=MsoNormal align=center style='text-align:center'><i><font size="2">&nbsp;</font></i></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-right:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">
  <p class=MsoNormal align=center style='text-align:center'><i><font size="2">2004</font></i></p>
  </td>
  <td valign=top style='border:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">
  <p class=MsoNormal align=center style='text-align:center'><i><font size="2">2003</font></i></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border-top:solid windowtext 1.0pt;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:none;
  padding:0in .85pt 0in .85pt;height:12.75pt'>

  </td>
  <td width=136 valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
  <td width=136 valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Net sales </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 6,226,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7,232,000
	</font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>

  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Cost of sales </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  2,747,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  3,985,000 </font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Gross profit </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  3,479,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  3,247,000 </font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>

  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Operating expenses: </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Selling </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  477,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  399,000 </font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; General and
  administrative expenses </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  1,125,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  1,295,000 </font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Research and
  development costs </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  876,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  826,000 </font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Total operating expenses </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  2,478,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  2,520,000 </font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Income from operations </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  1,001,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  727,000 </font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>

  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Other income (expense): </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Other income, net
	</font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;45,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  12,000 </font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Royalty income
	</font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  40,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  - </font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Interest expense
	</font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  (9,000)</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  (35,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Total</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  76,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  (23,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>

  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Income before provision for
  income taxes</font></p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  1,077,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  704,000 </font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>

  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:13.5pt'>
  <p class=MsoNormal><font size="2">Provision for income taxes</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:13.5pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  431,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:13.5pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  282,000 </font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Net income</font></p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;646,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 422,000
  </font>
  </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=top style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	</font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=bottom style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Net Income per share:</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </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;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=bottom style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Basic</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.07&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.05 </font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=bottom style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Diluted</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.07&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.05 </font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=bottom style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>

  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </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;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=bottom style='width:3.0in;border:none;border-left:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Weighted average shares
  outstanding - basic</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,928,876&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,771,300
  </font>
  </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=bottom style='width:3.0in;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Weighted average shares
  outstanding - diluted</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,508,454&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,266,300
  </font>
  </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=bottom style='width:3.0in;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
  <td valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=bottom style='width:3.0in;padding:0in .85pt 0in .85pt;
  height:12.75pt'>
  <p class=MsoNormal><i><font size="2">&nbsp;</font></i></p>
  </td>
  <td valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=bottom style='width:3.0in;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
  <td valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=288 nowrap valign=bottom style='width:3.0in;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
  <td valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

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







</div>

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



<div align="center">



<table class=MsoNormalTable border=0 cellpadding=0 width=722
 style='width:740px;border-collapse:collapse'>
 <tr style='height:9.15pt'>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-4-</p>
  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>
<p align="right">&nbsp;</p>

<div class=MsoNormal align=center style='text-align:center'>

<hr size=2 width="100%" noshade color=navy align=center>

</div>



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










<div align="left">







<table class=MsoNormalTable border=0 cellpadding=0 width=629
 style='width:740px;margin-left:4.65pt;border-collapse:collapse' id="table4">
 <tr style='height:12.75pt'>
  <td colspan=3 valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">
  <p class=MsoNormal align=center style='text-align:center'><b><font size="2">PRO-DEX, INC. and SUBSIDIARIES</font></b></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td colspan=3 valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">
  <p class=MsoNormal align=center style='text-align:center'><b><font size="2">CONSOLIDATED STATEMENTS OF CASH FLOWS</font></b></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td colspan=3 valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">
  <p class=MsoNormal align=center style='text-align:center'><b><font size="2">Six months ended December 31 (unaudited)</font></b></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
  <td width=99 nowrap valign=bottom style='width:73.9pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
  <td width=102 nowrap valign=bottom style='width:76.4pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-right:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">
  <p class=MsoNormal align=center style='text-align:center'><i><font size="2">2004</font></i></p>
  </td>
  <td valign=top style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="center">
  <p class=MsoNormal align=center style='text-align:center'><i><font size="2">2003</font></i></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border:solid windowtext 1.0pt;
  border-bottom:none;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Cash Flows from Operating
  Activities: </font> </p>
  </td>
  <td width=99 nowrap valign=top style='width:73.9pt;border:none;border-right:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>

  </td>
  <td width=102 nowrap valign=top style='width:76.4pt;border:none;border-right:
  solid windowtext 1.0pt;padding:0in .85pt 0in .85pt;height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Net Income</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 646,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 422,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Adjustments to
  reconcile net income to net cash used in operating activities:</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Depreciation and
  amortization </font> </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 171,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 193,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Provision for
  doubtful accounts</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 15,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (Recovery)
  reserve for obsolete inventory</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 37,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (136,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stock based
  compensation</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 13,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 13,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred taxes</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 20,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Changes in:</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  (Increase) decrease in accounts receivable</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 761,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (565,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  (Increase) decrease in inventories</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (471,000)</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 45,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:321.7pt;border-left:
  1.0pt solid windowtext;height:15px; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  (Increase) in prepaid expenses</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:15px; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (147,000)</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:15px; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (88,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:19px; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  (Increase) decrease in other assets</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:19px; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (21,000)</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:19px; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  (Decrease) in accounts payable and accrued expenses</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (279,000)</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (153,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Increase
  (decrease) in income taxes payable</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (229,000)</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 282,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Net Cash provided by
  Operating Activities </font> </p>
  </td>
  <td valign=top style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 486,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 57,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Cash Flows From Investing
  Activities: </font> </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Purchases of equipment
  and leasehold improvements</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (196,000)</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (148,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Net Cash (used in)
  Investing Activities </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (196,000)</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (148,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Cash Flows from Financing
  Activities:</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;
  Principal payments on long-term shareholder borrowings </font> </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (145,000)</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (25,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Net
  payments on line of credit </font> </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -
  &nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (182,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;
  Proceeds from option and warrant exercise </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 329,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 35,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Net Cash provided by (used
  in) Financing Activities</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 184,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (172,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>

  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Net Increase (decrease) in
  Cash and Cash Equivalents </font> </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 474,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (263,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Cash and Cash Equivalents,
  beginning of period </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2,070,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 795,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:12.75pt'>

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Cash and Cash Equivalents,
  end of period </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp; 2,544,000
	</font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 532,000&nbsp;
	</font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
  <td valign=top style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=629 nowrap colspan=3 valign=bottom style='width:472.0pt;padding:
  0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal align=center style='text-align:center'><i><font size="2">Supplemental Information</font></i></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=bottom style='width:321.7pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
  <td valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border:solid windowtext 1.0pt;
  border-bottom:none;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Cash payments for interest</font></p>
  </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;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 33,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:9.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in .85pt 0in .85pt;height:9.75pt'>

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:9.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:9.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=top style='width:321.7pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in .85pt 0in .85pt;height:12.75pt'>
  <p class=MsoNormal><font size="2">Cash payments for income
  taxes </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 660,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0in; padding-bottom:0in' align="right">
  <p class=MsoNormal><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=bottom style='width:321.7pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>
  <p class=MsoNormal><i><font size="2">&nbsp;</font></i></p>
  </td>
  <td width=99 nowrap valign=bottom style='width:73.9pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
  <td width=102 nowrap valign=bottom style='width:76.4pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=bottom style='width:321.7pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
  <td width=99 nowrap valign=bottom style='width:73.9pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
  <td width=102 nowrap valign=bottom style='width:76.4pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=bottom style='width:321.7pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
  <td width=99 nowrap valign=bottom style='width:73.9pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
  <td width=102 nowrap valign=bottom style='width:76.4pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=bottom style='width:321.7pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
  <td width=99 nowrap valign=bottom style='width:73.9pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
  <td width=102 nowrap valign=bottom style='width:76.4pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=429 nowrap valign=bottom style='width:321.7pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
  <td width=99 nowrap valign=bottom style='width:73.9pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

  </td>
  <td width=102 nowrap valign=bottom style='width:76.4pt;padding:0in .85pt 0in .85pt;
  height:12.75pt'>

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





</div>

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



<div align="center">



<table class=MsoNormalTable border=0 cellpadding=0 width=722
 style='width:740px;border-collapse:collapse'>
 <tr style='height:9.15pt'>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-5-</p>
  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>

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

<div class=MsoNormal align=center style='text-align:center'>

<hr size=2 width="100%" noshade color=navy align=center>

</div>



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










<p align=center style='text-align:center;text-autospace:none'><b>PRO-DEX,
INC. AND SUBSIDIARIES <br>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS </b></p>

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

<p style='text-autospace:none'><b>BASIS OF PRESENTATION</b></p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The accompanying unaudited consolidated financial statements of Pro-Dex,
Inc. (&quot;Pro-Dex&quot; or the &quot;Company&quot;) have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Regulation S-B. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. These
financial statements should be read in conjunction with the audited financial
statements presented in our Annual Report for the fiscal year ended June 30,
2004.&nbsp; In the opinion of management, all adjustments considered necessary for a
fair presentation have been included. The results of operations for such
interim periods are not necessarily indicative of the results that may be
expected for the full year. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-KSB for the year ended June 30, 2004. </p>

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



<div align=center>

<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 width=528
 style='width:396.25pt;border-collapse:collapse;border:none'>
 <tr>
  <td width=258 valign=bottom style='width:193.75pt;border-top:solid windowtext 1.0pt;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:none;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=138 valign=bottom style='width:103.5pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:none;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>December
  31, 2004<br>
	(unaudited)</p>
  </td>
  <td width=132 valign=bottom style='width:99.0pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>&nbsp;June
  30, 2004&nbsp; </p>
  </td>
 </tr>
 <tr>
  <td width=258 valign=top style='width:193.75pt;border:none;border-left:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Raw materials </p>
  </td>
  <td width=138 valign=top style='width:103.5pt;border:none;padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>$&nbsp;&nbsp;&nbsp;&nbsp; 1,210,000 </p>
  </td>
  <td width=132 valign=top style='width:99.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>$&nbsp;&nbsp;&nbsp;&nbsp; 1,068,000 </p>
  </td>
 </tr>
 <tr>
  <td width=258 valign=top style='width:193.75pt;border:none;border-left:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Work in process </p>
  </td>
  <td width=138 valign=top style='width:103.5pt;border:none;padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>424,000</p>
  </td>
  <td width=132 valign=top style='width:99.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>242,000</p>
  </td>
 </tr>
 <tr>
  <td width=258 valign=top style='width:193.75pt;border:none;border-left:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Development costs under
  contract</p>
  </td>
  <td width=138 valign=top style='width:103.5pt;border:none;padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>100,000</p>
  </td>
  <td width=132 valign=top style='width:99.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>23,000</p>
  </td>
 </tr>
 <tr>
  <td width=258 valign=top style='width:193.75pt;border:none;border-left:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Finished goods </p>
  </td>
  <td width=138 valign=top style='width:103.5pt;border:none;padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,587,000 </u></p>
  </td>
  <td width=132 valign=top style='width:99.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,517,000 </u></p>
  </td>
 </tr>
 <tr>
  <td width=258 valign=top style='width:193.75pt;border:none;border-left:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp; Total
  </p>
  </td>
  <td width=138 valign=top style='width:103.5pt;border:none;padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>3,321,000 </p>
  </td>
  <td width=132 valign=top style='width:99.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'>2,850,000 </p>
  </td>
 </tr>
 <tr>
  <td width=258 valign=top style='width:193.75pt;border:none;border-left:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Reserve for slow moving items </p>
  </td>
  <td width=138 valign=top style='width:103.5pt;border:none;padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (345,000)</u></p>
  </td>
  <td width=132 valign=top style='width:99.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (308,000)</u></p>
  </td>
 </tr>
 <tr>
  <td width=258 valign=top style='width:193.75pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;border-right:
  none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp; Total
  inventories, net </p>
  </td>
  <td width=138 valign=top style='width:103.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>$&nbsp;&nbsp; &nbsp; 2,976,000 </u></p>
  </td>
  <td width=132 valign=top style='width:99.0pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='margin-right:4.5pt;text-align:right;
  text-autospace:none'><u>$&nbsp;&nbsp; &nbsp; 2,542,000 </u></p>
  </td>
 </tr>
</table>

</div>



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



<p style='text-align:justify;text-indent:.5in'>On July 1, 2002
we adopted SFAS No. 142 &quot;Goodwill and Other Intangible Assets.&quot;&nbsp; SFAS No. 142
requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead tested for impairment at least annually in
accordance with the provisions of SFAS No. 142.&nbsp; </p>



<p style='text-align:justify;text-indent:.5in'>In accordance
with the requirements of SFAS No. 142, we performed impairment tests and recorded
no impairment charges in 2003 or 2004.&nbsp; We prepare our annual impairment
testing on April 1 of each year.&nbsp; We have compared the estimated carrying value
with the estimated fair value of the operations and determined that none of the
goodwill recorded as of April 1, 2004 was impaired.&nbsp; Additionally, during the
quarter ended December 31, 2004, management determined that there are no events
or circumstances which have occurred that would indicate an impairment of the
goodwill had occurred.&nbsp; </p>













<div align="center">













<table class=MsoNormalTable border=0 cellpadding=0 width=722
 style='width:740px;border-collapse:collapse'>
 <tr style='height:9.15pt'>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-6-</p>
  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>

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

<div class=MsoNormal align=center style='text-align:center'>

<hr size=2 width="100%" noshade color=navy align=center>

</div>



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












<p style='text-autospace:none'><b>NET INCOME PER SHARE</b></p>

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

<div align=left>

<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 width=630
 style='width:740px;margin-left:18.9pt;border-collapse:collapse;border:medium none; '>
 <tr style='page-break-inside:avoid'>
  <td width=375 valign=top style='width:281.4pt;border:none;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'>Three Months Ended
  December 31,</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td 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'>2004</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="center">
  <p align=center style='text-align:center'>2003</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

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

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

  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Net
  income </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 183,000</p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 230,000</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Basic net income per common share:</p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">

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

  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;&nbsp; Weighted average of common shares outstanding&nbsp;&nbsp;&nbsp; </p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,993,849</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,776,600</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Basic net income per common share&nbsp;</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.02</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.03</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  &nbsp;

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

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

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

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

  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;&nbsp; Weighted average of common shares outstanding&nbsp;&nbsp;&nbsp; </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,993,849</p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,776,600</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effect of potentially dilutive securities
  (options)&nbsp;&nbsp;</p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;436,521</p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-top:0in;page-break-after:
  auto'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 400,287</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effect of potentially dilutive securities
  (warrants)&nbsp;&nbsp;</p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;75,777</p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 51,984</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=bottom style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effect of potentially dilutive securities
  (convertible<br>
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Preferred Shares)</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">

  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 78,129</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;78,129</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Weighted average number of common and shares - Diluted</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,584,276</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,307,000</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p>Diluted net income per common share</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.02</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.02</p>
  </td>
 </tr>
</table>

</div>



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



<div align=left>

<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 width=630
 style='width:740px;margin-left:18.9pt;border-collapse:collapse;border:medium none; ' id="table5">
 <tr style='page-break-inside:avoid'>
  <td width=375 valign=top style='width:281.4pt;border:none;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'>Six Months Ended
  December 31,</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td 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'>2004</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="center">
  <p align=center style='text-align:center'>2003</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

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

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

  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  Net
  income
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 646,000</td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 422,000</td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  Basic net income per common share:</td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">

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

  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  &nbsp;&nbsp; Weighted average of common shares outstanding&nbsp;&nbsp;&nbsp;
  </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="right">
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,928,876</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="right">
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,771,300</td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  Basic net income per common share&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </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="right">
  $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.07</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="right">
  $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.05</td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  &nbsp;

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

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

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

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

  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  &nbsp;&nbsp; Weighted average of common shares outstanding&nbsp;&nbsp;&nbsp;
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8, 928,876</td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,771,300</td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effect of potentially dilutive securities
  (options)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 427,487</td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-top:0in;page-break-after:
  auto'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 372,067 </p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effect of potentially dilutive securities
  (warrants)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;73,962</td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 44,803</td>
 </tr>
 <tr>
  <td width=375 valign=bottom style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effect of potentially dilutive securities
  (convertible<br>
	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Preferred Shares)</td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">

  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 78,129</td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 78,129</p>
  </td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  Weighted average number of common and shares - Diluted</td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;9,508,454</td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,266,299</td>
 </tr>
 <tr>
  <td width=375 valign=top style='width:281.4pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  Diluted net income per common share</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="right">
  $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.07</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="right">
  $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.05</td>
 </tr>
</table>

</div>



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



<p style='text-align:justify;text-indent:.5in'>In October 2003,
our credit facility with Wells Fargo Business Credit Inc. was refinanced with a
more favorable facility by Wells Fargo Bank, N.A. (Wells Fargo) for borrowings
up to the lesser of $2,000,000 or the total of our eligible accounts
receivable.&nbsp; The terms of the credit facility expired in October 2004 and its
terms required monthly interest payments at the prime rate or LIBOR (one month
to three months) plus 2.75% based on outstanding borrowings, with no minimum
interest charge.&nbsp; The outstanding borrowings are secured by all assets of,
and guaranteed by the Company. </p>



<div align="center">



<table class=MsoNormalTable border=0 cellpadding=0 width=722
 style='width:740px;border-collapse:collapse'>
 <tr style='height:9.15pt'>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-7-</p>
  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>

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

<div class=MsoNormal align=center style='text-align:center'>

<hr size=2 width="100%" noshade color=navy align=center>

</div>



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










<p style='text-align:justify;text-indent:.5in'>In October 2004,
the credit facility with Wells Fargo was renewed again with a more favorable
facility for borrowings up to $2,000,000.&nbsp; The credit facility expires in
October 2005 and its terms require monthly interest payments at the prime rate
of interest (5.25% at December 31, 2004) or LIBOR (2.40% (one month) to 2.49%
(three months) at December 31, 2004) plus 2.50%, based on outstanding
borrowings, with no minimum interest charge.&nbsp; The outstanding borrowings
are secured by all assets of, and guaranteed by the Company.&nbsp; There was no
outstanding balance under the terms of this credit facility as of December 31,
2004.&nbsp; The total eligible borrowing capacity at December 31, 2004 was
$2,000,000.</p>



<p style='text-autospace:ideograph-numeric ideograph-other; text-indent:0.5in'>There
are certain financial and non-financial covenants that we must meet to be in
compliance with the terms of the Wells Fargo credit facility.&nbsp; At December 31,
2004, we were in compliance with all such covenants.&nbsp; </p>

<p style='text-autospace:none'><b>LONG TERM DEBT TO SHAREHOLDER</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Long-term debt was comprised of a Not to Compete liability under the
terms of a Noncompetition Agreement offset by a Note Receivable asset from the
same shareholder.&nbsp; The interest rate on both was 7% annually.&nbsp; The Note was
collateralized by the Not to Compete liability and was subordinated to the line
of credit with Wells Fargo.&nbsp; </p>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>On October 27, 2004, the Not to Compete Liability and the Note Receivable
were each paid in full at book value, with no further obligation under either
instrument remaining.</p>

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



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Deferred income taxes are provided on a liability method whereby deferred
tax assets and liabilities are recognized for temporary differences.&nbsp; Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases.&nbsp; Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.&nbsp; We have a net operating loss carry
forward of $2,012,000 for state income tax purposes which expires beginning in
2012.&nbsp; Tax credit carry forwards totaling $325,000 for Federal tax purposes
expire beginning in 2018 and $237,000 for state tax purposes do not expire.</p>



<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Significant management
judgment is required in determining our provision for income taxes and the
recoverability of our deferred tax asset.&nbsp; It is based on our estimates of
future taxable income by jurisdiction in which we operate and the period over
which our deferred tax assets will be recoverable.&nbsp; In the event that actual
results differ from these estimates or we adjust these estimates in future
periods, we may need to establish a valuation allowance which could result in a
tax provision up to the carrying value of our deferred tax assets.</p>

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



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>During the quarter ended December 31, 2004, we granted 15,000 Common
Stock Options under the Company's Director Stock Option Plan, exercisable at an
average per share price of $2.81 (fair market value $1.62, per option) and
25,000 Common Stock Options under the Employee Stock Option Plan exercisable at
an average per share price of $2.65 (fair market value, $1.53 per option).&nbsp; </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>During the quarter ended December 31, 2004, 14,200 Common Stock Options
under the Employee Stock Option Plan expired unexercised.</p>



<div align="center">



<table class=MsoNormalTable border=0 cellpadding=0 width=722
 style='width:740px;border-collapse:collapse'>
 <tr style='height:9.15pt'>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-8-</p>
  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>

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

<div class=MsoNormal align=center style='text-align:center'>

<hr size=2 width="100%" noshade color=navy align=center>

</div>



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










<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The fair market value of each grant is estimated at the grant date using
the Black-Scholes option-pricing model with the following weighted-average
assumptions: no dividend rate for all years; price volatility of 66%, risk-free
interest rate of approximately 3.3% to 3.4%; and expected lives of five years.</p>



<div align=left>

<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 width=693
 style='width:740px;margin-left:4.5pt;border-collapse:collapse;border:medium none; '>
 <tr style='page-break-inside:avoid'>
  <td style='border:none;padding:0in 0in 0in 0in' width=1><p>&nbsp;</td>
  <td width=200 colspan=2 valign=top style='width:150.0pt;border:none;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=220 colspan=2 valign=top style='width:165.0pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=272 colspan=3 valign=top style='width:204.0pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center'>Three Months Ended December
  31,</p>
  </td>
 </tr>
 <tr>
  <td width=199 colspan=2 valign=top style='width:149.2pt;border:none;
  border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=221 colspan=2 valign=top style='width:165.8pt;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=141 colspan=2 valign=top style='width:105.65pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center'>2004</p>
  </td>
  <td width=130 valign=top style='width:97.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center'>2003</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=199 colspan=2 valign=top style='width:149.2pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Net
  income as reported:</p>
  </td>
  <td width=221 colspan=2 valign=top style='width:165.8pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=141 colspan=2 valign=top style='width:105.65pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 183,000</p>
  </td>
  <td width=130 valign=top style='width:97.55pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 230,000</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=199 colspan=2 valign=top style='width:149.2pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=221 colspan=2 valign=top style='width:165.8pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
  <p>Add stock-based
  employee compensation expense included in reported net income, net of related
  tax effects</p>
  </td>
  <td width=141 colspan=2 valign=bottom style='width:105.65pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'>



  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; ---</p>
  </td>
  <td width=130 valign=bottom style='width:97.55pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

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

  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; ---</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=199 colspan=2 valign=top style='width:149.2pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=221 colspan=2 valign=top style='width:165.8pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
  <p>(Deduct) total
  stock-based employee and director compensation expense determined under fair
  value based method for all awards, net of related tax effects</p>
  </td>
  <td width=141 colspan=2 valign=bottom style='width:105.65pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'>



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

  <p><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (20,000)</u></p>
  </td>
  <td width=130 valign=bottom style='width:97.55pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (12,000)</u></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=199 colspan=2 valign=top style='width:149.2pt;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>Pro-forma net income:</p>
  </td>
  <td width=221 colspan=2 valign=top style='width:165.8pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;</p>
  </td>
  <td width=141 colspan=2 valign=top style='width:105.65pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p><u>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 163,000</u></p>
  </td>
  <td width=130 valign=top style='width:97.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p><u>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 218,000</u></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=199 colspan=2 valign=top style='width:149.2pt;border:solid windowtext 1.0pt;
  border-bottom:none;padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=221 colspan=2 valign=top style='width:165.8pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=141 colspan=2 valign=top style='width:105.65pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=130 valign=top style='width:97.55pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=199 colspan=2 valign=top style='width:149.2pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Basic earnings per share </p>
  </td>
  <td width=221 colspan=2 valign=top style='width:165.8pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
  <p>As reported</p>
  </td>
  <td width=141 colspan=2 valign=top style='width:105.65pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.02</p>
  </td>
  <td width=130 valign=top style='width:97.55pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.03</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=199 colspan=2 valign=bottom style='width:149.2pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=221 colspan=2 valign=top style='width:165.8pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>pro forma</p>
  </td>
  <td width=141 colspan=2 valign=top style='width:105.65pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.02</p>
  </td>
  <td width=130 valign=top style='width:97.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.02</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=199 colspan=2 valign=top style='width:149.2pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=221 colspan=2 valign=top style='width:165.8pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;</p>
  </td>
  <td width=141 colspan=2 valign=top style='width:105.65pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;</p>
  </td>
  <td width=130 valign=top style='width:97.55pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>&nbsp;</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=199 colspan=2 valign=top style='width:149.2pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>Diluted earnings per share: </p>
  </td>
  <td width=221 colspan=2 valign=top style='width:165.8pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
  <p>As reported</p>
  </td>
  <td width=141 colspan=2 valign=top style='width:105.65pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.02</p>
  </td>
  <td width=130 valign=top style='width:97.55pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.02</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=199 colspan=2 valign=bottom style='width:149.2pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>

  </td>
  <td width=221 colspan=2 valign=top style='width:165.8pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>pro forma</p>
  </td>
  <td width=141 colspan=2 valign=top style='width:105.65pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.02</p>
  </td>
  <td width=130 valign=top style='width:97.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.02</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p>&nbsp;</td>
 </tr>
 <tr height=0>
  <td width=1 style='border:none'></td>
  <td width=198 style='border:none'></td>
  <td width=2 style='border:none'></td>
  <td width=219 style='border:none'></td>
  <td width=1 style='border:none'></td>
  <td width=140 style='border:none'></td>
  <td width=130 style='border:none'></td>
  <td width=2 style='border:none'></td>
 </tr>
</table>

</div>

<p style='text-autospace:none'><b>PREFERRED STOCK SUBSEQUENT
EVENT</b></p>



<p style='text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Subsequent
to the ending of our second quarter, 78,129 Preferred Stock shares had been
converted to 78,129 shares of Common Stock, leaving no Preferred Stock shares outstanding.</p>

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



<p style='text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prior
to July 1, 2004, our reports included two business segments that were each
strategic business units and which offered different products and services.&nbsp;
They were operated separately as each business required different technology
and marketing strategies.&nbsp; The two reportable segments within Pro-Dex were:
Rotary Devices (formerly, Micro Motors) and Motion Control (formerly, Oregon
Micro Systems).</p>



<p style='text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; As
of July 1, 2004, due to subsidiary mergers of Micro Motors and Oregon Micro
Systems into Pro-Dex, Inc. and the consolidation of the Company's management
control, resource allocation and operations, separate business segments are no
longer applicable under FASB 133 and are no longer separately defined.&nbsp; There
is no restatement of our consolidated financial information due to the
subsidiary merger and segment elimination. </p>

<div align="center">



<table class=MsoNormalTable border=0 cellpadding=0 width=722
 style='width:740px;border-collapse:collapse'>
 <tr style='height:9.15pt'>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-9-</p>
  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>

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

<div class=MsoNormal align=center style='text-align:center'>

<hr size=2 width="100%" noshade color=navy align=center>

</div>



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










<p style='text-autospace:none'><b>Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations</b></p>

<p><b>COMPANY OVERVIEW</b></p>










<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The following discussion and analysis provides information that the
Company's management believes is relevant to an assessment and understanding of
our results of operations and financial condition for each of the three month and
six month periods ended December 31, 2003 and 2004, respectively.&nbsp; This
discussion should be read in conjunction with the Consolidated Financial
Statements and the Notes thereto included elsewhere in this Report. This Report
contains certain forward-looking statements and information. The cautionary
statements included herein should be read as being applicable to all related
forward-looking statements wherever they may appear.&nbsp; Our actual future results
could differ materially from those discussed herein.&nbsp; Our critical accounting
policies relate to inventory valuation for slow moving items, impairment of
goodwill, and recoverability of deferred income taxes.</p>



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



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Pro-Dex, Inc. is a Colorado corporation, organized in 1978, currently
conducting business in two locations.&nbsp; In the fiscal year ended June 30, 2004,
we eliminated the Company's &quot;holding company&quot; structure and terminated the
separate legal status of our operating subsidiaries, Micro Motors, Inc.
(&quot;Micro Motors&quot;) headquartered in Santa Ana, California and Oregon
Micro Systems, Inc. (&quot;OMS&quot;) headquartered in Beaverton, Oregon,
through the merger of each such subsidiary into the Company.&nbsp; As a result, we
no longer operate as a holding company but as one unified business operating in
two locations: Santa Ana and Beaverton.&nbsp; The company names of Micro Motors and
Oregon Micro Systems will continue to be used for marketing purposes as brand
names.&nbsp; We specialize in bringing speed to
market&nbsp;in the&nbsp;development and manufacture of&nbsp;technology-based
solutions that incorporate embedded motion control and miniature rotary drive
systems.&nbsp; We design and produce products serving the medical, dental, factory
automation and scientific research markets.&nbsp; Our strategic focus is to get
customers to market faster, at a lower cost and with a higher quality
product.&nbsp; Our products are found in hospitals, dental offices, medical
engineering labs, scientific research facilities and high tech manufacturing
operations&nbsp;around the world.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Pro-Dex's principal headquarters are located at 151 E. Columbine Avenue, Santa Ana,   California 92707 and our phone number is 714-241-4411.&nbsp; The Company's
Internet address is <u><font color="#0000FF">www.pro-dex.com</font></u>.&nbsp; Our
annual reports on Form 10-KSB, quarterly reports on Form 10-QSB, current reports
on Form 8-K, amendments to those reports and other Securities and Exchange
Commission (&quot;SEC&quot;) filings, are available free of charge through our website as
soon as reasonably practicable after such reports are electronically filed
with, or furnished to, the SEC.&nbsp; In addition, the Company's Code of Ethics and
other corporate governance documents may be found on its website at the
Internet address set forth above.&nbsp; Our filings with the SEC may also be read and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.&nbsp; You may obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330.&nbsp; The SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC at http://www.sec.gov.</p>



<p>&nbsp;</p>



<div align="center">



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 style='width:740px;border-collapse:collapse'>
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  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-10-</p>
  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>

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

<div class=MsoNormal align=center style='text-align:center'>

<hr size=2 width="100%" noshade color=navy align=center>

</div>



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










<b>Description of Business</b><p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The majority of our revenue is derived from designing, developing and
manufacturing electric, air, and battery powered rotary drive systems for the
medical device and dental industries, and motion control software and hardware
for industrial and scientific applications.&nbsp; The Company also distributes its
own line of pneumatic and electric dental hand pieces sold under the Micro
Motors name utilizing a network of independent sales representatives across North America.&nbsp; A large part of the revenue growth of the Company has been driven by
developing and selling numerous private label rotary drive systems for use in
dental, cranial, spinal, arthroscopic and orthopedic surgery.&nbsp; Other revenue
sources include designing and manufacturing miniature pneumatic motors and
motion control systems for industrial applications in the automotive,
aerospace, apparel and entertainment industries.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Company-funded research and development supports the development of
rotary drive and motion control platforms.&nbsp; We then seek customer-funded
projects to customize these platforms to specific customer requirements.&nbsp;
Company-funded research and development projects are generally expected to
convert to customer-funded projects within six to eighteen months.&nbsp;
Company-funded project costs are expensed as incurred.&nbsp; In the three months
ended December 31, 2004, $457,000 was expensed; an increase of $18,000 from the
$439,000 expensed in the three months ended December 31, 2003.&nbsp; </p>



<p align="justify" style="text-indent: 0.5in">In customer-funded development projects, costs are
capitalized and recognized as a cost of sales as specific deliverables within
the development contracts are produced, matching the costs to the revenue.&nbsp; In
the three months ended December 31, 2004, $6,000 was recognized as cost of
sales, and $54,000 was recognized as cost of sales in the three months ended
December 31, 2003, reflecting the delay in new product launches this quarter.</p>



<p align="justify" style="text-indent: 0.5in">Customer-funded research and development provided
$103,000 in revenue in the three months ended December 31, 2004, and $75,000 in
revenue in the three months ended December 31, 2003.&nbsp; The results of the
development work are intended to provide long-term exclusive manufacturing
agreements and provide the customer with the retention of the intellectual
property developed.&nbsp; The identity of the customer is generally protected by a
non-disclosure agreement.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Our dental products are sold to original equipment manufacturers and
dental product distributors.&nbsp; An independent dealer network was engaged in 2003
to market our own branded line of dental products in a more effective manner.&nbsp;
The medical products sales represent the manufacture of proprietary designs
developed by the Company under exclusive design and supply agreements.&nbsp; We also
design and manufacture embedded multi-axis motion controllers used to regulate
the motion of servo and stepper motors, predominantly for the factory
automation and medical analysis equipment industries.&nbsp; The controllers support
the platforms for PCI, VME, ISA, and cPCI busses as well as standalone
requirements.&nbsp; Other products sold by Pro-Dex include motors, drivers, cables,
software and a variety of accessories to meet most embedded motion control
requirements; as well as pneumatic motors for industrial applications that are
marketed directly to end-users and through industrial supply distributors.&nbsp; The
increase in the percentage of sales of medical products and the decrease in the
percentage of sales of dental product sales is a direct result of the shift in
the focus of our research and development efforts away from dental products and
toward the our capabilities in the medical product market.&nbsp;&nbsp; </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Of Pro-Dex sales in fiscal year 2004, over 16% were shipments of products
developed in the last 12 months and 31% were shipments of products developed in
the last 24 months as a result of research and development contracts with new
or existing customers.</p>



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



<div align="center">



<table class=MsoNormalTable border=0 cellpadding=0 width=722
 style='width:740px;border-collapse:collapse'>
 <tr style='height:9.15pt'>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-11-</p>
  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>

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

<div class=MsoNormal align=center style='text-align:center'>

<hr size=2 width="100%" noshade color=navy align=center>

</div>



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










<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>At the present time, we are generally able to fill orders within sixty
(60) days.&nbsp; At December 31, 2004, we had a backlog, including orders for
delivery beyond 60 days, of $4.7 million compared with a backlog of $4.3
million at September 30, 2004 and $4.0 million at December 31, 2003.&nbsp; We expect
to fill all of our future orders during the next twelve months.&nbsp; The increased backlog
from September 30, 2004 is due to the Company gaining additional orders for
shipment in the next twelve months.&nbsp; The increase in backlog from December 31,
2003 is due to the timing of receiving and shipping against long-term purchase
orders, of which we had a higher amount of bookings than shipments in the
quarter.&nbsp; Although we may experience seasonal fluctuations in our new order
bookings due to the timing of major medical, dental and industrial trade shows
and events, we do not typically experience seasonal fluctuations in our order
shipments.&nbsp; </p>



<p style='text-align:justify;text-indent:.5in'>We distribute
our products directly to end users, original equipment manufacturers and
through a network of high technology distributors within the United States.&nbsp; Internationally, we have sales agreements with foreign distributors or sell
through the domestic subsidiaries of foreign customers.</p>



<p><b>CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS</b></p>



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



<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; We determine our
inventory value at the lower of cost (first-in, first-out method) or market
value and calculate a reserve for slow moving items to reflect a reduced
marketability for the item.&nbsp; The reserve is calculated by comparing the
quantity of the item on hand with our prior 12-month sales history.&nbsp; If over 24
months of inventory for a specific part is believed to be on hand, between 20%
and 100% of its value may be included in the inventory reserve.&nbsp; The actual
percentage reserved depends on the total quantity on hand, its sales history,
and expected near term sales prospects.</p>



<p style='text-indent:.5in'>On July 1, 2002 the Company
adopted SFAS No. 142 &quot;Goodwill and Other Intangible Assets.&quot;&nbsp; SFAS No. 142
requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead tested for impairment at least annually in
accordance with the provisions of SFAS No. 142.&nbsp; In accordance with the
requirements of SFAS No. 142, we have recorded no impairment charge in 2003 or
2004.&nbsp; We prepare our annual impairment testing on April 1 of each year.&nbsp; </p>



<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of the process of preparing our consolidated financial statements, we
are required to estimate our income taxes in each of the jurisdictions in which
we operate.&nbsp; This process involves estimating the actual current tax
liabilities together with assessing temporary differences resulting from
differing treatment of items for tax and accounting purposes.&nbsp; These
differences result in deferred tax assets and liabilities, which are included
within the consolidated balance sheet.&nbsp; The most significant tax assets
are future deductions from the amortization of intangibles over the next ten
years.&nbsp; Tax assets also result from net operating losses and research and
development tax credits.&nbsp; We must then assess the likelihood that the
deferred tax assets will be recovered from future taxable income and to the
extent we believe that recovery is not likely, a valuation allowance must be
established.&nbsp; To the extent we establish a valuation allowance or increase
or decrease this allowance in a period, the impact will be included in the tax
provision in the statement of operations.</p>



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  </td>
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  </td>
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  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-12-</p>
  </td>
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  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
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<p align=center style='text-align:center'>&nbsp;</p>

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<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Significant management judgment is required in determining our provision for
income taxes and the recoverability of the deferred tax asset.&nbsp; It is
based on estimates of future taxable income by jurisdiction in which the
Company operates and the period over which the deferred tax assets will be
recoverable.&nbsp; In the event that actual results differ from these estimates
or we adjust these estimates in future periods, a valuation allowance may need
to be established which could result in a tax provision equal to the carrying
value of the deferred tax assets. </p>



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

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

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

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

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

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

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

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

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

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



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  </td>
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  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-13-</p>
  </td>
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  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
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</div>

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

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

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

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

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



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

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

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

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

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

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

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

<p><b>&nbsp;</b></p>

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  </td>
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  </td>
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  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
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  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-14-</p>
  </td>
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  </td>
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<p style='margin-bottom:6.0pt;text-align:justify'><b>Ability to
Manage Growth</b><i> </i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>

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

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

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

<p style='margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Our
future performance also depends in significant part upon the continued service
of our key technical and senior management personnel, many of who have been
with the Company for a significant period of time.&nbsp; We purchased a one year
term key man life insurance policy for the president in December 2004, but do
not maintain key man life insurance on any other of our employees. Because we
have a relatively small number of employees when compared to other leading
companies in the same industry, our dependence on maintaining our relationship
with key employees is particularly significant. We are also dependent on our
ability to attract and retain high quality personnel, particularly in the areas
of product development, operations management and finance. </p>

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

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

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

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



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

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  </td>
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  </td>
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  </td>
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  <p align=center style='text-align:center'>-15-</p>
  </td>
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  <p align=right style='text-align:right'><b>&nbsp;</b></p>
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<p style='text-autospace:none'><b>Results of Operations </b></p>

<p style='text-autospace:none'><b>For the Three-Month periods
ended December 31, 2004 and 2003</b></p>

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

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 style='margin-left:9.9pt;border-collapse:collapse;border:none' width="740">
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  <td width=369 rowspan=2 valign=top style='width:276.75pt;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 width=249 colspan=2 valign=top style='width:186.75pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center'>Three Months Ended December
  31,</p>
  </td>
 </tr>
 <tr style='page-break-inside:avoid'>
  <td width=120 valign=top style='width:1.25in;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:center'>2004</p>
  </td>
  <td width=129 valign=top style='width:96.75pt;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'>
  <p align=center style='text-align:center'>2003</p>
  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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>Net Revenues: </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>&nbsp;100.0%&nbsp;&nbsp; </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>&nbsp;100.0%&nbsp;&nbsp;&nbsp;&nbsp; </p>
  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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>Cost of Goods Sold </p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>44.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>53.9&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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>Gross Profit </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>55.9&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>46.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">

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

  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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>Selling, General and
  Administrative Expenses </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>29.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>23.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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>Research and Development Costs </p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>15.8&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>11.9&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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>Income from Operations </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>10.5 &nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>10.6 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">

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

  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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>Net interest and other expense (income)</p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>(0.1)&nbsp;&nbsp;&nbsp;</p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>0.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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 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="right">

  </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="right">

  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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>Provision for Income
  Taxes&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>4.3 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>4.1 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p>Net Income</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-5.4pt'><u>6.3%&nbsp;</u>&nbsp;&nbsp;&nbsp; </p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-5.4pt'><u>6.2% </u>&nbsp;&nbsp;&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='text-align:justify;text-indent:.5in'><b>Net Sales.</b>&nbsp;
Consolidated sales decreased from $3,704,000 to $2,894,000 ($810,000 or 22%)
for the quarter ended December 31, 2004, compared to the quarter ended December
31, 2003.&nbsp; The reduction in sales is mainly due to a $439,000 decrease in
sales due to the HealOzone shipments being replaced by a royalty agreement and
product shipment delays.&nbsp; Medical products declined as a percent of total sales
to 29% from 43% in the same quarter last year due to the timing of new product
launches that were delayed for shipment in future periods.&nbsp; Shipments to dental
customers remained flat at 29% as HealOzone shipments in the prior quarter were
replaced by a royalty agreement.&nbsp; Sales to factory automation and industrial
customers increased to 29% as the industry maintained its higher levels of
activity as compared to the last three fiscal years.&nbsp; Although selective price
increases and decreases were implemented in response to market conditions, the
majority of the sales growth and declines for each product line is due
primarily to increased or decreased sales volume, not the effect of price
changes.&nbsp; Our revenue is derived from four main customer types.&nbsp; The proportion
of Pro-Dex total sales to each customer type is noted in the table below:</p>



<div align=left>

<table class=MsoNormalTable border=0 cellpadding=0
 style='margin-left:20pt;border-collapse:collapse' width="740">
 <tr>
  <td width=251 valign=top style='width:187.95pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;</b></p>
  </td>
  <td colspan=2 valign=top style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:0in; ' align="center">
  <p align=center style='text-align:center;text-autospace:none'>Three
  Months Ended December 31,<br>
	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;
  2003</p>
  </td>
  <td width=50 valign=top style='width:37.55pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>FY<br>
	2004
  </u></p>
  </td>
  <td width=43 valign=top style='width:32.45pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>FY<br>
	2003
  </u></p>
  </td>
  <td width=43 valign=top style='width:32.45pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>FY<br>
	2002&nbsp;
  </u></p>
  </td>
 </tr>
 <tr>
  <td width=251 valign=top style='width:187.95pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Dental</p>
  </td>
  <td width=144 valign=top style='width:1.5in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>29%</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>29%</p>
  </td>
  <td width=50 valign=top style='width:37.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>32%
  </p>
  </td>
  <td width=43 valign=top style='width:32.45pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>43%
  </p>
  </td>
  <td width=43 valign=top style='width:32.45pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>54%
  </p>
  </td>
 </tr>
 <tr>
  <td width=251 valign=top style='width:187.95pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Medical</p>
  </td>
  <td width=144 valign=top style='width:1.5in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>29%</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>43%</p>
  </td>
  <td width=50 valign=top style='width:37.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>41%</p>
  </td>
  <td width=43 valign=top style='width:32.45pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>28%
  </p>
  </td>
  <td width=43 valign=top style='width:32.45pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>17%
  </p>
  </td>
 </tr>
 <tr>
  <td width=251 valign=top style='width:187.95pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Factory Automation</p>
  </td>
  <td width=144 valign=top style='width:1.5in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>29%</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>16%</p>
  </td>
  <td width=50 valign=top style='width:37.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>18%</p>
  </td>
  <td width=43 valign=top style='width:32.45pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>19%
  </p>
  </td>
  <td width=43 valign=top style='width:32.45pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>19%
  </p>
  </td>
 </tr>
 <tr>
  <td width=251 valign=top style='width:187.95pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Government research and other</p>
  </td>
  <td width=144 valign=top style='width:1.5in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>13%</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>12%</p>
  </td>
  <td width=50 valign=top style='width:37.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>9%</p>
  </td>
  <td width=43 valign=top style='width:32.45pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>10%</p>
  </td>
  <td width=43 valign=top style='width:32.45pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>10%</p>
  </td>
 </tr>
</table>

</div>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><b>Gross Profit and Gross Profit Percentage of Sales</b>.&nbsp; Our
consolidated gross profit percentage for the quarter ended December 31, 2004
increased 21% over the same quarter in the previous year in spite of the
decline in sales as lower margin dental sales were replaced by higher margin
factory automation and medical sales.&nbsp; Gross profit as a percentage of sales
increased to 55.9% for the quarter ended December 31, 2004 compared to 46.1%
for the quarter ended December 31, 2003, as the continued gains from increased high
margin factory automation sales, manufacturing cost improvements and a richer
product mix, were realized.&nbsp; Gross profit and gross profit percentage were as
follows: </p>





<div align="center">





<table class=MsoNormalTable border=0 cellpadding=0 width=722
 style='width:740px;border-collapse:collapse'>
 <tr style='height:9.15pt'>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-16-</p>
  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>

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

<div class=MsoNormal align=center style='text-align:center'>

<hr size=2 width="100%" noshade color=navy align=center>

</div>



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












<div align=left>

<table class=MsoNormalTable border=0 cellpadding=0
 style='margin-left:20.2pt; border-collapse:collapse' width="740">
 <tr>
  <td width=168 valign=top style='width:1.75in;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

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

  </td>
  <td colspan=3 valign=top style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center;text-autospace:none'>Three
  Months Ended December 31,</p>
  </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:0in; ' align="center">
  <p align=center style='text-align:center;text-autospace:none'>Increase</p>
  </td>
 </tr>
 <tr>
  <td width=168 valign=top style='width:1.75in;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

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

  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center;text-autospace:none'>2004</p>
  </td>
  <td valign=top style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:0in; ' align="center">

  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center;text-autospace:none'>2003</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:medium none;
  border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center;text-autospace:none'>(decrease)
  </p>
  </td>
 </tr>
 <tr>
  <td width=168 valign=top style='width:1.75in;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Gross Profit</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$ </p>
  </td>
  <td width=138 valign=top style='width:103.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1,619,000</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=138 valign=top style='width:103.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1,707,000</p>
  </td>
  <td width=93 valign=top style='width:69.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>(5%)</p>
  </td>
 </tr>
 <tr>
  <td width=168 valign=top style='width:1.75in;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Gross Profit Percentage</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=138 valign=top style='width:103.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>55.9%</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=138 valign=top style='width:103.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>46.1%</p>
  </td>
  <td width=93 valign=top style='width:69.9pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>21%</p>
  </td>
 </tr>
</table>

</div>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><b>Selling, General and Administrative Costs (S, G&amp;A)</b>.&nbsp; S, G
&amp; A expenses decreased to $859,000 for the quarter ended December 31, 2004
from $875,000 for the quarter ended December 31, 2003.&nbsp; The decrease is mainly
due to reduced administrative, audit and insurance costs offset by increased
sales and marketing expenses.&nbsp; S, G &amp; A costs were as follows: </p>



<div align=left>

<table class=MsoNormalTable border=0 cellpadding=0
 style='margin-left:20pt;border-collapse:collapse' width="740">
 <tr>
  <td width=175 valign=top style='width:131.55pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

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

  </td>
  <td colspan=3 valign=top style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center'>Three Months Ended
  December 31,</p>
  </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:0in; ' align="center">
  <p align=center style='text-align:center'>Increase</p>
  </td>
 </tr>
 <tr>
  <td width=175 valign=top style='width:131.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

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

  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center'>2004</p>
  </td>
  <td valign=top style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:0in; ' align="center">

  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center;text-autospace:none'>2003</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center;text-autospace:none'>&nbsp;(decrease)</p>
  </td>
 </tr>
 <tr>
  <td width=175 valign=top style='width:131.55pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Selling</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=138 valign=top style='width:103.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>278,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=138 valign=top style='width:103.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>193,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=105 valign=top style='width:78.9pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>44%</p>
  </td>
 </tr>
 <tr>
  <td width=175 valign=top style='width:131.55pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>General and administrative</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=138 valign=top style='width:103.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>581,000&nbsp;&nbsp;</u></p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=138 valign=top style='width:103.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>682,000&nbsp;&nbsp;</u></p>
  </td>
  <td width=105 valign=top style='width:78.9pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>(15%)</p>
  </td>
 </tr>
 <tr>
  <td width=175 valign=top style='width:131.55pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Total S, G&amp;A</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=138 valign=top style='width:103.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>859,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=138 valign=top style='width:103.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>875,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=105 valign=top style='width:78.9pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>(2%)</p>
  </td>
 </tr>
</table>

</div>

<p style='text-align:justify;text-indent:.5in'><b>Research and
Development Costs</b>.&nbsp; Company-funded research and development expenses
increased to $457,000 for the quarter ended December 31, 2004 from $439,000 for
the quarter ended December 31, 2003, an increase of 4%.&nbsp; The overall increase
is due to an increase in Company-funded research and development in support of
a higher number of medical and dental new product development projects and
continued development of motion control system product line extensions.&nbsp;
Company-funded research and development costs were as follows:</p>



<div align=left>

<table class=MsoNormalTable border=0 cellpadding=0
 style='margin-left:20.2pt;border-collapse:collapse' width="740">
 <tr>
  <td width=274 valign=top style='width:205.85pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

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

  </td>
  <td width=246 colspan=3 valign=top style='width:184.5pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center'>Three Months Ended
  December 31,</p>
  </td>
  <td width=99 valign=top style='width:74.55pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
 </tr>
 <tr>
  <td width=274 valign=top style='width:205.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

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

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center'>2004</p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center'>2003</p>
  </td>
  <td width=99 valign=top style='width:74.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center'>Increase</p>
  </td>
 </tr>
 <tr>
  <td width=274 valign=top style='width:205.85pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-align:justify'>Research and Development costs</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-align:justify'>$ </p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right'>457,000&nbsp;&nbsp; </p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right'>$ </p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right'>439,000&nbsp;&nbsp; </p>
  </td>
  <td width=99 valign=top style='width:74.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center'>4%</p>
  </td>
 </tr>
</table>

</div>

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

<p style='text-align:justify;text-indent:.5in'>We engage in two
types of research and development efforts: Company-funded and customer-funded.&nbsp;
Company funded research and development is intended to develop generic rotary
device and multi axis motion control platforms that will subsequently be
modified to meet the needs of individual customers.&nbsp; The results of the
development work are intended to provide us with long-term exclusive
manufacturing agreements.&nbsp; In this initial phase, there are generally no revenues
generated and the associated costs are expensed as incurred.&nbsp; </p>



<p align="justify" style="text-indent: 0.5in">Customer-funded research and development effort is
the work performed for and funded by specific customers under the terms of
formal research and development agreements.&nbsp; These efforts are generally
for specific modifications to the generic platforms developed by the
Company-funded research.&nbsp; These projects typically take place within
twelve months of the generic development work being completed.&nbsp; We
recognize revenue under these research and development agreements as certain
deliverables are completed as specified in each development contract.&nbsp; The
research and development costs associated with these efforts are capitalized as
inventory and recognized as costs of sales (COS) when the contracted
deliverable is made, matching the cost to the revenue.&nbsp; Customer-funded
research and development provided $103,000 and $75,000 in revenue in the
quarters ended December 31, 2004 and December 31, 2003, respectively.&nbsp; In the
quarter ended December 31, 2004, $6,000 was recognized as COS, and $54,000 was
recognized as COS in the quarter ended December 31, 2003.&nbsp; </p>



<div align="center">



<table class=MsoNormalTable border=0 cellpadding=0 width=722
 style='width:740px;border-collapse:collapse'>
 <tr style='height:9.15pt'>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-17-</p>
  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>

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

<div class=MsoNormal align=center style='text-align:center'>

<hr size=2 width="100%" noshade color=navy align=center>

</div>



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










<p style='text-align:justify;text-indent:.5in'><b>Operating
Profit and Operating Profit Percentage of Sales</b>.&nbsp; Our
consolidated operating profit for the quarter ended December 31, 2004 decreased
to $303,000 compared to the same quarter in the previous year's operating
profit of $393,000.&nbsp; The decrease was due to decreased medical and dental sales
levels, offset by a more profitable sales mix and lower general and
administrative expenses.&nbsp; Operating profit as a percentage of sales decreased
to 10.5% for the quarter ended December 31, 2004 compared to 10.6% for the
quarter ended December 31, 2003 due to the loss of efficiencies from the lower
sales volumes.&nbsp; Operating profit and margin were as follows: </p>

<div align=left>

<table class=MsoNormalTable border=0 cellpadding=0
 style='margin-left:11.65pt;border-collapse:collapse' width="740">
 <tr>
  <td width=203 valign=top style='width:152.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

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

  </td>
  <td colspan=3 valign=top style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center'>Three Months Ended
  December 31,</p>
  </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:0in; ' align="center">

  </td>
 </tr>
 <tr>
  <td width=203 valign=top style='width:152.0pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

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

  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center'>2004</p>
  </td>
  <td valign=top style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:0in; ' align="center">

  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center'>2003</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:medium none;
  border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center'>Decrease </p>
  </td>
 </tr>
 <tr>
  <td width=203 valign=top style='width:152.0pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-align:justify'>Operating Profit</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>
  <p style='text-align:justify'>$ </p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  303,000</p>
  </td>
  <td width=18 valign=top style='width:13.5pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right'>$ </p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right'>393,000</p>
  </td>
  <td width=90 valign=top style='width:67.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center'>23%</p>
  </td>
 </tr>
 <tr>
  <td width=203 valign=top style='width:152.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-align:justify'>Operating Profit Percentage</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right'>10.5%</p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right'>10.6%</p>
  </td>
  <td width=90 valign=top style='width:67.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center'>0.9%</p>
  </td>
 </tr>
</table>

</div>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><b>Net Interest Expense. </b>&nbsp;Net interest expense was $2,000 in the
quarter ended December 31, 2004, down from $16,000 in the prior year's quarter
due to the reduced balance and rates on the restructured credit line and the
payoff of the note to a shareholder. </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><b>Provision for Taxes</b>. Our estimated effective combined Federal and state
tax rate on income from operations was 40% for the quarters ended December 31,
2004, and 2003, respectively. </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><b>Net Income.</b>&nbsp; Our net income for the three months ended December
31, 2004 was $183,000 or $0.02 per share on a basic and diluted basis, as
compared to a net income of $230,000 or $0.03 per share on a basic and $0.02
diluted basis for the three months ended December 31, 2003.</p>

<p style='text-autospace:none'><b>For the Six-Month periods
ended December 31, 2004 and 2003</b></p>

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



<div align=left>

<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0
 style='margin-left:9.9pt;border-collapse:collapse;border:none' width="740">
 <tr style='page-break-inside:avoid'>
  <td width=369 rowspan=2 valign=top style='width:276.75pt;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 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'>Six Months Ended December
  31,</p>
  </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'>2004</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="center">
  <p align=center style='text-align:center'>2003</p>
  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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>Net Revenues: </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>&nbsp;100.0%&nbsp;&nbsp;&nbsp; </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>&nbsp;100.0%&nbsp;&nbsp;&nbsp; </p>
  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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>Cost of Goods Sold </p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>44.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>55.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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>Gross Profit </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>55.9&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>44.9&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">

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

  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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>Selling, General and
  Administrative Expenses </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>25.7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>23.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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>Research and Development Costs </p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>14.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>11.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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>Income from Operations </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>16.1 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>10.0 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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 valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">

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

  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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>Net interest and other expense (income)</p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>(1.2)&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p>0.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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 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="right">

  </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="right">

  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;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>Provision for Income Taxes</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>6.9 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-.05in'>3.9 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=369 valign=top style='width:276.75pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p>Net Income</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-5.4pt'><u>10.4%&nbsp;&nbsp;&nbsp;&nbsp; </u></p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:-5.4pt'><u>5.8% &nbsp;&nbsp;</u></p>
  </td>
 </tr>
</table>

</div>

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

<p style='text-align:justify;text-indent:.5in'><b>Net Sales.</b>&nbsp;
Consolidated sales decreased from $7,232,000 to $6,226,000 ($1,006,000 or 14%)
for the six months ended December 31, 2004, compared to the six months ended
December 31, 2003.&nbsp; The reduction in sales is mainly due to a $698,000
decrease in sales due to the HealOzone shipments being replaced by a royalty
agreement and product shipment delays.&nbsp; Medical products declined as a percent
of total sales to 31% from 43% in the same six months last year due to the
timing of new product launches that were delayed for shipment in future periods.&nbsp;
Shipments to dental customers decreased to 26% as HealOzone shipments in the
prior six months were replaced by a royalty agreement.&nbsp; Sales to factory
automation and industrial customers increased to 31% as the industry maintained
its higher levels of activity as compared to the last three years.&nbsp; Although
selective price increases and decreases were implemented in response to market
conditions, the majority of the sales growth and declines for each product line
is due primarily to increased or decreased sales volume, not the effect of
price changes.&nbsp; Our revenue is derived from four main customer types.&nbsp; The
proportion of Pro-Dex total sales to each customer type is noted in the table
below:</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=722
 style='width:740px;border-collapse:collapse'>
 <tr style='height:9.15pt'>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-18-</p>
  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>

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

<div class=MsoNormal align=center style='text-align:center'>

<hr size=2 width="100%" noshade color=navy align=center>

</div>



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












<div align=center>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='margin-left:-159.45pt;border-collapse:collapse' width="663">
 <tr>
  <td width=251 valign=top style='width:187.95pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'><b>&nbsp;</b></p>
  </td>
  <td width=258 colspan=2 valign=top style='width:193.5pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>Six
  Months Ended December 31,<br>
	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;
  2003</p>
  </td>
  <td width=50 valign=top style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:0in; ' align="center">
  <p align=right style='text-align:right;text-autospace:none'><u>FY<br>
	2004
  </u></p>
  </td>
  <td valign=top style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:0in; ' align="center">
  <p align=right style='text-align:right;text-autospace:none'><u>FY<br>
	2003
  </u></p>
  </td>
  <td valign=top style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:0in; ' align="center">
  <p align=right style='text-align:right;text-autospace:none'><u>FY<br>
	2002&nbsp;
  </u></p>
  </td>
 </tr>
 <tr>
  <td width=251 valign=top style='width:187.95pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Dental</p>
  </td>
  <td width=144 valign=top style='width:1.5in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>26%</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>31%</p>
  </td>
  <td width=50 valign=top style='width:37.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>32%
  </p>
  </td>
  <td valign=top style='width:50px;border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; '>
  <p align=right style='text-align:right;text-autospace:none'>43%
  </p>
  </td>
  <td valign=top style='width:47px;border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; '>
  <p align=right style='text-align:right;text-autospace:none'>54%
  </p>
  </td>
 </tr>
 <tr>
  <td width=251 valign=top style='width:187.95pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Medical</p>
  </td>
  <td width=144 valign=top style='width:1.5in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>31%</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>43%</p>
  </td>
  <td width=50 valign=top style='width:37.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>41%</p>
  </td>
  <td valign=top style='width:50px;border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; '>
  <p align=right style='text-align:right;text-autospace:none'>28%
  </p>
  </td>
  <td valign=top style='width:47px;border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; '>
  <p align=right style='text-align:right;text-autospace:none'>17%
  </p>
  </td>
 </tr>
 <tr>
  <td width=251 valign=top style='width:187.95pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Factory Automation</p>
  </td>
  <td width=144 valign=top style='width:1.5in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>31%</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>15%</p>
  </td>
  <td width=50 valign=top style='width:37.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>18%
  </p>
  </td>
  <td valign=top style='width:50px;border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; '>
  <p align=right style='text-align:right;text-autospace:none'>19%
  </p>
  </td>
  <td valign=top style='width:47px;border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; '>
  <p align=right style='text-align:right;text-autospace:none'>19%
  </p>
  </td>
 </tr>
 <tr>
  <td width=251 valign=top style='width:187.95pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Government research and other</p>
  </td>
  <td width=144 valign=top style='width:1.5in;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>12%</p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>11%</p>
  </td>
  <td width=50 valign=top style='width:37.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>9%</p>
  </td>
  <td valign=top style='width:50px;border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; '>
  <p align=right style='text-align:right;text-autospace:none'>10%</p>
  </td>
  <td valign=top style='width:47px;border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; '>
  <p align=right style='text-align:right;text-autospace:none'>10%</p>
  </td>
 </tr>
</table>

</div>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><b>Gross Profit and Gross Profit Percentage of Sales</b>.&nbsp; Our
consolidated gross profit percentage for the six months ended December 31, 2004
increased 24% over the same six months in the previous year in spite of the
decline in sales as lower margin dental sales were replaced by higher margin
factory automation and medical sales.&nbsp; Gross profit as a percentage of sales
increased to 55.9% for the six months ended December 31, 2004 compared to 44.9%
for the six months ended December 31, 2003, as the continued gains from increased
high margin factory automation sales, manufacturing cost improvements and a
richer product mix were realized.&nbsp; Gross profit and gross profit percentage
were as follows: </p>



<div align=left>

<table class=MsoNormalTable border=0 cellpadding=0
 style='margin-left:20pt;border-collapse:collapse' width="740">
 <tr>
  <td width=168 valign=top style='width:1.75in;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

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

  </td>
  <td colspan=3 valign=top style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center;text-autospace:none'>Six
  Months Ended December 31,</p>
  </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:0in; ' align="center">

  </td>
 </tr>
 <tr>
  <td width=168 valign=top style='width:1.75in;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

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

  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center;text-autospace:none'>2004</p>
  </td>
  <td valign=top style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:0in; ' align="center">

  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center;text-autospace:none'>2003</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:medium none;
  border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center;text-autospace:none'>Increase</p>
  </td>
 </tr>
 <tr>
  <td width=168 valign=top style='width:1.75in;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Gross Profit</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$ </p>
  </td>
  <td width=138 valign=top style='width:103.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>3,479,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=138 valign=top style='width:103.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>3,247,000&nbsp;&nbsp;
  </p>
  </td>
  <td width=93 valign=top style='width:69.9pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>7%</p>
  </td>
 </tr>
 <tr>
  <td width=168 valign=top style='width:1.75in;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Gross Profit Percentage</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=138 valign=top style='width:103.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>55.9%</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=138 valign=top style='width:103.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>44.9%</p>
  </td>
  <td width=93 valign=top style='width:69.9pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>24%</p>
  </td>
 </tr>
</table>

</div>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><b>Selling, General and Administrative Costs (S, G&amp;A)</b>.&nbsp; S, G
&amp; A expenses decreased by $92,000 or 5% for the six months ended December
31, 2004 from the six months ended December 31, 2003.&nbsp; The decrease is mainly
due to reduced legal, audit and insurance costs offset by increased sales and
marketing expenses.&nbsp; S, G &amp; A costs were as follows: </p>



<div align=left>

<table class=MsoNormalTable border=0 cellpadding=0
 style='margin-left:20pt;border-collapse:collapse' width="740">
 <tr>
  <td width=185 valign=top style='width:138.8pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

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

  </td>
  <td colspan=3 valign=top style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center'>Six Months Ended
  December 31,</p>
  </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:0in; ' align="center">
  <p align=center style='text-align:center'>Increase</p>
  </td>
 </tr>
 <tr>
  <td width=185 valign=top style='width:138.8pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

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

  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center'>2004</p>
  </td>
  <td valign=top style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:0in; ' align="center">

  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center;text-autospace:none'>2003</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center;text-autospace:none'>&nbsp;(Decrease)</p>
  </td>
 </tr>
 <tr>
  <td width=185 valign=top style='width:138.8pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Selling</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=138 valign=top style='width:103.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>477,000</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=138 valign=top style='width:103.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>399,000</p>
  </td>
  <td width=105 valign=top style='width:78.9pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>20%</p>
  </td>
 </tr>
 <tr>
  <td width=185 valign=top style='width:138.8pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>General and administrative</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=138 valign=top style='width:103.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>1,125,000</u></p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>

  </td>
  <td width=138 valign=top style='width:103.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'><u>1,295,000</u></p>
  </td>
  <td width=105 valign=top style='width:78.9pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>(13%)</p>
  </td>
 </tr>
 <tr>
  <td width=185 valign=top style='width:138.8pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-autospace:none'>Total S, G&amp;A</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=138 valign=top style='width:103.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1,602,000</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>$
  </p>
  </td>
  <td width=138 valign=top style='width:103.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right;text-autospace:none'>1,694,000</p>
  </td>
  <td width=105 valign=top style='width:78.9pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center;text-autospace:none'>(5%)</p>
  </td>
 </tr>
</table>

</div>

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

<p style='text-align:justify;text-indent:.5in'><b>Research and
Development Costs</b>.&nbsp; Research and development expenses increased to
$876,000 for the six months ended December 31, 2004 from $826,000 for the six
months ended December 31, 2003, an increase of $50,000 or 6%.&nbsp; The overall
increase is due to an increase in Company-funded research and development in
support of the new product development in the medical and dental product lines
and continuing investment in support of motion control system product line
extensions.&nbsp; Company-funded research and development costs were as follows:</p>

<div align=left>

<table class=MsoNormalTable border=0 cellpadding=0
 style='margin-left:20.2pt;border-collapse:collapse' width="740">
 <tr>
  <td width=274 valign=top style='width:205.85pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

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

  </td>
  <td colspan=3 valign=top style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center'>Six Months Ended
  December 31,</p>
  </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:0in; ' align="center">

  </td>
 </tr>
 <tr>
  <td width=274 valign=top style='width:205.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

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

  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center'>2004</p>
  </td>
  <td valign=top style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:0in; ' align="center">

  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center'>2003</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center'>Increase</p>
  </td>
 </tr>
 <tr>
  <td width=274 valign=top style='width:205.85pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-align:justify'>Research and Development costs</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-align:justify'>$ </p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right'>876,000&nbsp;&nbsp; </p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right'>$ </p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right'>826,000&nbsp;&nbsp; </p>
  </td>
  <td width=99 valign=top style='width:74.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center'>6%</p>
  </td>
 </tr>
</table>

</div>

<p style='text-align:justify;text-indent:.5in'>We engage in two
types of research and development efforts: Company-funded and
customer-funded.&nbsp; Company funded research and development is intended to
develop generic rotary device and multi axis motion control platforms that will
subsequently be modified to meet the needs of individual customers.&nbsp; The
results of the development work are intended to provide us with long-term
exclusive manufacturing agreements.&nbsp; In this initial phase, there are generally
no revenues generated and the associated costs are expensed as incurred.&nbsp; </p>



<div align="center">



<table class=MsoNormalTable border=0 cellpadding=0 width=722
 style='width:740px;border-collapse:collapse'>
 <tr style='height:9.15pt'>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-19-</p>
  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>

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

<div class=MsoNormal align=center style='text-align:center'>

<hr size=2 width="100%" noshade color=navy align=center>

</div>



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










<p align="justify" style="text-indent: 0.5in">Customer-funded research and development effort is
the work performed for and funded by specific customers under the terms of
formal research and development agreements.&nbsp; These efforts are generally
for specific modifications to the generic platforms developed by the
Company-funded research.&nbsp; These projects typically take place within
twelve months of the generic development work being completed.&nbsp; We
recognize revenue under these research and development agreements as certain
deliverables are completed as specified in each development contract.&nbsp; The
research and development costs associated with these efforts are capitalized as
inventory and recognized as costs of sales (COS) when the contracted deliverable
is made, matching the cost to the revenue.&nbsp; Customer-funded research and
development provided $252,000 and $193,000 in revenue in the six months ended
December 31, 2004 and December 31, 2003, respectively.&nbsp; In the six months ended
December 31, 2004, $43,000 was recognized as COS, and $196,000 was recognized
as COS in the six months ended December 31, 2003.&nbsp; </p>



<p style='text-align:justify;text-indent:.5in'><b>Operating
Profit and Operating Profit Percentage of Sales</b>.&nbsp; Our
consolidated operating profit for the six months ended December 31, 2004
increased to $1,001,000 compared to the same six months in the previous year's
operating profit of $727,000.&nbsp; The increase was due to a more favorable product
mix, lead by a greater contribution of the factory automation products.&nbsp;
Operating profit as a percentage of sales increased to 16.1% for the six months
ended December 31, 2004 compared to 10.0% for the six months ended December 31,
2003 due to the effects of the more favorable sales mix offsetting the loss of
efficiencies from the lower sales volumes.&nbsp; Operating profit and margin were as
follows: </p>

<div align=left>

<table class=MsoNormalTable border=0 cellpadding=0
 style='margin-left:11.65pt;border-collapse:collapse' width="740">
 <tr>
  <td width=203 valign=top style='width:152.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

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

  </td>
  <td colspan=3 valign=top style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center'>Six Months Ended
  December 31,</p>
  </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:0in; ' align="center">

  </td>
 </tr>
 <tr>
  <td width=203 valign=top style='width:152.0pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

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

  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center'>2004</p>
  </td>
  <td valign=top style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:0in; ' align="center">

  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center'>2003</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:medium none;
  border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:0in; ' align="center">
  <p align=center style='text-align:center'>Increase </p>
  </td>
 </tr>
 <tr>
  <td width=203 valign=top style='width:152.0pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p style='text-align:justify'>Operating Profit</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;padding:0in 0in 0in 0in'>
  <p style='text-align:justify'>$ </p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  1,001,000&nbsp;&nbsp; </p>
  </td>
  <td width=18 valign=top style='width:13.5pt;padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right'>$ </p>
  </td>
  <td width=114 valign=top style='width:85.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right'>727,000&nbsp;&nbsp; </p>
  </td>
  <td width=90 valign=top style='width:67.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center'>38%</p>
  </td>
 </tr>
 <tr>
  <td width=203 valign=top style='width:152.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 0in 0in 0in'>
  <p style='text-align:justify'>Operating Profit Percentage</p>
  </td>
  <td width=12 valign=top style='width:9.0pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right'>16.1%</p>
  </td>
  <td width=18 valign=top style='width:13.5pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>

  </td>
  <td width=114 valign=top style='width:85.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=right style='text-align:right'>10.0%</p>
  </td>
  <td width=90 valign=top style='width:67.5pt;border-top:none;border-left:none;
  border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 0in 0in 0in'>
  <p align=center style='text-align:center'>61%</p>
  </td>
 </tr>
</table>

</div>

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><b>Royalties and Other Income. </b>&nbsp;We received $40,000 in royalty
payments in the six months ended December 31, 2004, compared to none in the
prior year.</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><b>Net Interest Expense. </b>&nbsp;Net interest expense was $9,000 in the six
months ended December 31, 2004, down from $35,000 in the prior year's six
months due to the reduced balance and rates on the restructured credit line and
the payoff of the net note to a shareholder. </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><b>Provision for Taxes</b>. Our estimated effective combined Federal and state
tax rate on income from operations was 40% for the six months ended December
31, 2004, and 2003, respectively. </p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'><b>Net Income.</b>&nbsp; Our net income for the six months ended December 31,
2004 was $646,000 or $0.07 per share on a basic and diluted basis, as compared
to a net income of $422,000 or $0.05 per share on a basic and diluted basis for
the six months ended December 31, 2003.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>

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

<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>The following table presents selected financial information for the
comparative period last year and the year ended June 30, 2004:</p>

<div align="left">

<table class=MsoNormalTable border=0 cellpadding=0 width=678
 style='width:740px;margin-left:17.9pt;border-collapse:collapse'>
 <tr style='page-break-inside:avoid'>
  <td width=318 valign=top style='width:238.5pt;border:none;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p><i>&nbsp;</i></p>
  </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'>At December 31,</p>
  </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'>At</p>
  </td>
 </tr>
 <tr style='page-break-inside:avoid'>
  <td width=318 valign=top style='width:238.5pt;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 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'>2004</p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="center">
  <p align=center style='text-align:center'>2003</p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="center">
  <p align=center style='text-align:center'>June 30, 2004</p>
  </td>
 </tr>
 <tr>
  <td width=318 valign=top style='width:238.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p>Cash and cash equivalents </p>
  </td>
  <td width=130 valign=top style='width:97.8pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p align=right style='text-align:right'>$2,544,000&nbsp;</p>
  </td>
  <td width=120 valign=top style='width:90.35pt;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'>
  <p align=right style='text-align:right'>$532,000&nbsp;</p>
  </td>
  <td width=109 valign=top style='width:81.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p align=right style='text-align:right'>$2,070,000&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=318 valign=top style='width:238.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p>Working Capital<sup>1</sup></p>
  </td>
  <td width=130 valign=top style='width:97.8pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p align=right style='text-align:right'>$6,661,000&nbsp;</p>
  </td>
  <td width=120 valign=top style='width:90.35pt;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'>
  <p align=right style='text-align:right'>$5,073,000&nbsp;</p>
  </td>
  <td width=109 valign=top style='width:81.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p align=right style='text-align:right'>$5,795,000&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=318 valign=top style='width:238.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p>Credit Line outstanding balance </p>
  </td>
  <td width=130 valign=top style='width:97.8pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p align=right style='text-align:right'>$0&nbsp;</p>
  </td>
  <td width=120 valign=top style='width:90.35pt;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'>
  <p align=right style='text-align:right'>$250,000&nbsp;</p>
  </td>
  <td width=109 valign=top style='width:81.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p align=center style='text-align:right'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; $0&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=318 valign=top style='width:238.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p>Tangible book value/common share<sup>2</sup></p>
  </td>
  <td width=130 valign=top style='width:97.8pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p align=right style='text-align:right'>$0.95&nbsp;</p>
  </td>
  <td width=120 valign=top style='width:90.35pt;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'>
  <p style='line-height:normal' align="right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  $0.78&nbsp;</p>
  </td>
  <td width=109 valign=top style='width:81.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p style='line-height:normal' align="right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  $0.85&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=318 valign=top style='width:238.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p>Number of days of sales outstanding (DSO) in accounts
  receivable at end of period<sup>3</sup></p>
  </td>
  <td width=130 valign=bottom style='width:97.8pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  <p align=right style='text-align:right'>50&nbsp;</p>
  </td>
  <td width=120 valign=bottom style='width:90.35pt;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'>

  <p align=right style='text-align:right'>58&nbsp;</p>
  </td>
  <td width=109 valign=bottom style='width:81.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>

  <p align=center style='text-align:right'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 59&nbsp;</p>
  </td>
 </tr>
</table>



</div>
<div align="center">



<table class=MsoNormalTable border=0 cellpadding=0 width=722
 style='width:740px;border-collapse:collapse'>
 <tr style='height:9.15pt'>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-20-</p>
  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>

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

<div class=MsoNormal align=center style='text-align:center'>

<hr size=2 width="100%" noshade color=navy align=center>

</div>

<p style='line-height:1.0pt'><sup>&nbsp;</sup></p>

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

<p style='line-height:1.0pt'><sup>&nbsp;</sup></p>

<p style='margin-left:.5in;text-align:justify;text-autospace:
none'><sup>1</sup> Working Capital is calculated as follows:&nbsp; Ending Current
assets balance less Ending Current liabilities balance.</p>



<p style='margin-left:.5in;text-align:justify;text-autospace:
none'><sup>2</sup> Tangible book value/common share<sup> </sup>is calculated as
follows: (Total shareholders' equity less Goodwill) divided by (basic
outstanding shares for the most recent quarter).</p>

<p style='margin-left:.5in;text-align:justify;text-autospace:
none'><sup>3</sup> DSO is calculated as follows: Ending Net Accounts Receivable
balance divided by (Previous Quarter Sales divided by 91 days).</p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>Our working capital at December 31, 2004 increased to $6.7 million
compared to $5.1 million at December 31, 2003 and $5.8 million at June 30,
2004.&nbsp; Sustained higher profitability contributed to the provision of cash and increased
working capital for the quarter, even as we began to make significant tax
payments of $660,000 in the six months ended December 31, 2004 compared to
$4,000 in the comparable six months last year.&nbsp;</p>



<p style='text-align:justify;text-indent:.5in'>In October 2003,
our credit facility with Wells Fargo Business Credit Inc. was refinanced with a
more favorable facility by Wells Fargo Bank, N.A. (Wells Fargo) for borrowings
up to the lesser of $2,000,000 or the total of our eligible accounts
receivable.&nbsp; The terms of the credit facility expired in October 2004 and
its terms required monthly interest payments at the prime rate or LIBOR (one
month to three months) plus 2.75% based on outstanding borrowings, with no
minimum interest charge.&nbsp; The outstanding borrowings are secured by all
assets of, and guaranteed by the Company. </p>



<p style='text-align:justify;text-indent:.5in'>In October 2004,
the credit facility with Wells Fargo was renewed again with a more favorable
facility for borrowings up to $2,000,000.&nbsp; The credit facility expires in
October 2005 and its terms require monthly interest payments at the prime rate
of interest (5.25% at December 31, 2004) or LIBOR (2.40% (one month) to 2.49%
(three months) at December 31, 2004) plus 2.50%, based on outstanding
borrowings, with no minimum interest charge.&nbsp; The outstanding borrowings
are secured by all assets of, and guaranteed by the Company.&nbsp; There was no
outstanding balance under the terms of this credit facility as of December 31,
2004.&nbsp; The total eligible borrowing capacity at December 31, 2004 was
$2,000,000.</p>



<p style='text-autospace:ideograph-numeric ideograph-other; text-indent:0.5in' align="justify">There
are certain financial and non-financial covenants that we must meet to be in
compliance with the terms of the Wells Fargo credit facility.&nbsp; At December 31,
2004, we were in compliance with all such covenants.&nbsp; </p>



<p style='text-align:justify;text-indent:.5in'>In September
2002, our Board of Directors authorized the repurchase on the open market of up
to 500,000 shares at a share price no greater than $1.25 of our outstanding
Common Stock, subject to compliance with applicable laws and regulations.&nbsp;
There is no requirement that we repurchase all or any portion of such shares.&nbsp;
The maximum total value of the repurchase is not to exceed $500,000.&nbsp; This
repurchase is to be financed with cash generated by operations.&nbsp; From the
inception of the repurchase authorization through the year-end date of June 30,
2003, we repurchased 75,700 shares of Common Stock for $43,741, at an average
price of $0.58 per share.&nbsp; No additional shares were repurchased in fiscal year
2004 or to date during fiscal year 2005.</p>



<p style='text-align:justify;text-indent:.5in'>At December 31,
2004, we had cash and cash equivalents of $2,544,000.&nbsp; We believe that our
cash and cash equivalents on hand, together with cash flows from operations, if
any, and amounts available under the credit facility will be sufficient to meet
our working capital and capital expenditure requirements for fiscal 2005. </p>



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

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=722
 style='width:740px;border-collapse:collapse'>
 <tr style='height:9.15pt'>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-21-</p>
  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>

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

<div class=MsoNormal align=center style='text-align:center'>

<hr size=2 width="100%" noshade color=navy align=center>

</div>



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










<p style='text-autospace:none'><b>Recent Accounting
Pronouncements</b></p>



<p style='text-align:justify;text-indent:.5in;text-autospace:
none'>We are subject to the revised requirements of the Statement of Financial
Accounting Standards (&quot;SFAS&quot;) No. 123 &quot;Accounting for Stock-Based Compensation&quot;
as revised December 2004.&nbsp; This standard establishes the accounting standards
for equity compensation, and will apply to us in the recognition of the cost of
stock options awarded based on the grant-date fair value of those awards.&nbsp; As a
small business issuer, the statement is effective for us at the beginning of
the first interim reporting period that begins after December 15, 2005, so we
will begin to report the expense of stock options granted after January 1, 2006
in our report for the quarter and nine month period ending March 31, 2006.</p>

<p style='text-align:justify;text-autospace:none'><b>Item 3.
Controls and Procedures</b></p>

<p style='text-align:justify;text-indent:.5in'>&nbsp;The Chief Executive Officer and Chief Financial
Officer (the principal executive officer and principal financial officer,
respectively) conducted an evaluation of the design and operation of our
&quot;disclosure controls and procedures&quot; (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (&quot;Exchange Act&quot;)).&nbsp;&nbsp;
Based on that evaluation, which was conducted within 90 days of the date on
which this quarterly report was filed with the Securities and Exchange
Commission, the Chief Executive Officer and Chief Financial Officer concluded
that the disclosure controls and procedures are effective to ensure that
information required to be disclosed by use in the reports filed or submitted
by us under the Exchange Act is accumulated, recorded, processed, summarized
and reported to management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding whether
or not disclosure is required.</p>



<p style='text-align:justify;text-indent:.5in'>During the
quarter ended December 31, 2004, there were no changes in our internal controls
over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the
Exchange Act) that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.</p>



<p style='text-align:justify;text-indent:.5in'>Subsequent to
the ending of our second quarter, we improved the information and financial
controls by consolidating the Company's accounting and Enterprise Resource
Planning (&quot;ERP&quot;) system on to one platform. This allowed us to eliminate two of
the previous three accounting systems that the Company previously operated
with.&nbsp; As the systems were consolidated, many of the operating procedures and
information processing steps were streamlined, reducing the opportunity for
error and increasing the overall company's information processing efficiency
and reliability.</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=722
 style='width:740px;border-collapse:collapse'>
 <tr style='height:9.15pt'>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-22-</p>
  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>

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

<div class=MsoNormal align=center style='text-align:center'>

<hr size=2 width="100%" noshade color=navy align=center>

</div>



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<p style='text-align:justify'><b>PART II</b></p>

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



<p style='text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Item 1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Legal Proceedings </b></p>



<p style='margin-left:1.0in;text-align:justify;text-autospace:
none'>The Company is a party to various legal
proceedings incidental to its business, none of which are considered by the
Company to be material at this time.</p>

<p style='margin-top:.25in;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Item 2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unregistered Sales of
Equity Securities and Use of Proceeds. </b>&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; None.</p>

<p style='margin-top:.25in;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Item 3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Defaults Upon Senior
Securities. </b>&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; None.</p>

<p style='margin-top:.25in;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Item 4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Submissions of Matters
to a Vote of Securities Holders. </b>&nbsp;</p>

<p style='margin-top:.25in;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; On
December 6, 2004, the Company held its 2004 annual Shareholders Meeting. At the
Meeting the Company's shareholders (i) elected George J. Isaac and Michael A.
Mesenbrink as Class I directors; and (ii) ratified the appointment of Moss
Adams, LLP as the Company's independent auditors for the fiscal year ending
June 30, 2005.</p>

<p style='margin-top:.25in;text-align:justify;text-indent:.5in'>Mr. Isaac received the following votes: For 8,118,697;
and Withhold 128,649.&nbsp; Mr. Mesenbrink received the following votes: For
6,320,347; and Withhold 1,926,999.&nbsp; The proposal to ratify the appointment of
Moss Adams, LLP received the following votes: For 8,124,256; Against 102,300;
and Abstain/Broker Non-Votes 20,790.&nbsp; The following directors continued service
on the Company's Board and were not voted upon by the Company's shareholders at
the Annual Shareholders Meeting:&nbsp; Mark P. Murphy and Valerio L. Giannini.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>

<p style='margin-top:.25in;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Item 5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Information. </b>&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; None.</p>

<p style='margin-top:.25in;text-align:justify'><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Item 6. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibits. </b>&nbsp;</p>

<p style='margin-left:.5in;text-indent:.5in'><u>Exhibits</u>:</p>

<p style='margin-left:2.0in;text-indent:-.5in'>31.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certifications of Chief Executive officer
and Chief financial Officer Required by Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</p>



<p style='margin-left:2.0in;text-indent:-.5in'>31.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certifications of Chief Executive
Officer and Chief Financial Officer Pursuant 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</p>
<p style='margin-left:2.0in;text-indent:-.5in'>32&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certification of the Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.</p>



<p>SIGNATURES <br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In
accordance with the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.</p>



<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=684
 style='width:513.0pt;border-collapse:collapse'>
 <tr>
  <td width=306 valign=top style='width:229.5pt;padding:0in 0in 0in 0in'>
  <p>Date:&nbsp; February 14, 2005</p>

  <p>PRO-DEX INC. </p>
  </td>
  <td width=378 valign=top style='width:283.5pt;padding:0in 0in 0in 0in'>
  <p>Date:&nbsp; February 14, 2005</p>

  <p>PRO-DEX INC. </p>
  </td>
 </tr>
 <tr>
  <td width=306 valign=top style='width:229.5pt;padding:0in 0in 0in 0in'>
  <p>By: / s / Patrick Johnson </p>
  </td>
  <td width=378 valign=top style='width:283.5pt;padding:0in 0in 0in 0in'>
  <p>By: / s / Jeffrey J.
  Ritchey </p>
  </td>
 </tr>
 <tr>
  <td width=306 valign=top style='width:229.5pt;padding:0in 0in 0in 0in'>

  &nbsp;

  </td>
  <td width=378 valign=top style='width:283.5pt;padding:0in 0in 0in 0in'>

  &nbsp;

  </td>
 </tr>
 <tr>
  <td width=306 valign=top style='width:229.5pt;padding:0in 0in 0in 0in'>
  <p>Patrick Johnson </p>
  </td>
  <td width=378 valign=top style='width:283.5pt;padding:0in 0in 0in 0in'>
  <p>Jeffrey J. Ritchey </p>
  </td>
 </tr>
 <tr>
  <td width=306 valign=top style='width:229.5pt;padding:0in 0in 0in 0in'>
  <p>Chief Executive Officer</p>
  </td>
  <td width=378 valign=top style='width:283.5pt;padding:0in 0in 0in 0in'>
  <p>Secretary and Chief
  Financial Officer<br>
	(Principal Financial and
  Accounting Officer)</p>
  </td>
 </tr>
</table>









<div align="center">









<table class=MsoNormalTable border=0 cellpadding=0 width=722
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  &nbsp;</td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  &nbsp;</td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  &nbsp;</td>
 </tr>
 <tr style='height:9.15pt'>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  &nbsp;</td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  &nbsp;</td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  &nbsp;</td>
 </tr>
 <tr style='height:9.15pt'>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>

  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt;
  height:9.15pt'>
  <p><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=252 valign=bottom style='width:189.0pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=center style='text-align:center'>-23-</p>
  </td>
  <td width=218 valign=bottom style='width:163.8pt;padding:0in 1.8pt 0in 1.8pt'>
  <p align=right style='text-align:right'><b>&nbsp;</b></p>
  </td>
 </tr>
</table>

</div>

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

<div class=MsoNormal align=center style='text-align:center'>

<hr size=2 width="100%" noshade color=navy align=center>

</div>



<br clear=all
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</body>

</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>ex31-1.htm
<TEXT>
<html>

<head>
<title>EXHIBIT 31.1</title>
</head>

<body>












<p>&nbsp;</p>
<p><b>EXHIBIT
31.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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></p>

<p align=center style='text-align:center'><b><u>CERTIFICATIONS</u></b></p>



<p><font size="2">I, Patrick L. Johnson,
certify that:</font></p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'><font size="2">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; I have reviewed this Form 10-QSB of
Pro-Dex, Inc.;</font></p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'><font size="2">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Based on my knowledge, this quarterly
report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with
respect to the period covered by this quarterly report; </font> </p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'><font size="2">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Based on my knowledge, the financial
statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this
report; </font> </p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'><font size="2">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The registrant's other certifying
officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) [language omitted pursuant to SEC release 34-47986] for the
registrant and have:</font></p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'><font size="2">a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this
report is being prepared;</font></p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'><font size="2">b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Omitted pursuant to SEC
Release 34-47986];</font></p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'><font size="2">c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Evaluated the
effectiveness of the registrant's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and</font></p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'><font size="2">d) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Disclosed in this report
any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and</font></p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'><font size="2">5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The registrant's other certifying
officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing the
equivalent functions):</font></p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'><font size="2">a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;all significant
deficiencies and material weaknesses in the design or operation of internal
controls over financial reporting which are reasonably likely to adversely
affect the registrant's ability to record, process, summarize and report
financial information; and </font> </p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'><font size="2">b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Any fraud, whether or not
material, that involves management or other employees who have a significant
role in the registrant's internal control over financial reporting.</font></p>





<p><font size="2">Date: February 14, 2005</font></p>

<p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>/s/
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Patrick L. Johnson</u> _______<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Patrick
L. Johnson<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Chief
Executive Officer</font></p>
<p>&nbsp;</p>
<p>&nbsp;</p>

</body>

</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>3
<FILENAME>ex31-2.htm
<TEXT>
<html>

<head>
<title>EXHIBIT 31.2</title>
</head>

<body>

&nbsp;<p><b>EXHIBIT 31.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></p>

<p align=center style='text-align:center'><b><u>CERTIFICATIONS</u></b></p>

<p><font size="2">I, Jeffrey J. Ritchey,
certify that: </font> </p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'><font size="2">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; I have reviewed this Form 10-QSB of
Pro-Dex, Inc.;</font></p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'><font size="2">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Based on my knowledge, this quarterly
report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with
respect to the period covered by this quarterly report; </font> </p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'><font size="2">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Based on my knowledge, the financial
statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this
report; </font> </p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'><font size="2">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The registrant's other certifying
officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) [language omitted pursuant to SEC release 34-47986] for the
registrant and have:</font></p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'><font size="2">a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this
report is being prepared;</font></p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'><font size="2">b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Omitted pursuant to SEC
Release 34-47986];</font></p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'><font size="2">c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Evaluated the
effectiveness of the registrant's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and</font></p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'><font size="2">d) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Disclosed in this report
any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant's internal
control over financial reporting;&nbsp; and</font></p>



<p style='margin-left:.5in;text-align:justify;text-indent:-.5in'><font size="2">5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The registrant's other certifying
officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing the
equivalent functions):</font></p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'><font size="2">a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;all significant
deficiencies and material weaknesses in the design or operation of internal
controls over financial reporting which are reasonably likely to adversely
affect the registrant's ability to record, process, summarize and report
financial information; and </font> </p>



<p style='margin-left:1.0in;text-align:justify;text-indent:
- -.5in'><font size="2">b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Any fraud, whether or not
material, that involves management or other employees who have a significant
role in the registrant's internal control over financial reporting.</font></p>





<p><font size="2">Date: February 14, 2005</font></p>

<p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>/s/
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; JEFFREY J. RITCHEY</u> _______<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Jeffrey
J. Ritchey<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Chief
Financial Officer</font></p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>

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<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>4
<FILENAME>ex32.htm
<TEXT>
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<head>
<title>EXHIBIT 32</title>
</head>

<body>

&nbsp;<p><b>EXHIBIT 32</b></p>





<p align=center style='margin-top:0in;text-align:center'><b>CERTIFICATIONS
OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER<br>
PURSUANT
TO 18 U.S.C. SECTION 1350, <br>
AS ADOPTED PURSUANT TO <br>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</b></p>

<p align=center style='margin-top:0in;text-align:center'><b>Certifications
of Chief Executive Officer and Chief Financial Officer</b></p>



<p style='margin-top:0in;text-align:justify; text-indent:0.5in'>In connection with the
quarterly report on Form 10-QSB of Pro-Dex Inc. (the &quot;Company&quot;) for the
quarterly period ended December 31, 2004 (the &quot;Report&quot;), the undersigned hereby
certify in their capacities as Chief Executive Officer and Chief Financial
Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:</p>

<p style='text-align:justify; text-indent:0.5in'>1.&nbsp;&nbsp; The Report fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and</p>

<p style='text-align:justify; text-indent:0.5in'>2.&nbsp;&nbsp; The information contained in the
Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.</p>



<div align="left">
	<table border="0" width="740" id="table1">
		<tr>
			<td width="354" valign="bottom">Dated: February 14, 2005 </td>
			<td valign="bottom">By:<u>
/s/ &nbsp;&nbsp; Patrick L. Johnson&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u>
			</td>
		</tr>
		<tr>
			<td width="354" valign="bottom">&nbsp;</td>
			<td valign="bottom">Patrick L. Johnson<br>
			Chief Executive Officer and President</td>
		</tr>
		<tr>
			<td width="354" valign="bottom">&nbsp;</td>
			<td valign="bottom">&nbsp;</td>
		</tr>
		<tr>
			<td width="354" valign="bottom"><u><br>
</u>Dated: February 14, 2005 </td>
			<td valign="bottom">By:<u>
/s/ &nbsp;&nbsp; JEFFREY J. RITCHEY&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></td>
		</tr>
		<tr>
			<td width="354" valign="bottom">&nbsp;</td>
			<td valign="bottom">Jeffrey J. Ritchey<br>
			Chief Financial Officer</td>
		</tr>
		<tr>
			<td width="354" valign="bottom">&nbsp;</td>
			<td valign="bottom">&nbsp;</td>
		</tr>
	</table>
</div>



<p>A signed
original of this written statement required by Section 906, or other document
authenticating, acknowledging, or otherwise adopting the signatures that appear
in typed form within the electronic version of this written statement required
by Section 906, has been provided to the Company and will be retained by the
Company and Furnished to the Securities and Exchange Commission or its staff
upon request.<u><br>
<br>
</u></p>





<p align=center style='text-align:center;line-height:1.0pt;
text-autospace:none'><b>End of Filing</b></p>
<p align=center style='text-align:center;line-height:1.0pt;
text-autospace:none'>&nbsp;</p>
<p align=center style='text-align:center;line-height:1.0pt;
text-autospace:none'>&nbsp;</p>

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

<div class=MsoNormal align=center style='text-align:center;text-autospace:none'>

<hr size=2 width="100%" noshade color=navy align=center>

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