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<SEC-DOCUMENT>0001003297-05-000151.txt : 20050512
<SEC-HEADER>0001003297-05-000151.hdr.sgml : 20050512
<ACCEPTANCE-DATETIME>20050512160838
ACCESSION NUMBER:		0001003297-05-000151
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20050331
FILED AS OF DATE:		20050512
DATE AS OF CHANGE:		20050512

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:		05824573

	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>Pro-Dex, Inc. Form 10-QSB for 3/31/2005 by www.edgar2.com</title>



</head>

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















&nbsp;<p align="center"><b>UNITED STATES <br>
SECURITIES AND EXCHANGE COMMISSION</b></p>
  <p align=center style='text-align:center'><b>Washington, D.C. 20549</b></p>

  <p align=center style='text-align:center'><b><font size="5">FORM
  10-QSB&nbsp;</font></b></p>
  <p style='margin-left:54.0pt;text-indent:-54.0pt;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 March 31, 2005</b></p>
  <p align=center style='text-align:center'><b>OR</b></p>
  <p style='margin-left:54.0pt;text-indent:-54.0pt;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&nbsp; FROM <u>&nbsp;&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>
  <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:540.0pt;padding:0pt 0pt 0pt 0pt'>
  <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:0pt 0pt 0pt 0pt'>
  <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:540.0pt;padding:0pt 0pt 0pt 0pt'>
  <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:0pt 0pt 0pt 0pt'>
  <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:540.0pt;padding:0pt 0pt 0pt 0pt'>
  <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:0pt 0pt 0pt 0pt'>
  <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:540.0pt;padding:0pt 0pt 0pt 0pt'>
  <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:0pt 0pt 0pt 0pt'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=360 valign=top style='width:270.0pt;padding:0pt 0pt 0pt 0pt'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp;&nbsp;&nbsp; </b></p>
  </td>
  <td width=360 valign=top style='width:270.0pt;padding:0pt 0pt 0pt 0pt'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp;&nbsp;&nbsp; </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0pt 0pt 0pt 0pt'>
  <p style='text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=360 valign=top style='width:270.0pt;padding:0pt 0pt 0pt 0pt'>
  <p align=center style='text-align:center;text-autospace:none'><b><u>Colorado </u></b></p>
  </td>
  <td width=360 valign=top style='width:270.0pt;padding:0pt 0pt 0pt 0pt'>
  <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:0pt 0pt 0pt 0pt'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=360 valign=top style='width:270.0pt;padding:0pt 0pt 0pt 0pt'>
  <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:270.0pt;padding:0pt 0pt 0pt 0pt'>
  <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:0pt 0pt 0pt 0pt'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=360 valign=top style='width:270.0pt;padding:0pt 0pt 0pt 0pt'>
  <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:270.0pt;padding:0pt 0pt 0pt 0pt'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp; </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0pt 0pt 0pt 0pt'>
  <p style='text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=360 valign=top style='width:270.0pt;padding:0pt 0pt 0pt 0pt'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp;&nbsp;&nbsp; </b></p>
  </td>
  <td width=360 valign=top style='width:270.0pt;padding:0pt 0pt 0pt 0pt'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp;&nbsp;&nbsp; </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0pt 0pt 0pt 0pt'>
  <p style='text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=720 colspan=2 valign=top style='width:540.0pt;padding:0pt 0pt 0pt 0pt'>
  <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:0pt 0pt 0pt 0pt'>
  <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:540.0pt;padding:0pt 0pt 0pt 0pt'>
  <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:0pt 0pt 0pt 0pt'>
  <p align=center style='text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=360 valign=top style='width:270.0pt;padding:0pt 0pt 0pt 0pt'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp;&nbsp;&nbsp; </b></p>
  </td>
  <td width=360 valign=top style='width:270.0pt;padding:0pt 0pt 0pt 0pt'>
  <p style='text-autospace:none'><b>&nbsp;&nbsp; &nbsp; </b></p>
  </td>
  <td width=1 valign=top style='width:1.0pt;padding:0pt 0pt 0pt 0pt'>
  <p style='text-autospace:none'><b>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=720 colspan=2 valign=top style='width:540.0pt;padding:0pt 0pt 0pt 0pt'>
  <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:0pt 0pt 0pt 0pt'>
  <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; 9,340,903 shares of
Common Stock, no par value, as of May 6, 2005. </p>



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



<p align=center style='text-align:center'>1</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><b>Item 1. &nbsp;&nbsp;&nbsp;&nbsp; Financial
Statements</b></p>












<div align="left">












<table class=MsoNormalTable border=0 cellpadding=0
 style='width:700px;margin-left:5pt;border-collapse:collapse' id="table9">
 <tr style='height:1.0pt'>
  <td colspan=5 valign=bottom style='height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="center">
  <p class=MsoNormal align=center style='text-align:center'><b>PRO-DEX, INC.
  and SUBSIDIARIES</b></p>
  </td>
 </tr>
 <tr style='height:1.0pt'>
  <td colspan=5 valign=bottom style='height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="center">
  <p class=MsoNormal align=center style='text-align:center'><b>CONSOLIDATED
  BALANCE SHEETS</b></p>
  </td>
 </tr>
 <tr style='height:1.0pt'>
  <td valign=bottom style='height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=center style='text-align:center'><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td colspan=2 valign=bottom style='height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=2 valign=bottom style='height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <td valign=top style='height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="center">
  <p class=MsoNormal align=center style='text-align:center'><i><font size="2">March 31, 2005
  <br>
	(unaudited)</font></i></p>
  </td>
  <td colspan=2 valign=top style='border:1.0pt solid windowtext;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' 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:1.0pt'>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:medium none; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Current 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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal>
  <font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Cash and cash equivalents </font>
  </p>
  </td>
  <td valign=top style='height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p align="right"><font size="2">2,259,000&nbsp;</font></td>
  <td valign=top style='height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p align="right"><font size="2">2,070,000&nbsp;</font></td>
 </tr>
 <tr style='height:1.0pt'>
  <td valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  &nbsp;</td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; accounts
  of $45,000 at March 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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">2,565,000&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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">2,952,000&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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">170,000&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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">8,739,000&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;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  &nbsp;</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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,010,000&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;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  &nbsp;</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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">48,000&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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,946,000&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;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  &nbsp;</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;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Total assets</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">11,695,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <td valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  &nbsp;</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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Accounts payable</font></p>
  </td>
  <td valign=top style='height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">625,000&nbsp;</font></p>
  </td>
  <td valign=top style='height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">432,000&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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">655,000&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;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,712,000&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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  &nbsp;</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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  &nbsp;</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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,712,000&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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  &nbsp;</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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0 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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">-&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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">15,737,000&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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(5,748,000)</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;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(6,669,000)</font></p>
  </td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  &nbsp;</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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">9,989,000&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; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  &nbsp;</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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  &nbsp;
  </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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  &nbsp;</td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(6,000)</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;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(25,000)</font></p>
  </td>
 </tr>
 <tr style='height:1.0pt'>
  <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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total shareholders' equity</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;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">9,983,000&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;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <td valign=top style='border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:2.25pt double windowtext;
  border-right:medium none;height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and shareholders' equity</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:2.25pt double windowtext;
  border-right:medium none;height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">11,695,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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:1.0pt'>
  <td valign=top style='height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=2 valign=top style='height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=2 valign=top style='height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <td valign=bottom style='height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=2 valign=bottom style='height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=2 valign=bottom style='height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

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





</div>












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

<p><i>See notes to consolidated financial statements.</i></p>
<p>2</p>

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

</div>



<font size="2">



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














</font>














<div align="left">














<table class=MsoNormalTable border=0 cellpadding=0
 style='margin-left:5pt;border-collapse:collapse' width="700" id="table2">
 <tr style='height:15.75pt'>
  <td colspan=10 valign=bottom style='height:15.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=center style='text-align:center'><b>PRO-DEX, INC.
  and SUBSIDIARIES</b></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td colspan=10 valign=bottom style='height:15.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=center style='text-align:center'><b>CONSOLIDATED
  STATEMENTS OF OPERATIONS</b></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td colspan=10 valign=bottom style='height:15.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=center style='text-align:center'><b>Three months
  ended March 31 (unaudited)</b></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=9 valign=top style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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 valign=top style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=center style='text-align:center'><i><font size="2">2005</font></i></p>
  </td>
  <td colspan=5 valign=top style='border:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=center style='text-align:center'><i><font size="2">2004</font></i></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='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:0pt; padding-bottom:0pt'>

  &nbsp;</td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td colspan=3 valign=top style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">3,241,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">3,302,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>

  &nbsp;</td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Cost of sales </font> </p>
  </td>
  <td colspan=4 valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,598,000&nbsp;</font></p>
  </td>
  <td colspan=5 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:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,698,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Gross profit </font> </p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,643,000&nbsp;</font></p>
  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,604,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>

  &nbsp;</td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:1.0pt'>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Operating expenses: </font> </p>
  </td>
  <td colspan=4 valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=5 valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Selling </font> </p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">249,000&nbsp;</font></p>
  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">231,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; General and administrative expenses
	</font> </p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">586,000&nbsp;</font></p>
  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">501,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Research and development costs
	</font> </p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">467,000&nbsp;</font></p>
  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">472,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:1.0pt'>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Total operating expenses </font> </p>
  </td>
  <td colspan=4 valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,302,000&nbsp;</font></p>
  </td>
  <td colspan=5 valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,204,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>

  &nbsp;</td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Income from operations </font> </p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">341,000&nbsp;</font></p>
  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">400,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>

  &nbsp;</td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Other income (expense): </font> </p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Royalty income
	</font> </p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">6,000&nbsp;</font></p>
  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">40,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Other income, net
	</font> </p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">12,000&nbsp;</font></p>
  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">4,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Interest expense
	</font> </p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">-&nbsp;</font></p>
  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(9,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Total</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">18,000&nbsp;</font></p>
  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">35,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>

  &nbsp;</td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Income before provision for income taxes</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">359,000&nbsp;</font></p>
  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">435,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>

  &nbsp;</td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Provision for income taxes</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">84,000&nbsp;</font></p>
  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">174,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Net income</font></p>
  </td>
  <td colspan=2 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td colspan=2 valign=top style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">275,000&nbsp;</font></p>
  </td>
  <td colspan=3 valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">261,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	</font> </p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Net Income per share:</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Basic</font></p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">0.03&nbsp;</font></p>
  </td>
  <td colspan=4 valign=top style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">0.03&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Diluted</font></p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td valign=top style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">0.03&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">0.03&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom 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:0pt; padding-bottom:0pt'>

  &nbsp;

  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Weighted average shares outstanding - basic</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">9,163,900&nbsp;</font></p>
  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">8,797,325&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Weighted average shares outstanding - diluted</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">9,615,127&nbsp;</font></p>
  </td>
  <td colspan=5 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">9,398,688&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=4 valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=5 valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

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

  </td>
  <td colspan=4 valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=5 valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

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







</div>







<p align="center"><i>See notes to consolidated financial statements.</i></p>
<p align="center">3</p>
<hr size=2 width="100%" noshade color=navy align=center>



<font size="2">



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












</font>












<div align="left">












<table class=MsoNormalTable border=0 cellpadding=0 width=543
 style='width:700px;margin-left:5pt;border-collapse:collapse' id="table3">
 <tr style='height:15.75pt'>
  <td colspan=8 valign=bottom style='height:15.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=center style='text-align:center'><b>PRO-DEX, INC.
  and SUBSIDIARIES</b></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td colspan=8 valign=bottom style='height:15.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=center style='text-align:center'><b>CONSOLIDATED
  STATEMENTS OF OPERATIONS</b></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td colspan=8 valign=bottom style='height:15.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=center style='text-align:center'><b>Nine months
  ended March 31 (unaudited)</b></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=7 valign=top style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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 valign=top style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=center style='text-align:center'><i><font size="2">2005</font></i></p>
  </td>
  <td colspan=4 valign=top style='border:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=center style='text-align:center'><i><font size="2">2004</font></i></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td colspan=2 valign=top style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">9,466,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">10,534,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:1.0pt'>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  &nbsp;</td>
  <td colspan=3 valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=4 valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:1.0pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Cost of sales </font> </p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">4,344,000&nbsp;</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">5,683,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Gross profit </font> </p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">5,122,000&nbsp;</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">4,851,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>

  &nbsp;</td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Operating expenses: </font> </p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Selling </font> </p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">726,000&nbsp;</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">629,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; General and administrative expenses
	</font> </p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,711,000&nbsp;</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,796,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Research and development costs
	</font> </p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,343,000&nbsp;</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,299,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Total operating expenses </font> </p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">3,780,000&nbsp;</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">3,724,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>

  &nbsp;</td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Income from operations </font> </p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,342,000&nbsp;</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,127,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>

  &nbsp;</td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Other income (expense): </font> </p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Royalty income
	</font> </p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">47,000&nbsp;</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">40,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Other income, net
	</font> </p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">56,000&nbsp;</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <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 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Interest expense
	</font> </p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(9,000)</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(44,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Total</font></p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">94,000&nbsp;</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">12,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>

  &nbsp;</td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Income before provision for income taxes</font></p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,436,000&nbsp;</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,139,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>

  &nbsp;</td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Provision for income taxes</font></p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">515,000&nbsp;</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">456,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Net income</font></p>
  </td>
  <td colspan=2 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td valign=top style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">921,000&nbsp;</font></p>
  </td>
  <td colspan=3 valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">683,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	</font> </p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Net Income per share:</font></p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Basic</font></p>
  </td>
  <td colspan=2 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td valign=top style='border-top:medium none;border-left:medium none;
  border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">0.10&nbsp;</font></p>
  </td>
  <td colspan=3 valign=top style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">0.08&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Diluted</font></p>
  </td>
  <td colspan=2 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td valign=top style='border-top:medium none;border-left:medium none;
  border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">0.10&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">0.07&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom 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:0pt; padding-bottom:0pt'>

  &nbsp;</td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Weighted average shares outstanding - basic</font></p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">9,006,073&nbsp;</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">8,779,913&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Weighted average shares outstanding - diluted</font></p>
  </td>
  <td colspan=3 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">9,434,431&nbsp;</font></p>
  </td>
  <td colspan=4 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">9,288,056&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=3 valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=4 valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

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

  </td>
  <td colspan=3 valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=4 valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

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







</div>







<p align="center"><i>See notes to consolidated financial statements.</i></p>
<p align="center">4</p>
<hr size=2 width="100%" noshade color=navy align=center>



<font size="2">



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












</font>












<div align="left">












<table class=MsoNormalTable border=0 cellpadding=0
 style='width:709px;margin-left:5pt;border-collapse:collapse' id="table10">
 <tr style='height:12.75pt'>
  <td colspan=5 valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=center style='text-align:center'><b>PRO-DEX, INC.
  and SUBSIDIARIES</b></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td colspan=5 valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=center style='text-align:center'><b>CONSOLIDATED
  STATEMENTS OF CASH FLOWS</b></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td colspan=5 valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=center style='text-align:center'><b>Nine months
  ended March 31 (unaudited)</b></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=503 valign=top style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=2 valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=2 valign=bottom style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=502 valign=top style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=center style='text-align:center'><i><font size="2">2005</font></i></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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=center style='text-align:center'><i><font size="2">2004</font></i></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Cash Flows from Operating Activities: </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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Net Income</font></p>
  </td>
  <td width=16 valign=top style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">921,000&nbsp;</font></p>
  </td>
  <td valign=top style='height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">683,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <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 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:0pt; padding-bottom:0pt'>

  </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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Depreciation and amortization
	</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">176,000&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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">273,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Provision for doubtful accounts</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">5,000&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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">10,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (Recovery) reserve for obsolete inventory</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(116,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stock based compensation</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">19,000&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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">19,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred 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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">20,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Changes in:</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <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 accounts receivable</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(200,000)</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(278,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <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 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(447,000)</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">350,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <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 colspan=2 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(94,000)</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(29,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <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 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(32,000)</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">9,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <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 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(120,000)</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(237,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <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 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(154,000)</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">456,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Net Cash provided by Operating Activities
	</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">111,000&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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">1,160,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>

  &nbsp;</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:0pt; padding-bottom:0pt'>

  </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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Cash Flows From Investing Activities: </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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Purchases of equipment and leasehold improvements</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;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(156,000)</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;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(233,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>

  &nbsp;</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:0pt; padding-bottom:0pt'>

  </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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Net Cash (used in) Investing Activities
	</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;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(156,000)</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;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(233,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>

  &nbsp;</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:0pt; padding-bottom:0pt'>

  </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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Cash Flows from Financing Activities:</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Principal payments on long-term
  shareholder borrowings </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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(145,000)</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(54,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Net payments on line of credit
	</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(432,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from option and warrant
  exercise </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;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">379,000&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;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <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 width=501 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:0pt; padding-bottom:0pt'>

  &nbsp;</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:0pt; padding-bottom:0pt'>

  </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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Net Cash provided by (used in) Financing Activities</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;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">234,000&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;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='text-align:right'><font size="2">(416,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>

  &nbsp;</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

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

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Net Increase (decrease) in Cash and Cash Equivalents
	</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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">189,000&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; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">511,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=501 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:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">Cash and Cash Equivalents, beginning of period
	</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;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">2,070,000&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;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal align=right style='margin-right:.7pt;text-align:right'>
	<font size="2">795,000&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=501 valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1px solid #000000;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2"><br>
	Cash and Cash Equivalents, end of period
	</font> </p>
  </td>
  <td width=16 valign=bottom style='border-bottom:3px double #000000; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:3px double #000000; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p align="right"><font size="2">2,259,000&nbsp;</font></td>
  <td valign=bottom style='border-bottom:3px double #000000; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p class=MsoNormal><font size="2">&nbsp;$</font></p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:3px double #000000; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p align="right"><font size="2">1,306,000&nbsp;</font></td>
 </tr>
 </table>







</div>

<p align=center style='text-align:center'><i>Supplemental Information</i></p>












<table class=MsoNormalTable border=0 cellpadding=0
 style='width:716px;margin-left:-1.85pt;border-collapse:collapse' id="table11">
 <tr style='height:12.75pt'>
  <td width=510 valign=top style='border-top:1px solid #000000;
  border-left:1px solid windowtext;border-bottom:medium none #000000;border-right:1px solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
			<font size="2">Cash payments for interest</font></td>
  <td valign=top style='border-left:medium none; border-top:1px solid #000000; border-bottom:medium none #000000; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p align="right"><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,000&nbsp;</font></td>
  <td valign=top style='border-left:1px solid #000000; border-top:1px solid #000000; border-bottom:medium none #000000; border-right:1px solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' width="96">
  <p align="right"><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 42,000&nbsp;</font></td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=510 valign=top style='border-top:medium none;
  border-left:1px solid windowtext;border-bottom:medium none #000000;border-right:1px solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  &nbsp;</td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none #000000; border-right:medium none windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  &nbsp;</td>
  <td valign=top style='border-left:1px solid #000000; border-top:medium none; border-bottom:medium none #000000; border-right:1px solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' width="96">
  &nbsp;</td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=510 valign=top style='border-top:medium none;
  border-left:1px solid windowtext;border-bottom:1px solid #000000;border-right:1px solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
			<font size="2">Cash payments for income taxes</font></td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:1px solid #000000; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p align="right"><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 668,000&nbsp;</font></td>
  <td valign=top style='border-left:1px solid #000000; border-top:medium none; border-bottom:1px solid #000000; border-right:1px solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' width="96">
			<p align="right"><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 6,000&nbsp;</font></td>
 </tr>
 </table>







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



<p align=center style='text-align:center'>5</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>
</b><b>NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS </b></p>

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



<p style='text-align:justify;text-indent:36.0pt;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-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="left">

<table class=MsoNormalTable border=0 cellpadding=0 width=463
 style='width:550px;margin-left:50pt;border-collapse:collapse'>
 <tr style='height:12.75pt'>
  <td width=207 nowrap valign=bottom style='width:155.0pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td valign=bottom style='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:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">March 31, 2005</font></p>
  </td>
  <td valign=bottom 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:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">June 30, 2004</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=207 nowrap valign=bottom style='width:155.0pt;border:none;
  border-bottom:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td valign=bottom 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:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">(unaudited)</font></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;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="center">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=207 nowrap valign=bottom style='width:155.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Raw Materials</font></p>
  </td>
  <td valign=bottom 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:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,142,000&nbsp;</font></p>
  </td>
  <td valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,068,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=207 nowrap valign=bottom style='width:155.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Work in process</font></p>
  </td>
  <td valign=bottom 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:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 483,000&nbsp;</font></p>
  </td>
  <td valign=bottom 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:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 242,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=207 nowrap valign=bottom style='width:155.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Development costs under
  contract</font></p>
  </td>
  <td valign=bottom 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:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 105,000&nbsp;</font></p>
  </td>
  <td valign=bottom 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:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 23,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=207 nowrap valign=bottom style='width:155.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Finished goods</font></p>
  </td>
  <td valign=bottom 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:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,567,000&nbsp;</font></p>
  </td>
  <td valign=bottom 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:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,517,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=207 nowrap valign=bottom style='width:155.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp; Total</font></p>
  </td>
  <td valign=bottom 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:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3,297,000&nbsp;</font></p>
  </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:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2,850,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=207 nowrap valign=bottom style='width:155.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <font size="2">Reserve for slow moving items</font></td>
  <td valign=bottom 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:0pt; padding-bottom:0pt' align="right">
  <p align="right"><font size="2">(345,000)</font></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:0pt; padding-bottom:0pt' align="right">
  <p align="right"><font size="2">(308,000)</font></td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=207 nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:1px solid #000000; width:155.0pt;border-left:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <font size="2">&nbsp;&nbsp;&nbsp; Total inventories, net</font></td>
  <td valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1px solid #000000;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align="right"><font size="2">2,952,000&nbsp;</font></td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:1px solid #000000; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align="right"><font size="2">2,542,000&nbsp;</font></td>
 </tr>
</table>





</div>





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



<p style='text-align:justify;text-indent:36.0pt'>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:36.0pt'>In accordance
with the requirements of SFAS No. 142, we performed impairment tests and recorded
no impairment charges in fiscal years ended June 30, 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 nine months ended March 31, 2005,
management determined that there are no events or circumstances which have
occurred that would indicate an impairment of the goodwill.&nbsp; </p>
<p style='text-align:justify;text-indent:36.0pt'>&nbsp;</p>
<p style='text-align:center;'>6</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>&nbsp;</b></p>

<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=0 cellpadding=0 width=515
 style='width:550px;margin-left:50pt;border-collapse:collapse'>
 <tr style='height:12.75pt'>
  <td width=311 nowrap valign=bottom style='width:233.0pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td width=204 nowrap colspan=2 valign=bottom style='width:153.0pt;border-top:
  solid windowtext 1.0pt;border-left:solid windowtext 1.0pt;border-bottom:none;
  border-right:solid black 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">Nine Months Ended March 31,</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=311 nowrap valign=bottom style='width:233.0pt;border:none;
  border-bottom:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=100 nowrap valign=bottom style='width:75.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td width=104 nowrap valign=bottom style='width:78.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=311 nowrap valign=bottom style='width:233.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Net income</font></p>
  </td>
  <td width=100 nowrap valign=bottom style='width:75.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 921,000
	</font> </p>
  </td>
  <td width=104 nowrap valign=bottom style='width:78.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 683,000
	</font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=311 nowrap valign=bottom style='width:233.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Basic net income per
  common share:</font></p>
  </td>
  <td width=100 nowrap valign=bottom style='width:75.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">

  </td>
  <td width=104 nowrap valign=bottom style='width:78.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=311 nowrap valign=bottom style='width:233.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">&nbsp;&nbsp; Weighted average of
  common shares outstanding</font></p>
  </td>
  <td width=100 nowrap valign=bottom style='width:75.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,006,073 </font> </p>
  </td>
  <td width=104 nowrap valign=bottom style='width:78.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,779,913
	</font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=311 nowrap valign=bottom style='width:233.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Basic net income per
  common share </font> </p>
  </td>
  <td width=100 nowrap valign=bottom style='width:75.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.10
	</font> </p>
  </td>
  <td width=104 nowrap valign=bottom style='width:78.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.08
	</font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=311 nowrap valign=bottom style='width:233.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=100 nowrap valign=bottom style='width:75.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">

  </td>
  <td width=104 nowrap valign=bottom style='width:78.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=311 nowrap valign=bottom style='width:233.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=100 nowrap valign=bottom style='width:75.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">

  </td>
  <td width=104 nowrap valign=bottom style='width:78.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=311 nowrap valign=bottom style='width:233.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Diluted net income per
  share:</font></p>
  </td>
  <td width=100 nowrap valign=bottom style='width:75.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">

  </td>
  <td width=104 nowrap valign=bottom style='width:78.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=311 nowrap valign=bottom style='width:233.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">&nbsp;&nbsp; Weighted average of
  common shares outstanding</font></p>
  </td>
  <td width=100 nowrap valign=bottom style='width:75.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,006,073 </font> </p>
  </td>
  <td width=104 nowrap valign=bottom style='width:78.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,779,913
	</font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=311 nowrap valign=bottom style='width:233.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effect of
  potentially dilutive securities (options)</font></p>
  </td>
  <td width=100 nowrap valign=bottom style='width:75.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 352,032
	</font> </p>
  </td>
  <td width=104 nowrap valign=bottom style='width:78.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 374,764
	</font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=311 nowrap valign=bottom style='width:233.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effect of
  potentially dilutive securities (warrants)</font></p>
  </td>
  <td width=100 nowrap valign=bottom style='width:75.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 76,326
	</font> </p>
  </td>
  <td width=104 nowrap valign=bottom style='width:78.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 55,250
	</font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=311 nowrap valign=bottom style='width:233.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effect of
  potentially dilutive securities </font> </p>
  </td>
  <td width=100 nowrap valign=bottom style='width:75.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">

  </td>
  <td width=104 nowrap valign=bottom style='width:78.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=311 nowrap valign=bottom style='width:233.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (convertible
  Preferred Shares)</font></p>
  </td>
  <td width=100 nowrap valign=bottom style='width:75.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <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; -
	</font> </p>
  </td>
  <td width=104 nowrap valign=bottom style='width:78.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 78,129
	</font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=311 nowrap valign=bottom style='width:233.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Weighted average number of
  common and shares - </font> </p>
  </td>
  <td width=100 nowrap valign=bottom style='width:75.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">

  </td>
  <td width=104 nowrap valign=bottom style='width:78.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=311 nowrap valign=bottom style='width:233.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <font size="2">Diluted</font></td>
  <td width=100 nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:1px solid #000000; width:75.0pt;border-left:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="right">

  <font size="2">9,434,431</font></td>
  <td width=104 nowrap valign=bottom style='width:78.0pt;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1px solid #000000;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="right">

  <font size="2">9,288,056</font></td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=311 nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:1px solid #000000; width:233.0pt;border-left:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <font size="2">Diluted net income per common share</font></td>
  <td width=100 nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:1px solid #000000; width:75.0pt;border-left:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="right">

  <font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.10</font></td>
  <td width=104 nowrap valign=bottom style='width:78.0pt;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1px solid #000000;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="right">

  <font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.07</font></td>
 </tr>
</table>



</div>



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



<p style='text-align:justify;text-indent:36.0pt'>In October
2003, our then existing 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 credit facility expired in October 2004.&nbsp;
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 under the credit facility were
secured by all assets of, and guaranteed by the Company. </p>



<p style='text-align:justify;text-indent:36.0pt'>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 (5.75% at March 31, 2005); or LIBOR plus 2.50% (5.37% (one
month) to 5.62% (three months) at March 31, 2005), 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 March 31, 2005.&nbsp;
The total eligible borrowing capacity at March 31, 2005 was $2,000,000.</p>
<p style='text-align:justify;text-indent:36.0pt'>There
are certain financial and non-financial covenants that we must meet to be in
compliance with the terms of the October 2004 Wells Fargo credit facility.&nbsp; At March
31, 2005, we were in compliance with all such covenants.&nbsp; </p>
<p style='text-align:justify;'><b>LONG TERM DEBT TO SHAREHOLDER</b></p>
<p style='text-align:justify;text-indent:36pt'>Long-term debt was comprised of a Not to Compete liability under the
terms of a Noncompetition Agreement with a shareholder 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:36pt'>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-align:center;'>7</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>INCOME TAXES</b></p>



<p style='text-align:justify;text-indent:36.0pt;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:36.0pt;text-autospace:
none'>During the quarter ended March 31, 2005, we granted no Common Stock
Options under the Company's Director Stock Option Plan or the Employee Stock
Option Plan. &nbsp;&nbsp;There are 1,109,316 Common Stock options under both of these
plans granted and outstanding, of which 883,691 are vested. </p>



<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'>During the quarter ended March 31, 2005, 98,679 Common Stock Options
under the Employee Stock Option Plan expired unexercised.</p>

&nbsp;<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=572
 style='width:429.0pt;margin-left:50pt;border-collapse:collapse'>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:171px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='width:184px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td width=213 nowrap colspan=2 valign=bottom style='width:160.0pt;border-top:
  solid windowtext 1.0pt;border-left:solid windowtext 1.0pt;border-bottom:none;
  border-right:solid black 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">Three Months Ended March 31,
	</font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:171px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='width:184px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td width=107 nowrap valign=bottom style='width:80.6pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td width=106 nowrap valign=bottom style='width:79.4pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; width:169px;border-bottom:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Net income as reported:</font></p>
  </td>
  <td nowrap valign=bottom style='width:184px;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:0pt; padding-bottom:0pt'>

  </td>
  <td width=107 nowrap valign=bottom style='width:80.6pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 275,000&nbsp;
	</font> </p>
  </td>
  <td width=106 nowrap valign=bottom style='width:79.4pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 261,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:169px;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:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; width:184px;border-right:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Add stock-based employee</font></p>
  </td>
  <td width=107 nowrap valign=bottom style='width:80.6pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=106 nowrap valign=bottom style='width:79.4pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:169px;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:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; width:184px;border-right:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">compensation expense
  included</font></p>
  </td>
  <td width=107 nowrap valign=bottom style='width:80.6pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=106 nowrap valign=bottom style='width:79.4pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:169px;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:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; width:184px;border-right:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">in reported net income,
  net of</font></p>
  </td>
  <td width=107 nowrap valign=bottom style='width:80.6pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=106 nowrap valign=bottom style='width:79.4pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:169px;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:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; width:184px;border-right:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">related tax effects</font></p>
  </td>
  <td width=107 nowrap valign=bottom style='width:80.6pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=106 nowrap valign=bottom style='width:79.4pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:169px;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:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; width:184px;border-right:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">(Deduct) total stock-based</font></p>
  </td>
  <td width=107 nowrap valign=bottom style='width:80.6pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=106 nowrap valign=bottom style='width:79.4pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:169px;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:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; width:184px;border-right:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">employee and director</font></p>
  </td>
  <td width=107 nowrap valign=bottom style='width:80.6pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=106 nowrap valign=bottom style='width:79.4pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:169px;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:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; width:184px;border-right:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">compensation expense&nbsp;&nbsp; </font> </p>
  </td>
  <td width=107 nowrap valign=bottom style='width:80.6pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=106 nowrap valign=bottom style='width:79.4pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:169px;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:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; width:184px;border-right:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">determined under fair
  value</font></p>
  </td>
  <td width=107 nowrap valign=bottom style='width:80.6pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=106 nowrap valign=bottom style='width:79.4pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:169px;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:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; width:184px;border-right:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">based method for all
  awards,</font></p>
  </td>
  <td width=107 nowrap valign=bottom style='width:80.6pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=106 nowrap valign=bottom style='width:79.4pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:169px;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:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; width:184px;border-right:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">net of related tax effects</font></p>
  </td>
  <td width=107 nowrap valign=bottom style='width:80.6pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="right"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (51,000)</font></p>
  </td>
  <td width=106 nowrap valign=bottom style='width:79.4pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><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;
	</font> </p>
  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td nowrap valign=bottom style='width:169px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:13.5pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Pro-forma net income:</font></p>
  </td>
  <td nowrap valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; width:184px;border-right:1.0pt solid windowtext;height:13.5pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td width=107 nowrap valign=bottom style='width:80.6pt;border-top:none;
  border-left:none;border-bottom:double windowtext 2.25pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:13.5pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 224,000&nbsp;</font></p>
  </td>
  <td width=106 nowrap valign=bottom style='width:79.4pt;border-top:none;
  border-left:none;border-bottom:double windowtext 2.25pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:13.5pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 261,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td nowrap valign=bottom style='width:169px;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:13.5pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Basic earnings per share</font></p>
  </td>
  <td nowrap valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; width:184px;border-right:1.0pt solid windowtext;height:13.5pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">As reported</font></p>
  </td>
  <td width=107 nowrap valign=bottom style='width:80.6pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:13.5pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.03&nbsp;</font></p>
  </td>
  <td width=106 nowrap valign=bottom style='width:79.4pt;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:13.5pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&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-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:169px;border-top:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='width:184px;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:0pt; padding-bottom:0pt'>
  <p><font size="2">Pro-forma</font></p>
  </td>
  <td width=107 nowrap valign=bottom style='width:80.6pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.02&nbsp;</font></p>
  </td>
  <td width=106 nowrap valign=bottom style='width:79.4pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&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=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:169px;border-top:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  <font size="2">Diluted earnings per share</font></td>
  <td nowrap valign=top style='width:184px;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:0pt; padding-bottom:0pt'>
  <font size="2">As reported<br>
	Pro-forma</font></td>
  <td width=107 nowrap valign=top style='width:80.6pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="right"><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	0.03&nbsp;<br>
	$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	0.02&nbsp;</font></td>
  <td width=106 nowrap valign=top style='width:79.4pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="right"><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	0.03&nbsp;<br>
	$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	0.03&nbsp;</font></td>
 </tr>
</table>

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



<p style='text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 78,129
Preferred Stock shares representing 100% of all Preferred stock shares
outstanding were converted to 78,129 shares of Common Stock in the quarter
ended March 31, 2005, leaving no Preferred Stock shares outstanding.&nbsp; We
received no cash proceeds from the conversion.</p>
<p style='text-align:center;text-autospace:none'>8</p>

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

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</div>



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style='page-break-before:always'>












<p style='text-align:justify;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 Inc.) and Motion Control (formerly,
Oregon Micro Systems Inc.).</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>

<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:36.0pt;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
nine month periods ended March 31, 2004 and 2005, 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:36.0pt;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:36.0pt;text-autospace:
none'>Pro-Dex, Inc. is a Colorado corporation, organized in 1978, conducting
business in two locations.&nbsp; Until June 30, 2004, each location was a separate
subsidiary and Pro-Dex had a &quot;holding company&quot; structure.&nbsp; In the fiscal year
ended June 30, 2004, we eliminated the Company's holding company 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 value proposition is
to get customers to market faster, at a lower cost and with a higher quality
product.&nbsp; Products developed and manufactured by us are used in hospitals,
dental offices, medical engineering labs, scientific research facilities and
high tech manufacturing operations&nbsp;around the world.</p>
<p style='text-align:center;text-autospace:
none'>9</p>

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style='page-break-before:always'>












<p style='text-align:justify;text-indent:36.0pt;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; Our 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, our Code of Ethics and other corporate
governance documents may be found on our 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><b>Description of Business</b></p>










<p style='text-align:justify;text-indent:36.0pt;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:36.0pt;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 March 31, 2005, $467,000 was expensed; a $5,000 decrease from the $472,000
expensed in the three months ended March 31, 2004.&nbsp; </p>



<p align="justify" style="text-indent: 36pt">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 March 31, 2005, $88,000 was recognized as cost of sales,
compared to $4,000 recognized as cost of sales in the three months ended March
31, 2004, reflecting the completion of new product launches this quarter.</p>



<p align="justify" style="text-indent: 36pt">Customer-funded research and development provided $285,000
in revenue in the three months ended March 31, 2005, and $107,000 in revenue in
the three months ended March 31, 2004.&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:36.0pt;text-autospace:
none'>Medical product sales represent the manufacture of proprietary designs
developed by the Company under exclusive design and supply agreements.&nbsp; 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; 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 stand-alone
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:center;text-autospace:
none'>10</p>

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<p style='text-align:justify;text-indent:36.0pt;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>



<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'>At the present time, we are generally able to fill orders within sixty
(60) days.&nbsp; At March 31, 2005 we had a backlog, including orders for delivery
beyond 60 days, of $8.3 million compared with a backlog of $5.1 million at June
30, 2004 and $3.3 million at March 31, 2004.&nbsp; We expect to fill all of our
future orders during the next twelve months.&nbsp; The increased backlog from June
30, 2004 is due to the development of new products to be supplied under
exclusive long-term supply agreements.&nbsp; The increase in backlog from March 31,
2004 to March 31, 2005 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:36.0pt'>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
inventory on hand for a specific part exceeds and estimated 24 months of usage,
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:36.0pt' align="justify">On July 1, 2002 the Company
adopted SFAS No. 142 &quot;Goodwill and Other Intangible Assets.&quot;&nbsp; SFAS No. 142
requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead tested for impairment at least annually in
accordance with the provisions of SFAS No. 142.&nbsp; 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 align="center">11</p>

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<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>



<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Significant management judgment is required to determine 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 factory automation 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'>&nbsp;</p>
<p style='margin-bottom:6.0pt;text-align:center'>12</p>

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

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style='page-break-before:always'>












<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>



<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;</p>
<p style='margin-bottom:6.0pt;text-align:justify'>&nbsp;</p>
<p style='margin-bottom:6.0pt;text-align:center'>13</p>

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

<p style='margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; There
can be no assurance that such litigation will not result in liability in excess
of 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 style='margin-bottom:6.0pt;text-align:justify'><b>Ability to
Manage Growth</b><i> </i>&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='margin-bottom:6.0pt;text-align:justify'>&nbsp;</p>
<p style='margin-bottom:6.0pt;text-align:center'>14</p>

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style='page-break-before:always'>












<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>Accounting Matters</b></p>



<p style='text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; We
are subject to changes in and interpretations of financial accounting matters
that govern the measurement of our performance. Based on our reading and interpretations
of relevant guidance, principles or concepts issued by, among other
authorities, the American Institute of Certified Public Accountants, the
Financial Accounting Standards Board, and the United States Securities and
Exchange Commission, our management believes our current sales and licensing
contract terms and business arrangements have been properly reported. However,
there continue to be issued interpretations and guidance for applying the
relevant standards to a wide range of contract terms and business arrangements
that are prevalent in the industries in which we operate. Future
interpretations or changes by the regulators of existing accounting standards
or changes in our business practices could result in future changes in our
accounting policies and practices that could have a material adverse effect on
our business, financial condition, cash flows, revenue and results of operations.&nbsp;
</p>



<p style='text-align:justify'><b>Internal Controls</b></p>










<p style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Any weaknesses
identified in our internal controls as part of the evaluation being undertaken
by us and our independent public accountants pursuant to Section 404 of the
Sarbanes-Oxley Act of 2002 could have an adverse effect on our business.&nbsp; We
are in the process of evaluating and documenting our controls pursuant to
Section 404 of the Sarbanes-Oxley Act.</p>



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

<p style='text-align:justify'><b><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </i></b>Stock
options have from time to time been an important component of the compensation
packages for many of our directors and employees.&nbsp; We currently do not deduct
the expense of director or employee stock option grants from our income.&nbsp; As
issued on December 16, 2004, FAS 123R requires companies to change their accounting
policies to record the value of stock options vested as an expense and a charge
against earnings.&nbsp; We are a small business issuer and thus the rule would
require that we comply at the beginning of the first fiscal year after December
15, 2005, so reports issued for dates after &nbsp;July 1, 2006 will reflect the
change and our reported earnings will be adversely affected. </p>



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

<p align=center style='text-align:center'>15</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 March 31, 2005 and 2004</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=0 cellpadding=0 width=510
 style='width:600px;margin-left:50pt;border-collapse:collapse'>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td width=237 nowrap colspan=2 valign=bottom style='width:178.0pt;border-top:
  solid windowtext 1.0pt;border-left:solid windowtext 1.0pt;border-bottom:none;
  border-right:solid black 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">Three Months Ended March 31,
	</font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border-top:solid windowtext 1.0pt;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:none;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Net Revenues:</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">100.0%</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">100.0%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Cost of Goods Sold</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">49.3%</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">51.4%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Gross Profit</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">50.7%</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">48.6%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Selling, General and
  Administrative Expenses</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">25.8%</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">22.2%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Research and Development
  Costs</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">14.4%</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">14.3%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Income from Operations</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">10.5%</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">12.1%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Net interest and other
  expense (income)</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">-0.6%</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">-1.1%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Provision for Income Taxes</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">2.6%</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">5.3%</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; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <div style="border-bottom-style: solid; border-bottom-width: 1px">
  <font size="2">Net Income</font></div>
	</td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="right"><font size="2">8.5%</font></td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="right"><font size="2">7.9%</font></td>
 </tr>
</table>





</div>





<p style='text-align:justify;text-indent:36.0pt'><b>Net Sales.</b>&nbsp;
Consolidated sales decreased from $3,302,000 to $3,241,000 ($61,000 or 2%) for
the quarter ended March 31, 2005, compared to the quarter ended March 31, 2004.&nbsp;
We continued to shift our product mix away from lower margin dental sales to
higher margin medical and factory automation sales.&nbsp; As a result, medical
products increased as a percentage of total sales to 45% from 40% in the same
quarter last year.&nbsp; Shipments to dental customers were reduced to 25% of total
sales compared to 41% for the same quarter in the prior year.&nbsp; Sales to
factory automation and industrial customers increased to 23% from 15% for the
same quarter in the prior year as the industry maintained its recent 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 width=589
 style='width:675px;margin-left:50pt;border-collapse:collapse'>
 <tr style='height:12.75pt'>
  <td width=191 nowrap valign=bottom style='width:143.0pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td width=211 nowrap colspan=2 valign=bottom style='width:158.0pt;border-top:
  solid windowtext 1.0pt;border-left:solid windowtext 1.0pt;border-bottom:none;
  border-right:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">Three Months Ended March 31,</font></p>
  </td>
  <td width=65 nowrap valign=bottom style='width:49.0pt;border:solid windowtext 1.0pt;
  border-bottom:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">FY</font></p>
  </td>
  <td width=67 nowrap valign=bottom style='width:50.0pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">FY</font></p>
  </td>
  <td width=56 nowrap valign=bottom style='width:42.0pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">FY</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=191 nowrap valign=bottom style='width:143.0pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">% of Total Sales</font></p>
  </td>
  <td width=105 nowrap valign=bottom style='width:79.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td width=105 nowrap valign=bottom style='width:79.0pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
  <td width=65 nowrap valign=bottom style='width:49.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
  <td width=67 nowrap valign=bottom style='width:50.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2003</font></p>
  </td>
  <td width=56 nowrap valign=bottom style='width:42.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2002</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=191 nowrap valign=bottom style='width:143.0pt;border:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Dental</font></p>
  </td>
  <td width=105 nowrap valign=bottom style='width:79.0pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">25%</font></p>
  </td>
  <td width=105 nowrap valign=bottom style='width:79.0pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">41%</font></p>
  </td>
  <td width=65 nowrap valign=bottom style='width:49.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">32%</font></p>
  </td>
  <td width=67 nowrap valign=bottom style='width:50.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">43%</font></p>
  </td>
  <td width=56 nowrap valign=bottom style='width:42.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">54%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=191 nowrap valign=bottom style='width:143.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Medical </font> </p>
  </td>
  <td width=105 nowrap valign=bottom style='width:79.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">45%</font></p>
  </td>
  <td width=105 nowrap valign=bottom style='width:79.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">40%</font></p>
  </td>
  <td width=65 nowrap valign=bottom style='width:49.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">41%</font></p>
  </td>
  <td width=67 nowrap valign=bottom style='width:50.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">28%</font></p>
  </td>
  <td width=56 nowrap valign=bottom style='width:42.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">17%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=191 nowrap valign=bottom style='width:143.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <font size="2">Factory Automation</font></td>
  <td width=105 nowrap valign=bottom style='width:79.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="center"><font size="2">23%</font></td>
  <td width=105 nowrap valign=bottom style='width:79.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="center"><font size="2">15%</font></td>
  <td width=65 nowrap valign=bottom style='width:49.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="center"><font size="2">18%</font></td>
  <td width=67 nowrap valign=bottom style='width:50.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="center"><font size="2">19%</font></td>
  <td width=56 nowrap valign=bottom style='width:42.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="center"><font size="2">19%</font></td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=191 nowrap valign=bottom style='width:143.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <font size="2">Government research and other</font></td>
  <td width=105 nowrap valign=bottom style='width:79.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="center"><font size="2">7%</font></td>
  <td width=105 nowrap valign=bottom style='width:79.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="center"><font size="2">4%</font></td>
  <td width=65 nowrap valign=bottom style='width:49.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="center"><font size="2">9%</font></td>
  <td width=67 nowrap valign=bottom style='width:50.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="center"><font size="2">10%</font></td>
  <td width=56 nowrap valign=bottom style='width:42.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="center"><font size="2">10%</font></td>
 </tr>
</table>





</div>





<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'><b>Gross Profit and Gross Profit Percentage of Sales</b>.&nbsp; Our
consolidated gross profit percentage for the quarter ended March 31, 2005 increased
2% over the same quarter in the previous year despite a decline in sales as
lower margin dental sales were replaced by higher margin medical sales.&nbsp; Gross
profit as a percentage of sales increased to 50.7% for the quarter ended March
31, 2005 compared to 48.6% for the quarter ended March 31, 2004, as the
continued gains from manufacturing cost improvements and a richer product mix
were realized.&nbsp; Gross profit and gross profit percentage were as follows: </p>












<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=439
 style='width:329.25pt;margin-left:100pt;border-collapse:collapse' id="table6">
 <tr style='height:12.75pt'>
  <td width=144 nowrap valign=bottom style='width:108.25pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td width=213 nowrap colspan=2 valign=bottom style='width:160.0pt;border-top:
  solid windowtext 1.0pt;border-left:solid windowtext 1.0pt;border-bottom:none;
  border-right:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">Three Months Ended March 31,</font></p>
  </td>
  <td width=81 nowrap valign=bottom style='width:61.0pt;border:solid windowtext 1.0pt;
  border-bottom:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">Increase</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=144 nowrap valign=bottom style='width:108.25pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td width=107 nowrap valign=bottom style='width:80.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td width=107 nowrap valign=bottom style='width:80.0pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
  <td width=81 nowrap valign=bottom style='width:61.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=144 nowrap valign=bottom style='width:108.25pt;border:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <font size="2">Gross Profit</font></td>
  <td width=107 nowrap valign=bottom style='width:80.0pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">$1,643,000</font></p>
  </td>
  <td width=107 nowrap valign=bottom style='width:80.0pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">$1,604,000</font></p>
  </td>
  <td width=81 nowrap valign=bottom style='width:61.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">2.4%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=144 nowrap valign=bottom style='width:108.25pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <font size="2">Gross Profit Percentage</font></td>
  <td width=107 nowrap valign=bottom style='width:80.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">50.7%</font></p>
  </td>
  <td width=107 nowrap valign=bottom style='width:80.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">48.6%</font></p>
  </td>
  <td width=81 nowrap valign=bottom style='width:61.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">4.3%</font></p>
  </td>
 </tr>
</table>

<p align="center">16</p>
<hr size=2 width="100%" noshade color=navy align=center>



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












<p align=center style='text-align:justify;text-indent:36.0pt;
text-autospace:none'><b>&nbsp;Selling, General and Administrative Costs (S, G&amp;A)</b>.&nbsp; S, G
&amp; A expenses increased to $835,000 for the quarter ended March 31, 2005 from
$732,000 for the quarter ended March 31, 2004.&nbsp; The increase is mainly due to increased
labor costs, in addition to 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 width=469
 style='width:600px;margin-left:50pt;border-collapse:collapse'>
 <tr style='height:12.75pt'>
  <td width=167 nowrap valign=bottom style='width:125.0pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td colspan=2 valign=bottom style='border-top:
  1.0pt solid windowtext;border-left:1.0pt solid windowtext;border-bottom:medium none;
  border-right:1.0pt solid black;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">Three Months Ended March 31,</font></p>
  </td>
  <td valign=bottom 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:0pt; padding-bottom:0pt' align="center">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=167 nowrap valign=bottom style='width:125.0pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td valign=bottom 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:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">2005</font></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;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">2004</font></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;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">Increase</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=167 nowrap valign=bottom style='width:125.0pt;border:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Selling</font></p>
  </td>
  <td width=116 nowrap valign=bottom style='width:87.05pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 249,000
	</font> </p>
  </td>
  <td width=112 nowrap valign=bottom style='width:83.95pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 231,000
	</font> </p>
  </td>
  <td width=75 valign=bottom 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:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:center'><font size="2">&nbsp;&nbsp;&nbsp;8%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=167 nowrap valign=bottom style='width:125.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">General and administrative</font></p>
  </td>
  <td width=116 nowrap valign=bottom style='width:87.05pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 586,000
	</font> </p>
  </td>
  <td width=112 nowrap valign=bottom style='width:83.95pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 501,000
	</font> </p>
  </td>
  <td width=75 valign=bottom 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:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:center'><font size="2">&nbsp;&nbsp;&nbsp;17%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=167 nowrap valign=bottom style='width:125.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Total S, G&amp;A</font></p>
  </td>
  <td width=116 nowrap valign=bottom style='width:87.05pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 835,000
	</font> </p>
  </td>
  <td width=112 nowrap valign=bottom style='width:83.95pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 732,000
	</font> </p>
  </td>
  <td width=75 valign=bottom 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:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:center'><font size="2">&nbsp;&nbsp;&nbsp;14%</font></p>
  </td>
 </tr>
</table>





</div>





<p style='text-align:justify;text-indent:36.0pt'><b>Research
and Development Costs</b>.&nbsp; Company-funded research and development
expenses decreased to $467,000 for the quarter ended March 31, 2005 from $472,000
for the quarter ended March 31, 2004.&nbsp; The decrease in Company-funded research
and development costs is due to an increase in customer-funded research and
development in support of a higher number of medical and dental new product
development projects.&nbsp; Company-funded research and development costs were as
follows:</p>



<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='width:601px;margin-left:50pt;border-collapse:collapse'>
 <tr style='height:12.75pt'>
  <td width=240 nowrap valign=bottom style='width:180.0pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td nowrap valign=bottom style='width:242px;border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid black;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' colspan="2">
  <p align=center style='text-align:center'><font size="2">Three Months Ended March 31,</font></p>
  </td>
  <td nowrap valign=bottom style='width:111px;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:0pt; padding-bottom:0pt'>

  <p align="center"><font size="2">Decrease</font></td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=240 nowrap valign=bottom style='width:180.0pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  &nbsp;</td>
  <td nowrap valign=bottom style='width:242px;border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid black;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' colspan="2">
  <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	2005&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	2004</font></td>
  <td nowrap valign=bottom style='width:111px;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:0pt; padding-bottom:0pt'>

  &nbsp;</td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=240 nowrap valign=bottom style='width:180.0pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  <div style="border-style: solid; border-width: 1px; padding-left: 4px; padding-right: 4px; padding-top: 1px; padding-bottom: 1px">
	<font size="2">Research and Development costs</font></div>

  </td>
  <td nowrap valign=bottom style='width:121px;border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:1px solid #000000;border-right:1.0pt solid black;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	467,000&nbsp;&nbsp;&nbsp;</font></td>
  <td nowrap valign=bottom style='width:118px;border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:1px solid #000000;border-right:1.0pt solid black;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	472,000&nbsp;&nbsp;&nbsp;</font></td>
  <td nowrap valign=bottom style='width:111px;border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:1px solid #000000;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  <p align="center"><font size="2">-1%</font></td>
 </tr>
</table>





<p style='text-align:justify;text-indent:36.0pt'>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 utilized to meet the needs of individual customers.&nbsp; In this
initial phase, there are generally no revenues generated and the associated
costs are expensed as incurred.&nbsp; </p>



<p align="justify">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 applications of 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 when certain
deliverables are completed as specified in each development contract.&nbsp; The
research and development costs associated with the customer-funded research and
development 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 $285,000 and $107,000 in
revenue in the quarters ended March 31, 2005 and March 31, 2004, respectively.&nbsp;
In the quarter ended March 31, 2005, $88,000 was recognized as COS, and $4,000 was recognized as COS in the quarter ended March 31, 2004.&nbsp; </p>










<p style='text-align:justify;text-indent:36.0pt'><b>Operating
Profit and Operating Profit </b><b>Percentage of Sales</b>.&nbsp; Our
consolidated operating profit for the quarter ended March 31, 2005 decreased to
$341,000 compared operating rofit of $400,000 for the same quarter in the
previous year.&nbsp; The decrease was due to decreased factory automation sales
levels and higher general and administrative expenses, partially offset by a
more profitable sales mix.&nbsp; Operating profit as a percentage of sales decreased
to 10.5% for the quarter ended March 31, 2005 compared to 12.1% for the quarter
ended March 31, 2004 due to the higher selling, general and administrative expenses.&nbsp;
Operating profit and margin were as follows: </p>
<div align="left">
<TABLE width="700" border=0 cellspacing=0 cellpadding=0 id="table7">
<TR>
   <TD>&nbsp;</TD>
   <TD width="267">&nbsp;</TD>
   <TD colspan=2 width="32%" align="center" style="border-style: solid; border-width: 1px; padding-left: 4px; padding-right: 4px; padding-top: 1px; padding-bottom: 1px" bordercolor="#000000"><FONT size=2 face="sans-serif">Three Months Ended March 31,</FONT></TD>
   <TD width="14%" align="center" style="border-style: solid; border-width: 1px; padding-left: 4px; padding-right: 4px; padding-top: 1px; padding-bottom: 1px" bordercolor="#000000" rowspan="2" valign="bottom"><FONT size=2 face="sans-serif">Decrease</FONT></TD>
</TR>
<TR>
   <TD>&nbsp;</TD>
   <TD width="267">&nbsp;</TD>
   <TD width="15%" align="center" style="border-style: solid; border-width: 1px; padding-left: 4px; padding-right: 4px; padding-top: 1px; padding-bottom: 1px" bordercolor="#000000"><FONT size=2 face="sans-serif">2005</FONT></TD>
   <TD width="17%" align="center" style="border-style: solid; border-width: 1px; padding-left: 4px; padding-right: 4px; padding-top: 1px; padding-bottom: 1px" bordercolor="#000000"><FONT size=2 face="sans-serif">2004</FONT></TD>
</TR>
<TR>
   <TD>&nbsp;</TD>
   <TD width="267" style="border-style: solid; border-width: 1px; padding-left: 4px; padding-right: 4px; padding-top: 1px; padding-bottom: 1px" bordercolor="#000000"><FONT size=2 face="sans-serif">Operating Profit</FONT></TD>
   <TD width="15%" align="right" style="border-style: solid; border-width: 1px; padding-left: 4px; padding-right: 4px; padding-top: 1px; padding-bottom: 1px" bordercolor="#000000"><FONT size=2 face="sans-serif">$341,000</FONT></TD>
   <TD width="17%" align="right" style="border-style: solid; border-width: 1px; padding-left: 4px; padding-right: 4px; padding-top: 1px; padding-bottom: 1px" bordercolor="#000000"><FONT size=2 face="sans-serif">$400,000</FONT></TD>
   <TD width="14%" align="center" style="border-style: solid; border-width: 1px; padding-left: 4px; padding-right: 4px; padding-top: 1px; padding-bottom: 1px" bordercolor="#000000"><FONT size=2 face="sans-serif">-15%</FONT></TD>
</TR>
<TR>
   <TD>&nbsp;</TD>
   <TD width="267" style="border-style: solid; border-width: 1px; padding-left: 4px; padding-right: 4px; padding-top: 1px; padding-bottom: 1px" bordercolor="#000000"><FONT size=2 face="sans-serif">Operating Profit Percentage</FONT></TD>
   <TD width="15%" align="right" style="border-style: solid; border-width: 1px; padding-left: 4px; padding-right: 4px; padding-top: 1px; padding-bottom: 1px" bordercolor="#000000"><FONT size=2 face="sans-serif">10.5%</FONT></TD>
   <TD width="17%" align="right" style="border-style: solid; border-width: 1px; padding-left: 4px; padding-right: 4px; padding-top: 1px; padding-bottom: 1px" bordercolor="#000000"><FONT size=2 face="sans-serif">12.1%</FONT></TD>
   <TD width="14%" align="center" style="border-style: solid; border-width: 1px; padding-left: 4px; padding-right: 4px; padding-top: 1px; padding-bottom: 1px" bordercolor="#000000"><FONT size=2 face="sans-serif">-13%</FONT></TD>
</TR>
</TABLE>
</div>
<p align=center style='text-align:justify;text-indent:36.0pt;
text-autospace:none'><b>Net Interest Expense. </b>&nbsp;Net interest expense was $0 in the quarter
ended March 31, 2005, down from $9,000 in the prior year's quarter due to the Company's
current debt-free status. </p>
<p align=center style='text-autospace:none'>17</p>
<hr size=2 width="100%" noshade color=navy align=center>



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












<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'><b>Provision for Taxes</b>. Our estimated effective combined federal and state
tax rate on income from operations for the quarter ended March 31, 2005 was 23%
due to the filing of the 2004 tax return that resulted in a $59,000 refund
received in the quarter and was 40% for the quarter ended March 31, 2004. </p>



<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'><b>Net Income.</b>&nbsp; Our net income for the three months ended March 31,
2005 was $275,000 or $0.03 per share on a basic and diluted basis, as compared
to a net income of $261,000 or $0.03 per share on a basic and diluted basis for
the three months ended March 31, 2004.</p>

<p style='text-autospace:none'><b>For the Nine-Month periods
ended March 31, 2005 and 2004</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=0 cellpadding=0 width=510
 style='width:600px;margin-left:50pt;border-collapse:collapse'>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td colspan=2 valign=bottom style='border-top:
  1.0pt solid windowtext;border-left:1.0pt solid windowtext;border-bottom:medium none;
  border-right:1.0pt solid black;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">Nine Months Ended March 31,
	</font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td valign=bottom 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:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">2005</font></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;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:medium none;
  height:19px; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Net Revenues:</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:89.0pt;border-left:1.0pt solid windowtext;height:18px; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">100.0%</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:18px; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">100.0%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:204.4pt;border-left:1.0pt solid windowtext;height:16px; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Cost of Goods Sold</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:16px; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">45.9%</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:89.0pt;border-top:medium none;height:16px; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">54.0%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Gross Profit</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">54.1%</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">46.0%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Selling, General and
  Administrative Expenses</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">25.8%</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">23.0%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Research and Development
  Costs</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">14.2%</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">12.3%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Income from Operations</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">14.1%</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">10.7%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Net interest and other
  expense (income)</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">-1.0%</font></p>
  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=right style='text-align:right'><font size="2">-0.1%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='width:204.4pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  <font size="2">Provision for Income Taxes</font></td>
  <td width=119 nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:1px solid #000000; width:89.0pt;border-left:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  <p align="right"><font size="2">5.4%</font></td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1px solid #000000;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  <p align="right"><font size="2">4.3%</font></td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=273 nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:1px solid #000000; width:204.4pt;border-left:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  <font size="2">Net Income</font></td>
  <td width=119 nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:1px solid #000000; width:89.0pt;border-left:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  <p align="right"><font size="2">9.7%</font></td>
  <td width=119 nowrap valign=bottom style='width:89.0pt;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1px solid #000000;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  <p align="right"><font size="2">6.5%</font></td>
 </tr>
</table>







</div>










<p style='text-align:justify;text-indent:36.0pt'><b>Net Sales.</b>&nbsp;
Consolidated sales decreased from $10,534,000 to $9,466,000 ($1,068,000 or 10%)
for the nine months ended March 31, 2005, compared to the nine months ended March
31, 2004.&nbsp; The reduction in sales is mainly due to a $698,000 decrease in
sales due to HealOzone shipments being replaced by a royalty agreement,
transitioning away from low margin customers and customer driven new product
shipment delays.&nbsp; Medical products declined as a percent of total sales to 36%
from 42% in the same nine months last year due to the timing of new product
launches that were delayed for shipment into future periods.&nbsp; Shipments to
dental customers decreased to 25% as HealOzone shipments in the prior nine
months were replaced by royalty payments.&nbsp; Sales to factory automation and
industrial customers increased to 28% as the industry maintained its recent 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 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>



<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=585
 style='width:439.0pt;margin-left:50pt;border-collapse:collapse'>
 <tr style='height:12.75pt'>
  <td width=199 nowrap valign=bottom style='width:149.0pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td width=195 nowrap colspan=2 valign=bottom style='width:146.0pt;border-top:
  solid windowtext 1.0pt;border-left:solid windowtext 1.0pt;border-bottom:none;
  border-right:solid black 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">Nine Months Ended March 31,
	</font> </p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.0pt;border:none;border-top:
  solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">FY</font></p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.0pt;border:none;border-top:
  solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">FY</font></p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.0pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">FY</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=199 nowrap valign=bottom style='width:149.0pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">% of Total Sales</font></p>
  </td>
  <td width=97 nowrap valign=bottom style='width:73.0pt;border:none;border-left:
  solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td width=97 nowrap valign=bottom style='width:73.0pt;border:none;border-right:
  solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.0pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.0pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2003</font></p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.0pt;border:none;border-right:
  solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2002</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=199 nowrap valign=bottom style='width:149.0pt;border:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Dental</font></p>
  </td>
  <td width=97 nowrap valign=bottom style='width:73.0pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">25%</font></p>
  </td>
  <td width=97 nowrap valign=bottom style='width:73.0pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">34%</font></p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.0pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">32%</font></p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.0pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">43%</font></p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.0pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">54%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=199 nowrap valign=bottom style='width:149.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Medical</font></p>
  </td>
  <td width=97 nowrap valign=bottom style='width:73.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">36%</font></p>
  </td>
  <td width=97 nowrap valign=bottom style='width:73.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">42%</font></p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">41%</font></p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">28%</font></p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">17%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=199 nowrap valign=bottom style='width:149.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Factory Automation</font></p>
  </td>
  <td width=97 nowrap valign=bottom style='width:73.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">28%</font></p>
  </td>
  <td width=97 nowrap valign=bottom style='width:73.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">15%</font></p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">18%</font></p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">19%</font></p>
  </td>
  <td width=64 nowrap valign=bottom style='width:48.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">19%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=199 nowrap valign=bottom style='width:149.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <font size="2">Government research and other</font></td>
  <td width=97 nowrap valign=bottom style='width:73.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="center"><font size="2">10%</font></td>
  <td width=97 nowrap valign=bottom style='width:73.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="center"><font size="2">9%</font></td>
  <td width=64 nowrap valign=bottom style='width:48.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="center"><font size="2">9%</font></td>
  <td width=64 nowrap valign=bottom style='width:48.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="center"><font size="2">10%</font></td>
  <td width=64 nowrap valign=bottom style='width:48.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align="center"><font size="2">10%</font></td>
 </tr>
</table>





<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'><b>Gross Profit and Gross Profit Percentage of Sales</b>.&nbsp; Our
consolidated gross profit for the nine months ended March 31, 2005 increased
$271,000 or 6% over the same nine months in the previous year despite 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 54.1% for the nine months ended March 31, 2005 compared to 46.0%
for the nine months ended March 31, 2004, due to gains from increased high
margin factory automation sales and manufacturing cost improvements.&nbsp; Gross
profit and gross profit percentage were as follows: </p>
<p style='text-align:center;text-autospace:
none'>18</p>
<hr size=2 width="100%" noshade color=navy align=center>



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












<div align="left">












<table class=MsoNormalTable border=0 cellpadding=0 width=443
 style='width:600px;margin-left:50pt;border-collapse:collapse'>
 <tr style='height:12.75pt'>
  <td width=149 nowrap valign=bottom style='width:112.0pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td nowrap colspan=2 valign=bottom style='border-top:
  1.0pt solid windowtext;border-left:1.0pt solid windowtext;border-bottom:medium none;
  border-right:1.0pt solid black;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">Nine Months Ended March 31,
	</font> </p>
  </td>
  <td nowrap valign=bottom 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:0pt; padding-bottom:0pt' align="center">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=149 nowrap valign=bottom style='width:112.0pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td nowrap valign=bottom 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:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td nowrap 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:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
  <td nowrap 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:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">Increase</font></p>
  </td>
 </tr>
 <tr height=0>
  <td width=149 style='border:1px solid; ; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' bordercolor="#000000">
	<font size="2">Gross Profit</font></td>
  <td width=109 style='border:1px solid; ; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right" bordercolor="#000000">
	<font size="2">$5,122,000</font></td>
  <td width=109 style='border:1px solid; ; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right" bordercolor="#000000">
	<font size="2">$4,851,000</font></td>
  <td width=75 style='border:1px solid; ; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right" bordercolor="#000000">
	<p align="center">
	<font size="2">&nbsp;&nbsp;&nbsp;6%</font></td>
 </tr>
 <tr height=0>
  <td width=149 style='border:1px solid; ; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' bordercolor="#000000">
	<font size="2">Gross Profit Percentage</font></td>
  <td width=109 style='border:1px solid; ; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' bordercolor="#000000">
	<p align="right"><font size="2">54.1%</font></td>
  <td width=109 style='border:1px solid; ; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' bordercolor="#000000">
	<p align="right"><font size="2">46.0%</font></td>
  <td width=75 style='border:1px solid; ; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' bordercolor="#000000">
	<p align="center"><font size="2">&nbsp;&nbsp;&nbsp;18%</font></td>
 </tr>
</table>





</div>





<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'><b>Selling, General and Administrative Costs (S, G&amp;A)</b>.&nbsp; S, G
&amp; A expenses increased by $12,000 or 0.5% for the nine months ended March
31, 2005 from the nine months ended March 31, 2004.&nbsp; The increase is mainly due
to a higher level of sales and marketing expenses supporting the new business
wins offset by reduced legal and insurance costs.&nbsp; S, G &amp; A costs were as
follows: </p>



<div align="left">



<table class=MsoNormalTable border=0 cellpadding=0 width=441
 style='width:600px;margin-left:50pt;border-collapse:collapse'>
 <tr style='height:12.75pt'>
  <td width=161 nowrap valign=bottom style='width:121.05pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td colspan=2 valign=bottom style='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:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">Nine Months Ended March 31,
	</font> </p>
  </td>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:medium none; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">Increase</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=161 nowrap valign=bottom style='width:121.05pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td valign=bottom 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:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
  <td valign=bottom 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:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">Decrease</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=161 nowrap valign=bottom style='width:121.05pt;border:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Selling</font></p>
  </td>
  <td width=107 nowrap valign=bottom style='width:80.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 726,000
	</font> </p>
  </td>
  <td width=99 nowrap valign=bottom style='width:74.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 629,000
	</font> </p>
  </td>
  <td width=75 nowrap valign=bottom style='width:56.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">&nbsp;&nbsp;&nbsp;15%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=161 nowrap valign=bottom style='width:121.05pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">General and administrative</font></p>
  </td>
  <td width=107 nowrap valign=bottom style='width:80.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,711,000 </font> </p>
  </td>
  <td width=99 nowrap valign=bottom style='width:74.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp; 1,796,000 </font> </p>
  </td>
  <td width=75 nowrap valign=bottom style='width:56.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">&nbsp;&nbsp;&nbsp;-5%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=161 nowrap valign=bottom style='width:121.05pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Total S, G&amp;A</font></p>
  </td>
  <td width=107 nowrap valign=bottom style='width:80.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2,437,000 </font> </p>
  </td>
  <td width=99 nowrap valign=bottom style='width:74.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp; 2,425,000 </font> </p>
  </td>
  <td width=75 nowrap valign=bottom style='width:56.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">&nbsp;&nbsp;&nbsp;0%</font></p>
  </td>
 </tr>
</table>





</div>





<p style='text-align:justify;text-indent:36.0pt'><b>Research
and Development Costs</b>.&nbsp; Research and development expenses increased to
$1,343,000 for the nine months ended March 31, 2005 from $1,299,000 for the nine
months ended March 31, 2004, an increase of $44,000 or 3%.&nbsp; The increase is due
to higher support levels 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>












<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='width:660px;margin-left:50pt;border-collapse:collapse'>
 <tr style='height:12.75pt'>
  <td width=239 nowrap valign=bottom style='width:179.0pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td nowrap valign=bottom style='width:279px;border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid black;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' colspan="2">
  <p align=center style='text-align:center'><font size="2">Nine Months Ended March 31,</font></p>
  </td>
  <td nowrap valign=bottom style='width:137px;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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=239 nowrap valign=bottom style='width:179.0pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  &nbsp;</td>
  <td nowrap valign=bottom style='width:279px;border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid black;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' colspan="2">
  <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	2005&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	2004</font></td>
  <td nowrap valign=bottom style='width:137px;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:0pt; padding-bottom:0pt'>

  <p align="center"><font size="2">Increase</font></td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=239 nowrap valign=bottom style='border-style:solid; border-width:1px; width:179.0pt;height:12.75pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' bordercolor="#000000">

  <font size="2">Research and Development Costs</font></td>
  <td nowrap valign=bottom style='width:133px;border-top:1px solid windowtext;
  border-left:1px solid windowtext;border-bottom:1px solid;border-right:1px solid black;
  height:12.75pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' bordercolor="#000000">
  <p align="center"><font size="2">$1,343,000</font></td>
  <td nowrap valign=bottom style='width:142px;border-top:1px solid windowtext;
  border-left:1px solid windowtext;border-bottom:1px solid;border-right:1px solid black;
  height:12.75pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' bordercolor="#000000">
  <p align="center"><font size="2">$1,299,000</font></td>
  <td nowrap valign=bottom style='width:137px;border-top:1px solid windowtext;
  border-left:1px solid;border-bottom:1px solid;border-right:1px solid windowtext;
  height:12.75pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' bordercolor="#000000">

  <p align="center"><font size="2">3%</font></td>
 </tr>
</table>





<p style='text-align:justify;text-indent:36.0pt'>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 utilized to meet the needs of individual customers.&nbsp; In this
initial phase, there are generally no revenues generated and the associated
costs are expensed as incurred.&nbsp; </p>



<p align="justify">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 applications of 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
$537,000 and $299,000 in revenue in the nine months ended March 31, 2005 and March
31, 2004, respectively.&nbsp; In the nine months ended March 31, 2005, $130,000 was
recognized as COS, and $200,000 was recognized as COS in the nine months ended March
31, 2004.&nbsp; </p>



<p style='text-align:justify;text-indent:36.0pt'><b>Operating
Profit and Operating Profit </b><b>Percentage of Sales</b>.&nbsp; Our
consolidated operating profit for the nine months ended March 31, 2005 increased
to $1,342,000 compared to operating profit of $1,127,000 in the same nine
months of the previous year.&nbsp; The increase was due to a more favorable product
mix, led by a greater contribution of factory automation products.&nbsp; Operating
profit as a percentage of sales increased to 14.2% for the nine months ended March
31, 2005 compared to 10.7% for the nine months ended March 31, 2004 due to the
effects of a more favorable sales mix offsetting the loss of efficiencies from
the lower sales volumes.&nbsp; Operating profit and margin were as follows: </p>
<p style='text-align:justify;text-indent:36.0pt'>&nbsp;</p>
<p style='text-align:center;'>19</p>
<hr size=2 width="100%" noshade color=navy align=center>



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












<div align="left">

<table class=MsoNormalTable border=0 cellpadding=0 width=432
 style='width:600px;margin-left:50pt;border-collapse:collapse'>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:233px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=2 valign=bottom style='border-top:
  1.0pt solid windowtext;border-left:1.0pt solid windowtext;border-bottom:medium none;
  border-right:1.0pt solid black;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">Nine Months Ended March 31,
	</font> </p>
  </td>
  <td valign=bottom 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:0pt; padding-bottom:0pt' align="center">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:233px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td valign=bottom 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:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </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:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </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:0pt; padding-bottom:0pt' align="center">
  <p align=center style='text-align:center'><font size="2">Increase</font></p>
  </td>
 </tr>
 <tr height=0>
  <td width=226 style='border:1px solid; ; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' bordercolor="#000000">
	<font size="2">Operating Profit</font></td>
  <td width=120 style='border:1px solid; ; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' bordercolor="#000000">
	<p align="right"><font size="2">$1,342,00</font></td>
  <td width=101 style='border:1px solid; ; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right" bordercolor="#000000">
	<font size="2">$1,127,000</font></td>
  <td width=64 style='border:1px solid; ; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right" bordercolor="#000000">
	<font size="2">19.1%</font></td>
 </tr>
 <tr height=0>
  <td width=226 style='border:1px solid; ; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' bordercolor="#000000">
	<font size="2">Operating Profit Percentage</font></td>
  <td width=120 style='border:1px solid; ; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' bordercolor="#000000">
	<p align="right"><font size="2">14.2%</font></td>
  <td width=101 style='border:1px solid; ; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right" bordercolor="#000000">
	<font size="2">10.7%</font></td>
  <td width=64 style='border:1px solid; ; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right" bordercolor="#000000">
	<font size="2">32.7%</font></td>
 </tr>
</table>

</div>

<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'><b>Royalties and Other Income. </b>&nbsp;We received $47,000 in royalty payments
in the nine months ended March 31, 2005, compared to $40,000 in the same period
of the prior year.</p>



<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'><b>Net Interest Expense. </b>&nbsp;Net interest expense was $9,000 in the nine
months ended March 31, 2005, down from $44,000 in the prior year's nine 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:36.0pt;text-autospace:
none'><b>Provision for Taxes</b>. Our estimated effective combined Federal and
state tax rate on income from operations for the nine months ended March 31,
2005 was 36% due to the filing of the 2004 tax return that resulted in a
$59,000 refund received in the third quarter and was 40% for the nine months
ended March 31, 2004. </p>



<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'><b>Net Income.</b>&nbsp; Our net income for the nine months ended March 31,
2005 increased 35% to $921,000 or $0.10 per share on a basic and diluted basis,
as compared to a net income of $683,000 or $0.08 per share on a basic and $0.07
per share on a diluted basis for the nine months ended March 31, 2004.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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:36.0pt;text-autospace:
none'>The following table presents selected financial information for the
comparative period last year and the year ended June 30, 2004:</p>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='width:602px;margin-left:50pt;border-collapse:collapse'>
 <tr style='height:12.75pt'>
  <td width=274 nowrap valign=bottom style='width:205.5pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td nowrap colspan=2 valign=bottom style='width:205px;border-top:
  1.0pt solid windowtext;border-left:1.0pt solid windowtext;border-bottom:medium none;
  border-right:1.0pt solid black;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">As of March 31,
	</font> </p>
  </td>
  <td nowrap valign=bottom style='width:114px;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:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">Year Ending</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=274 nowrap valign=bottom style='width:205.5pt;padding:0pt .85pt 0pt .85pt;
  height:12.75pt'>

  </td>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:111px;border-left:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td nowrap valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; width:92px;border-right:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
  <td nowrap valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; width:114px;border-right:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">June 30, 2004</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=274 nowrap valign=bottom style='width:205.5pt;border:solid windowtext 1.0pt;
  padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Cash and cash equivalents</font></p>
  </td>
  <td nowrap valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:110px;border-left:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">$2,259,000 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:92px;border-left:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">$1,306,000 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:114px;border-left:medium none;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">$2,070,000 </font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=274 nowrap valign=bottom style='width:205.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Working Capital</font>&#185;</p>
  </td>
  <td nowrap valign=bottom style='width:110px;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:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">$7,027,000 </font> </p>
  </td>
  <td nowrap valign=bottom style='width:92px;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:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">$5,353,000 </font> </p>
  </td>
  <td nowrap valign=bottom style='width:114px;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:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">$5,795,000 </font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=274 nowrap valign=bottom style='width:205.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <p><font size="2">Credit Line outstanding
  balance</font></p>
  </td>
  <td nowrap valign=bottom style='width:110px;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:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">$0 </font> </p>
  </td>
  <td nowrap valign=bottom style='width:92px;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:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">$0 </font> </p>
  </td>
  <td nowrap valign=bottom style='width:114px;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:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right </p>
  </td>
 </tr>
 <tr style='>
  <font size="2">$0</font></tr>
 <tr style='height:12.75pt'>
  <td width=274 nowrap valign=bottom style='width:205.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt .85pt 0pt .85pt;height:12.75pt'>
  <font size="2">Tangible book value/common
  share</font>&#178;</td>
  <td nowrap valign=bottom style='width:110px;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:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">$0.97 </font> </p>
  </td>
  <td nowrap valign=bottom style='width:92px;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:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">$0.81 </font> </p>
  </td>
  <td nowrap valign=bottom style='width:114px;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:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">$0.85 </font> </p>
  </tr>
 <tr style='height:12.75pt'>
  <td width=274 nowrap valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; width:205.5pt;border-bottom:medium none;padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' rowspan="2">
  <div style="border-bottom-style: solid; border-bottom-width: 1px">
	<font size="2">Number of days of sales
  outstanding (DSO) in accounts receivable at end
  of quarter</font>&#179;</div>
  </td>
  <td nowrap valign=bottom style='width:110px;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:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='width:92px;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:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='width:114px;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:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:110px;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:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">72</font></p>
  </td>
  <td nowrap valign=bottom style='width:92px;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:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">52</font></p>
  </td>
  <td nowrap valign=bottom style='width:114px;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:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">59</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=274 nowrap valign=bottom style='width:205.5pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td nowrap valign=bottom style='width:111px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='width:93px;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; width:114px;border-right:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=274 nowrap valign=bottom style='width:205.5pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  </td>
  <td nowrap colspan=2 valign=bottom style='width:205px;border-top:
  1.0pt solid windowtext;border-left:1.0pt solid windowtext;border-bottom:medium none;
  border-right:1.0pt solid black;padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' rowspan="2">
  <p align=center style='text-align:center'><font size="2">Nine Months Ended March 31,
	<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2005&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	2004</font></p>
  </td>
  <td nowrap valign=bottom style='width:114px;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:0pt; padding-bottom:0pt' rowspan="2">
  <p align=center style='text-align:center'><font size="2">Year Ending<br>
	June 30, 2004</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=274 nowrap valign=bottom style='width:205.5pt;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt .85pt 0pt .85pt;height:12.75pt'>

  <div style="border-bottom-style: solid; border-bottom-width: 1px">
&nbsp;</div>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=274 nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:1px solid; width:205.5pt;border-left:1.0pt solid windowtext;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' bordercolor="#000000">

  <font size="2">Net cash provided by operations</font></td>
  <td nowrap valign=bottom style='width:110px;border-top:
  1.0pt solid windowtext;border-left:1.0pt solid windowtext;border-bottom:1px solid;
  border-right:1.0pt solid black;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="right" bordercolor="#000000">
  <font size="2">$111,000</font></td>
  <td nowrap valign=bottom style='width:92px;border-top:
  1.0pt solid windowtext;border-left:1.0pt solid windowtext;border-bottom:1px solid;
  border-right:1.0pt solid black;height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="right" bordercolor="#000000">
  <font size="2">$1,160,000</font></td>
  <td nowrap valign=bottom style='width:114px;border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:1px solid;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:.85pt; padding-right:.85pt; padding-top:0pt; padding-bottom:0pt' align="right" bordercolor="#000000">
  <font size="2">$2,054,000</font></td>
 </tr>
</table>





<p style='margin-left:36.0pt;text-align:justify;text-autospace:
none'>&#185; Working Capital is calculated as follows:&nbsp; ending current assets
balance less ending current liabilities balance.</p>



<p style='margin-left:36.0pt;text-align:justify;text-autospace:
none'>&#178; Tangible book value/common share<sup> </sup>is calculated as
follows: (Total shareholders' equity less Goodwill) divided by (basic weighted
average outstanding shares for the most recent quarter).</p>

<p style='margin-left:36.0pt;text-align:justify;text-autospace:
none'>&#179; 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:36.0pt;text-autospace:
none'>Our working capital at March 31, 2005 increased to $7.0 million compared
to $5.4 million at March 31, 2004 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 $668,000
in the nine months ended March 31, 2005 compared to $4,000 in the comparable nine
months last year.&nbsp;</p>
<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'>&nbsp;</p>
<p style='text-align:center;text-autospace:
none'>20</p>
<hr size=2 width="100%" noshade color=navy align=center>



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












<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'>&nbsp;</p>



<p style='text-align:justify;text-indent:36.0pt'>In October
2003, our then existing 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 credit facility expired in October
2004.&nbsp; 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 under the credit
facility were secured by all assets of, and guaranteed by the Company. </p>



<p style='text-align:justify;text-indent:36.0pt'>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 (5.75% at March 31, 2005); or LIBOR plus 2.50% (5.37%
(one month) to 5.62% (three months) at March 31, 2005), based on outstanding
borrowings with no minimum interest charge.&nbsp;&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 March
31, 2005.&nbsp; The total eligible borrowing capacity at March 31, 2005 was
$2,000,000.</p>



<p style='text-autospace:ideograph-numeric ideograph-other; text-indent:36pt' align="justify">There
are certain financial and non-financial covenants that we must meet to be in
compliance with the terms of the October 2004 Wells Fargo credit facility.&nbsp; At
March 31, 2005, we were in compliance with all such covenants.&nbsp; </p>










<p style='text-align:justify;text-indent:36.0pt'>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:36.0pt'>At March 31,
2005, we had cash and cash equivalents of $2,259,000.&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 the next twelve
months. </p>

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



<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'>We are subject to the revised requirements of the Statement of Financial
Accounting Standards (&quot;SFAS&quot;) No. 123R &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 fiscal year that begins after December 15,
2005. Accordingly we will begin to report the expense of vested stock options
in our report for the quarter and ending September 30, 2006.</p>

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

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

<p style='text-align:center;text-autospace:none'>&nbsp;21</p>

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



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












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

<p style='text-align:justify;text-indent:36.0pt'>&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:36.0pt'>During the
quarter ended March 31, 2005, 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 except that subsequent
to the ending of our second quarter, we improved the information and financial
controls by consolidating our accounting and Enterprise Resource Planning
system to a unified platform. This allowed us to eliminate two of the previous
three accounting systems which we operated.&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 Company's
information processing efficiency.</p>
<p style='text-align:justify;text-indent:36.0pt'>&nbsp;</p>
<p style='text-align:justify;text-indent:36.0pt'>&nbsp;</p>
<p style='text-align:justify;text-indent:36.0pt'>&nbsp;</p>
<p style='text-align:justify;text-indent:36.0pt'>&nbsp;</p>
<p style='text-align:justify;text-indent:36.0pt'>&nbsp;</p>

<p align=center style='text-align:center'>22</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'><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;<font size="2">&nbsp;
</font></p>
<div align="left">
	<table border="0" width="740" id="table8">
		<tr>
			<td valign="top"> <b><font size="2">Item 1.</font></b></td>
			<td width="665" valign="top">



<p style='text-autospace:none'><b><font size="2">Legal Proceedings </font> </b></p>



			</td>
		</tr>
		<tr>
			<td valign="top">&nbsp;</td>
			<td width="665" valign="top">&nbsp; </td>
		</tr>
		<tr>
			<td valign="top">&nbsp;</td>
			<td width="665" valign="top">



<p style='text-align:justify;text-autospace:
none'><font size="2">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.</font></p>

			</td>
		</tr>
		<tr>
			<td valign="top"> <b><font size="2">Item 2.</font></b></td>
			<td width="665" valign="top">

<p style='margin-top:18.0pt;text-align:justify'><font size="2"><b>Unregistered Sales of
Equity Securities and Use of Proceeds. </b>&nbsp;<br>
None.</font></p></td>
		</tr>
		<tr>
			<td valign="top"> <b><font size="2">Item 3.</font></b></td>
			<td width="665" valign="top">

<p style='margin-top:18.0pt;text-align:justify'><font size="2"><b>Defaults Upon Senior
Securities. </b>&nbsp;<br>
None.</font></p></td>
		</tr>
		<tr>
			<td valign="top"> <b><font size="2">Item 4.</font></b></td>
			<td width="665" valign="top">

<p style='margin-top:18.0pt;text-align:justify'><font size="2"><b>Submissions of Matters
to a Vote of Securities Holders. &nbsp;</b>&nbsp;<br>
None.</font></p></td>
		</tr>
		<tr>
			<td valign="top"> <b><font size="2">Item 5.</font></b></td>
			<td width="665" valign="top">

<p style='margin-top:18.0pt;text-align:justify'><font size="2"><b>Other Information. </b>&nbsp;<br>
None.</font></p></td>
		</tr>
		<tr>
			<td valign="top"><b><font size="2">Item 6. </font> </b></td>
			<td width="665" valign="top">

<p style='margin-top:18.0pt;text-align:justify'><b><font size="2">Exhibits.
</font> </b></p>

			</td>
		</tr>
	</table>
</div>
<p style='text-autospace:none'><font size="2">&nbsp;</font></p>

<p style='margin-left:36.0pt;text-indent:36.0pt'><u><font size="2">Exhibits</font></u><font size="2">:</font></p>

<p style='margin-left:144.0pt;text-indent:-36.0pt' align="justify"><font size="2">31.1&nbsp;&nbsp;&nbsp;&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</font></p>



<p style='margin-left:144.0pt;text-indent:-36.0pt' align="justify"><font size="2">31.2&nbsp;&nbsp;&nbsp;&nbsp;&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</font></p>

<p style='margin-left:144.0pt;text-indent:-36.0pt' align="justify"><font size="2">32&nbsp;&nbsp;&nbsp;&nbsp;&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</font></p>

<p><font size="2">SIGNATURES </font> </p>

<p style='text-indent:36.0pt' align="justify"><font size="2">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.</font></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:0pt 0pt 0pt 0pt'>
  <p><font size="2">Date:&nbsp; May 12, 2005</font></p>

  <p><font size="2">PRO-DEX INC. </font> </p>
  </td>
  <td width=378 valign=top style='width:283.5pt;padding:0pt 0pt 0pt 0pt'>
  <p><font size="2">Date:&nbsp; May 12, 2005</font></p>

  <p><font size="2">PRO-DEX INC. </font> </p>
  </td>
 </tr>
 <tr>
  <td width=306 valign=top style='width:229.5pt;padding:0pt 0pt 0pt 0pt'>
  <p><font size="2">By: / s / Patrick Johnson </font> </p>
  </td>
  <td width=378 valign=top style='width:283.5pt;padding:0pt 0pt 0pt 0pt'>
  <p><font size="2">By: / s / Jeffrey J.
  Ritchey </font> </p>
  </td>
 </tr>
 <tr>
  <td width=306 valign=top style='width:229.5pt;padding:0pt 0pt 0pt 0pt'>

  <font size="2">&nbsp; </font>

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

  </td>
 </tr>
 <tr>
  <td width=306 valign=top style='width:229.5pt;padding:0pt 0pt 0pt 0pt'>
  <p><font size="2">Patrick Johnson </font> </p>
  </td>
  <td width=378 valign=top style='width:283.5pt;padding:0pt 0pt 0pt 0pt'>
  <p><font size="2">Jeffrey J. Ritchey </font> </p>
  </td>
 </tr>
 <tr>
  <td width=306 valign=top style='width:229.5pt;padding:0pt 0pt 0pt 0pt'>
  <p><font size="2">Chief Executive Officer</font></p>
  </td>
  <td width=378 valign=top style='width:283.5pt;padding:0pt 0pt 0pt 0pt'>
  <p><font size="2">Secretary and Chief
  Financial Officer<br>
	(Principal Financial and
  Accounting Officer)</font></p>
  </td>
 </tr>
</table>



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

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

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

</div>



&nbsp;












</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><font size="2">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;</font></b></p>

<p align=center style='text-align:center'><b><u><font size="2">CERTIFICATIONS</font></u></b></p>



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



<div align="left">
	<table border="0" width="740" id="table1" cellpadding="5">
		<tr>
			<td valign="top"><font size="2">1.</font></td>
			<td valign="top" colspan="2">



<p style='margin-left:36.0pt;text-align:justify;text-indent:
- -36.0pt'><font size="2">I have reviewed this
Form 10-QSB of Pro-Dex, Inc.;</font></p>



			</td>
		</tr>
		<tr>
			<td valign="top"><font size="2">2.</font></td>
			<td valign="top" colspan="2">



<p style='text-align:justify;'><font size="2">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>



			</td>
		</tr>
		<tr>
			<td valign="top"><font size="2">3.</font></td>
			<td valign="top" colspan="2">



<p style='text-align:justify;'><font size="2">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>



			</td>
		</tr>
		<tr>
			<td valign="top"><font size="2">4.</font></td>
			<td valign="top" colspan="2">



<p style='text-align:justify;'><font size="2">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>



			</td>
		</tr>
		<tr>
			<td valign="top">&nbsp;</td>
			<td valign="top"><font size="2">a)</font></td>
			<td valign="top">



<p style='text-align:justify;'><font size="2">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>



			</td>
		</tr>
		<tr>
			<td valign="top">&nbsp;</td>
			<td valign="top"><font size="2">b)</font></td>
			<td valign="top">



<p style='text-align:justify;'><font size="2">[Omitted pursuant to SEC
Release 34-47986];</font></p>



			</td>
		</tr>
		<tr>
			<td valign="top">&nbsp;</td>
			<td valign="top"><font size="2">c)</font></td>
			<td valign="top">



<p style='text-align:justify;'><font size="2">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>



			</td>
		</tr>
		<tr>
			<td valign="top">&nbsp;</td>
			<td valign="top"><font size="2">d)</font></td>
			<td valign="top">



<p style='text-align:justify;'><font size="2">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>



			</td>
		</tr>
		<tr>
			<td valign="top"><font size="2">5.</font></td>
			<td valign="top" colspan="2">



<p style='text-align:justify;'><font size="2">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>



			</td>
		</tr>
		<tr>
			<td valign="top">&nbsp;</td>
			<td valign="top"><font size="2">a)</font></td>
			<td valign="top">



<p style='text-align:justify;'><font size="2">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>



			</td>
		</tr>
		<tr>
			<td valign="top">&nbsp;</td>
			<td valign="top"><font size="2">b)</font></td>
			<td valign="top">



<p style='text-align:justify;'><font size="2">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>





			</td>
		</tr>
	</table>
</div>
<p><font size="2">Date: May 12, 2005</font></p>

<p style="margin-left: 3.5in"><font size="2"><u>/s/
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; PATRICK L. JOHNSON&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<br>
</u>Patrick
L. Johnson<br>
Chief
Executive Officer</font></p>
<p>&nbsp;</p>
<p>&nbsp;</p>

</body>

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

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

<body>










<p>&nbsp;</p>
<p><b><font size="2">EXHIBIT
31.2&nbsp;&nbsp;&nbsp;&nbsp;</font></b></p>

<p align=center style='text-align:center'><b><u><font size="2">CERTIFICATIONS</font></u></b></p>

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



<div align="left">
	<table border="0" width="740" id="table2" cellpadding="5">
		<tr>
			<td valign="top"><font size="2">1.</font></td>
			<td valign="top" colspan="2">



<p style='margin-left:36.0pt;text-align:justify;text-indent:
- -36.0pt'><font size="2">I have reviewed this
Form 10-QSB of Pro-Dex, Inc.;</font></p>



			</td>
		</tr>
		<tr>
			<td valign="top"><font size="2">2.</font></td>
			<td valign="top" colspan="2">



<p style='text-align:justify;'><font size="2">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>



			</td>
		</tr>
		<tr>
			<td valign="top"><font size="2">3.</font></td>
			<td valign="top" colspan="2">



<p style='text-align:justify;'><font size="2">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>



			</td>
		</tr>
		<tr>
			<td valign="top"><font size="2">4.</font></td>
			<td valign="top" colspan="2">



<p style='text-align:justify;'><font size="2">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>



			</td>
		</tr>
		<tr>
			<td valign="top">&nbsp;</td>
			<td valign="top"><font size="2">a)</font></td>
			<td valign="top">



<p style='text-align:justify;'><font size="2">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>



			</td>
		</tr>
		<tr>
			<td valign="top">&nbsp;</td>
			<td valign="top"><font size="2">b)</font></td>
			<td valign="top">



<p style='text-align:justify;'><font size="2">[Omitted pursuant to SEC
Release 34-47986];</font></p>



			</td>
		</tr>
		<tr>
			<td valign="top">&nbsp;</td>
			<td valign="top"><font size="2">c)</font></td>
			<td valign="top">



<p style='text-align:justify;'><font size="2">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>



			</td>
		</tr>
		<tr>
			<td valign="top">&nbsp;</td>
			<td valign="top"><font size="2">d)</font></td>
			<td valign="top">



<p style='text-align:justify;'><font size="2">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>



			</td>
		</tr>
		<tr>
			<td valign="top"><font size="2">5.</font></td>
			<td valign="top" colspan="2">



<p style='text-align:justify;'><font size="2">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>



			</td>
		</tr>
		<tr>
			<td valign="top">&nbsp;</td>
			<td valign="top"><font size="2">a)</font></td>
			<td valign="top">



<p style='text-align:justify;'><font size="2">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>



			</td>
		</tr>
		<tr>
			<td valign="top">&nbsp;</td>
			<td valign="top"><font size="2">b)</font></td>
			<td valign="top">



<p style='text-align:justify;'><font size="2">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>





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





<p><font size="2">Date: May 12, 2005</font></p>

<p style="margin-left: 3.5in"><font size="2"><u>/s/
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; JEFFREY J. RITCHEY&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u>&nbsp;<br>
Jeffrey
J. Ritchey<br>
Chief
Financial Officer</font></p>
<p>&nbsp;</p>
<p><font size="2">&nbsp;</font></p>

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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>4
<FILENAME>ex32.htm
<TEXT>
<html>

<head>
<title>EXHIBIT 32</title>
</head>

<body>












<p>&nbsp;</p>
<p><b><font size="2">EXHIBIT 32</font></b></p>





<p align=center style='margin-top:0pt;text-align:center'><b><font size="2">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</font></b></p>

<p align=center style='margin-top:0pt;text-align:center'><b><font size="2">&nbsp;</font></b></p>

<p align=center style='margin-top:0pt;text-align:center'><b><font size="2">Certifications
of Chief Executive Officer and Chief Financial Officer</font></b></p>



<p style='margin-top:0pt;text-align:justify; text-indent:36pt'><font size="2">In connection with the
quarterly report on Form 10-QSB of Pro-Dex Inc. (the &quot;Company&quot;) for the
quarterly period ended March 31, 2005 (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:</font></p>

<p style='text-align:justify; text-indent:36pt'><font size="2">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</font></p>

<p style='text-align:justify; text-indent:36pt'><font size="2">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.</font></p>
<p style='text-align:justify; text-indent:36pt'>&nbsp;</p>



<p><font size="2">Dated: May
12, 2005&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; By:</font><u><font size="2">
/s/ &nbsp;&nbsp; PATRICK L. JOHNSON&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<br>
</font> </u><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;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;Chief
Executive Officer and President</font><u><font size="2"><br>
<br>
</font>
</u></p>



<p><font size="2">Dated: May
12, 2005&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; By:</font><u><font size="2">
/s/ &nbsp;&nbsp; JEFFREY J. RITCHEY&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<br>
</font> </u><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;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; Chief Financial Officer</font></p>



<p align="justify"><font size="2">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.</font><u><font size="2"><br>
<br>
</font>
</u></p>





<p align=center style='text-align:center;line-height:1.0pt;
text-autospace:none'><b><font size="2">End of Filing</font></b></p>

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







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