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<SEC-DOCUMENT>0001003297-06-000051.txt : 20060214
<SEC-HEADER>0001003297-06-000051.hdr.sgml : 20060214
<ACCEPTANCE-DATETIME>20060214145641
ACCESSION NUMBER:		0001003297-06-000051
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20051231
FILED AS OF DATE:		20060214
DATE AS OF CHANGE:		20060214

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PRO DEX INC
		CENTRAL INDEX KEY:			0000788920
		STANDARD INDUSTRIAL CLASSIFICATION:	SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841]
		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:		06613392

	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>pdex10q1.htm
<TEXT>
<html>

<head>


<title>Pro-Dex Form 10Q-SB by www.edgar2.com</title>



</head>

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















  <p>&nbsp;</p>
<p>&nbsp;</p>
<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</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 December 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 FROM&nbsp;<u> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>&nbsp;TO&nbsp;<u> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	</u>.</b></p>

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

  <p align=center style='text-align:center;text-autospace:none'><b>Commission
  File Number&nbsp;&nbsp;&nbsp; 0-14942 </b></p>
  <p align=center style='text-align:center;text-autospace:none'><b>
	<font size="5">PRO-DEX, INC.&nbsp;&nbsp;&nbsp; <br>
	</font>(Exact
  name of small business issuer as specified in its
  charter)&nbsp;&nbsp;&nbsp;&nbsp; </b></p>
<table border="0" width="100%" id="table1">
	<tr>
		<td align="center">&nbsp;</td>
		<td align="center">
  <p align=center style='text-align:center;text-autospace:none'>&nbsp;</p>
  		</td>
	</tr>
	<tr>
		<td align="center"><b><u>Colorado </u></b></td>
		<td align="center">
  <p align=center style='text-align:center;text-autospace:none'><b><u>84-1261240
  </u></b></p>
  		</td>
	</tr>
	<tr>
		<td align="center"><b>(State
  or Other Jurisdiction of</b></td>
		<td align="center">
  <p align=center style='text-align:center;text-autospace:none'><b>(IRS
  Employer Identification No.) </b></p>
  		</td>
	</tr>
	<tr>
		<td align="center"><b>Incorporation
  or Organization)</b></td>
		<td align="center">
  <p align=center style='text-align:center;text-autospace:none'>&nbsp;</p>
  		</td>
	</tr>
	<tr>
		<td align="center">&nbsp;</td>
		<td align="center">
  <p align=center style='text-align:center;text-autospace:none'>&nbsp;</p>
  		</td>
	</tr>
</table>
  <p align=center style='text-align:center;text-autospace:none'><b><u>151 E. Columbine Avenue, Santa Ana, California 92707&nbsp;&nbsp;&nbsp;
  <br>
	</u>(Address
  of Principal Executive Offices)&nbsp;&nbsp;&nbsp;&nbsp; </b></p>
  <p align=center style='text-align:center;text-autospace:none'><b>Issuer's
  telephone number: <u>714-241-4411&nbsp;&nbsp;&nbsp; <br>
	</u>&nbsp;</b></p>





<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 by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).<br>
Yes
[&nbsp; ] No [X]</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; 9,524,912 shares of
Common Stock, no par value, as of February 7, 2006. </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&nbsp;</b></p>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width="100%"
 style='width:100.0%;border-collapse:collapse'>
 <tr style='height:15.75pt'>
  <td colspan=3 valign=bottom style='height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><b><font size="2">PRO-DEX, INC.
  and SUBSIDIARIES</font></b></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td colspan=3 valign=bottom style='height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><b><font size="2">CONSOLIDATED
  BALANCE SHEETS</font></b></p>
  </td>
 </tr>
 <tr style='height:10.5pt'>
  <td valign=bottom style='height:10.5pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td valign=bottom style='height:10.5pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td valign=bottom style='height:10.5pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:27.0pt'>
  <td valign=top style='height:27.0pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-right:medium none; height:27.0pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><i><font size="2">December 31, 2005
	<br>
	(unaudited)</font></i></p>
  </td>
  <td valign=top style='border:1.0pt solid windowtext;
  height:27.0pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><i><font size="2">June 30,2005 <br>
	(audited)</font></i></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><b><font size="2">ASSETS</font></b></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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Current assets:</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Cash and cash equivalents </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  <font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,177,000&nbsp;</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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  <font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,584,000&nbsp;</font></td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;
  Accounts receivable, net of allowance for doubtful </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  accounts of $40,000 at December 31 and $100,000 at June 30</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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">2,643,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;
  3,521,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;
  Inventories, net </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">3,575,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;
  3,145,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;
  Prepaid expenses </font> </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">224,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  66,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;
  Income tax receivable</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><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:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  96,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;
  Deferred income taxes</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">525,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;
  519,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total current assets
  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;9,144,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;
  9,931,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><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 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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">1,225,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;
  1,156,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Other assets:</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Goodwill</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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align="right"><font size="2">1,110,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;
  1,110,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Intangibles - Patents,
  net</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:5.4pt; padding-right:5.4pt; 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;&nbsp;
  1,523,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  - </font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td 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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Deferred income taxes</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;&nbsp;
  481,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;
  541,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;
  Other </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:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  34,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  18,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total other assets
  </font>
  </p>
  </td>
  <td valign=top style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;
  3,148,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;
  1,669,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  <font size="2">Total assets</font></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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  <font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13,517,000&nbsp;</font></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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  <font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12,756,000&nbsp;</font></td>
 </tr>
 <tr style='height:12.75pt'>
  <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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  &nbsp;</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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  &nbsp;</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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  &nbsp;</td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><b><font size="2">LIABILITIES AND
  SHAREHOLDERS' EQUITY</font></b></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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Current liabilities:</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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Accounts payable</font></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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  <font size="2">$855,000&nbsp;</font></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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  <font size="2">$1,158,000&nbsp;</font></td>
 </tr>
 <tr style='height:12.75pt'>
  <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:19px; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Accrued expenses</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:19px; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;&nbsp;
  531,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:19px; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;
  472,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Deferred payable
  (patent)</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:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  71,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  -&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td 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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Income taxes payable </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:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  -&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  13,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total current
  liabilities </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:5.4pt; padding-right:5.4pt; 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; &nbsp;1,457,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;
  1,643,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Long-term liabilities
  (patent deferred payable)</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;&nbsp;
  245,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  -&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td 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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Total liabilities</font></p>
  </td>
  <td valign=top style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;
  1,702,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 1,643,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Commitments and
  contingencies </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Shareholders' equity:</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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Common shares; no par
  value; 50,000,000 shares authorized;</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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,504,912 shares
  issued and outstanding December 31, </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,449,396 shares
  issued and outstanding June 30.</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:5.4pt; padding-right:5.4pt; 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;
  16,046,000&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:5.4pt; padding-right:5.4pt; 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;
  15,933,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Accumulated deficit </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:5.4pt; padding-right:5.4pt; 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;
  (4,231,000)</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;
  (4,820,000)</font></p>
  </td>
 </tr>
 <tr style='height:9.75pt'>
  <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:9.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:9.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:9.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total shareholders'
  equity</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:5.4pt; padding-right:5.4pt; 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;
  11,815,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;11,113,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  &nbsp;</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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  &nbsp;</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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  &nbsp;</td>
 </tr>
 <tr style='height:9.75pt'>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:3px double windowtext; border-top:medium none; height:9.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and
	shareholders' equity</font></td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:3px double windowtext;border-right:1.0pt solid windowtext;
  height:9.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  <font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13,517,000&nbsp;</font></td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:3px double windowtext;border-right:1.0pt solid windowtext;
  height:9.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  <font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12,756,000&nbsp;</font></td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

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

  </td>
  <td valign=top style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td colspan=3 valign=bottom style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><i><font size="2">See notes to consolidated financial statements.</font></i></p>
  </td>
 </tr>
 </table>

<p align="center">&nbsp;-2-</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'>










<table class=MsoNormalTable border=0 cellpadding=0
 style='width:100%;border-collapse:collapse'>
 <tr style='height:15.75pt'>
  <td colspan=3 valign=bottom style='height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><b><font size="2">PRO-DEX, INC.
  and SUBSIDIARIES</font></b></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td colspan=3 valign=bottom style='height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><b><font size="2">CONSOLIDATED
  STATEMENTS OF OPERATIONS</font></b></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td colspan=3 valign=bottom style='height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><b><font size="2">Three months
  ended December 31 (unaudited)</font></b></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">

  </td>
  <td colspan=2 valign=top style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p 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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">

  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-right:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="20%">
  <p align=center style='text-align:center'><i><font size="2">2005</font></i></p>
  </td>
  <td valign=top style='border:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="19%">
  <p 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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="20%">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="19%">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">
  <p><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	3,750,000
	</font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">
  <p><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	2,894,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">Cost of sales </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">
  <p><font size="2">2,022,000 </font> </p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">
  <p><font size="2">1,275,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">Gross profit </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">
  <p><font size="2">1,728,000 </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  1,619,000&nbsp;</font></p>
  </td>
 </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">Operating expenses: </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Selling </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">
  <p><font size="2">254,000 </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">
  <p><font size="2">278,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; General and
  administrative expenses </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">
  <p><font size="2">534,000 </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">
  <p><font size="2">581,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Research and
  development costs </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">
  <p><font size="2">444,000 </font> </p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">
  <p><font size="2">457,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">Total operating expenses </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">
  <p><font size="2">1,232,000 </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">
  <p><font size="2">1,316,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">

  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">Income from operations </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">
  <p><font size="2">496,000 </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">
  <p><font size="2">303,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">Other income (expense): </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Other income, net </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">
  <p><font size="2">- </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">
  <p><font size="2">5,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Royalty income</font></p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">
  <p><font size="2">26,000
  </font>
  </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">
  <p><font size="2">-&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Interest income
  (expense)</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">
  <p><font size="2">21,000 </font> </p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">
  <p><font size="2">(2,000)</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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">Total</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">
  <p><font size="2">47,000 </font> </p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">
  <p><font size="2">3,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">Income before provision for
  income taxes</font></p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">
  <p><font size="2">543,000 </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">
  <p><font size="2">306,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">

  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:13.5pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">Provision for income taxes</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:13.5pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">
  <p><font size="2">216,000 </font> </p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:13.5pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">
  <p><font size="2">123,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">Net income</font></p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">
  <p><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	327,000
  </font>
  </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 183,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">Net Income per share:</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Basic</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	0.03 </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	0.02&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Diluted</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	0.03 </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	0.02&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">

  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">Weighted average shares
  outstanding - basic</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">
  <p><font size="2">10,053,076
  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">
  <p><font size="2">8,993,849&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">
  <p><font size="2">Weighted average shares
  outstanding - diluted</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">
  <p><font size="2">10,062,315
	</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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">
  <p><font size="2">9,584,276&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' width="57%">

  </td>
  <td valign=bottom style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="20%">

  </td>
  <td valign=bottom style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right" width="19%">

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

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

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

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

<p align=center style='text-align:center'>&nbsp;-3-</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'>










<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width="100%"
 style='width:100.0%;border-collapse:collapse'>
 <tr style='height:15.75pt'>
  <td colspan=3 valign=bottom style='height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><b><font size="2">PRO-DEX, INC.
  and SUBSIDIARIES</font></b></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td colspan=3 valign=bottom style='height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><b><font size="2">CONSOLIDATED
  STATEMENTS OF OPERATIONS</font></b></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td colspan=3 valign=bottom style='height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><b><font size="2">Six months ended
  December 31 (unaudited)</font></b></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=2 valign=top style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p 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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-right:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><i><font size="2">2005</font></i></p>
  </td>
  <td valign=top style='border:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p 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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7,514,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 6,226,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Cost of sales </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;
  4,094,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;
  2,747,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Gross profit </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;
  3,420,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;
  3,479,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Operating expenses: </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Selling </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;
  509,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;
  477,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; General and
  administrative expenses </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;
  1,120,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;
  1,125,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Research and
  development costs </font> </p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;
  886,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;
  876,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Total operating expenses </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;
  2,515,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;
  2,478,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Income from operations </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;
  905,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;
  1,001,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Other income (expense): </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Other income
  (expense), net </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;
  (7,000)</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;
  45,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Royalty income </font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;
  37,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Interest income
  (expense )</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;
  43,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;
  (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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Total</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;
  73,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;
  76,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Income before provision for
  income taxes</font></p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;978,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;
  1,077,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:13.5pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Provision for income taxes</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:13.5pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;
  389,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:13.5pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;
  431,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Net income</font></p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 589,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 646,000&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	</font> </p>
  </td>
  <td valign=top style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Net Income per share:</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Basic</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.06&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Diluted</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.06&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Weighted average shares
  outstanding - basic</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 9,474,227&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:5.4pt; padding-right:5.4pt; 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;8,928,876&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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Weighted average shares
  outstanding - diluted</font></p>
  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;
	10,045,179&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:5.4pt; padding-right:5.4pt; 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; 9,508,454&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td valign=bottom style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=bottom style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><i><font size="2">&nbsp;</font></i></p>
  </td>
  <td valign=bottom style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=bottom style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

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

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

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

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










<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width="100%"
 style='width:100.0%;border-collapse:collapse'>
 <tr style='height:12.75pt'>
  <td width="89%" colspan=3 valign=bottom style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><b><font size="2">PRO-DEX, INC. and SUBSIDIARIES</font></b></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width="89%" colspan=3 valign=bottom style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><b><font size="2">CONSOLIDATED STATEMENTS OF CASH FLOWS</font></b></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width="89%" colspan=3 valign=bottom style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><b><font size="2">Six months ended December 31 (unaudited)</font></b></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td valign=bottom style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td valign=bottom style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td valign=top style='border-left:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-right:medium none;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><i><font size="2">2005</font></i></p>
  </td>
  <td valign=top style='border:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p 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-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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Cash Flows from Operating
  Activities: </font> </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Net Income</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 589,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 646,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Adjustments to
  reconcile net income to net cash used in operating activities:</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Depreciation and
  amortization </font> </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 189,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 171,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loss on disposal</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:5.4pt; padding-right:5.4pt; 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; 6,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  -&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (Recovery)
  provision for doubtful accounts</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;(60,000)</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 5,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Reserve for
  obsolete inventory</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 99,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 37,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stock based
  compensation</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 13,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred taxes</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;45,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  -&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Changes in:</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Decrease
  in accounts receivable</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 939,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 761,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  (Increase) in inventories</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (528,000)</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;(471,000)</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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  (Increase) in prepaid expenses</font></p>
  </td>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (158,000)</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; (147,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  (Increase) in other assets</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; (17,000)</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; (21,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  (Decrease) in accounts payable and accrued expenses</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (244,000)</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; (279,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Increase
  (decrease) in income taxes payable</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 92,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; (229,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Net Cash provided by
  Operating Activities </font> </p>
  </td>
  <td valign=top style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 952,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 486,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Cash Flows From Investing
  Activities: </font> </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from
  equipment sale</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:5.4pt; padding-right:5.4pt; 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; 1,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  -&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Purchase of intangible
  assets - patents</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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (1,223,000)</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Purchases of equipment
  and leasehold improvements</font></p>
  </td>
  <td valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (250,000)</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; (196,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Net Cash (used in)
  Investing Activities </font> </p>
  </td>
  <td valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (1,472,000)</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; (196,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Cash Flows from Financing
  Activities:</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;
  Principal payments on long-term shareholder borrowings </font> </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp;</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; (145,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;
  Proceeds from option and warrant exercise </font> </p>
  </td>
  <td valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 113,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 329,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Net Cash provided by
  Financing Activities</font></p>
  </td>
  <td valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 113,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 184,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Net Increase (decrease) in
  Cash and Cash Equivalents </font> </p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (407,000)</font></p>
  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 474,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Cash and Cash Equivalents,
  beginning of period </font> </p>
  </td>
  <td valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2,584,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,070,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><u><font size="2">&nbsp;</font></u></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:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><u><font size="2">&nbsp;</font></u></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Cash and Cash Equivalents,
  end of period </font> </p>
  </td>
  <td valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:2.25pt double windowtext;border-right:
  1.0pt solid windowtext;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2,177,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2,544,000
	</font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td valign=top style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width="89%" colspan=3 valign=bottom style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><i><font size="2">Supplemental Information</font></i></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Cash payments for interest</font></p>
  </td>
  <td valign=top style='border-top:
  1.0pt solid windowtext;border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:9.75pt'>
  <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:9.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;height:9.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:
  1.0pt solid windowtext;height:9.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Cash payments for income
  taxes </font> </p>
  </td>
  <td valign=top style='border-top:
  medium none;border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 251,000&nbsp;</font></p>
  </td>
  <td valign=top style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 660,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=top style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td valign=top style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=top style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width="89%" colspan=3 valign=bottom style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><i><font size="2">Non-Cash Disclosure of Investing and Financing
  Activities</font></i></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=top style='width:69%;border:1.0pt solid windowtext;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Long term payable incurred
  in acquisition of intangible assets</font></p>
  </td>
  <td nowrap valign=top style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:15%;border-left:medium none;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	316,000&nbsp;</font></p>
  </td>
  <td nowrap valign=top style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:13%;border-left:medium none;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  -&nbsp;</font></p>
  </td>
 </tr>
 </table>

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

<p align=center style='text-align:center'><i>See notes to consolidated financial statements.</i></p>
<p align=center style='text-align:center'>&nbsp;</p>
<p align=center style='text-align:center'>-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>NOTE 1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</b><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;we&quot;, &quot;us&quot;, &quot;our&quot;, &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, 2005.&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, 2005. </p>

<p style='text-autospace:none'><b>NOTE 2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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="100%"
 style='width:740px;border-collapse:collapse'>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='width:55%;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='width:21%;border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:medium none;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">December 31, 2005</font></p>
  </td>
  <td nowrap valign=bottom style='width:19%;border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">June 30, 2005</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; width:55%;border-bottom:1.0pt solid windowtext;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='width:21%;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">(unaudited)</font></p>
  </td>
  <td nowrap valign=bottom style='width:19%;border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">(audited)</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:55%;border-left:1.0pt solid windowtext;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Raw Materials</font></p>
  </td>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:20%;border-left:1.0pt solid windowtext;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  1,296,000&nbsp;</font></p>
  </td>
  <td nowrap valign=bottom style='width:19%;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,421,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:55%;border-left:1.0pt solid windowtext;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Work in process</font></p>
  </td>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:20%;border-left:1.0pt solid windowtext;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <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;
  520,000&nbsp;</font></p>
  </td>
  <td nowrap valign=bottom style='width:19%;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 409,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:55%;border-left:1.0pt solid windowtext;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Development costs under contract</font></p>
  </td>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:20%;border-left:1.0pt solid windowtext;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <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;
  243,000&nbsp;</font></p>
  </td>
  <td nowrap valign=bottom style='width:19%;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 132,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:55%;border-left:1.0pt solid windowtext;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Finished goods</font></p>
  </td>
  <td nowrap valign=bottom style='width:20%;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <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;
  1,905,000&nbsp;</font></p>
  </td>
  <td nowrap valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:19%;border-top:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,473,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:55%;border-left:1.0pt solid windowtext;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp; Total</font></p>
  </td>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:20%;border-left:1.0pt solid windowtext;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  3,964,000&nbsp;</font></p>
  </td>
  <td nowrap valign=bottom style='width:19%;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3,435,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:55%;border-left:1.0pt solid windowtext;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Reserve for slow moving items</font></p>
  </td>
  <td nowrap valign=bottom style='width:20%;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <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;
  (389,000)</font></p>
  </td>
  <td nowrap valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:19%;border-top:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  (290,000)</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='width:55%;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp; Total inventories, net</font></p>
  </td>
  <td nowrap valign=bottom style='width:20%;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  3,575,000&nbsp;</font></p>
  </td>
  <td nowrap valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:19%;border-top:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3,145,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:56%;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='width:21%;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='width:19%;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

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





</div>





<p style='text-autospace:none'><b>NOTE 3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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, 2004 or 2005.&nbsp; We
prepare our annual impairment testing on April 1 of each year.&nbsp; , Management determined
that there were no events or circumstances which have occurred that would
indicate an impairment of the goodwill had occurred during the three and six
month periods ended December 31, 2005.&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'>-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>NOTE 4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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="100%"
 style='width:90%;border-collapse:collapse'>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="38%" nowrap colspan=2 valign=bottom style='width:38.3%;border-top:
  solid windowtext 1.0pt;border-left:solid windowtext 1.0pt;border-bottom:none;
  border-right:solid black 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">Three Months Ended
  December 31,</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-bottom:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Net income</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 327,000&nbsp;</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 183,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Basic net income per common share:</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">&nbsp;&nbsp; Weighted average number of common shares outstanding</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	9,495,673&nbsp;</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,993,849&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Basic net income per common share </font> </p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.03&nbsp;</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.02&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Diluted net income per share:</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">&nbsp;&nbsp; Weighted average of common shares outstanding</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,504,912&nbsp;</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,993,849&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effect of potentially dilutive securities (options)</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 523,000&nbsp;</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 436,521&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effect of potentially dilutive securities (warrants)</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 34,403&nbsp;</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 75,777&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effect of potentially dilutive securities
	</font> </p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (convertible Preferred Shares)</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' 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;&nbsp;&nbsp;&nbsp; -&nbsp;</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 78,129&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Weighted average number of common and shares - </font> </p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Diluted&nbsp; </font> </p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10,053,076&nbsp;</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,584,276&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Diluted net income per common share</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.03&nbsp;</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.02&nbsp;</font></p>
  </td>
 </tr>
</table>







</div>

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

&nbsp;</div>



&nbsp;<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='width:90%;border-collapse:collapse'>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="38%" nowrap colspan=2 valign=bottom style='width:38.3%;border-top:
  solid windowtext 1.0pt;border-left:solid windowtext 1.0pt;border-bottom:none;
  border-right:solid black 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">Six Months Ended
  December 31,</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-bottom:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Net income</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 589,000&nbsp;</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 646,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Basic net income per common share:</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">&nbsp;&nbsp; Weighted average number of common shares outstanding</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,474,227&nbsp;</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,928,876&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Basic net income per common share </font> </p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.06&nbsp;</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.07&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Diluted net income per share:</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">&nbsp;&nbsp; Weighted average of common shares outstanding</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,474,227&nbsp;</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,928,876&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effect of potentially dilutive securities (options)</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 535,869&nbsp;</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 427,487&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effect of potentially dilutive securities (warrants)</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 35,083&nbsp;</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;73,962&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effect of potentially dilutive securities
	</font> </p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (convertible Preferred Shares)</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' 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;&nbsp;&nbsp;&nbsp; -&nbsp;</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 78,129&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Weighted average number of common and shares - </font> </p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Diluted&nbsp; </font> </p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10,045,179&nbsp;</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9,508,454&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="61%" nowrap valign=bottom style='width:61.7%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Diluted net income per common share</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.06&nbsp;</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.07&nbsp;</font></p>
  </td>
 </tr>
</table>







<p style='text-autospace:none'><b>NOTE 5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b><b>CREDIT FACILITY</b></p>



<p style='text-align:justify;text-indent:36.0pt'>In October
2005, we renewed our credit facility with Wells Fargo Bank N.A. (&quot;Wells Fargo&quot;)
for borrowings up to $2,000,000.&nbsp; Its terms require monthly interest
payments at either the prime rate of interest (7.25% at December 31, 2005); or
LIBOR plus 2.50% (6.90% (one month) to 7.04% (three months) at December 31,
2005), at management's discretion, based on outstanding borrowings with no
minimum interest charge.&nbsp; The outstanding borrowings are secured by all
assets of and guaranteed by the Company.&nbsp; There was no outstanding balance
under the terms of this credit facility as of December 31, 2005.&nbsp; The
total eligible borrowing capacity at December 31, 2005 was $2,000,000.</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:ideograph-numeric ideograph-other'>There
are certain financial and non-financial covenants that we must meet to be in
compliance with the terms of the October 2005 Wells Fargo credit facility.&nbsp; At
December 31, 2005, we were in compliance with all such covenants.&nbsp; </p>

<p style='text-autospace:none'><b>NOTE 6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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 tax credit carry forwards
totaling $80,000 for state tax purposes that do not expire and can be carried
forward indefinitely until fully utilized.&nbsp; </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>NOTE 7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; STOCK OPTIONS</b></p>



<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'>During the quarter ended December 31, 2005, the Company granted 15,000
Common Stock Options under our Director's Plan exercisable at an average per
share price of $2.44 (fair market value $0.93 per option) and no Common Stock
Options under our Employee's Plan.&nbsp; </p>



<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'>The fair market value of each grant is estimated at the grant date using
the Black-Scholes option-pricing model with the following weighted-average
assumptions: no dividend rate for all years; price volatility of 35%, risk-free
interest rate of approximately 4.5%; and expected lives of five years.</p>
<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'>&nbsp;</p>
<p style='text-align:center;text-autospace:
none'>-8-</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'>
























<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width="100%"
 style='width:100.0%;border-collapse:collapse'>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.06%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="39%" nowrap colspan=2 valign=bottom style='width:39.56%;
  border-top:solid windowtext 1.0pt;border-left:solid windowtext 1.0pt;
  border-bottom:none;border-right:solid black 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">Three Months Ended
  December 31, </font> </p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.06%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.06%;border:solid windowtext 1.0pt;
  border-bottom:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Net income as reported:</font></p>
  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  327,000</font></p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  183,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.06%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Add stock-based employee</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.06%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">compensation expense included</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.06%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">in reported net income, net of</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.06%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">related tax effects</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p 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;&nbsp;&nbsp; -&nbsp;&nbsp;
	</font> </p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p 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;&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp;&nbsp;
	</font> </p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.06%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">(Deduct) total stock-based</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.06%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">employee and director</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.06%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">compensation expense&nbsp;&nbsp; </font> </p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.06%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">determined under fair value</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.06%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">based method for all awards,</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.06%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">net of related tax effects</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align="right"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (37,000)</font></p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <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;
  (35,000)</font></p>
  </td>
 </tr>
 <tr style='height:18.0pt'>
  <td width="27%" nowrap valign=bottom style='width:27.06%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:18.0pt'>
  <p><font size="2">Pro-forma net income:</font></p>
  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:18.0pt'>

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:18.0pt'>
  <p align=right style='text-align:right'><u><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  290,000&nbsp;</font></u></p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:18.0pt'>
  <p align=right style='text-align:right'><u><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  148,000&nbsp;</font></u></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.06%;border:solid windowtext 1.0pt;
  border-bottom:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Basic earnings per share</font></p>
  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">As reported</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.03&nbsp;</font></p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.02&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.06%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Pro-forma</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.03&nbsp;</font></p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.02&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.06%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Diluted earnings per share:</font></p>
  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">As reported </font> </p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.03&nbsp;</font></p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.02&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.06%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Pro-forma</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.03&nbsp;</font></p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.02&nbsp;</font></p>
  </td>
 </tr>
</table>







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







<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width="100%"
 style='width:100.0%;border-collapse:collapse' id="table2">
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.04%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="39%" nowrap colspan=2 valign=bottom style='width:39.58%;
  border-top:solid windowtext 1.0pt;border-left:solid windowtext 1.0pt;
  border-bottom:none;border-right:solid black 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">Six Months Ended
  December 31, </font> </p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.04%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.04%;border:solid windowtext 1.0pt;
  border-bottom:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <font size="2">Net income as reported:</font></td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  589,000&nbsp;</font></p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  646,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.04%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <font size="2">Add stock-based employee</font></td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.04%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <font size="2">compensation expense included</font></td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.04%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <font size="2">in reported net income, net of</font></td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.04%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <font size="2">related tax effects</font></td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p 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;&nbsp;&nbsp; -&nbsp;&nbsp;
	</font> </p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p 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;&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp;&nbsp;
	</font> </p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.04%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <font size="2">(Deduct) total stock-based</font></td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.04%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <font size="2">employee and director</font></td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.04%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <font size="2">compensation expense&nbsp;&nbsp;
  </font>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.04%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <font size="2">determined under fair value</font></td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.04%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <font size="2">based method for all awards,</font></td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.04%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <font size="2">net of related tax effects</font></td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align="right"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (64,000)</font></p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <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;
  (56,000)</font></p>
  </td>
 </tr>
 <tr style='height:18.0pt'>
  <td width="27%" nowrap valign=bottom style='width:27.04%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:18.0pt'>
  <font size="2">Pro-forma net income:</font></td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:18.0pt'>

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:18.0pt'>
  <p align=right style='text-align:right'><u><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  525,000&nbsp;</font></u></p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:18.0pt'>
  <p align=right style='text-align:right'><u><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  590,000&nbsp;</font></u></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.04%;border:solid windowtext 1.0pt;
  border-bottom:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <font size="2">Basic earnings per share</font></td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <font size="2">As reported</font></td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.06&nbsp;</font></p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.02&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.04%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <font size="2">Pro-forma</font></td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.06&nbsp;</font></p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.02&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.04%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <font size="2">Diluted earnings per share:</font></td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <font size="2">As reported
  </font>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.06&nbsp;</font></p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.02&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="27%" nowrap valign=bottom style='width:27.04%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="33%" nowrap valign=bottom style='width:33.4%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <font size="2">Pro-forma</font></td>
  <td width="19%" nowrap valign=bottom style='width:19.14%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.05&nbsp;</font></p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.42%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  0.02&nbsp;</font></p>
  </td>
 </tr>
</table>







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

<p style='text-autospace:none'><b>NOTE 8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; PREFERRED STOCK </b></p>



<p style='text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In
January 2005, 78,129 Preferred Stock shares representing 100% of all Preferred
stock shares outstanding were converted to 78,129 shares of Common Stock,
leaving no Preferred Stock shares outstanding.&nbsp; We received no cash proceeds
from the conversion.</p>
<p align=center style='text-align:center;text-autospace:none'>-9-</p>

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<p style='text-autospace:none'><b>NOTE 9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; MAJOR CUSTOMERS</b></p>

<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'>The Company had two Major Customers (defined as a customer that
represents greater than 10% of the Company's total revenues) in the six months
ended December 31, 2005 and one Major Customer in the six months ended December
31, 2004.&nbsp; One Major customer was the same customer in 2005 and 2004 and an
additional Major customer was added in 2005.&nbsp;&nbsp; Net sales to the these customers
in 2005 amounted to $2,440,000 and $911,000 and at December 31, 2005 the
accounts receivable included balances of $483,000 and $619,000 respectively,
due from them.&nbsp; Net sales to the Major Customer in 2004 amounted to $1,247,000
and at December 31, 2004 the accounts receivable included a balance of $171,000
due from this Major Customer.</p>

<p style='text-autospace:none'><b>NOTE 10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; INTRAVANTAGE ASSET ACQUISITION</b></p>

<p style='text-align:justify;text-indent:36.0pt'>On October 31,
2005, we entered into an Asset Purchase Agreement (the &quot;Purchase Agreement&quot;)
with IntraVantage, Inc., a Delaware corporation (&quot;IntraVantage&quot;), whereby the
Company purchased from IntraVantage certain of IntraVantage's assets related to
IntraVantage's dental products business, including all of IntraVantage's
intellectual property rights (the &quot;Intellectual Property&quot; and, collectively
with the other purchased assets, the &quot;Assets&quot;).&nbsp; The purchase price for the
Assets comprised of the following consideration:</p>



<ul>
	<li>
	<p style='margin-left:36.0pt;text-align:justify;text-indent:
36.0pt'>$226,087 in cash paid to IntraVantage on October 31, 2005;</p></li>
	<li>
	<p style='margin-top:12.0pt;margin-right:0pt;margin-bottom:
0pt;margin-left:36.0pt;margin-bottom:.0001pt;text-align:justify;text-indent:
36.0pt'>$893,271 in cash paid to IntraVantage's bank on October 31, 2005
as full payoff and release of all of IntraVantage's credit obligations with
such bank; and</p></li>
	<li>
	<p style='margin-top:12.0pt;margin-right:0pt;margin-bottom:
0pt;margin-left:36.0pt;margin-bottom:.0001pt;text-align:justify;text-indent:
36.0pt'>$400,000 to IntraVantage in annual installments of $100,000 in
cash payable on each of October 31, 2006, 2007, 2008 and 2009.</p></li>
</ul>

<p style='margin-top:12.0pt;text-align:justify;text-indent:
36.0pt'>As further inducement for IntraVantage to enter into the Purchase
Agreement, Pro-Dex also entered into an Exclusive License Agreement and a
Royalty Agreement with IntraVantage in conjunction with the October 31, 2005
closing of the Purchase Agreement.&nbsp; The Exclusive License Agreement grants to
IntraVantage an exclusive, worldwide, irrevocable, royalty-free and perpetual
license to use the acquired Intellectual Property in any non-dental related
field of use.&nbsp; The Royalty Agreement requires that the Company pay to
IntraVantage certain royalty payments on revenues generated from future sales
of products by the Company which fall within the scope of, incorporate, are a
modification of or are substantially derived from one or more of the patents
included in the Intellectual Property.</p>



<p style='margin-left:0pt;text-align:justify;
text-indent:36.0pt'>Also in conjunction with the
closing of the Purchase Agreement, the Company agreed to terminate a supply
agreement between the Company and IntraVantage, along with all amendments
thereto. Pursuant to this termination, IntraVantage shall return to the Company
certain products previously delivered to IntraVantage under the previously
executed supply agreement in exchange for the Company issuing to IntraVantage a
credit memo equal to the full value of outstanding IntraVantage invoices
related to the supply agreement.</p>
<p style='margin-left:0pt;text-align:justify;
text-indent:36.0pt'>Pro-Dex reversed
approximately $245,000 in previously recorded sales to IntraVantage during the
second fiscal quarter of 2006, sales that relate to product which was returned
to Pro-Dex at the close of the transaction. Pro-Dex also reduced its open order
backlog by approximately $900,000 to eliminate all orders currently in place
from IntraVantage. Additionally, this adjustment did not unfavorably impact
bottom-line earnings during the second quarter and is not expected to for the
remainder of the fiscal year as the impact on profit was previously addressed
through increased reserves for accounts receivable during the fourth quarter of
fiscal 2005 and the first quarter of fiscal year 2006, subsequently reversed in
the second quarter of 2006.</p>
<p style='margin-left:0pt;text-align:justify;
text-indent:36.0pt'>&nbsp;</p>

<p align=center style='text-align:center'>-10-</p>

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<p style='text-autospace:none'><b>NOTE 11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SUBSEQUENT EVENTS</b></p>



<p style='text-align:justify;text-indent:36.0pt'>&nbsp;On
January 5, 2006, we entered into an Asset Purchase Agreement with Astromec,
Inc., a Nevada corporation (&quot;Astromec&quot;), whereby the Company's wholly owned
subsidiary, Pro-Dex Astromec purchased from Astromec substantially all of
Astromec's assets.&nbsp; The purchase price for the assets was comprised of the following
consideration:</p>



<ul>
	<li>
	<p style='margin-left:36.0pt;text-align:justify;text-indent:
36.0pt'>$2,600,000 in cash paid to Astromec on January 5, 2006;</p></li>
	<li>
	<p style='margin-top:12.0pt;margin-right:0pt;margin-bottom:
0pt;margin-left:36.0pt;margin-bottom:.0001pt;text-align:justify;text-indent:
36.0pt'>$100,000 to be paid at the end of a six month period, subject to
adjustments based on the asset values presented in Astromec's audited closing
balance sheet; and</p></li>
	<li>
	<p style='margin-top:12.0pt;margin-right:0pt;margin-bottom:
0pt;margin-left:36.0pt;margin-bottom:.0001pt;text-align:justify;text-indent:
36.0pt'>Assumption of operating liabilities of approximately $300,000.</p></li>
</ul>



<p style='text-align:justify;text-indent:36.0pt'>On January 4,
2006, the credit facility with Wells Fargo was amended to allow for a
$1,000,000 four year term loan in addition to the $2,000,000 line of credit.&nbsp;
The term loan and is fully amortizing and requires monthly principal and
interest payments at either the prime rate of interest (7.25% at December 31,
2005); or LIBOR plus 2.50% (6.90% (one month) to 7.04% (three months) at
December 31, 2005), at management's discretion, based on the outstanding balance.&nbsp;
The outstanding borrowings are secured by all assets of and guaranteed by the
Company.&nbsp; Pro-Dex used the full proceeds of the term loan to finance the
Astromec asset purchase.</p>



<p style='text-align:justify;text-indent:36.0pt'>On January 3,
2006, we entered into a purchase and sale agreement with M. D. Glover, Inc. including
the establishment of an escrow to purchase the land and building for the
property located at 2950 Arrowhead Drive, Carson City, Nevada.&nbsp; M. D. Glover,
Inc. is owned by Mr. Glover, a substantioal owner of Astromec.&nbsp; This property has
been the operating location for Astromec for the last fifteen years.&nbsp; The
purchase price for the land and building is $2,200,000 to be paid at closing of
escrow, which is expected to take place by the end of April, 2006.&nbsp; This
purchase price is expected to be financed with a combination of a mortgage and
available cash on hand.&nbsp; Until the close of escrow, Pro-Dex Astromec will lease
the property from M. D. Glover, Inc. &nbsp;&nbsp;</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 six and three
month periods ended December 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'>&nbsp;</p>
<p style='text-align:center;text-autospace:
none'>-11-</p>

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<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'>Pro-Dex, Inc. is a Colorado corporation that was chartered in 1978, and specializes 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 manufacture 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 total cost and with a higher quality
product.&nbsp; Products that we have developed and manufactured are used in
hospitals, dental offices, medical engineering labs, scientific research
facilities and high tech manufacturing operations&nbsp;around the world.&nbsp; Until
June 30, 2004, Pro-Dex had a &quot;holding company&quot; legal 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 then 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
integrated business operating in two locations providing a broad range of
systems solutions to our customers.&nbsp; The company names of Micro Motors&reg; and
Oregon Micro Systems&reg; continue to be used for marketing purposes as brand
names.&nbsp; </p>



<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 <u>
<font color="#0000FF">www.sec.gov.</font></u> </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'>All years relating to financial data herein shall refer to fiscal years
ending June 30, unless indicated otherwise.</p>



<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'>Company-funded research and development supports the development of
generic rotary drive and motion control platforms.&nbsp; We then seek
customer-funded projects to customize these platforms to specific customer
requirements.&nbsp; Company-funded research and development projects are generally
expected to convert to customer-funded projects within six to eighteen months.&nbsp;
Company funded project costs are expensed as incurred.&nbsp; In the three months
ended December 31, 2005, $444,000 was expensed; a decrease of $13,000 from the
$457,000 expensed in the three months ended December 31, 2004.&nbsp; </p>
<p style='text-align:center;text-autospace:
none'>-12-</p>

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<p align="justify" style="text-indent: 36pt">For customer-funded development projects, costs are
capitalized and recognized as a cost of sales when specific deliverables within
the development contracts are produced, matching the costs to the revenue. In
the three months ended December 31, 2005, $16,000 was recognized as cost of
sales, compared to $6,000 recognized as cost of sales in the three months ended
December 31, 2004, reflecting an increase in costs associated with the development
fees billable during the quarter.</p>



<p align="justify" style="text-indent: 36pt">Customer-funded research and development provided $29,000
in revenue in the three months ended December 31, 2005, and $103,000 in revenue
in the three months ended December 31, 2004, reflecting a decrease in
development fees billable during the quarter.&nbsp; The results of customer-funded
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-autospace:ideograph-numeric ideograph-other; text-indent:36pt' align="justify">The
Company's 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 cellpadding=0 width=639
 style='width:100%;margin-left:0pt;border-collapse:collapse'>
 <tr style='height:12.75pt'>
  <td width=191 nowrap valign=bottom style='width:143.25pt;padding:0pt 5.4pt 0pt 5.4pt;
  height:12.75pt'>

  </td>
  <td width=65 nowrap valign=bottom style='width:49.0pt;border:solid windowtext 1.0pt;
  border-bottom:none;padding:0pt 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">Q2 FY</font></p>
  </td>
  <td width=65 nowrap valign=bottom style='width:49.0pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">6 mo FY</font></p>
  </td>
  <td width=65 nowrap valign=bottom style='width:49.0pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">Q2 FY</font></p>
  </td>
  <td width=65 nowrap valign=bottom style='width:49.0pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">6 mo 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 5.4pt 0pt 5.4pt;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 5.4pt 0pt 5.4pt;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 5.4pt 0pt 5.4pt;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:143.25pt;padding:0pt 5.4pt 0pt 5.4pt;
  height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">% of Total Sales</font></p>
  </td>
  <td width=65 nowrap valign=bottom style='width:49.0pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2006</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2006</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2005</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2005</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2005</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 5.4pt 0pt 5.4pt;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;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">2003</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=191 nowrap valign=bottom style='width:143.25pt;border:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p><font size="2">Dental</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">19%</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">24%</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">29%</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">26%</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">24%</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 5.4pt 0pt 5.4pt;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-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">43%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=191 nowrap valign=bottom style='width:143.25pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p><font size="2">Medical </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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">54%</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">49%</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">29%</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">31%</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">42%</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 5.4pt 0pt 5.4pt;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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">28%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width=191 nowrap valign=bottom style='width:143.25pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p><font size="2">Industrial</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">20%</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">20%</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">29%</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">31%</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">26%</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 5.4pt 0pt 5.4pt;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 5.4pt 0pt 5.4pt;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=191 nowrap valign=bottom style='width:143.25pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p><font size="2">Government
  research and other</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">6%</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">7%</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">13%</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">12%</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">8%</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">9%</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 5.4pt 0pt 5.4pt;height:12.75pt'>
  <p align=center style='text-align:center'><font size="2">10%</font></p>
  </td>
 </tr>
 </table>











<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'>Medical product sales represent the manufacture of products which utilize
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; In addition, we make and sell 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 is a direct result of the shift in the focus of our research and
development efforts away from dental products and toward our capabilities in
the medical product market. </p>



<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'>The Company holds many independently verified certifications for
maintaining quality processes and products, including 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 December 31, 2005, we had a backlog, including orders for delivery
beyond 60 days, of $7.0 million compared with a backlog of $4.7 million at
December 31, 2004 and $7.9 million at June 30, 2005.&nbsp; We expect to ship most of
our backlog in fiscal year 2006 and the remainder in fiscal year 2007.&nbsp; The increased
backlog compared to December 31, 2004 is due to an increase in the number and
size of new purchase orders in the last year from new and existing customers.&nbsp;
2006 backlog was lower due to the elimination of approximately $900,000 of
Intravantage orders during the quarter ended December 31, 2005. &nbsp;&nbsp;We do not
typically experience seasonal fluctuations in our new order bookings, but may
experience variability in our new order bookings due to the timing of major new
product launches.&nbsp; Similarly, we do not typically experience seasonal
fluctuations in our shipments and revenues.&nbsp; </p>
<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'>&nbsp;</p>
<p align=center style='text-align:center'>-13-</p>

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










<p style='text-align:justify;text-indent:36.0pt'>We sell our
products using several methods; selling directly to the customer, selling
directly to original equipment manufacturers and selling through a network of
high technology and dental product distributors within North America.&nbsp;
Internationally, the Company has sales agreements with foreign distributors or
sells 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 an 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'>The Company accounts for
goodwill under 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; We have recorded no impairment
charge in 2004 or 2005.&nbsp; We prepare our annual impairment testing on April 1 of
each year.&nbsp; </p>



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



<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:center'>-14-</p>

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

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





<table class=MsoNormalTable border=0 cellpadding=0 width=578
 style='width:90%;margin-left:24.65pt;border-collapse:collapse'>
 <tr style='height:15.75pt'>
  <td valign=bottom style='height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">(In Thousands)</font></p>
  </td>
  <td colspan=4 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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">Three Months Ended
  December 31, </font> </p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=bottom style='height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td colspan=2 valign=bottom style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:
  medium none;border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:1.0pt solid black;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Net sales:</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">$&nbsp;&nbsp;&nbsp; 3,750 </font> </p>
  </td>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">100.0%</font></p>
  </td>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp; 2,894 </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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">100.0%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Cost of sales</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2,022 </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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">53.9%</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,275 </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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">44.1%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Gross Profit</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,728 </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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">46.1%</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,619 </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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">55.9%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; 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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Selling, general and administrative expenses</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 788
	</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">21.0%</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 859
	</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">29.7%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Research and development costs</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 444
	</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">11.8%</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 457
	</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">15.8%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Income from Operations</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 496
	</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">13.2%</font></p>
  </td>
  <td valign=bottom style='height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 303
	</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">10.5%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; 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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=bottom style='height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Net interest and other income</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 47
	</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">1.3%</font></p>
  </td>
  <td valign=bottom style='height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; 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; 3
	</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">0.1%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; 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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
  <td valign=bottom style='height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Provision for Income Taxes</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 216
	</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">5.8%</font></p>
  </td>
  <td valign=bottom style='height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 123
	</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:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">4.3%</font></p>
  </td>
 </tr>
 <tr style='height:16.5pt'>
  <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:16.5pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Net Income</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:2.25pt double windowtext; height:16.5pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 327 </font> </p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; height:16.5pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">8.7%</font></p>
  </td>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:2.25pt double windowtext; height:16.5pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 183 </font> </p>
  </td>
  <td valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  height:16.5pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt' align="right">
  <p align=right style='text-align:right'><font size="2">6.3%</font></p>
  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td valign=bottom style='height:13.5pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td valign=bottom style='height:13.5pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td valign=bottom style='height:13.5pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td valign=bottom style='height:13.5pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td valign=bottom style='height:13.5pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

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
















<p style='text-align:justify;text-indent:36.0pt'><b>Net Sales.</b>&nbsp;
Consolidated sales increased from $2,894,000 to $3,750,000 ($856,000 or 30%)
for the quarter ended December 31, 2005, compared to the quarter ended December
31, 2004.&nbsp; Medical products continued to increase in total and as a
percentage of total sales to 54% from 29% in the same quarter last year.&nbsp; Shipments
to dental customers decreased to 19% of total sales compared to 29% for the
same quarter in the prior year as a one time $245,000 credit for the Intraflow
product was realized at the completion of the Intravantage asset acquisition,
reversing sales from last fiscal year as the product was returned as a condition
of the acquisition.&nbsp; Sales to factory automation and industrial customers
decreased to 20% from 29% for the same quarter in the prior year as shipments
of legacy motion control devices were reduced.&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 changes in sales volume, not the effect of price changes.&nbsp; </p>



<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 quarter ended December 31, 2005 increased 7%
over the same quarter in the previous year consistent with the increase in
sales.&nbsp; Gross profit as a percentage of sales decreased to 46.1% for the
quarter ended December 31, 2005 compared to 55.9% for the quarter ended December
31, 2004, reflecting the sales product mix changes away from factory automation
products as well as vendor supplied component rework costs of $151,000 associated
with a product introduced in the last fiscal year.&nbsp; Included in the $151,000 is
an increase in our warranty costs of $43,000 for estimated rework costs.&nbsp; Gross
profit and gross profit percentage were as follows:</p>







<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='width:80%;margin-left:44.65pt;border-collapse:collapse'>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='width:40%;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap colspan=2 valign=bottom style='width:34%;
  border-top:1.0pt solid windowtext;border-left:1.0pt solid windowtext;
  border-bottom:medium none;border-right:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">Three Months Ended
  December 31,</font></p>
  </td>
  <td nowrap valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; width:20%;border-bottom:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">Increase/</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='width:40%;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:16%;border-left:1.0pt solid windowtext;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; 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='width:18%;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; 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:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:20%;border-top:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">(Decrease)</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='width:40%;border:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Gross Profit</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:16%;border-left:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">$1,728,000</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:18%;border-left:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">$1,619,000</font></p>
  </td>
  <td nowrap valign=bottom style='width:20%;border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">6.7%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:40%;border-top:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Gross Profit Percentage</font></p>
  </td>
  <td nowrap valign=bottom style='width:16%;border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">46.1%</font></p>
  </td>
  <td nowrap valign=bottom style='width:18%;border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">55.9%</font></p>
  </td>
  <td nowrap valign=bottom style='width:20%;border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">-17.6%</font></p>
  </td>
 </tr>
</table>







<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 decreased to $788,000 for the quarter ended December 31, 2005
from $859,000 for the quarter ended December 31, 2004.&nbsp; The decrease is due to reductions
in legal and staffing expenses by $40,000 and $23,000 respectively.&nbsp; S, G &amp;
A costs were as follows: </p>
<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'>&nbsp;</p>
<p style='text-align:center;text-autospace:
none'>-15-</p>

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

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

</div>



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










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

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='width:75%;border-collapse:collapse'>
 <tr style='height:12.75pt'>
  <td width="35%" nowrap valign=bottom style='width:35.78%;padding:0pt 5.4pt 0pt 5.4pt;
  height:12.75pt'>

  </td>
  <td width="24%" nowrap valign=bottom style='width:24.26%;padding:0pt 5.4pt 0pt 5.4pt;
  height:12.75pt'>

  </td>
  <td width="22%" nowrap valign=bottom style='width:22.88%;padding:0pt 5.4pt 0pt 5.4pt;
  height:12.75pt'>

  </td>
  <td width="17%" nowrap valign=bottom style='width:17.1%;padding:0pt 5.4pt 0pt 5.4pt;
  height:12.75pt'>

  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width="35%" nowrap valign=bottom style='width:35.78%;padding:0pt 5.4pt 0pt 5.4pt;
  height:12.75pt'>

  </td>
  <td width="24%" nowrap valign=bottom style='width:24.26%;padding:0pt 5.4pt 0pt 5.4pt;
  height:12.75pt'>

  </td>
  <td width="22%" nowrap valign=bottom style='width:22.88%;padding:0pt 5.4pt 0pt 5.4pt;
  height:12.75pt'>

  </td>
  <td width="17%" nowrap valign=bottom style='width:17.1%;padding:0pt 5.4pt 0pt 5.4pt;
  height:12.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="35%" nowrap valign=bottom style='width:35.78%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="47%" nowrap colspan=2 valign=bottom style='width:47.12%;
  border-top:solid windowtext 1.0pt;border-left:solid windowtext 1.0pt;
  border-bottom:none;border-right:solid black 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">Three Months Ended
  December 31,</font></p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.1%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="35%" nowrap valign=bottom style='width:35.78%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="24%" nowrap valign=bottom style='width:24.26%;border:none;
  border-bottom:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td width="22%" nowrap valign=bottom style='width:22.88%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.1%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">(Decrease)</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="35%" nowrap valign=bottom style='width:35.78%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Selling</font></p>
  </td>
  <td width="24%" nowrap valign=bottom style='width:24.26%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  254,000 </font> </p>
  </td>
  <td width="22%" nowrap valign=bottom style='width:22.88%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 278,000
	</font> </p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.1%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">-9%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="35%" nowrap valign=bottom style='width:35.78%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">General and administrative</font></p>
  </td>
  <td width="24%" nowrap valign=bottom style='width:24.26%;border:none;
  border-bottom:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 534,000
	</font> </p>
  </td>
  <td width="22%" nowrap valign=bottom style='width:22.88%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 581,000
	</font> </p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.1%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">-8%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="35%" nowrap valign=bottom style='width:35.78%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Total S, G&amp;A</font></p>
  </td>
  <td width="24%" nowrap valign=bottom style='width:24.26%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 788,000
	</font> </p>
  </td>
  <td width="22%" nowrap valign=bottom style='width:22.88%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 859,000
	</font> </p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.1%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">-8%</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 $444,000 for the quarter ended December 31, 2005 from $457,000
for the quarter ended December 31, 2004.&nbsp; The decrease in Company-funded
research and development costs is due to reduced personnel expenses.&nbsp;
Company-funded research and development costs were as follows:</p>



<div align="center">



<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='width:80%;border-collapse:collapse'>
 <tr style='height:15.75pt'>
  <td width="41%" nowrap valign=bottom style='width:41.56%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="42%" nowrap colspan=2 valign=bottom style='width:42.8%;border-top:
  solid windowtext 1.0pt;border-left:solid windowtext 1.0pt;border-bottom:none;
  border-right:solid black 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">Three Months Ended
  December 31,</font></p>
  </td>
  <td width="15%" nowrap valign=bottom style='width:15.62%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="41%" nowrap valign=bottom style='width:41.56%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="23%" nowrap valign=bottom style='width:23.02%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.78%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
  <td width="15%" nowrap valign=bottom style='width:15.62%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">(Decrease)</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="41%" nowrap valign=bottom style='width:41.56%;border:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Research and Development costs</font></p>
  </td>
  <td width="23%" nowrap valign=bottom style='width:23.02%;border:solid windowtext 1.0pt;
  border-left:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 444,000
  </font>
  </p>
  </td>
  <td width="19%" nowrap valign=bottom style='width:19.78%;border:solid windowtext 1.0pt;
  border-left:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 457,000
	</font> </p>
  </td>
  <td width="15%" nowrap valign=bottom style='width:15.62%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">-3%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td width="41%" nowrap valign=bottom style='width:41.56%;padding:0pt 5.4pt 0pt 5.4pt;
  height:12.75pt'>

  </td>
  <td width="23%" nowrap valign=bottom style='width:23.02%;padding:0pt 5.4pt 0pt 5.4pt;
  height:12.75pt'>

  </td>
  <td width="19%" nowrap valign=bottom style='width:19.78%;padding:0pt 5.4pt 0pt 5.4pt;
  height:12.75pt'>

  </td>
  <td width="15%" nowrap valign=bottom style='width:15.62%;padding:0pt 5.4pt 0pt 5.4pt;
  height:12.75pt'>

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







</div>

<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'>Company-funded research and development supports the development of
generic rotary drive and motion control platforms.&nbsp; We then seek
customer-funded projects to customize these platforms to specific customer
requirements.&nbsp; Company-funded research and development projects are generally
expected to convert to customer-funded projects within six to eighteen months.&nbsp;
Company funded project costs are expensed as incurred.&nbsp; In the three months
ended December 31, 2005, $444,000 was expensed; a decrease of $13,000 from the
$457,000 expensed in the three months ended December 31, 2004.&nbsp; </p>



<p>For customer-funded development projects, costs are
capitalized and recognized as a cost of sales when specific deliverables within
the development contracts are produced, matching the costs to the revenue. In
the three months ended December 31, 2005, $16,000 was recognized as cost of
sales, compared to $6,000 recognized as cost of sales in the three months ended
December 31, 2004, reflecting an increase in costs associated with the
development fees billable during the quarter.</p>



<p>Customer-funded research and development provided
$29,000 in revenue in the three months ended December 31, 2005, and $103,000 in
revenue in the three months ended December 31, 2004, reflecting the
fluctuations in the timing of prototypes and other related deliverables.&nbsp; The
results of customer-funded 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'><b>Operating
Profit and Operating Profit </b><b>Percentage of Sales</b>.&nbsp; Our
consolidated operating profit for the quarter ended December 31, 2005 increased
to $496,000 compared to operating profit of $303,000 for the same quarter in
the previous year.&nbsp; The increase was due to the reduced operating expenses and
increased level of sales.&nbsp; Consequently, operating profit as a percentage of
sales increased to 13.2% for the quarter ended December 31, 2005 compared to 10.5%
for the quarter ended December 31, 2004.&nbsp; Operating profit and margin were as
follows: </p>



<div align="center">



<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='width:80%;border-collapse:collapse'>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='width:55%;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap colspan=2 valign=bottom style='width:28%;
  border-top:1.0pt solid windowtext;border-left:1.0pt solid windowtext;
  border-bottom:medium none;border-right:1.0pt solid black;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">Three Months Ended
  December 31, </font> </p>
  </td>
  <td width="12%" nowrap valign=bottom style='width:12.94%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='width:55%;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:13%;border-left:1.0pt solid windowtext;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; 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:13%;border-right:1.0pt solid windowtext;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
  <td width="12%" nowrap valign=bottom style='width:12.94%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">Increase</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='width:55%;border:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Operating Profit</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:13%;border-left:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">$496,000</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:13%;border-left:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">$303,000</font></p>
  </td>
  <td width="12%" nowrap valign=bottom style='width:12.94%;border:solid windowtext 1.0pt;
  border-left:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">64%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:55%;border-top:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Operating Profit Percentage</font></p>
  </td>
  <td nowrap valign=bottom style='width:13%;border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">13.2%</font></p>
  </td>
  <td nowrap valign=bottom style='width:13%;border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">10.5%</font></p>
  </td>
  <td width="12%" nowrap valign=bottom style='width:12.94%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">26%</font></p>
  </td>
 </tr>
</table>



</div>

<p align=center style='text-align:center;text-indent:36.0pt;
text-autospace:none'>&nbsp;-16-</p>

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

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

</div>



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










<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'><b>Royalties and Other Income. </b>&nbsp;The Company recognized $26,000 in royalty
income in the three months ended December 31, 2005, compared to none in the
prior year's second fiscal quarter.</p>

<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'><b>Interest. </b>&nbsp;Interest income was $21,000 in the quarter ended
December 31, 2005, compared to a $2,000 expense in the prior year's quarter due
to the maintenance of Company's positive cash balance and debt-free status in
the current period. </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 quarter ended December 31,
2005 was 40%, unchanged from the quarter ended December 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 December
31, 2005 was $315,000 or $0.03 per share on a basic and diluted basis, as
compared to a net income of $183,000 or $0.02 per share on a basic and diluted
basis for the three months ended December 31, 2004.</p>

<p style='text-autospace:none'><b>For the Six-Month periods
ended December 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="center">





<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='width:85%;border-collapse:collapse'>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.42%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>
  <p><font size="2">(In Thousands)</font></p>
  </td>
  <td width="49%" nowrap colspan=4 valign=bottom style='width:49.5%;border-top:
  solid windowtext 1.0pt;border-left:solid windowtext 1.0pt;border-bottom:none;
  border-right:solid black 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">Six Months Ended
  December 31, </font> </p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.42%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="24%" nowrap colspan=2 valign=bottom style='width:24.74%;
  border-top:none;border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td width="24%" nowrap colspan=2 valign=bottom style='width:24.74%;
  border-top:none;border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:solid black 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.42%;border-top:solid windowtext 1.0pt;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:none;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Net sales:</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp; 7,514 </font> </p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">100.0%</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp; 6,226 </font> </p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">100.0%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.42%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Cost of sales</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4,094 </font> </p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border:none;
  border-bottom:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">54.5%</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2,747 </font> </p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">44.1%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.42%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Gross Profit</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3,420 </font> </p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">45.5%</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3,479 </font> </p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">55.9%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.42%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.42%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Selling, general and administrative expenses</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,629 </font> </p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">21.7%</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,602 </font> </p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">25.7%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.42%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Research and development costs</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 886
	</font> </p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border:none;
  border-bottom:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">11.8%</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 876
	</font> </p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">14.1%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.42%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Income from Operations</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 905
	</font> </p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">12.0%</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,001 </font> </p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">16.1%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.42%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt' align="right">

  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.42%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Net interest and other income</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 73
	</font> </p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">1.0%</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 76
	</font> </p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">1.2%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.42%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt' align="right">

  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.42%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Provision for Income Taxes</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 389
	</font> </p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">5.2%</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt' align="right">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 431
	</font> </p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt' align="right">
  <p align=right style='text-align:right'><font size="2">6.9%</font></p>
  </td>
 </tr>
 <tr style='height:16.5pt'>
  <td width="47%" nowrap valign=bottom style='width:47.42%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt 5.4pt 0pt 5.4pt;height:16.5pt'>
  <p><font size="2">Net Income</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;border:solid windowtext 1.0pt;
  border-bottom:double windowtext 2.25pt;padding:0pt 5.4pt 0pt 5.4pt;
  height:16.5pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 589 </font> </p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border:none;
  border-bottom:double windowtext 2.25pt;padding:0pt 5.4pt 0pt 5.4pt;
  height:16.5pt' align="right">
  <p align=right style='text-align:right'><font size="2">7.8%</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;border:solid windowtext 1.0pt;
  border-bottom:double windowtext 2.25pt;padding:0pt 5.4pt 0pt 5.4pt;
  height:16.5pt' align="right">
  <p><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 646 </font> </p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;border-top:none;
  border-left:none;border-bottom:double windowtext 2.25pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:16.5pt' align="right">
  <p align=right style='text-align:right'><font size="2">10.4%</font></p>
  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td width="47%" nowrap valign=bottom style='width:47.42%;padding:0pt 5.4pt 0pt 5.4pt;
  height:13.5pt'>

  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;padding:0pt 5.4pt 0pt 5.4pt;
  height:13.5pt' align="right">

  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;padding:0pt 5.4pt 0pt 5.4pt;
  height:13.5pt' align="right">

  </td>
  <td width="13%" nowrap valign=bottom style='width:13.9%;padding:0pt 5.4pt 0pt 5.4pt;
  height:13.5pt' align="right">

  </td>
  <td width="10%" nowrap valign=bottom style='width:10.86%;padding:0pt 5.4pt 0pt 5.4pt;
  height:13.5pt' align="right">

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









</div>










<p style='text-align:justify;text-indent:36.0pt'><b>Net Sales.</b>&nbsp;
Consolidated sales increased from $6,226,000 to $7,514,000 ($1,288,000 or 21%)
for the six months ended December 31, 2005, compared to the six months ended
December 31, 2004.&nbsp; Medical products continued to increase in total and as
a percentage of total sales to 49% from 31% in the same period last year.&nbsp;
Shipments to dental customers decreased to 24% of total sales compared to 26%
for the same period in the prior year as a one time $245,000 credit for the Intraflow
product was realized at the completion of the Intravantage asset acquisition,
reversing sales from last fiscal year as the product was returned as a
condition of the acquisition.&nbsp; Sales to factory automation and industrial
customers decreased to 20% from 31% for the same period in the prior year as
shipments of legacy motion control devices were reduced.&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 changes in sales volume, not the effect of price changes. </p>
<p style='text-align:justify;text-indent:36.0pt'>&nbsp;</p>
<p style='text-align:center;'>-17-</p>

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

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

</div>



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










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



<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 six months ended December 31, 2005 decreased 2%
over the same period in the previous year reflecting a reduced level of higher
margin industrial product sales.&nbsp; Gross profit as a percentage of sales
decreased to 45.5% for the six months ended December 31, 2005 compared to 55.9%
for the six months ended December 31, 2004, again reflecting the sales product
mix changes away from industrial products towards medical products. We had
$172,000 in vendor supplied component rework costs associated with a product
introduced in the last fiscal year.&nbsp; Included in the $172,000 is an increase in
our warranty costs of $43,000 for estimated future rework costs.&nbsp; Gross profit
and gross profit percentage were as follows:</p>



<div align="center">



<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='width:75%;border-collapse:collapse'>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='width:47%;height:20px; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap colspan=2 valign=bottom style='width:33%;
  border-top:1.0pt solid windowtext;border-left:1.0pt solid windowtext;
  border-bottom:medium none;border-right:medium none;height:20px; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">Six Months Ended
  December 31,</font></p>
  </td>
  <td nowrap valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; width:15%;border-bottom:medium none;height:20px; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">Increase/</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='width:47%;height:22px; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:16%;border-left:1.0pt solid windowtext;height:22px; padding-left:5.4pt; padding-right:5.4pt; 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='width:16%;height:22px; padding-left:5.4pt; padding-right:5.4pt; 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:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:15%;border-top:medium none;height:23px; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">(Decrease)</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='width:47%;border:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Gross Profit</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:16%;border-left:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">$3,420,000</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:16%;border-left:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">$3,479,000</font></p>
  </td>
  <td nowrap valign=bottom style='width:15%;border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">-1.7%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:47%;border-top:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Gross Profit Percentage</font></p>
  </td>
  <td nowrap valign=bottom style='width:16%;border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">45.5%</font></p>
  </td>
  <td nowrap valign=bottom style='width:16%;border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">55.9%</font></p>
  </td>
  <td nowrap valign=bottom style='width:15%;border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">-18.5%</font></p>
  </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 to $1,629,000 for the six months ended December 31,
2005 from $1,602,000 for the six months ended December 31, 2004.&nbsp; The increase
is due to higher expenditures in advertising and consulting, primarily related
to the Intraflow product relaunch, by $18,000 and $14,000 respectively.&nbsp; S, G
&amp; A costs were as follows: </p>



<div align="center">



<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='width:75%;border-collapse:collapse'>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='width:48%;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap colspan=2 valign=bottom style='width:33%;border-top:
  1.0pt solid windowtext;border-left:1.0pt solid windowtext;border-bottom:medium none;
  border-right:1.0pt solid black;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">Six Months Ended
  December 31,</font></p>
  </td>
  <td width="15%" nowrap valign=bottom style='width:15.62%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='width:48%;border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; width:16%;border-bottom:1.0pt solid windowtext;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; 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='width:16%;border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
  <td width="15%" nowrap valign=bottom style='width:15.62%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">Increase</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='width:48%;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Selling</font></p>
  </td>
  <td nowrap valign=bottom style='width:16%;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  509,000 </font> </p>
  </td>
  <td nowrap valign=bottom style='width:16%;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 477,000
	</font> </p>
  </td>
  <td width="15%" nowrap valign=bottom style='width:15.62%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">7%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:48%;border-top:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">General and administrative</font></p>
  </td>
  <td nowrap valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; width:16%;border-bottom:1.0pt solid windowtext;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align="right"><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,120,000
	</font> </p>
  </td>
  <td nowrap valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:16%;border-top:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,125,000
	</font> </p>
  </td>
  <td width="15%" nowrap valign=bottom style='width:15.62%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">0%</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='width:48%;border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Total S, G&amp;A</font></p>
  </td>
  <td nowrap valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:16%;border-top:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,629,000
	</font> </p>
  </td>
  <td nowrap valign=bottom style='width:16%;border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,602,000
	</font> </p>
  </td>
  <td width="15%" nowrap valign=bottom style='width:15.62%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">2%</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 increased
to $886,000 for the months ended December 31, 2005 from $876,000 for the months
ended December 31, 2004.&nbsp; The increase in Company-funded research and
development costs is due to higher travel expenses.&nbsp; Company-funded research
and development costs were as follows:</p>





<div align="center">












<table class=MsoNormalTable border=0 cellpadding=0
 style='width:84%;border-collapse:collapse'>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='width:48%;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap colspan=2 valign=bottom style='width:38%;
  border-top:1.0pt solid windowtext;border-left:1.0pt solid windowtext;
  border-bottom:medium none;border-right:1.0pt solid black;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">Six Months Ended
  December 31,</font></p>
  </td>
  <td nowrap valign=bottom style='width:10%;border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='width:48%;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; width:19%;border-left:1.0pt solid windowtext;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; 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='width:17%;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; 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:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:10%;border-top:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">Increase</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td nowrap valign=bottom style='width:48%;border:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p><font size="2">Research and Development costs</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:19%;border-left:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 886,000
  </font>
  </p>
  </td>
  <td nowrap valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; width:17%;border-left:medium none;height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=right style='text-align:right'><font size="2">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 876,000
	</font> </p>
  </td>
  <td nowrap valign=bottom style='width:10%;border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  height:15.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>
  <p align=center style='text-align:center'><font size="2">1%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='width:48%;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='width:19%;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='width:17%;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

  </td>
  <td nowrap valign=bottom style='width:10%;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0pt; padding-bottom:0pt'>

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







</div>







<p align="justify" style="text-indent: 36pt">Customer-funded research and development provided $48,000
and $252,000 in revenue in the six months ended December 31, 2005 and December
31, 2004, respectively reflecting the fluctuations in the timing of prototypes
and other related deliverables.&nbsp; In the six months ended December 31, 2005, $21,000
was recognized as cost of sales, and $43,000 was recognized as cost of sales in
the six months ended December 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 six months ended December 31, 2005 decreased
to $885,000 compared to operating profit of $1,001,000 for the same six months
in the previous year.&nbsp; The decrease was due to the less profitable product
sales mix given the decreased industrial product sales levels and increased operating
expenses.&nbsp; Consequently, operating profit as a percentage of sales decreased to
11.8% for the six months ended December 31, 2005 compared to 16.1% for the six
months ended December 31, 2004. &nbsp;Operating profit and margin were as follows:</p>





<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width="100%"
 style='width:100.0%;border-collapse:collapse'>
 <tr style='height:15.75pt'>
  <td width="10%" nowrap valign=bottom style='width:10.0%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="29%" nowrap valign=bottom style='width:29.6%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="37%" nowrap colspan=2 valign=bottom style='width:37.3%;border-top:
  solid windowtext 1.0pt;border-left:solid windowtext 1.0pt;border-bottom:none;
  border-right:solid black 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">Six Months Ended
  December 31, </font> </p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.08%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="10%" nowrap valign=bottom style='width:10.0%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="10%" nowrap valign=bottom style='width:10.0%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="29%" nowrap valign=bottom style='width:29.6%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="17%" nowrap valign=bottom style='width:17.0%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.3%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.08%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">(Decrease)</font></p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.0%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="10%" nowrap valign=bottom style='width:10.0%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="29%" nowrap valign=bottom style='width:29.6%;border:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Operating Profit</font></p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.0%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">$885,000</font></p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.3%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">$1,001,000</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.08%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">-12%</font></p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.0%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="10%" nowrap valign=bottom style='width:10.0%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="29%" nowrap valign=bottom style='width:29.6%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Operating Profit Percentage</font></p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.0%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">11.8%</font></p>
  </td>
  <td width="20%" nowrap valign=bottom style='width:20.3%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">16.1%</font></p>
  </td>
  <td width="13%" nowrap valign=bottom style='width:13.08%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">-27%</font></p>
  </td>
  <td width="10%" nowrap valign=bottom style='width:10.0%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

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



<p style='text-align:justify;text-indent:36.0pt'><b>&nbsp;</b></p>

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

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

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

</div>



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










<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'><b>Royalties and Other Income. </b>&nbsp;We received $37,000 in royalty
payments in the six months ended December 31, 2005, compared to $40,000 in
royalty payments in the six months ended December 31, 2004.</p>

<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'><b>Net Interest Expense. </b>&nbsp;Net interest income was $43,000 in the six
months ended December 31, 2005, compared to a $9,000 expense in the prior
year's same six month period due to the maintenance of Company's positive cash
balance and debt-free status in the current period<b> </b></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 six months ended December 31,
2005 was 40%, unchanged from the six months ended December 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 six months ended December 31,
2005 was $577,000 or $0.06 per share on a basic and diluted basis, as compared
to a net income of $646,000 or $0.07 per share on a basic and diluted basis for
the six months ended December 31, 2004.&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 dates last year and the year ended June 30, 2005:</p>



<div align="center">












<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='width:90%;border-collapse:collapse'>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.22%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="35%" nowrap colspan=2 valign=bottom style='width:35.88%;
  border-top:solid windowtext 1.0pt;border-left:solid windowtext 1.0pt;
  border-bottom:none;border-right:solid black 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">As of December 31,
	</font> </p>
  </td>
  <td width="16%" nowrap valign=bottom style='width:16.92%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">As of</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.22%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;border:none;
  border-left:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
  <td width="16%" nowrap valign=bottom style='width:16.92%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">June 30, 2005</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.22%;border:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Cash and cash equivalents</font></p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;border:solid windowtext 1.0pt;
  border-left:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">$2,177,000&nbsp;</font></p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;border:solid windowtext 1.0pt;
  border-left:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">$2,544,000 </font> </p>
  </td>
  <td width="16%" nowrap valign=bottom style='width:16.92%;border:solid windowtext 1.0pt;
  border-left:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">$2,584,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.22%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Working Capital&#185;</font></p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">$7,659,000&nbsp;</font></p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">$6,661,000 </font> </p>
  </td>
  <td width="16%" nowrap valign=bottom style='width:16.92%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">$8,288,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.22%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Credit Line outstanding balance</font></p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">$0&nbsp;</font></p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">$0 </font> </p>
  </td>
  <td width="16%" nowrap valign=bottom style='width:16.92%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">$0&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.22%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Tangible book value/common share&#178;</font></p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">$0.97&nbsp;</font></p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">$0.95 </font> </p>
  </td>
  <td width="16%" nowrap valign=bottom style='width:16.92%;border:none;
  border-right:solid windowtext 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">$1.10&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.22%;border:solid windowtext 1.0pt;
  border-bottom:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Number of days of sales outstanding (DSO)</font></p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
  <td width="16%" nowrap valign=bottom style='width:16.92%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.22%;border:solid windowtext 1.0pt;
  border-top:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">in accounts receivable at end of quarter&#179;</font></p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">64&nbsp;</font></p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">50&nbsp;</font></p>
  </td>
  <td width="16%" nowrap valign=bottom style='width:16.92%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">75&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.22%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="16%" nowrap valign=bottom style='width:16.92%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.22%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="35%" nowrap colspan=2 valign=bottom style='width:35.88%;
  border-top:solid windowtext 1.0pt;border-left:solid windowtext 1.0pt;
  border-bottom:none;border-right:solid black 1.0pt;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">Six Months Ended
  December 31, </font> </p>
  </td>
  <td width="16%" nowrap valign=bottom style='width:16.92%;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">Year Ending</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.22%;padding:0pt 5.4pt 0pt 5.4pt;
  height:15.75pt'>

  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;border-top:none;
  border-left:solid windowtext 1.0pt;border-bottom:solid windowtext 1.0pt;
  border-right:none;padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2005</font></p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">2004</font></p>
  </td>
  <td width="16%" nowrap valign=bottom style='width:16.92%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=center style='text-align:center'><font size="2">June 30, 2005</font></p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td width="47%" nowrap valign=bottom style='width:47.22%;border:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p><font size="2">Net cash provided by operations</font></p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">$952,000 </font> </p>
  </td>
  <td width="17%" nowrap valign=bottom style='width:17.94%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">$486,000 </font> </p>
  </td>
  <td width="16%" nowrap valign=bottom style='width:16.92%;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0pt 5.4pt 0pt 5.4pt;height:15.75pt'>
  <p align=right style='text-align:right'><font size="2">$557,000 </font> </p>
  </td>
 </tr>
</table>









</div>









<p style='margin-left:36.0pt;text-align:justify;text-autospace:
none'><sup>1</sup> Working Capital is calculated as follows:&nbsp; ending current
assets balance less ending current liabilities balance.</p>



<p style='margin-left:36.0pt;text-align:justify;text-autospace:
none'><sup>2</sup> Tangible book value/common share<sup> </sup>is calculated as
follows: (Total shareholders' equity less Goodwill less intangibles - patents)
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'><sup>3</sup> DSO is calculated as follows: Ending Net Accounts Receivable
balance divided by (Previous Quarter Sales divided by 91 days).</p>



<p style='text-align:justify;text-indent:36.0pt;text-autospace:
none'>Our working capital at December 31, 2005 increased to $7.7 million
compared to $6.7 million at December 31, 2004 and decreased from $8.3 million
at June 30, 2005.&nbsp; Sustained profitability contributed to the provision of cash
and increased working capital for the year and was offset by the use of cash to
fund the Intravantage asset acquisition.&nbsp;</p>



<p style='text-align:justify;text-indent:36.0pt'>In October
2005, we renewed our credit facility with Wells Fargo Bank N.A. (&quot;Wells Fargo&quot;)
for borrowings up to $2,000,000.&nbsp; Its terms require monthly interest
payments at either the prime rate of interest (7.25% at December 31, 2005); or
LIBOR plus 2.50% (6.90% (one month) to 7.04% (three months) at December 31,
2005), at management's discretion, based on outstanding borrowings with no
minimum interest charge.&nbsp; The outstanding borrowings are secured by all
assets of and guaranteed by the Company. &nbsp;There was no outstanding balance
under the terms of this credit facility as of December 31, 2005.&nbsp; The
total eligible borrowing capacity at December 31, 2005 was $2,000,000.</p>



<p style='text-autospace:ideograph-numeric ideograph-other' align="center">-19-</p>

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<p style='text-autospace:ideograph-numeric ideograph-other; text-indent:36pt'>There
are certain financial and non-financial covenants that we must meet to be in
compliance with the terms of the October 2005 Wells Fargo credit facility.&nbsp; At
December 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,
2005, or to date during fiscal year 2006.</p>












<p style='text-align:justify;text-indent:36.0pt'>At December
31, 2005, we had cash and cash equivalents of $2,177,000.&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 facilities will be
sufficient to meet our working capital and capital expenditure requirements for
the next twelve months. </p>



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



<p style='text-align:justify;text-indent:36.0pt'>&nbsp;On
January 5, 2006, we entered into an Asset Purchase Agreement with Astromec,
Inc., a Nevada corporation (&quot;Astromec&quot;), whereby the Company's wholly owned
subsidiary, Pro-Dex Astromec purchased from Astromec substantially all of
Astromec's assets.&nbsp; The purchase price for the assets comprised of the following
consideration:</p>



<ul>
	<li>
	<p style='margin-left:36.0pt;text-align:justify;text-indent:
36.0pt'>$2,600,000 in cash paid to Astromec on January 5, 2006;</p></li>
	<li>
	<p style='margin-top:12.0pt;margin-right:0pt;margin-bottom:
0pt;margin-left:36.0pt;margin-bottom:.0001pt;text-align:justify;text-indent:
36.0pt'>$100,000 to be paid at the end of a six month period, subject to
adjustments based on the asset values presented in Astromec's audited closing
balance sheet; and</p></li>
	<li>
	<p style='margin-top:12.0pt;margin-right:0pt;margin-bottom:
0pt;margin-left:36.0pt;margin-bottom:.0001pt;text-align:justify;text-indent:
36.0pt'>Assumption of operating liabilities of approximately $300,000.</p></li>
</ul>



<p style='text-align:justify;text-indent:36.0pt'>On January 4,
2006, the credit facility with Wells Fargo was amended to allow for a
$1,000,000 four year term loan in addition to the $2,000,000 line of
credit.&nbsp; The term loan and is fully amortizing and requires monthly
principal and interest payments at either the prime rate of interest (7.25% at
December 31, 2005); or LIBOR plus 2.50% (6.90% (one month) to 7.04% (three
months) at December 31, 2005), at management's discretion, based on the
outstanding balance.&nbsp; The outstanding borrowings are secured by all assets
of and guaranteed by the Company.&nbsp; Pro-Dex used the full proceeds of the term
loan to finance the Astromec asset purchase.</p>



<p style='text-align:justify;text-indent:36.0pt'>On January 3,
2006, we entered into a purchase and sale agreement with M. D. Glover, Inc. including
the establishment of an escrow to purchase the land and building for the
property located at 2950 Arrowhead Drive, Carson City, Nevada.&nbsp; M. D. Glover,
Inc. is owned by Mr. Glover, a substantioal owner of Astromec.&nbsp; This property
has been the operating location for Astromec for the last fifteen years.&nbsp; The
purchase price for the land and building is $2,200,000 to be paid at closing of
escrow, which is expected to take place by the end of April, 2006.&nbsp; This
purchase price is expected to be financed with a combination of a mortgage and
available cash on hand.&nbsp; Until the close of escrow, Pro-Dex Astromec will lease
the property from M. D. Glover, Inc. &nbsp;&nbsp;</p>
<p style='text-align:center;'>-20-</p>

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










<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 in December 2004.&nbsp; This standard establishes the
accounting standards for share-based compensation, and will apply to us in the
recognition of the cost of share-based awards 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.
Upon adoption of SFAS 123(R), all stock option awards will be recognized as compensation
expense in the income statement, typically over any related vesting period.&nbsp; We
will be required to adopt SFAS 123(R) in the first quarter of fiscal year
2007.&nbsp; We believe the impact of adopting SFAS 123(R) will be similar to the
pro-forma disclosure impact presented.</p>

<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;
Based on that evaluation for the quarter ended December 31, 2005, 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, and 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 December 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 of fiscal 2005, 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:center;'>-21-</p>

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<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>



	<table border="0" width="100%" id="table3">
		<tr>
			<td>&nbsp;</td>
			<td width="83"><b>
<font size="2">Item 1.
</font> </b></td>
			<td width="969">



<p style='text-autospace:none; margin-top:0'><b>
<font size="2">Legal Proceedings
</font> </b></p>



			</td>
		</tr>
		<tr>
			<td>&nbsp;</td>
			<td width="83">&nbsp;</td>
			<td width="969">



<p style='text-autospace:
none; margin-top:0' align="justify"><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>&nbsp;</td>
			<td width="83">
<b><font size="2">Item 2. </font> </b></td>
			<td width="969">

<p style='margin-top:0;text-align:justify; margin-bottom:0.001pt'>
<b><font size="2">Unregistered Sales of
Equity Securities and Use of Proceeds. </font> </b><font size="2">&nbsp;</font></p>

			</td>
		</tr>
		<tr>
			<td>&nbsp;</td>
			<td width="83">&nbsp;</td>
			<td width="969">

<p style='margin-top:0' align="justify">
<font size="2">None.</font></p>

			</td>
		</tr>
		<tr>
			<td>&nbsp;</td>
			<td width="83">
<b><font size="2">Item 3.</font></b></td>
			<td width="969">

<p style='margin-top:0;text-align:justify; margin-bottom:0.001pt'>
<b><font size="2">Defaults Upon Senior
Securities. </font> </b><font size="2">&nbsp;</font></p>

			</td>
		</tr>
		<tr>
			<td>&nbsp;</td>
			<td width="83">&nbsp;</td>
			<td width="969">

<p style='margin-top:0; margin-bottom:0.001pt'>
<font size="2">None.</font></p>

			</td>
		</tr>
		<tr>
			<td>&nbsp;</td>
			<td width="83"><b>
<font size="2">Item 4. </font> </b></td>
			<td width="969">

<p style='margin-top:18.0pt;text-align:justify; '><b>
<font size="2">Submissions of Matters
to a Vote of Securities Holders. </font> </b><font size="2">&nbsp;</font></p>

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

<p style='margin-top:18.0pt;text-align:justify; text-indent:36pt'>
<font size="2">On
December 1, 2005, the Company held its 2005 Annual Shareholders Meeting. At the
Meeting the Company's shareholders (i) elected Valerio L. Giannini and Patrick
L. Johnson as Class II directors; and (ii) ratified the appointment of Moss
Adams, LLP as the Company's independent auditors for the fiscal year ending
June 30, 2006.</font></p>

<p style='margin-top:18.0pt;text-align:justify;text-indent:
36.0pt'><font size="2">Mr. Giannini received the following
votes: For 8,501,092; and Withhold 70,085.&nbsp; Mr. Johnson received the following
votes: For 6,764,451; and Withhold 1,806,726.&nbsp; The proposal to ratify the
appointment of Moss Adams, LLP received the following votes: For 8,556,742;
Against 9,800; and Abstain/Broker Non-Votes 4,635.&nbsp; </font>  </p>

<p style='margin-top:18.0pt;text-align:justify; margin-left:36pt'>
<font size="2"><b>Item 5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other Information. </b>&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; None.</font></p>

<p style='margin-top:18.0pt;text-align:justify; margin-left:36pt'><b>
<font size="2">Item 6. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Exhibits.
</font> </b><font size="2">&nbsp;</font></p>

	<table border="0" width="100%" id="table4" cellspacing="3" cellpadding="2">
		<tr>
			<td valign="top">&nbsp;</td>
			<td width="976" align="left" valign="top" colspan="2">
	<font size="2">
	<u>Exhibits</u>:</font></td>
		</tr>
		<tr>
			<td valign="top">&nbsp;</td>
			<td width="49" align="left" valign="top"><font size="2">31.1&nbsp;</font></td>
			<td width="927" valign="top"><font size="2">Certifications of Chief Executive Officer
Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended,
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</font></td>
		</tr>
		<tr>
			<td valign="top">&nbsp;</td>
			<td width="49" align="left" valign="top"><font size="2">31.2&nbsp;</font></td>
			<td width="927" valign="top"><font size="2">Certifications of 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></td>
		</tr>
		<tr>
			<td valign="top">&nbsp;</td>
			<td width="49" align="left" valign="top"><font size="2">32&nbsp;</font></td>
			<td width="927" valign="top"><font size="2">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></td>
		</tr>
	</table>

<p><font size="2">SIGNATURES <br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In
accordance with the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.</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; February 14,
  2006</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; February 14,&nbsp;2006</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'>

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

  &nbsp;&nbsp;

  </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 align=center style='text-align:center'>&nbsp;</p>
<p align=center style='text-align:center'><b>End of Filing</b></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>



<font size="2">



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












</font>







</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>

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

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



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

<table border="0" width="100%" id="table1" cellspacing="4" cellpadding="3">
	<tr>
		<td colspan="3" align="justify"><font size="2">I, Jeffrey J. Ritchey,
certify that: </font></td>
	</tr>
	<tr>
		<td width="4%" align="justify"><font size="2">1.</font></td>
		<td colspan="2" align="justify">



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



		</td>
	</tr>
	<tr>
		<td width="4%" align="justify"><font size="2">2.</font></td>
		<td colspan="2" align="justify">



<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 width="4%" align="justify"><font size="2">3.</font></td>
		<td width="94%" colspan="2" align="justify">



<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 width="4%" align="justify"><font size="2">4.</font></td>
		<td width="94%" colspan="2" align="justify">



<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 width="4%" align="justify">&nbsp;</td>
		<td width="4%" align="justify"><font size="2">a)</font></td>
		<td width="90%" align="justify">



<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 width="4%" align="justify">&nbsp;</td>
		<td width="4%" align="justify"><font size="2">b)</font></td>
		<td width="90%" align="justify">



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



		</td>
	</tr>
	<tr>
		<td width="4%" align="justify">&nbsp;</td>
		<td width="4%" align="justify"><font size="2">c)</font></td>
		<td width="90%" align="justify">



<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 width="4%" align="justify">&nbsp;</td>
		<td width="4%" align="justify"><font size="2">d)</font></td>
		<td width="90%" align="justify">



<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;&nbsp; and</font></p>



		</td>
	</tr>
	<tr>
		<td width="4%" align="justify"><font size="2">5.</font></td>
		<td width="94%" align="justify" 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 width="4%" align="justify">&nbsp;</td>
		<td width="4%" align="justify"><font size="2">a)</font></td>
		<td width="90%" align="justify">



<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 width="4%" align="justify">&nbsp;</td>
		<td width="4%" align="justify"><font size="2">b)</font></td>
		<td width="90%" align="justify">



<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>





<p><font size="2">Date: February 14,
2006</font></p>

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

</body>

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

<head>
<title>Exhibit 31.2</title>
</head>

<body>










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

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

<table border="0" width="100%" id="table1" cellspacing="4" cellpadding="3">
	<tr>
		<td colspan="3" align="justify"><font size="2">I, Jeffrey J. Ritchey,
certify that: </font></td>
	</tr>
	<tr>
		<td width="4%" align="justify"><font size="2">1.</font></td>
		<td colspan="2" align="justify">



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



		</td>
	</tr>
	<tr>
		<td width="4%" align="justify"><font size="2">2.</font></td>
		<td colspan="2" align="justify">



<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 width="4%" align="justify"><font size="2">3.</font></td>
		<td width="94%" colspan="2" align="justify">



<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 width="4%" align="justify"><font size="2">4.</font></td>
		<td width="94%" colspan="2" align="justify">



<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 width="4%" align="justify">&nbsp;</td>
		<td width="4%" align="justify"><font size="2">a)</font></td>
		<td width="90%" align="justify">



<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 width="4%" align="justify">&nbsp;</td>
		<td width="4%" align="justify"><font size="2">b)</font></td>
		<td width="90%" align="justify">



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



		</td>
	</tr>
	<tr>
		<td width="4%" align="justify">&nbsp;</td>
		<td width="4%" align="justify"><font size="2">c)</font></td>
		<td width="90%" align="justify">



<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 width="4%" align="justify">&nbsp;</td>
		<td width="4%" align="justify"><font size="2">d)</font></td>
		<td width="90%" align="justify">



<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;&nbsp; and</font></p>



		</td>
	</tr>
	<tr>
		<td width="4%" align="justify"><font size="2">5.</font></td>
		<td width="94%" align="justify" 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 width="4%" align="justify">&nbsp;</td>
		<td width="4%" align="justify"><font size="2">a)</font></td>
		<td width="90%" align="justify">



<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 width="4%" align="justify">&nbsp;</td>
		<td width="4%" align="justify"><font size="2">b)</font></td>
		<td width="90%" align="justify">



<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>





<p><font size="2">Date: February 14,
2006&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>/s/
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; JEFFREY J. RITCHEY</u> _______<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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;Chief
Financial Officer</font></p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>

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

<body>












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





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

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



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

<p style='text-align:justify; text-indent:36pt'>1.&nbsp;&nbsp; The Report fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and</p>

<p style='text-align:justify; text-indent:36pt'>2.&nbsp;&nbsp; The information contained in the
Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.</p>



<div align="left">
	<table border="0" width="100%" id="table1">
		<tr>
			<td valign="top">Dated: February 14, 2006</td>
			<td width="663" valign="top">By:<u>
/s/ &nbsp;&nbsp; PATRICK L. JOHNSON&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
			<br>
			</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Patrick
L. Johnson<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Chief
Executive Officer and President<u><br>
</u>&nbsp; </td>
		</tr>
		<tr>
			<td valign="top">Dated: February 14, 2006</td>
			<td width="663" valign="top">By:<u>
/s/ &nbsp;&nbsp; JEFFREY J. RITCHEY&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
			<br>
			</u>&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; Chief Financial Officer</td>
		</tr>
	</table>
</div>



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





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

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