-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 NAZm+iI+p0oysJgdrrXIhLdxIj1TyN60iiMjoPsR3Q76n7OOFjINliE0D4AggjyJ
 jEJfbiSpVROqvASgFDj08Q==

<SEC-DOCUMENT>0001003297-08-000207.txt : 20080922
<SEC-HEADER>0001003297-08-000207.hdr.sgml : 20080922
<ACCEPTANCE-DATETIME>20080922160012
ACCESSION NUMBER:		0001003297-08-000207
CONFORMED SUBMISSION TYPE:	10KSB
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20080630
FILED AS OF DATE:		20080922
DATE AS OF CHANGE:		20080922

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:			0608

	FILING VALUES:
		FORM TYPE:		10KSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-14942
		FILM NUMBER:		081082468

	BUSINESS ADDRESS:	
		STREET 1:		2361 MCGAW AVENUE
		CITY:			IRVINE
		STATE:			CA
		ZIP:			92614
		BUSINESS PHONE:		949-769-3200

	MAIL ADDRESS:	
		STREET 1:		2361 MCGAW AVENUE
		CITY:			IRVINE
		STATE:			CA
		ZIP:			92614
</SEC-HEADER>
<DOCUMENT>
<TYPE>10KSB
<SEQUENCE>1
<FILENAME>esprodex10kv1.htm
<TEXT>
<html>

<head>
<!-- Document Prepared With EDGARSTAR Software-->
<!-- Copyright 2007 EDGARSTAR TRADEMARK-->
<!-- All rights reserved EDGAR2.com -->



<title> PRO DEX INC Form 10-K</title>



</head>

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

<div style='page:Section1;'>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;</p>

  <h4 style='margin:0in;margin-bottom:.0001pt;text-align:center;page-break-after:avoid;font-size:12.0pt;font-family:"Times New Roman";font-weight:normal;'><b><font style="font-size: 14.0pt">UNITED STATES </font></b></h4>
  <h4 style='margin:0in;margin-bottom:.0001pt;text-align:center;page-break-after:avoid;font-size:12.0pt;font-family:"Times New Roman";font-weight:normal;'><b><font style="font-size: 14.0pt">SECURITIES AND EXCHANGE COMMISSION</font></b></h4>
  <h5 style='margin-top:12.0pt;margin-right:0in;margin-bottom:3.0pt;margin-left:0in;font-size:13.0pt;font-family:"Times New Roman";font-weight:bold;text-align:center'>Washington, D.C. 20549</h5>
  <h6 style='margin-top:12.0pt;margin-right:0in;margin-bottom:3.0pt;margin-left:0in;font-size:11.0pt;font-family:"Times New Roman";font-weight:bold;text-align:center'>&nbsp;</h6>
<h6 style='margin-top:12.0pt;margin-right:0in;margin-bottom:3.0pt;margin-left:0in;font-size:11.0pt;font-family:"Times New Roman";font-weight:bold;text-align:center'>
<font style="font-size: 24.0pt">FORM
  10-KSB</font></h6>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-left:.75in;text-indent:-.75in;text-autospace:
  none'><b>[X]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.</b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>For
  the fiscal year ended June 30, 2008</b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><b><font style="font-size: 6.0pt">&nbsp;</font></b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><b>OR</b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-left:.75in;text-indent:-.75in;text-autospace:
  none'><b>[&nbsp;
  ]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.&nbsp;&nbsp; FOR THE TRANSITION
  PERIOD FROM&nbsp; <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>TO&nbsp;
  <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; .</u></b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>Commission
  File Number&nbsp;&nbsp;&nbsp; 0-14942 </b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b><font style="font-size: 10.0pt">&nbsp;</font></b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b><font style="font-size: 24.0pt">PRO-DEX, INC.&nbsp;&nbsp;&nbsp; </font></b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>(Name
  of small business issuer in its charter)&nbsp;&nbsp;&nbsp;&nbsp; </b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b><font style="font-size: 10.0pt">&nbsp;</font></b></p>
  <table border="0" style="border-collapse: collapse" width="100%" id="table2">
	<tr>
		<td width="494">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b><u>Colorado </u></b></p>
  		</td>
		<td>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b><u>84-1261240
  </u></b></p>
  		</td>
	</tr>
	<tr>
		<td width="494">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>(State
  or other jurisdiction of</b></p>
  		</td>
		<td>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>(I.R.S.
  Employer Identification No.) </b></p>
  		</td>
	</tr>
	<tr>
		<td width="494">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>incorporation
  or organization)</b></p></td>
		<td>&nbsp;</td>
	</tr>
</table>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;</p>
  <div align="center">
	<table border="0" style="border-collapse: collapse" width="85%" id="table1">
		<tr>
			<td width="492" style="border-bottom: 1px solid #000000">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>2361 McGaw Avenue, Irvine, California</b></p>
			</td>
			<td style="border-bottom: 1px solid #000000">
			<p align="center"><font face="Times New Roman"><b>92614</b></font></td>
		</tr>
		<tr>
			<td width="492">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>
	<b>(Address of principal executive offices)</b></p>
  			</td>
			<td>
			<p align="center"><font face="Times New Roman"><b>(Zip Code)</b></font></td>
		</tr>
	</table>
</div>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b><font style="font-size: 10.0pt">&nbsp;</font></b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>Issuer's
  telephone number: (<u>949) 769-3200 </u></b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b><font style="font-size: 10.0pt">&nbsp;</font></b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>Securities
  registered under Section 12(b) of the Exchange Act: </b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b><font style="font-size: 7.0pt">&nbsp;</font></b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b><font style="font-size: 7.0pt">&nbsp;</font></b></p>
  <div align=center>
  <table class=MsoNormalTable border=0 cellpadding=0
   style='border-collapse:collapse' width="75%">
   <tr>
    <td valign=top style='padding:0in; '>
    <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b><font style="font-size: 7.0pt">&nbsp;</font></b></p>
    </td>
    <td valign=top style='padding:0in; '>
    <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:
    none'><b><font style="font-size: 10.0pt">Name of each exchange </font></b></p>
    </td>
   </tr>
   <tr>
    <td valign=top style='padding:0in; '>
    <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:
    none'><b><u><font style="font-size: 10.0pt">Title of each class </font></u></b></p>
    </td>
    <td valign=top style='padding:0in; '>
    <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:
    none'><b><u><font style="font-size: 10.0pt">on which registered </font></u></b></p>
    </td>
   </tr>
   <tr>
    <td valign=top style='padding:0in; '>
    <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:
    none'><b><font style="font-size: 10.0pt">Common Stock, no par Value</font></b></p>
    </td>
    <td valign=top style='padding:0in; '>
    <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:
    none'><b><font style="font-size: 10.0pt">NASDAQ Capital Market </font></b></p>
    </td>
   </tr>
  </table>
  </div>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b><font style="font-size: 10.0pt">&nbsp;</font></b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>Securities
registered under Section 12(g) of the Exchange Act: </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>None</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>(Title
of class) </p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font><font size="2">-1-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Check whether the issuer is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act.&nbsp; [&nbsp; ]</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Check whether the issuer (1) filed all reports required by Section 13 or
15(d) of the Exchange Act during the past 12 months, and (2) has been subject
to such filing requirements for the past 90 days. </p>
<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:
none; margin-left:0in; margin-right:0in; margin-top:0in'>Yes
[X]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No&nbsp; [&nbsp; ]</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ X ]</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Indicate by check mark whether the registrant is a shell company (as
defined by rule 12b-2 of the Exchange Act).</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>Yes
[&nbsp; ]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No&nbsp; [&nbsp;X ]</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>State issuer's revenues for its most recent fiscal year: <u>$25,126,000</u>.
</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the average bid and
asked price of such common equity as of September 16, 2008:<u> $5,297,297</u>. &nbsp;For
the purpose of this calculation, shares owned by officers, directors and 10%
stockholders known to the registrant have been deemed to be owned by
affiliates. This determination of affiliate status is not a determination for
other purposes. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>The number of shares outstanding of each of the issuer&#146;s classes of
Common Stock outstanding as of the latest practicable date: 9,767,866 shares of Common Stock, no par value, as
of September 16, 2008. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>DOCUMENTS INCORPORATED BY REFERENCE: Part III incorporates by reference
certain information from the registrant's definitive proxy statement (the
&quot;Proxy Statement&quot;) for the 2008 Annual Meeting of Shareholders.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in;text-autospace:none'>Transitional
Small Business Disclosure Format:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Yes [&nbsp; ] No [X]</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>PART
I</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>Cautionary
statement pursuant to safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-2-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>When used in this report on Form 10-KSB, the words &quot;expects,&#148;
&quot;anticipates,&quot; &quot;estimates,&quot; &quot;believes,&quot;
&quot;hopes,&quot; &quot;intends,&quot; &quot;forecasts&quot; and similar
expressions are intended to identify &quot;forward-looking statements.&quot;
These statements which are not historical or current facts are made pursuant to
the safe harbor provisions of Section 27a of the Securities Act of 1933, as
amended and Section 21e of the Securities Exchange Act of 1934, as amended, and
the Company intends that such forward-looking statements be subject to those
safe harbor provisions for such statements. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements,
which speak only as of the date of this report. While forward-looking
statements represent management's best judgment as to what may occur in the
future, they are subject to risks, uncertainties and important factors beyond
the control of the Company that could cause actual results and events to differ
materially from historical results of operations and events as well as those
presently anticipated or projected. These factors include adverse economic
conditions, entry of new and stronger competitors, capital availability,
unexpected costs, failure to capitalize upon access to new customers, and
marketplace delisting. Other risks and uncertainties which may affect
forward-looking statements about the Company's business and prospects include,
but are not limited to, the ramifications of the continued industry
consolidation of dental and medical products manufacturers, dealers and
distributors, managed health care, the Company's ability to effectively
integrate operations of acquired companies, market acceptance and support of
new products, maintaining favorable supplier relationships, the inability to
engage qualified human resources as needed, regulatory compliance and general
economic conditions. The Company disclaims any obligations subsequently to
revise any forward-looking statements to reflect events or circumstances after
the date of such statement or to reflect the occurrence of anticipated or
unanticipated events.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-3-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b><font style="font-size: 11.0pt">Item 1. &nbsp;&nbsp;&nbsp;&nbsp; Description
of </font>Business</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b>Company Overview</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b><font style="font-size: 10.0pt">&nbsp;</font></b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>Pro-Dex, Inc.
(&#147;Company,&#148; &#147;Pro-Dex&#148;, &#147;we,&#148; &#147;our,&#148;, &#147;us&#148;), with operations
in Irvine, California, Beaverton, Oregon and Carson City, Nevada, provides a
pathway to product solutions never envisioned by customers.&nbsp; A unique
blend of creativity and systemic discipline enables us to develop and
manufacture innovative designs that powerfully complete a customer&#146;s strategic
product offering. Pro-Dex leverages extraordinary human collaboration and
superior technical capability to power and control products used in medical,
aerospace, military, research and industrial applications requiring high
precision in harsh environments.&nbsp; With expertise in multi-axis motion
control, fractional horsepower motors and rotary drive systems, we identify and
create unexpected value for our customers.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Pro-Dex's products are found in hospitals, dental
offices, medical engineering labs, commercial and military aircraft, scientific
research facilities and high tech manufacturing operations around the world.
The company names of Micro Motors, Oregon Micro Systems, and Astromec are used
for marketing purposes as brand names.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Pro-Dex&#146;s principal headquarters recently moved and are now located at 2361 McGaw Avenue, Irvine, California 92614 and our phone number also changed to
949-769-3200.&nbsp; Our Internet address is  <u><font color="#000080">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 SEC 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&#146;s
Public Reference Room at 100 F Street, N.E., 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="#000080">www.sec.gov</font></u>. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>All years relating to financial data herein shall refer to fiscal years
ending June 30, unless indicated otherwise.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b>Description of Business</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>The majority of our revenue is derived from designing, developing and
manufacturing rotary drive systems for the medical device and dental
industries, motion control software and hardware for industrial and scientific
applications and fractional horsepower DC motors for aerospace, medical and
military applications. A large part of the revenue of the Company has been
driven by developing and selling numerous types of private label rotary drive
systems for use in dental, cranial, spinal, arthroscopic and orthopedic
surgery.&nbsp; The Company 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; Other revenue sources include
designing and manufacturing miniature pneumatic motors, fractional horsepower
DC motors and motion control systems for industrial applications in the
automotive, aerospace, and apparel industries.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Company-funded research and development supports the development of
generic rotary drive, motion control, and electric motor technology platforms.&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 not associated with signed contracts or purchase orders
are expensed as incurred.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-4-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>In the year ended June 30, 2008, $2,732,000 was expensed for company-funded
research and development; an increase of $258,000 from the $2,474,000 expensed
in the year ended June 30, 2007.&nbsp; The increase was attributable to increased labor
costs for medical and small motor product development, improvement and
validation.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-indent:.5in;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>We seek customer-funded projects to customize these
platforms to specific customer requirements.&nbsp; For customer-funded development
projects, costs are capitalized and recognized as a cost of sales when specific
deliverables within the development contracts are earned, matching the costs to
the revenue.&nbsp; The results of customer-funded development work are intended to
provide long-term exclusive manufacturing agreements and may provide the
customer with the retention of certain parts of the intellectual property
developed.&nbsp; The identity of our customers is generally protected by a
non-disclosure agreement.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-indent:.5in;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=445
 style='width:65%;border-collapse:collapse'>
 <tr style='height:14.55pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Customer-funded</p>
  </td>
  <td colspan=6 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Year&nbsp;Ended&nbsp;June&nbsp;30,</p>
  </td>
 </tr>
 <tr style='height:14.6pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>development&nbsp;($'000)</p>
  </td>
  <td colspan=3 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td colspan=3 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
 </tr>
 <tr style='height:14.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Revenue</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>470&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(24)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.6pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Cost&nbsp;of&nbsp;Sales</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>119&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>124&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.55pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Gross&nbsp;margin</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>351&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>75%&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(148)</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>-&nbsp;-</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-indent:.5in;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-indent:
0in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-indent:.5in;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-indent:.5in;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>In fiscal year 2008, there was a $494,000 increase
in revenue from customer-funded research and development as there was work
performed on three major new development projects that were started in 2008
compared to $24,000 in negative revenue from customer-funded research and
development as fees were refunded due to cancelled development projects in the
year ended June 30, 2007.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-indent:.5in;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-autospace:ideograph-numeric ideograph-other'>The
Company&#146;s revenue is derived from five main customer types.&nbsp; The proportion of
total sales to each customer type and sales by location are noted in the tables
below:</p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-indent:.5in;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-autospace:ideograph-numeric ideograph-other'>&nbsp;</p>

<div align="left">

<table class=MsoNormalTable border=0 cellpadding=0 width=767
 style='width:95%;border-collapse:collapse'>
 <tr style='height:11.9pt'>
  <td width=210 valign=bottom style='width:157.8pt;border-top:medium none;border-left:
  medium none;border-bottom:medium none windowtext;padding:1.1pt;height:11.9pt; border-right-color:windowtext'>
  <font size="2">&nbsp; Sales&nbsp;by&nbsp;customer&nbsp;type&nbsp;($'000)</font></td>
  <td width=111 colspan=2 valign=bottom style='border-right:1px solid windowtext; border-top:1px solid windowtext; border-bottom:1px solid windowtext; width:83.5pt;border-left:1px solid;padding:1.1pt;height:11.9pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2008</font></p>
  </td>
  <td width=111 colspan=2 valign=bottom style='border-right:1px solid windowtext; border-top:1px solid windowtext; border-bottom:1px solid windowtext; width:83.45pt;border-left:1px solid;padding:1.1pt;height:11.9pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2007*</font></p>
  </td>
  <td width=111 colspan=2 valign=bottom style='border-right:1px solid windowtext; border-top:1px solid windowtext; border-bottom:1px solid windowtext; width:83.45pt;border-left:1px solid;padding:1.1pt;height:11.9pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2006</font></p>
  </td>
  <td width=111 colspan=2 valign=bottom style='border-right:1px solid windowtext; border-top:1px solid windowtext; border-bottom:1px solid windowtext; width:83.45pt;border-left:1px solid;padding:1.1pt;height:11.9pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2005</font></p>
  </td>
  <td width=111 colspan=2 valign=bottom style='border-right:1px solid windowtext; border-top:1px solid windowtext; border-bottom:1px solid windowtext; width:83.45pt;border-left:1px solid;padding:1.1pt;height:11.9pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2004</font></p>
  </td>
 </tr>
 <tr style='height:11.9pt'>
  <td width=210 valign=bottom style='border-left:1px solid windowtext; border-bottom:1px solid windowtext; width:157.8pt;border-top:1px solid #000000;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px; border-right-color:windowtext'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Dental</font></p>
  </td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$3,290</font></p>
  </td>
  <td width=44 valign=bottom style='width:33.1pt;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px; border-top-color:#000000' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">13%</font></p>
  </td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$3,476</font></p>
  </td>
  <td width=44 valign=bottom style='width:33.05pt;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px; border-top-color:#000000' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">16%</font></p>
  </td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$3,789</font></p>
  </td>
  <td width=44 valign=bottom style='width:33.05pt;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px; border-top-color:#000000' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">22%</font></p>
  </td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$3,368</font></p>
  </td>
  <td width=44 valign=bottom style='width:33.05pt;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px; border-top-color:#000000' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">24%</font></p>
  </td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$4,578</font></p>
  </td>
  <td width=44 valign=bottom style='width:33.05pt;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px; border-top-color:#000000' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">32%</font></p>
  </td>
 </tr>
 <tr style='height:11.9pt'>
  <td width=210 valign=bottom style='border-left:1px solid windowtext; border-bottom:1px solid windowtext; width:157.8pt;border-top:1px solid #000000;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px; border-right-color:windowtext'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:left; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Medical</font></p>
  </td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">14,121</font></td>
  <td width=44 valign=bottom style='width:33.1pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">56%</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">10,275</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">48%</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">6,447</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">38%</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">5,849</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">42%</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">5,864</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">41%</font></td>
 </tr>
 <tr style='height:11.9pt'>
  <td width=210 valign=bottom style='border-left:1px solid windowtext; border-bottom:1px solid windowtext; width:157.8pt;border-top:1px solid #000000;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px; border-right-color:windowtext' align="left">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Industrial</font></p>
  </td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">3,279</font></td>
  <td width=44 valign=bottom style='width:33.1pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">13%</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">3,317</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">15%</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">3,753</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">22%</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">3,570</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">26%</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">2,533</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">18%</font></td>
 </tr>
 <tr style='height:11.9pt'>
  <td width=210 valign=bottom style='border-left:1px solid windowtext; border-bottom:1px solid windowtext; width:157.8pt;border-top:1px solid #000000;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px; border-right-color:windowtext' align="left">
  <font size="2">Aerospace</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">2,382</font></td>
  <td width=44 valign=bottom style='width:33.1pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">9%</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">2,445</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">11%</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">1,194</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">7%</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">--</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">--</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">--</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">--</font></td>
 </tr>
 <tr style='height:11.9pt'>
  <td width=210 valign=bottom style='border-left:1px solid windowtext; border-bottom:1px solid windowtext; width:157.8pt;border-top:1px solid #000000;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px; border-right-color:windowtext' align="left">
  <font size="2">Repairs,&nbsp;Government&nbsp;and&nbsp;other</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">2,054</font></td>
  <td width=44 valign=bottom style='width:33.1pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">8%</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">2,050</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">10%</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">1,878</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">11%</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">1,047</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">8%</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">1,225</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">9%</font></td>
 </tr>
 <tr style='height:11.9pt'>
  <td width=210 valign=bottom style='border-left:1px solid windowtext; border-bottom:1px solid windowtext; width:157.8pt;border-top:1px solid #000000;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px; border-right-color:windowtext' align="left">
  <font size="2">Total&nbsp;Sales</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">$25,126</font></td>
  <td width=44 valign=bottom style='width:33.1pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">100%</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">$21,563</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">100%</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">$17,061</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">100%</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">$13,834</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">100%</font></td>
  <td valign=bottom style='border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; width:67px;border-bottom:
  1px solid windowtext;height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">$14,200</font></td>
  <td width=44 valign=bottom style='width:33.05pt;border-top:1px solid #000000;border-left:
  1px solid #000000;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  height:11.9pt; padding-left:4px; padding-right:4px; padding-top:1px; padding-bottom:1px' align="right">
  <font size="2">100%</font></td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>*Sales to customer types for
2007 have been changed for dental &amp; medical to reflect current
classifications.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<table class=MsoNormalTable border=0 cellpadding=0
 style='margin-left:4.65pt;border-collapse:collapse' id="table11" width="95%">
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='padding:0in 5.4pt 0in 5.4pt;height:12.75pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:left; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Sales by location ($'000)</font></p>
  </td>
  <td nowrap colspan=2 valign=bottom style='border:solid windowtext 1.0pt;
  border-right:solid black 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:12.75pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2008</font></p>
  </td>
  <td nowrap colspan=2 valign=bottom style='border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid black 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:12.75pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2007</font></p>
  </td>
  <td nowrap colspan=2 valign=bottom style='border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid black 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:12.75pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2006</font></p>
  </td>
  <td nowrap colspan=2 valign=bottom style='border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid black 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:12.75pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2005</font></p>
  </td>
  <td nowrap colspan=2 valign=bottom style='border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid black 1.0pt;
  padding:0in 5.4pt 0in 5.4pt;height:12.75pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2004</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='border:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Irvine</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;$ 18,268 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">73%</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;$ 13,852 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">64%</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;$ 10,823 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">63%</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;$&nbsp;&nbsp; 9,946 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">72%</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;$ 10,900 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">77%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='border:solid windowtext 1.0pt;border-top:
  none;padding:0in 5.4pt 0in 5.4pt;height:12.75pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Beaverton</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  3,443 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">14%</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  4,121 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">19%</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  4,585 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">27%</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  3,888 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">28%</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  3,300 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">23%</font></p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='border:solid windowtext 1.0pt;border-top:
  none;padding:0in 5.4pt 0in 5.4pt;height:12.75pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Carson
  City</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  3,453 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">14%</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  3,590 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">17%</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  1,653 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">10%</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  -&nbsp;&nbsp; </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp;&nbsp; </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  -&nbsp;&nbsp; </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp;&nbsp; </font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='border:solid windowtext 1.0pt;border-top:
  none;padding:0in 5.4pt 0in 5.4pt;height:12.75pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Interlocation
  sales</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;(38)</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">0%</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  -&nbsp;&nbsp; </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp;&nbsp; </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  -&nbsp;&nbsp; </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp;&nbsp; </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  -&nbsp;&nbsp; </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp;&nbsp; </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  -&nbsp;&nbsp; </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp;&nbsp; </font> </p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='border:solid windowtext 1.0pt;border-top:
  none;padding:0in 5.4pt 0in 5.4pt;height:12.75pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Total
  Sales</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;$ 25,126 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">100%</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;$ 21,563 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">100%</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;$ 17,061 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">100%</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;$ 13,834 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">100%</font></p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;$ 14,200 </font> </p>
  </td>
  <td nowrap valign=bottom style='border-top:none;border-left:none;border-bottom:
  solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;
  height:12.75pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">100%</font></p>
  </td>
 </tr>
</table>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Medical product sales represent the manufacture of products that utilize
proprietary designs developed by us under exclusive design and supply
agreements.&nbsp; Our dental products are primarily sold to original equipment
manufacturers and dental product distributors.&nbsp; An independent dealer network
markets our own branded line of dental products; including the Intraflow<sup>TM</sup>
dental anesthesia product that we acquired the rights to in October 2005.&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, scientific research, 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; We added sales with the purchase of
the assets of Astromec, Inc. in Carson City, Nevada, and the establishment of Pro-Dex
Astromec, Inc. in January 2006.&nbsp; The Carson City products include high
reliability fractional horsepower DC motors designed for harsh environments,
primarily for the aerospace and medical markets.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp; </p>

<p style="font-family: Times New Roman; text-align: center; margin-left: 0in; margin-right: 0in; margin-top: 0in; margin-bottom: .0001pt">
<font size="2">-5-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>In 2008, the top 20 customers accounted for 81% of our sales, compared to
77% in 2007.&nbsp; In 2008, our two largest customers accounted for 50% of such
sales with the largest customer accounting for over 32% of our sales.&nbsp; This
compares to 2007 when our two largest customers accounted for 41% of our sales
with the largest customer accounting for 23% of such sales.&nbsp; Some of our larger
customers include Smith and Nephew, Medtronic, Sullivan Schein, Thermo Fisher
Scientific, Monogram, and Benchmark Electronics.&nbsp; In many cases, disclosure of
other larger customer names is prohibited by confidentiality agreements with
such entities.&nbsp; We have no plans to discontinue the sales relationships with
our existing significant customers nor do we have knowledge of any plans by
such customers to discontinue their relationships with us. &nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>All of the raw materials used to manufacture our products are purchased
from various suppliers and are available from several sources. Precipart
Corporation, Tyco Precision Interconnect and Transicoil are some examples of
our key suppliers.&nbsp; We consider our relationships with our suppliers and
manufacturers to be good.&nbsp; We do not intend to terminate any such relationship
at this time, nor does management have knowledge that any supplier or
manufacturer intends to terminate its relationship with us.&nbsp; We have no
exclusive arrangements with any of our suppliers.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Our commitment to quality design and manufacturing are demonstrated by
our three independently verified certifications for maintaining quality
processes and products.&nbsp; We hold the following certifications: &nbsp;ISO
13485:2003, the Medical Device Directive 93\42\EEC Annex II, and CMDCAS
(Canadian Medical Device Regulation).</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>At the present time, we are generally able to fill orders for recurring
product within sixty (60) days from initial order receipt.&nbsp; At June 30, 2008,
we had a backlog, including orders for delivery beyond 60 days, of $10.4
million compared with a backlog of $10.1 million at June 30, 2007.&nbsp; We expect
to ship most of our backlog in fiscal year 2009 and the remainder in fiscal
year 2010.&nbsp; The decrease from June 2007 is due to normal fluctuations in the
timing of receipt and shipment of orders. &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. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>We sell our
products using several methods; directly to the customer, directly to original
equipment manufacturers and through a network of high technology and dental
product distributors within North America.&nbsp; Internationally, we maintain sales
agreements with foreign distributors or sell through the domestic subsidiaries
of foreign customers.</p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;line-height:normal'><b>&nbsp;</b></p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;line-height:normal'><b>Competition</b>&nbsp;
</p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;line-height:normal'><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </i>The
markets for products in the healthcare, fractional motors, motion control and
factory automation industries are intensely competitive, and we face
significant competition from a number of different sources.&nbsp; Several of our
competitors have significantly greater name recognition as well as
substantially greater financial, technical, product development and marketing
resources than us.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; We
compete in all of our markets with other major healthcare, fractional motors, motion
control and factory automation related companies. Competitive pressures and
other factors, such as new product or new technology introductions by us or our
competitors, may result in price or market share erosion that could have a
material adverse effect on our business, results of operations and financial
condition.&nbsp; Also, there can be no assurance that our products and services will
achieve broad market acceptance or will successfully compete with other
products targeting the same customers. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-6-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'><b>Research
and Development </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>We conduct company-funded and customer-funded research and development
programs. These product development programs are important to both maintain and
improve our market position. The net amounts spent on company-funded research
and development activities in 2008 and 2007 were approximately $2.7 million and
$2.5 million, respectively.&nbsp; Our research and development effort involves the
design and manufacture of products that perform specific applications for our
customers.&nbsp; We continue to target our research and development expenses toward
three goals:</p>

<ul>
	<li>
	<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-left:0.25in;text-align:justify;text-autospace:none; margin-right:0in; margin-top:0in'>expanding our knowledge base in the medical device, fractional
motor and motion control industry to solidify our products with current
customers and expand our customer base;</p></li>
	<li>
	<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-left:0.25in;text-align:justify;text-autospace:none; margin-right:0in; margin-top:0in'>general technical advances; and
	</p></li>
	<li>
	<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-left:0.25in;text-align:justify;text-autospace:none; margin-right:0in; margin-top:0in'>enhancements of current product lines.
	</p></li>
</ul>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>We share research and development costs with our customers by billing for
non-recurring engineering expenses. The fees received for non-recurring
engineering expenses do not, however, represent a significant portion of our
revenue.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>Employees </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>At June 30, 2008, we had 145 full-time employees compared to 124
full-time employees at June 30, 2007.&nbsp; At June 30, 2008, there were 104 persons
employed at the Irvine location, 30 persons employed at the Carson City
location and 11 persons employed at the Beaverton location.&nbsp; &nbsp;At June 30, 2007,
there were 86 persons employed at the Santa Ana location, 26 persons employed
at the Carson City location and 12 persons employed at the Beaverton location.&nbsp;
We use temporary staffing as a &#147;temp-to hire&#148; recruiting strategy as well as to
add flexibility in meeting our production, engineering and office staffing
needs. &nbsp;The use of temporary labor from temporary staffing agencies was reduced
as we employed 4 agency temps at June 30, 2008, down from 7 agency temps at
June 30, 2007. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>None of our employees are a party to any collective bargaining agreements
with us. We consider our relationships with our employees to be good. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>Government
Regulations </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Our manufacture and distribution of dental and medical devices are
subject to a number of state and federal regulatory bodies, including state
dental boards and the Food and Drug Administration (&quot;FDA&quot;). The
statutes, regulations, administrative orders, and advisories that affect our
businesses are complex and subject to diverse, often conflicting,
interpretations. While we make every effort to maintain full compliance with
all applicable laws and regulations, we are unable to eliminate an ongoing risk
that one or more of our activities may at some point be determined to have been
non-compliant. The penalties for non-compliance could range from an
administrative warning to termination of a portion of our business.&nbsp; Furthermore,
even if we are subsequently determined to have fully complied with applicable
laws or regulations, our costs to achieve such a determination and the
intervening loss of business could adversely affect or even terminate a portion
of our business. A change in such laws or regulations at any time may have an
adverse effect on our operations. Notwithstanding the risks inherent in our
business, management believes that our operations are in compliance with applicable
laws and regulations. </p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-7-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>The FDA regulates our dental and medical products as Class 1, Class 2 and
Class 3 medical devices.&nbsp; The FDA has broad enforcement powers to recall and
prohibit the sale of products that do not comply with federal regulations, and
to order the cessation of non-compliant processes. No claim has been made to
date by the FDA regarding any of our products or processes.&nbsp; Nevertheless, as
is common in the industry, certain of our products and processes have been the
subject of routine governmental reviews and investigations. While our
management is confident that our products and processes fully comply with
applicable laws and regulations, we are unable to predict the outcome of any
such investigation or review, pending its completion. </p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>We believe that our business is conducted in a manner consistent with
Environmental Protection Agency (&#147;EPA&#148;) and other agency regulations governing
disposition of industrial waste materials.&nbsp; While we are confident that our
products and processes fully comply with applicable laws and regulations, we
are unable to predict the outcome of any investigation or review which may in
the future be undertaken with respect to our products or processes. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Our management believes that we follow Good Manufacturing Practices for
all of our products at each of our locations. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Patents, Trademarks, and
Licensing Agreements </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>We hold patents relating to intraosseous dental anesthesia delivery, multi-axis
motion controllers and miniature rotary drive products.&nbsp; Our patents have
varying expiration dates.&nbsp; The near term expiration of the patents, if any, is
not expected to cause any change in the Company&#146;s revenue generating operations
as the revenue from the products associated with those patents would not be
material.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>We believe that the use of the patents acquired in connection with the
1995 OMS and Micro Motors acquisitions as well as the patents acquired with the
intraosseous dental anesthesia delivery (&#147;Intraflow&#148;) acquisition is neither
infringed upon by any third party, nor infringes upon any prior art of any
third party. &nbsp;We are unable to assess the validity, scope, or defensibility of
our patents with any degree of certainty, and any challenge to or claim of
infringement relating to our patents could materially and adversely affect our
business and results of operations.</p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-align:center;page-break-after:avoid;font-size:12.0pt;font-family:"Times New Roman";margin-top:0in;text-align:left;page-break-after:
auto;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>We have certain trademarks relating to our products, including OMS-EZ&trade;,
and The Company in Motion&trade;.&nbsp; We have filed for federal trademark protection for
Pro-Dex, OMS, and Intraflow. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>We have not entered into any licensing or franchising agreements for
revenue generating purposes; however we do have a royalty agreement in place
for a previously designed product.&nbsp; This income is reflected as &#147;other income&#148;
and not &#147;revenue.&#148;</p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;line-height:normal'><b>&nbsp;</b></p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;line-height:normal'><b>RISK FACTORS</b></p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;line-height:normal'><b>We face
significant competition from a number of different sources which could
negatively impact our results of operations and business conditions.&nbsp; &nbsp;</b></p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;line-height:normal'><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </i>The
markets for healthcare, factory automation and small motor manufacturing
industries are intensely competitive, and we face significant competition from
a number of different sources.&nbsp; Several of our competitors have significantly
greater name recognition as well as substantially greater financial, technical,
product development and marketing resources than us.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; We
compete in all of our markets with other major healthcare, factory automation
and small motor manufacturing related companies. Competitive pressures and
other factors, such as new product or new technology introductions by us or our
competitors may result in price or market share erosion that could have a
material adverse effect on the our business, results of operations and
financial condition. Also, there can be no assurance that our products and
services will achieve broad market acceptance or will successfully compete with
other products.&nbsp; </p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-8-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b>
Our quarterly results can fluctuate significantly from quarter to quarter which
may negatively impact the price of our shares and/or provide significant
variances in the prices at which such shares trade.</b></p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </i>Our
revenues have fluctuated in the past, and may fluctuate in the future from
quarter to quarter and period to period, as a result of a number of factors
including, without limitation: the size and timing of orders from customers;
the length of new product development cycles; market acceptance of new
technologies; the extent and timing of eligible product returned for repair or
replacement under warranty coverage;&nbsp; changes in pricing policies or price
reductions by us or our competitors; the timing of new product announcements
and product introductions by us or our competitors; the financial stability of
major customers; our success in expanding our sales and marketing programs;
deferrals of customer orders and deliveries; changes in our strategy; personnel
changes; and general market/economic factors. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Because
a significant percentage of our expenses are relatively fixed, a variation in
the timing of sales can cause significant variations in operating results from
quarter to quarter. As a result, we believe that interim period-to-period
comparisons of our results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance. Further, our
historical operating results are not necessarily indicative of future
performance for any particular period.&nbsp; </p>

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify; text-indent:0.5in; margin-left:0in; margin-right:0in; margin-top:0in'>Due to
all of the foregoing factors, it is possible that in some future quarter(s),
our operating results may be below the expectations of public market analysts
and investors. In such event, the price of our Common Stock would likely be
materially adversely affected.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'><b>A
substantial portion of our business is derived from our three core business
areas which, if not serviced properly, may result in a material adverse impact
upon our business, results of operations and financial condition.</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; We
currently derive a substantial part of our net revenues from sales of our
healthcare, factory automation and small motor products and services. &nbsp;We
believe that a primary factor in the market acceptance of our product and
services is the value that is created for our customers by those products and
services. Our future financial performance will depend in large part on our
ability to continue to meet the increasingly sophisticated needs of our
customers through the timely development, successful introduction and
implementation of new and enhanced products and services. We have historically
expended a significant percentage of our net revenues on product development
and believe that significant continued product development efforts will be required
to sustain our growth. Continued investment in our sales and marketing efforts
will also be required to support future growth.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; There can be no
assurance that we will be successful in our product development efforts, that
the market will continue to accept our existing products, or that new products
or product enhancements will be developed and implemented in a timely manner,
meet the requirements of our customers, or achieve market acceptance. If new
products or product enhancements do not achieve market acceptance, our
business, results of operations and financial condition could be materially
adversely affected.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'><b>The
industry in which we operate is subject to significant technological change and
any failure or delay in addressing such change could adversely affect our
competitive position or could make our current products obsolete.</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'><b><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </i></b>The
healthcare, factory automation and small motor markets are generally
characterized by rapid technological change, changing customer needs, frequent
new product introductions, and evolving industry standards. The introduction of
products incorporating new technologies and the emergence of new industry
standards could render the Company's existing products obsolete and
unmarketable. There can be no assurance that we will be successful in
developing and marketing new products that respond to technological changes or
evolving industry standards.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
<font size="2">-9-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; New
product development requires significant research and development expenditures
that are ultimately funded by sales growth.&nbsp; Any significant decrease in
revenues or research funding could impair our ability to respond to
technological advances in the marketplace and to remain competitive. If we are
unable, for technological or other reasons, to develop and introduce new products
in a timely manner in response to changing market conditions or customer
requirements, our business, results of operations and financial condition may
be materially adversely affected.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In response to
increasing market demand, we are currently developing new products and updating
existing products. There can be no assurance that we will successfully develop
these new products or that these products will operate successfully, or that
any such development, even if successful, will be completed concurrently with
or prior to the introduction of competing products.&nbsp; Any such failure or delay
could adversely affect our competitive position or could make our current
products obsolete.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'><b>We face
the risks and uncertainties that are associated with litigation against us
which could have a material adverse effect on our business, results of
operations and financial condition<font style="font-size: 10.0pt">. </font></b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'><i>&nbsp;</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; We
continually face the possibility of litigation as either a plaintiff or a
defendant.&nbsp; It is not reasonably possible to estimate the awards or damages, or
the range of awards or damages, if any, that we might incur in connection with
such litigation. The uncertainty associated with potential litigation may have
an adverse impact on our business. In particular, such litigation could impair our
relationships with existing customers and our ability to obtain new customers.
Defending or prosecuting such litigation may result in a diversion of
management's time and attention away from business operations, which could have
a material adverse effect on our business, results of operations and financial
condition.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Many
of our products are complex and technologically advanced.&nbsp; Such products
may, from time to time, be the subject of claims concerning product performance
and construction, including warranty claims.&nbsp;&nbsp; While we are committed
to correcting such problems as soon as possible, there is no assurance that
solutions can be found or found on a timely basis to satisfy customer demands
and avoid potential claims or litigation.&nbsp; Such matters could have a
material and adverse effect upon our business, results of operations and
financial condition. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Due
to the location of our facilities as well as our business activities, we may
face the risk of litigation related to environmental remediation claims.&nbsp; Defending
or prosecuting such litigation may result in a diversion of management's time
and attention away from business operations, which could have a material
adverse effect on our business, results of operations and financial condition &#150;
even if we are ultimately found to be without fault.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; There
can be no assurance that such litigation will not result in liability in excess
of our insurance coverage, that our insurance will cover such claims or that
appropriate insurance will continue to be available to us in the future at
commercially reasonable rates.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'><b>We rely
heavily on our proprietary technology which, if not properly protected or
deemed invalid, could have a material adverse effect on our business, results
of operations and financial condition.</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </i>We
are dependent on the maintenance and protection of our intellectual property
and rely on exclusive development and supply agreements, confidentiality
procedures, and employee nondisclosure agreements to protect our intellectual
property. </p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; There
can be no assurance that the legal protections and precautions taken by us will
be adequate to prevent misappropriation of our technology or that competitors
will not independently develop technologies equivalent or superior to ours.
Further, the laws of some foreign countries do not protect our proprietary
rights to as great an extent as do the laws of the United States and are often
not enforced as vigorously as those in the United States.</p>
<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;line-height:normal'>&nbsp;</p>
<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-family:"Times New Roman";text-align:center;line-height:normal'>
<font size="2">-10-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; We do not believe
that our operations or products infringe on the intellectual property rights of
others. However, there can be no assurance that others will not assert
infringement or trade secret claims against us with respect to our current or
future products or that any such assertion will not require us to enter into a
license agreement or royalty arrangement with the party asserting the claim. </p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'><b>Our
failure to manage growth could harm us by having a material adverse effect on
our business and results of operations.</b>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; We
have in the past experienced periods of growth that have placed, and may
continue to place, a significant strain on our resources. We also anticipate
expanding our overall development, marketing, sales, management and training
capacity as market demand requires.&nbsp; In the event we are unable to identify,
hire, train and retain qualified individuals in such capacities within a
reasonable timeframe, such failure could have a material adverse effect on us. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In
addition, our ability to manage future increases, in the scope of our
operations or personnel may depend on significant expansion of our research and
development, marketing and sales, management, and administrative and financial
capabilities. The ineffective management of expansion in the business could
have a material adverse effect on our business, results of operations and
financial condition.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'><b>Our
operations are dependent upon our key personnel. If such personnel were to
leave unexpectedly, we may not be able to execute our business plan.</b><font style="font-size: 10.0pt"> </font>&nbsp;&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Our
future performance also depends in significant part upon the continued service
of our key technical and senior management personnel, many of whom have been
with us for a significant period of time.&nbsp; We maintain term key man life
insurance policies for the CEO, the Executive Vice President who holds primary
responsibility for Business Development, and the head of the Beaverton
operations.&nbsp; Because we have a relatively small number of employees when
compared to other leading companies in the same industry, our dependence on
maintaining our relationship with key employees is particularly significant. We
are also dependent on our ability to attract and retain high quality personnel,
particularly in the areas of product development, operations management,
marketing and finance. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A
high level of employee mobility and the aggressive recruiting of skilled
personnel characterize the healthcare and motion control industries.&nbsp; There can
be no assurance that our current employees will continue to work for us.&nbsp; Loss
of services of key employees could have a material adverse effect on our
business, results of operations and financial condition. Furthermore, we may
need to grant additional stock options to key employees and provide other forms
of incentive compensation to attract and retain such key personnel.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'><b>Our
products may be subject to product liability legal claims which may cost us
significant amounts in both money and management time and resources.</b><i> </i></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; We
maintain insurance to protect against claims associated with the use of our
products, but there can be no assurance that our insurance coverage would
adequately cover any claim asserted against us. A successful claim brought
against us in excess of our insurance coverage could have a material adverse
effect on our business, results of operations and financial condition.&nbsp; Even unsuccessful
claims could result in the expenditure of funds in litigation and management
time and resources.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; There can be no
assurance that we will not be subject to product liability claims, that such
claims will not result in liability in excess of our insurance coverage, that
our insurance will cover such claims or that appropriate insurance will
continue to be available to us in the future at commercially reasonable rates.
Such claims could have a material adverse affect on our business, results of operations
and financial condition.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
<font size="2">-11-</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Our evaluation of internal
control and remediation of potential problems will be costly and time consuming
and could expose weaknesses in financial reporting.</b></p>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>The
regulations implementing Section 404 of the Sarbanes-Oxley Act of 2002 require
management's assessment of the effectiveness of the Company's internal control
over financial reporting beginning with our Annual Report on Form 10-KSB for
the fiscal year ending June 30, 2008. &nbsp;In the future, our independent auditors will
be required to confirm in writing whether management's assessment of the
effectiveness of the internal control over financial reporting is fairly stated
in all material respects, and separately report on whether they believe
management maintained, in all material respects, effective internal control
over financial reporting as of June 30, 2010. &nbsp;This process will be expensive
and time consuming, and will require significant attention of management. &nbsp;Management
can give no assurance that material weaknesses in internal controls will not be
discovered. If a material weakness is discovered, corrective action may be time
consuming, costly and further divert the attention of management. &nbsp;The
disclosure of a material weakness, even if quickly remedied, could reduce the
market's confidence in our financial statements and harm our stock price,
especially if a restatement of financial statements for past periods is
required. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>We are subject to changes in
and interpretations of financial accounting matters that govern the measurement
of our performance, compliance with which could be costly and time consuming</b>.<font style="font-size: 10.0pt"> </font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; We
are subject to changes in and interpretations of financial accounting matters
that govern the measurement of our performance. Based on our reading and interpretations
of relevant guidance, principles or concepts issued by, among other
authorities, the American Institute of Certified Public Accountants, the
Financial Accounting Standards Board, and the United States Securities and
Exchange Commission, our management believes our current sales contract terms
and business arrangements have been properly reported. However, there continue
to be issued interpretations and guidance for applying the relevant standards
to a wide range of contract terms and business arrangements that are prevalent
in the industries in which we operate. Future interpretations or changes by the
regulators of existing accounting standards or changes in our business
practices could result in future changes in our accounting policies and
practices that could have a material adverse effect on our business, financial
condition, cash flows, revenue and results of operations.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'><b>Our per share price may be
adversely effected if material weaknesses in our internal controls are
identified by ourselves or our independent auditors</b>.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Any weaknesses
identified in our internal controls as part of the evaluation being undertaken
by us and our registered independent public accountants pursuant to Section 404
of the Sarbanes-Oxley Act of 2002 could have an adverse effect on our
business.&nbsp; We are in the process of evaluating and documenting our controls
pursuant to Section 404 of the Sarbanes-Oxley Act.&nbsp; We are working toward being
fully compliant with the requirements of Section 404 of the Sarbanes-Oxley Act
at the time it applies to us.&nbsp; Failure to comply could have a material adverse
affect on our business, financial condition, and our ability to remain listed
as a publicly held exchange traded company.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'><b>A substantial portion of our
revenue is derived from a small number of customers such that if we were to
lose one, it could have a material and adverse effect on our business,
financial condition and results of operations.</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b>We have few
significant customers that contribute a significant portion of our revenue.&nbsp;
Our loss of one or more of such customers could severely impact us, including a
material adverse effect on our business, financial condition, cash flows,
revenue and results of operations.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>
<p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-autospace:none; margin-left:0in; margin-right:0in; margin-top:0in' align="center">
<font size="2">-12-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Item 2.&nbsp;&nbsp;
Description of Property </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Our executive offices and Irvine manufacturing facility are located at 2361 McGaw Avenue, Irvine, California 92614.&nbsp; We lease the 28,000 square foot facility from
an unrelated third party at a base monthly lease rate of $31,000 through April 2018,
with an option to terminate early in April 2015.&nbsp; The building is a one-story
stand-alone building of concrete tilt-up construction, approximately 25 years
old and in good condition.&nbsp; This facility was occupied in April, 2008 at the
lease termination of the prior 18,000 square foot facility at 151 East Columbine Avenue, Santa Ana, California 92707.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Our Beaverton office and manufacturing facility is located at 15201 N.W. Greenbrier Parkway, B-1 Ridgeview, Beaverton, Oregon 97006.&nbsp; The Company leases
the 7,500 square foot facility from an unrelated third party, at a base monthly
lease rate of $6,060 through April 2014.&nbsp; The building is a one-story suite in
a 20-year-old industrial office complex and in good condition.&nbsp; This facility
was occupied in January, 2008 at the lease termination of the prior 11,000
square foot facility at 1800 N.W. 169<sup>th</sup> Place, Building C100, Beaverton Oregon 97006.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>Our
Pro-Dex Astromec office and manufacturing facility is located at 2950 Arrowhead Drive, Carson City, NV 89708.&nbsp; We purchased 4.4 acres of real property and a
20,000 square foot industrial building and related improvements located in Carson City, Nevada for $2,200,000 in March 2006.&nbsp; The building is a two-story building of
concrete block construction and in good condition.&nbsp; The purchase was financed
with cash on hand and by a 10 year Promissory Note and related Loan Agreement
with Union Bank of California, whereby we borrowed $1,650,000.&nbsp; This loan is
secured by the land and building in Carson City, Nevada.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>The principal balance of the Union Bank loan evidenced by the Promissory Note
bears interest at a fixed rate of 6.73% per annum. Under the terms of the Promissory
Note, the Union Bank loan amortizes as a 25 year obligation due in 10 years
with 120 equal monthly payments of $11,379 beginning May 1, 2006. The maximum
amount of future payments due under the Promissory Note (undiscounted and
assuming no prepayment) is $2,380,538.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;We believe that the base monthly rental rates on the leased facilities are
comparable to rents charged for comparable properties in the market area.&nbsp; The
current facilities are believed to be adequate for our expected needs.&nbsp; We
believe there is full compliance with applicable state and EPA and other agency
environmental standards at each facility.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Item 3.&nbsp;&nbsp; Legal
Proceedings </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>On June 23,
2008, the Orange County Water District (&#147;OCWD&#148;) filed a complaint in the
Superior Court of the State of California in the County of Orange concerning
remediation of alleged ground water contamination in the Orange County
Groundwater South Basin; <u>Orange County Water District v. Sabic Innovative Plastics
U.S. LLC, etal</u>., Case No 00078246.&nbsp; The South Basin underlies parts of Santa Ana, California and adjacent cities.&nbsp; The complaint identifies 17 named defendants,
including Pro-Dex, and also designates 400 unnamed Doe defendants.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>The complaint
alleges that the defendants contaminated the South Basin with volatile organic
chemicals (&#147;VOCs&#148;) and perchlorate through various activities at properties
each defendant now controls or has controlled in the past.&nbsp; Through its
lawsuit, the OCWD seeks compensatory relief for all its own remedial
activities, and injunctive relief to compel the defendants to undertake
remedial activities in general.&nbsp; The complaint does not, however, specify any
remedial activities that the OCWD has undertaken to date or any remedial
activities that it seeks any particular defendants to undertake.&nbsp; Moreover,
from our investigation of OCWD&#146;s remedial activities to date, we have
determined that the OCWD is in the early stages of its remedial investigation
for the South Basin groundwater contamination.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center;margin-left:0in; margin-right:0in; margin-top:0in'>
<font size="2">-13-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>As noted above,
16 other entities are named defendants in this case along with Pro-Dex.&nbsp; While
some may be small businesses, others are larger corporations or their
subsidiaries.&nbsp; Further, as this case progresses, the OCWD is likely to add at
least a few more named defendants to the case from the 400 Doe defendants it
has designated in the current complaint.&nbsp; In the uncertain event that Pro-Dex
would be held liable in the case, OCWD&#146;s total recovery probably would be
allocated among several defendants, each of which would pay only a
proportionate share of that total recovery.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>Because of the
vagueness of the complaint, the early stage of the OCWD&#146;s remedial activities
in the South Basin, and the likelihood that any recovery the OCWD may gain will
be allocated among several defendants, our liability, as well as our costs of
defending, monitoring and concluding our involvement in this case are
uncertain, and those costs cannot now be estimated.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>In general, we are from time to time a party to various legal proceedings
incidental to our business, other than the above, none of which we consider may
be material at this time.&nbsp; There can be no certainty that we may not ultimately
incur liability or that such liability will not be material and adverse.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Item 4.&nbsp;&nbsp;
Submission of Matters to a Vote of Security Holders </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>No matter was submitted to a vote of our shareholders during the fourth
quarter ended June 30, 2008.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-autospace:none; margin-left:0in; margin-right:0in; margin-top:0in' align="center">
<font size="2">-14-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>PART II</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Item 5.&nbsp;&nbsp; Market
for Common Equity, Related Stockholder Matters and Small Business Issuer
Purchases of Equity Securities </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Our common stock, no par value, is quoted under the symbol
&quot;PDEX&quot; on the automated quotation system of the Nasdaq Capital Market
(&quot;NASDAQ&quot;). The following table sets forth for the quarters indicated
the high and low sales prices as reported by NASDAQ.&nbsp; The quotations reflect
inter-dealer prices, without retail markup, markdown, or commissions, and may
not necessarily represent actual transactions. &nbsp;On September 16, 2008, the last
sale price of our common stock as reported by NASDAQ was $0.81 per share.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<div align="center">
<TABLE width="65%" border=1 cellspacing=0 cellpadding=0 id="table3" style="border-style: solid; padding-left: 4px; padding-right: 4px; padding-top: 1px; padding-bottom: 1px" bordercolor="#000000">
<TR>
   <TD width="152"><B><FONT face="serif">Quarter Ended</FONT></B></TD>
   <TD align="center"><B><FONT face="serif">High</FONT></B></TD>
   <TD align="center"><B><FONT face="serif">Low</FONT></B></TD>
</TR>
<TR>
   <TD align="right" width="152">&nbsp;&nbsp;&nbsp;<FONT face="serif">September 30, 2006</FONT></TD>
   <TD align="right"><FONT face="serif">1.75</FONT></TD>
   <TD align="right"><FONT face="serif">1.32</FONT></TD>
</TR>
<TR>
   <TD align="right" width="152">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="serif">December 31, 2006</FONT></TD>
   <TD align="right"><FONT face="serif">1.57</FONT></TD>
   <TD align="right"><FONT face="serif">1.16</FONT></TD>
</TR>
<TR>
   <TD align="right" width="152">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="serif">March 31, 2007</FONT></TD>
   <TD align="right"><FONT face="serif">1.50</FONT></TD>
   <TD align="right"><FONT face="serif">1.23</FONT></TD>
</TR>
<TR>
   <TD align="right" width="152">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="serif">June 30, 2007</FONT></TD>
   <TD align="right"><FONT face="serif">1.68</FONT></TD>
   <TD align="right"><FONT face="serif">1.31</FONT></TD>
</TR>
<TR>
   <TD align="right" width="152">&nbsp;&nbsp;&nbsp;<FONT face="serif">September 30, 2007</FONT></TD>
   <TD align="right"><FONT face="serif">1.94</FONT></TD>
   <TD align="right"><FONT face="serif">1.36</FONT></TD>
</TR>
<TR>
   <TD align="right" width="152">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="serif">December 31, 2007</FONT></TD>
   <TD align="right"><FONT face="serif">1.55</FONT></TD>
   <TD align="right"><FONT face="serif">1.32</FONT></TD>
</TR>
<TR>
   <TD align="right" width="152">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="serif">March 31, 2008</FONT></TD>
   <TD align="right"><FONT face="serif">1.71</FONT></TD>
   <TD align="right"><FONT face="serif">1.43</FONT></TD>
</TR>
<TR>
   <TD align="right" width="152">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="serif">June 30, 2008</FONT></TD>
   <TD align="right"><FONT face="serif">1.70</FONT></TD>
   <TD align="right"><FONT face="serif">1.01</FONT></TD>
</TR>
</TABLE>
</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>At June 30, 2008, there were approximately 260 holders of record of our
common stock. This number does not include beneficial owners including holders
whose shares are held in nominee or &quot;street&quot; name.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>We have not paid a cash dividend with respect to our common stock, and do
not intend to pay cash dividends in the foreseeable future. &nbsp;The current policy
of our Board of Directors is to retain earnings to provide funds for the
operation and expansion of the business.&nbsp; The Board of Directors, in light of
the circumstances then existing, including our earnings and financial
requirements and general business conditions, will determine future dividends,
if any.&nbsp; There are restrictions associated with our credit facilities on the
Company issuing dividends. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Equity Compensation Plan
Information</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0
 style='border-collapse:collapse;border:none' width="95%">
 <tr>
  <td width=184 valign=top style='width:137.7pt;border:solid windowtext 1.0pt;
  border-bottom:none;padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>As of June 30, 2008</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>Plan Category</p>
  </td>
  <td width=184 valign=top style='width:137.7pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>Number
  of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and
  Rights</p>
  </td>
  <td width=184 valign=top style='width:137.7pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>Weighted
  Average Exercise Price of Outstanding Options, Warrants and Rights</p>
  </td>
  <td width=184 valign=top style='width:137.7pt;border:solid windowtext 1.0pt;
  border-left:none;padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>Number
  of Securities Available for Issuance Under Equity Compensation Plans
  (excluding services reflected in column (a))</p>
  </td>
 </tr>
 <tr>
  <td width=184 valign=top style='width:137.7pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
  </td>
  <td width=184 valign=top style='width:137.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>(a)</p>
  </td>
  <td width=184 valign=top style='width:137.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>(b)</p>
  </td>
  <td width=184 valign=top style='width:137.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>(c)</p>
  </td>
 </tr>
 <tr>
  <td width=184 valign=top style='width:137.7pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>Plans Approved by Stockholders</p>
  </td>
  <td width=184 valign=top style='width:137.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>1,279,500</p>
  </td>
  <td width=184 valign=top style='width:137.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>$1.56</p>
  </td>
  <td width=184 valign=top style='width:137.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>476,045</p>
  </td>
 </tr>
 <tr>
  <td width=184 valign=top style='width:137.7pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>Plans Not Approved by
  Stockholders</p>
  </td>
  <td width=184 valign=top style='width:137.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;&nbsp;
  100,000</p>
  </td>
  <td width=184 valign=top style='width:137.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;
  1.25</p>
  </td>
  <td width=184 valign=top style='width:137.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>---</p>
  </td>
 </tr>
 <tr>
  <td width=184 valign=top style='width:137.7pt;border:solid windowtext 1.0pt;
  border-top:none;padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>Total</p>
  </td>
  <td width=184 valign=top style='width:137.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>1,379,500</p>
  </td>
  <td width=184 valign=top style='width:137.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>$1.53</p>
  </td>
  <td width=184 valign=top style='width:137.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:0in 5.4pt 0in 5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>476,045</p>
  </td>
 </tr>
</table>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-15-<u>&nbsp;</u></p>
<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none; text-indent:0.5in; margin-left:0in; margin-right:0in; margin-top:0in'>We made no repurchases of our securities
during the fourth quarter and year of the year ended June 30, 2008. &nbsp;&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>The stock
repurchase was reconfirmed by our Board of Directors in July 2008.&nbsp; In the
period subsequent to June 30, 2008 through September 16, 2008, we repurchased 35,500
shares for $33,575 at an average price of $0.95 per share.&nbsp; Since the
initiation of the buyback in 2002 through September 16, 2008, we have
repurchased 111,200 shares for $77,316 at an average price of $0.69 per share. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Item 6. Management's
Discussion and Analysis or Plan of Operation </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>The following discussion and analysis provides information that
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition for each of the two
years ended June 30, 2008 and 2007, 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; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b>Critical Accounting Estimates and Judgments</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>Our consolidated
financial statements are prepared in accordance with accounting principles
generally accepted in the United States (&#147;GAAP&#148;).&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
revenue recognition, warranty reserve, inventory valuations for slow moving
items, impairment of goodwill, and the recovery of deferred income tax assets.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; We recognize sales
and associated cost of sales, upon shipment, FOB origin.&nbsp; There have been
minimal returns for credit, so no reserve for product returns has been
established. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";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 for each
specific part number.&nbsp; If inventory on hand for a specific part exceeds an
estimated 12 months of usage or orders on hand, 100% of its value is included
in the inventory reserve as it&#146;s carrying value is reduced to the lower of cost
or market value.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>We determine the reserve for our accounts receivable by examining the
aging of the receivables value.&nbsp; We define &#147;aging&#148; as time passed since the
sale was completed, revenue was recognized and the receivable was established.&nbsp;
If the receivable is aged over 90 days, or has a known collection risk, it is
reserved from 10% of its value up to 100%.&nbsp; The actual amount reserved may vary
depending on account credit and collection history. </p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>The majority of
our products have a twelve month warranty.&nbsp; We determine our warranty reserve
based on considering the historical costs to repair warranty-eligible products
and by estimating the number and type of products that may be eligible for future
warranty return and repair.&nbsp; We determine our reserve by calculating a cost
estimate based on what products are known to be warranty-eligible, have been
returned, and are in process of being repaired, and combining it with an
expected cost for units in the field that have a potential to be returned for
warranty-eligible repair.&nbsp; The potential return amount is based on historical
return and repair cost data.&nbsp;&nbsp; At June 30, 2008 we had $861,000 in accrued
warranty reserves, as compared to $469,000 in accrued warranty reserves at June
30, 2007.&nbsp; The increase is due to the much higher shipment levels in the
warranty- eligible product line in 2008 as compared to 2007, coupled with a
slightly higher assumed return rate.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-16-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in'>The Company accounts for goodwill
under SFAS No. 142 &#147;Goodwill and Other Intangible Assets.&#148;&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
fiscal 2008 or 2007.&nbsp; We prepare our annual impairment testing on April 1 of
each year. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>We are subject to the revised requirements of the Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No. 123 (R) <i>Accounting for Stock-Based
Compensation</i> as revised December 2004.&nbsp; This standard establishes the
accounting standards for equity compensation, and applies to us in the
recognition of the cost of stock options awarded based on the grant-date fair
value of those awards.&nbsp; As a small business issuer, the statement was effective
for us at the beginning of the first fiscal year that begins after December 15,
2005, which was our fiscal year ended June 30, 2007. &nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";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='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";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 our estimates of future taxable income by jurisdiction in which we
operate 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='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b>Year in Review</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>Fiscal year 2008
was a year of continued growth and improvement at Pro-Dex, continuing the
initiatives and improvements that were made in 2007.&nbsp; We grew our sales by
over 16% over fiscal year 2007 and have more than doubled sales in the five
years since fiscal year 2003. &nbsp;The sales growth can be attributed to both
organic growth, as our medical products have been favorably accepted by the
market, and acquisitive growth as the Pro-Dex
Astromec business added over $3.4 million to our revenues in both 2007 and 2008.&nbsp;
In 2008 we initiated three new major development projects, each proving
different growth opportunities for our business model, and with an opportunity
of providing meaningful revenues in the second half of fiscal year 2009 and
beyond. One project is with a new customer, and involves significant pre-launch
engineering and engineering development fees. The second is with a customer
that we developed the FDA qualification units for a few years ago and now we
have been selected to develop and produce the higher volume production units.&nbsp;
The third is with a continuing customer as we design their next generation
surgical system.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-17-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>We strengthened
the Company&#146;s infrastructure by moving the physical locations of both our Beaverton and the Southern California operations to new facilities.&nbsp; The Beaverton
facility moved at the end of December 2007 into a smaller workspace more amenable
to their engineering and development efforts. At the end of April, 2008, the
Southern California facility moved from its longstanding location in Santa Ana to a facility in Irvine.&nbsp; The move to Irvine was not an inexpensive proposition,
but necessary due to the constraints of the facility that Pro-Dex and its
predecessor company Micro Motors had occupied since the 1970&#146;s.&nbsp;&nbsp;&nbsp;The
facility is over 50% larger, and we were able to lay it out in a way that has
already significantly contributed toward providing for an efficient
collaborative culture with the necessary space to serve our customers as a
larger, more efficient company.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>We maintained
the Company&#146;s strong financial position by generating over $2.0 million in
operating cash for the 2008 fiscal year.&nbsp; We increased our borrowing capacity
by raising our credit line availability from $2.0 million to $4.0 million and
establishing an additional $2.0 million availability to fund our tenant
improvements. By remaining profitable, we increased our tangible net worth per
share by 6% from $0.88 per share to $0.93 per share. &nbsp;&nbsp;&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>Our operating margins were adversely affected, in part&nbsp;by the change in our inventory
reserve estimate, negatively impacting margins by $301,000 in the third
quarter.&nbsp; Another factor impacting margins was our sales mix, which had a
decline in industrial/motion control sales, as compared to 2007.&nbsp; Finally, we
completed our major facilities move in the fourth quarter, adding $274,000 in
move costs, an estimated $225,000 in manufacturing inefficiencies.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>As we enter
fiscal 2009, we are seeing that the results of the efforts to improve and grow
the Company are paying off in improved product quality, better designs and more
efficient manufacturing.&nbsp; We remain committed to changing the direction of
the Company to provide a higher level of earnings in the coming years and have
continued to transition Pro-Dex to a better, stronger, faster company.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">-18-</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>RESULTS OF OPERATIONS </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>
<b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Results of Operations for
Fiscal Year Ended June 30, 2008, Compared to Fiscal Year Ended June 30, 2007 </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>The following table sets forth financial data and the percentage of net
revenues regarding the Company's financial position and operating results. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=619
 style='width:78%;border-collapse:collapse'>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:medium none windowtext; border-top:1.0pt solid windowtext; border-bottom:medium none; padding:1.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>(In&nbsp;Thousands)</p>
  </td>
  <td colspan=6 valign=bottom style='border-top:1px solid windowtext;
  border-left:1px solid;border-bottom:medium none;border-right:1px solid windowtext;
  padding:1.1pt' bordercolor="#000000">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Fiscal&nbsp;Year&nbsp;ended&nbsp;June&nbsp;30,</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:medium none windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=3 valign=bottom style='border-top:1px solid;
  border-left:1px solid;border-bottom:1px solid windowtext;border-right:1px solid windowtext;
  padding:1.1pt' bordercolor="#000000">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td colspan=3 valign=bottom style='border-left:1px solid; border-right:1px solid; border-top:1px solid; border-bottom:1px solid windowtext; padding:1.1pt' bordercolor="#000000">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Net&nbsp;sales:</p>
  </td>
  <td valign=bottom style='padding:1.1pt; border-top-style:none; border-top-width:medium'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>25,126&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>100.0%&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt; border-top-style:none; border-top-width:medium'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>21,563&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>100.0%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Cost&nbsp;of&nbsp;sales</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>16,917&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>67.3%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>14,196&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>65.8%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Gross&nbsp;Profit</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>8,209&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>32.7%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>7,367&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>34.2%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Selling,&nbsp;general&nbsp;and&nbsp;administrative&nbsp;expenses</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>5,021&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>20.0%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4,051&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>18.8%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Research&nbsp;and&nbsp;development&nbsp;costs</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,732&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>10.9%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,474&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>11.5%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Income&nbsp;from&nbsp;Operations</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>456&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.8%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>842&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3.9%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Net&nbsp;interest&nbsp;and&nbsp;other&nbsp;(income)</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>138&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.5%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>267&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.2%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Provision&nbsp;for&nbsp;Income&nbsp;Taxes</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.0%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>69&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.3%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Net&nbsp;Income</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>317&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.3%&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>506&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2.3%&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b>Net Sales.</b>&nbsp;&nbsp; Consolidated sales increased 17% or $3,563,000 to $25,126,000
from $21,563,000 for 2008 as compared to 2007.&nbsp; Medical sales were higher
by $3,846,000 or 37%, due to higher sales to our two largest customers by $3,803,000.
&nbsp;Shipments to dental customers decreased by $186,000 or 5%.&nbsp; Sales to
industrial customers were essentially flat, showing a small decrease of $38,000
or 1% from the same period in the prior year.&nbsp; Sales related to government
research related products and product repairs, were also stable, with a year
over year increase of $4,000 as the increase in repair and upgrade work for
products that were not warranty eligible offset the decline in government
agency related work.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-indent:.5in;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>In fiscal year 2008, there was a $494,000 increase
in revenue from customer-funded research and development as there was work
performed on three major new development projects that were started in 2008
compared to $24,000 in negative revenue from customer-funded research and
development as fees were refunded due to cancelled development projects in the
year ended June 30, 2007.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>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='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>The amount of Pro-Dex total sales to each customer type and the
year-to-year change is noted in the table below:</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>
<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=512
 style='width:75%;border-collapse:collapse' id="table4">
 <tr style='height:12.1pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Fiscal&nbsp;Year&nbsp;ended&nbsp;June&nbsp;30,</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Increase/</p>
  </td>
 </tr>
 <tr style='height:12.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Sales&nbsp;by&nbsp;customer&nbsp;type&nbsp;($'000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>(Decrease)</p>
  </td>
 </tr>
 <tr style='height:12.1pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Dental</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,290&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,476&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-5%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.1pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Medical</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>14,121&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>10,275&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>37%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.1pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Industrial</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,279&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,317&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-1%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.1pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Aerospace</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,382&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,445&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-3%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.1pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Government&nbsp;research&nbsp;and&nbsp;other</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,054&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,050&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>25,126&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>21,563&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>17%&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-19-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'><b>Gross Profit </b>The Company's consolidated gross profit for 2008 increased
$841,000 or 11% compared to the gross profit in the previous year due to the
higher medical product sales level. &nbsp;Gross profit as a percentage of sales decreased
to 33% for the year ended June 30, 2008 compared to 34% for the year ended June
30, 2007.&nbsp; Gross margin as a percentage of sales was negatively impacted by inefficiencies
introduced in the Irvine facility move, and an inventory reserve estimate
change that impacted margins in unfavorably by $301,000.&nbsp; Gross profit and
gross profit percentage were as follows: </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=547
 style='width:410.15pt;border-collapse:collapse'>
 <tr style='height:12.55pt'>
  <td width=229 valign=bottom style='width:171.85pt;border:none;border-right:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td width=230 colspan=4 valign=bottom style='width:172.65pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Fiscal&nbsp;Year&nbsp;ended&nbsp;June&nbsp;30,</p>
  </td>
  <td width=88 valign=bottom style='width:65.65pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.6pt'>
  <td width=229 valign=bottom style='width:171.85pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td width=113 colspan=2 valign=bottom style='width:85.1pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td width=117 colspan=2 valign=bottom style='width:87.55pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
  <td width=88 valign=bottom style='width:65.65pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Increase</p>
  </td>
 </tr>
 <tr style='height:12.55pt'>
  <td width=229 valign=bottom style='width:171.85pt;border:solid windowtext 1.0pt;
  border-top:none;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Gross&nbsp;Profit</p>
  </td>
  <td width=10 valign=bottom style='width:7.3pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=104 valign=bottom style='width:77.8pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>8,209,000&nbsp;</p>
  </td>
  <td width=10 valign=bottom style='width:7.3pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=107 valign=bottom style='width:80.25pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>7,367,000&nbsp;</p>
  </td>
  <td width=88 valign=bottom style='width:65.65pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>11%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.55pt'>
  <td width=229 valign=bottom style='width:171.85pt;border:solid windowtext 1.0pt;
  border-top:none;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Gross&nbsp;Profit&nbsp;Percentage&nbsp;of&nbsp;Sales</p>
  </td>
  <td width=113 colspan=2 valign=bottom style='width:85.1pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>33%&nbsp;</p>
  </td>
  <td width=117 colspan=2 valign=bottom style='width:87.55pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>34%&nbsp;</p>
  </td>
  <td width=88 valign=bottom style='width:65.65pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;
  height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-indent:.5in;
text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'><b>Selling, general and administrative costs (S, G&amp;A)</b>.&nbsp; S, G
&amp; A expenses increased 18% to $5,021,000 for the year ended June 30, 2008
from $4,051,000 for year ended June 30, 2007.&nbsp; The increase in selling expense is
mainly due to increased labor expenditures.&nbsp; General and administrative costs
were higher primarily due to move related costs and increased labor and IT
related expenses.&nbsp; As a percentage of sales, S, G&amp;A costs increased from 19%
to 20%.&nbsp; S, G &amp; A costs were as follows: </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=515
 style='width:386.15pt;border-collapse:collapse'>
 <tr style='height:12.65pt'>
  <td width=217 valign=bottom style='width:162.5pt;border:none;border-right:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td width=219 colspan=4 valign=bottom style='width:164.1pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Fiscal&nbsp;Year&nbsp;ended&nbsp;June&nbsp;30,</p>
  </td>
  <td width=79 valign=bottom style='width:59.55pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.6pt'>
  <td width=217 valign=bottom style='width:162.5pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td width=114 colspan=2 valign=bottom style='width:85.25pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td width=105 colspan=2 valign=bottom style='width:78.85pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
  <td width=79 valign=bottom style='width:59.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Increase</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td width=217 valign=bottom style='width:162.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Selling</p>
  </td>
  <td width=16 valign=bottom style='width:12.05pt;border:none;border-bottom:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=98 valign=bottom style='width:73.2pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,482,000&nbsp;</p>
  </td>
  <td width=16 valign=bottom style='width:12.1pt;border:none;border-bottom:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=89 valign=bottom style='width:66.75pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,352,000&nbsp;</p>
  </td>
  <td width=79 valign=bottom style='width:59.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>10%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.6pt'>
  <td width=217 valign=bottom style='width:162.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>General&nbsp;and&nbsp;administrative</p>
  </td>
  <td width=16 valign=bottom style='width:12.05pt;border:none;border-bottom:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=98 valign=bottom style='width:73.2pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,539,000&nbsp;</p>
  </td>
  <td width=16 valign=bottom style='width:12.1pt;border:none;border-bottom:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=89 valign=bottom style='width:66.75pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,699,000&nbsp;</p>
  </td>
  <td width=79 valign=bottom style='width:59.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>31%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td width=217 valign=bottom style='width:162.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total&nbsp;S,&nbsp;G&amp;A</p>
  </td>
  <td width=16 valign=bottom style='width:12.05pt;border:none;border-bottom:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=98 valign=bottom style='width:73.2pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>5,021,000&nbsp;</p>
  </td>
  <td width=16 valign=bottom style='width:12.1pt;border:none;border-bottom:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=89 valign=bottom style='width:66.75pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4,051,000&nbsp;</p>
  </td>
  <td width=79 valign=bottom style='width:59.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>24%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.6pt'>
  <td width=217 valign=bottom style='width:162.5pt;border:solid windowtext 1.0pt;
  border-top:none;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>S,&nbsp;G&amp;A&nbsp;Percentage&nbsp;of&nbsp;Sales</p>
  </td>
  <td width=114 colspan=2 valign=bottom style='width:85.25pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>20%&nbsp;</p>
  </td>
  <td width=105 colspan=2 valign=bottom style='width:78.85pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>19%&nbsp;</p>
  </td>
  <td width=79 valign=bottom style='width:59.55pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;
  height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-indent:.5in;
text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'><b>Research and development costs</b>.&nbsp; Company funded research and
development expenses increased $258,000 to $2,732,000 for the year ended June
30, 2008 from $2,474,000 for the year ended June 30, 2007, an increase of 10%. &nbsp;The
increase was due to higher labor related costs at the Carson City and Irvine operations offset by reduced outside consultant cost.&nbsp; Company-funded research and
development costs were as follows:</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=601
 style='width:450.6pt;border-collapse:collapse'>
 <tr style='height:12.55pt'>
  <td width=304 valign=bottom style='width:228.15pt;border:none;border-right:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td width=215 colspan=4 valign=bottom style='width:161.35pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Fiscal&nbsp;Year&nbsp;ended&nbsp;June&nbsp;30,</p>
  </td>
  <td width=81 valign=bottom style='width:61.1pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.6pt'>
  <td width=304 valign=bottom style='width:228.15pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td width=111 colspan=2 valign=bottom style='width:83.15pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td width=104 colspan=2 valign=bottom style='width:78.2pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
  <td width=81 valign=bottom style='width:61.1pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Increase</p>
  </td>
 </tr>
 <tr style='height:12.55pt'>
  <td width=304 valign=bottom style='width:228.15pt;border:solid windowtext 1.0pt;
  border-top:none;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Research&nbsp;and&nbsp;Development&nbsp;(R&amp;D)&nbsp;Costs</p>
  </td>
  <td width=10 valign=bottom style='width:7.35pt;border:none;border-bottom:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=101 valign=bottom style='width:75.8pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,732,000&nbsp;</p>
  </td>
  <td width=10 valign=bottom style='width:7.3pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=95 valign=bottom style='width:70.9pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,474,000&nbsp;</p>
  </td>
  <td width=81 valign=bottom style='width:61.1pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>10%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.55pt'>
  <td width=304 valign=bottom style='width:228.15pt;border:solid windowtext 1.0pt;
  border-top:none;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>R&amp;D&nbsp;costs&nbsp;as&nbsp;a&nbsp;%&nbsp;of&nbsp;Sales</p>
  </td>
  <td width=111 colspan=2 valign=bottom style='width:83.15pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>11%&nbsp;</p>
  </td>
  <td width=104 colspan=2 valign=bottom style='width:78.2pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>15%&nbsp;</p>
  </td>
  <td width=81 valign=bottom style='width:61.1pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;
  height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-indent:.5in'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'><b>Operating
Profit and Operating Profit as a Percentage of Sales</b>.&nbsp; Our
consolidated operating profit for the year ended June 30, 2008 decreased to $456,000
from an operating profit of $842,000 for the year ended June 30, 2007.&nbsp;
Consequently, operating profit as a percentage of sales decreased to 2% for the
year ended June 30, 2008 compared to 4% for the year ended June 30, 2007.&nbsp;
Operating profit and margin were as follows:</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>
<div align="center">

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=554
 style='width:415.4pt;border-collapse:collapse' id="table5">
 <tr style='height:12.55pt'>
  <td width=255 valign=bottom style='width:191.45pt;border:none;border-right:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td width=216 colspan=4 valign=bottom style='width:162.25pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Fiscal&nbsp;Year&nbsp;ended&nbsp;June&nbsp;30,</p>
  </td>
  <td width=82 valign=bottom style='width:61.7pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.6pt'>
  <td width=255 valign=bottom style='width:191.45pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td width=115 colspan=2 valign=bottom style='width:86.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td width=102 colspan=2 valign=bottom style='width:76.25pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
  <td width=82 valign=bottom style='width:61.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>(Decrease)</p>
  </td>
 </tr>
 <tr style='height:12.55pt'>
  <td width=255 valign=bottom style='width:191.45pt;border:solid windowtext 1.0pt;
  border-top:none;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Operating&nbsp;Profit</p>
  </td>
  <td width=10 valign=bottom style='width:7.3pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=105 valign=bottom style='width:78.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>456,000&nbsp;</p>
  </td>
  <td width=10 valign=bottom style='width:7.3pt;border:none;border-bottom:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=92 valign=bottom style='width:68.95pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>842,000&nbsp;</p>
  </td>
  <td width=82 valign=bottom style='width:61.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(46%)</p>
  </td>
 </tr>
 <tr style='height:12.55pt'>
  <td width=255 valign=bottom style='width:191.45pt;border:solid windowtext 1.0pt;
  border-top:none;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Operating&nbsp;profit&nbsp;Percentage&nbsp;of&nbsp;Sales</p>
  </td>
  <td width=115 colspan=2 valign=bottom style='width:86.0pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2%&nbsp;</p>
  </td>
  <td width=102 colspan=2 valign=bottom style='width:76.25pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4%&nbsp;</p>
  </td>
  <td width=82 valign=bottom style='width:61.7pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;
  height:12.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-indent:.5in;
text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'><b>Royalties and Other Income. </b>&nbsp;We earned and received $35,000 in
royalty payments in fiscal year 2008, compared to $38,000 in royalty payments
in 2007.&nbsp; There was $9,000 in other expense for asset abandonment associated
with the move.  </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'><b>Net Interest Income/Expense. </b>&nbsp;Net interest expense was $164,000 in
the year ended June 30, 2008, which included $181,000 in interest expense
offset by $17,000 in interest income, compared to $301,000 which included $319,000
in interest expense offset by $18,000 in interest income, in the prior year. </p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-20-</p>
<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>The decrease in interest expense is due to lower interest rates
offsetting higher borrowing requirements, and the early prepayment of most of
the obligations associated with the Intravantage deferred payable.&nbsp; Included in
the $164,000 from 2008 and in the $301,000 from 2007 is $15,000 and $68,000
respectively in accrued interest relating to the ongoing IRS examination for
the tax years ending June 30, 2004, 2005 and 2006. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=558
 style='width:418.4pt;border-collapse:collapse'>
 <tr style='height:12.65pt'>
  <td width=260 valign=bottom style='width:194.7pt;border:none;border-right:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td width=219 colspan=4 valign=bottom style='width:164.15pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Fiscal&nbsp;Year&nbsp;ended&nbsp;June&nbsp;30,</p>
  </td>
  <td width=79 valign=bottom style='width:59.55pt;border-top:solid windowtext 1.0pt;
  border-left:none;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td width=260 valign=bottom style='width:194.7pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td width=114 colspan=2 valign=bottom style='width:85.3pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td width=105 colspan=2 valign=bottom style='width:78.85pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
  <td width=79 valign=bottom style='width:59.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Decrease</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td width=260 valign=bottom style='width:194.7pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Debt&nbsp;related&nbsp;interest&nbsp;expense</p>
  </td>
  <td width=17 valign=bottom style='width:12.9pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;
  height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=97 valign=bottom style='width:72.4pt;border:none;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>166,000&nbsp;</p>
  </td>
  <td width=17 valign=bottom style='width:12.85pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;
  height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=88 valign=bottom style='width:66.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>251,000&nbsp;</p>
  </td>
  <td width=79 valign=bottom style='width:59.55pt;border:none;border-right:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(34%)</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td width=260 valign=bottom style='width:194.7pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.7pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>IRS&nbsp;exam&nbsp;related&nbsp;interest</p>
  </td>
  <td width=17 valign=bottom style='width:12.9pt;border:none;border-bottom:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.7pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=97 valign=bottom style='width:72.4pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.7pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>15,000&nbsp;</p>
  </td>
  <td width=17 valign=bottom style='width:12.85pt;border:none;border-bottom:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.7pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=88 valign=bottom style='width:66.0pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.7pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>68,000&nbsp;</p>
  </td>
  <td width=79 valign=bottom style='width:59.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.7pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(78%)</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td width=260 valign=bottom style='width:194.7pt;border-top:none;border-left:
  solid windowtext 1.0pt;border-bottom:none;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total&nbsp;interest&nbsp;expense</p>
  </td>
  <td width=17 valign=bottom style='width:12.9pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;
  height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=97 valign=bottom style='width:72.4pt;border:none;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>181,000&nbsp;</p>
  </td>
  <td width=17 valign=bottom style='width:12.85pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;
  height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=88 valign=bottom style='width:66.0pt;border:none;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>319,000&nbsp;</p>
  </td>
  <td width=79 valign=bottom style='width:59.55pt;border:none;border-right:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(43%)</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td width=260 valign=bottom style='width:194.7pt;border:solid windowtext 1.0pt;
  border-top:none;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Interest&nbsp;income</p>
  </td>
  <td width=17 valign=bottom style='width:12.9pt;border:none;border-bottom:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=97 valign=bottom style='width:72.4pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(17,000)</p>
  </td>
  <td width=17 valign=bottom style='width:12.85pt;border:none;border-bottom:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=88 valign=bottom style='width:66.0pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(18,000)</p>
  </td>
  <td width=79 valign=bottom style='width:59.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(6%)</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td width=260 valign=bottom style='width:194.7pt;border:solid windowtext 1.0pt;
  border-top:none;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Net&nbsp;interest&nbsp;expense</p>
  </td>
  <td width=17 valign=bottom style='width:12.9pt;border:none;border-bottom:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=97 valign=bottom style='width:72.4pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>164,000&nbsp;</p>
  </td>
  <td width=17 valign=bottom style='width:12.85pt;border:none;border-bottom:
  solid windowtext 1.0pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=88 valign=bottom style='width:66.0pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>301,000&nbsp;</p>
  </td>
  <td width=79 valign=bottom style='width:59.55pt;border-top:none;border-left:
  none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(46%)</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td width=260 valign=bottom style='width:194.7pt;border:solid windowtext 1.0pt;
  border-top:none;padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Interest&nbsp;expense&nbsp;Percentage&nbsp;of&nbsp;Sales</p>
  </td>
  <td width=114 colspan=2 valign=bottom style='width:85.3pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1%&nbsp;</p>
  </td>
  <td width=105 colspan=2 valign=bottom style='width:78.85pt;border-top:none;
  border-left:none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt;
  padding:1.1pt 1.1pt 1.1pt 1.1pt;height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1%&nbsp;</p>
  </td>
  <td width=79 valign=bottom style='width:59.55pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;
  height:12.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'><b>Income Tax Provision</b>.&nbsp; Our effective income tax rate was 0% for
the year ended June 30, 2008, compared to 12% for the year ended June 30, 2007.&nbsp;
Our effective income tax rate in 2008 decreased from 2007 primarily due to the realization
of a fixed amount of research and development tax credits. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>The Company is undergoing an examination by the Internal Revenue Service
(IRS) of its Federal income tax returns filed for the fiscal years ending June
30, 2004, June 30, 2005 and June 30, 2006.&nbsp; Findings of the examination indicate
that there may have been differences in the timing of our tax payments due to
the treatment of inventory uniform capitalization rules.&nbsp; As a result of the examination,
we paid approximately $179,000 of additional tax payments in May 2008.&nbsp;
Subsequent to year end, we received a final interest invoice and paid $31,000
of interest to the IRS.&nbsp; The interest amounts have been accrued and are included
in accrued expenses and interest as of June 30, 2008. &nbsp;&nbsp;Although we have not
received a final audit closing notification, we do not believe there will be
any material adjustments resulting from the examination beyond those described
above.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; As
part of the process of preparing our consolidated financial statements, we are
required to estimate our income taxes in each of the jurisdictions in which we
operate. This process involves estimating our actual current tax liabilities
together with assessing temporary differences resulting from differing
treatment of items for tax and accounting purposes.&nbsp; These differences result
in deferred tax assets and liabilities, which are included within our
consolidated balance sheet.&nbsp; The deferred tax assets result primarily from tax
basis of intangible assets in excess of book basis. We must then assess the
likelihood that our deferred tax assets will be recovered from future taxable
income and to the extent management believes that recovery is not likely, we
must establish a valuation allowance. To the extent a valuation allowance is
either increased or decreased in a period, the impact will be included in the
tax provision in the statement of operations.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Net
Income.&nbsp; </b>We had net income of $317,000 or $0.03 per share, basic, and $0.03
per share, diluted, for the year ended June 30, 2008 compared to net income of $506,000
or $0.05 per share, basic, and $0.05 per share, diluted, for the year ended
June 30, 2007.&nbsp; </p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-21-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>
Liquidity and Capital
Resources </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:justify'>The following
table presents selected financial statistics and information for the periods
indicated: </p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=523
 style='width:65%;border-collapse:collapse'>
 <tr style='height:12.75pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>As&nbsp;of</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>June&nbsp;30,&nbsp;2008</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>June&nbsp;30,&nbsp;2007</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Cash&nbsp;and&nbsp;cash&nbsp;equivalents</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>517,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>403,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Working&nbsp;Capital&#185;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4,586,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>6,648,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Credit&nbsp;Line&nbsp;outstanding&nbsp;balance</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,000,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>300,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Tangible&nbsp;book&nbsp;value/common&nbsp;share&#178;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.93&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.88&nbsp;</p>
  </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;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Number&nbsp;of&nbsp;days&nbsp;of&nbsp;sales&nbsp;outstanding&nbsp;(DSO)&nbsp;in</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>accounts&nbsp;receivable&nbsp;at&nbsp;end&nbsp;of&nbsp;quarter&#179;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>48&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>61&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom style='padding:1.1pt;
  height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Year&nbsp;ended</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>June&nbsp;30,&nbsp;2008</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>June&nbsp;30,&nbsp;2007</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <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; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Net&nbsp;cash&nbsp;provided&nbsp;by&nbsp;operations</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,018,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;height:12.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,480,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:6.0pt;text-align:center'><sup>&nbsp;</sup></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'><sup>1</sup> Working Capital = Ending Current Assets balance &#150; Ending
Current liabilities balance</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-left:.5in;text-align:justify;text-autospace:
none'><sup>2</sup> Tangible book value/common share<sup> </sup>= (Total
shareholders&#146; equity &#150; Net intangible asset (patents) &#150; Goodwill)/(basic
outstanding shares)</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'><sup>&nbsp;</sup></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'><sup>3</sup> DSO = Ending Net Accounts Receivable balance/(Previous
Quarter Sales/91)</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Our working capital at June 30, 2008 decreased to approximately $4.6 million
compared to approximately $6.6 million at June 30, 2007 as cash flow from
operations was used to fund the facilities move and major machinery &amp;
equipment purchases.&nbsp; Cash flow provided by operations was $2,018,000 for the
year ended June 30, 2008 compared to $1,480,000 for the year ended June 30, 2007.&nbsp;
Cash was provided through continued profitability and an increase in accounts
payable and accrued expense, offset by increases in inventory.&nbsp; In the year
ended June 30, 2008, we had a high level of non-cash charges associated with
stock based compensation and increased reserves for warranty that amounted to
$574,000 in addition to $538,000 in depreciation and amortization.&nbsp; Management
believes that our working capital needs over the next twelve months can be
adequately supported by current operations.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>On November 1,
2007, our existing credit facility with Wells Fargo was replaced with an
expanded facility with a total borrowing capacity of $6,562,500.&nbsp; Included in
the increase is an increase in the credit line borrowing availability from
$2,000,000 to $4,000,000.&nbsp; The credit line&#146;s terms require monthly interest
payments at the prime rate of interest (5.00% at June 30, 2008); or LIBOR (2.48%
at June 30, 2008) plus 1.75%, at our discretion, based on outstanding
borrowings.&nbsp; The total effective interest rate at June 30, 2008 for borrowings
on the credit line was 4.25%.&nbsp; The credit facility expires on November 1,
2009.&nbsp; In addition to the credit line, a term commitment is available for
borrowings for amounts up to $2,000,000.&nbsp; We can take advances against this
commitment through November 1, 2008, at which time the outstanding borrowings
against this commitment will be converted to a term loan, to be amortized and
repaid over 60 months. The term commitment requires monthly interest payments
at the prime rate of interest; or LIBOR plus 2.0%, at our discretion, based on
outstanding borrowings.&nbsp; It is anticipated that the borrowings from the term
commitment will be used for construction financing of tenant improvements for
our Irvine, California facility.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-22-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>The term loan
that was entered into in January 2006 to finance the Astromec purchase remains
in place.&nbsp; As of June 30, 2008, there was a principal balance on this term loan
of $395,833 which is required to be fully paid-off in January 2010, in
accordance with its amortization schedule.&nbsp; The term loan requires monthly interest
payments at the prime rate of interest; or LIBOR plus 2.5%, at our discretion,
based on outstanding borrowings, with no minimum interest charge.&nbsp; The total
effective interest rate at June 30, 2008 for borrowings on term loan was
5.00%.&nbsp; All assets of the Company except our Carson City land and building
secure the outstanding borrowings from Wells Fargo. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>There was
$2,000,000 outstanding under the terms of the credit line and nothing outstanding
on the term commitment facility as of June 30, 2008.&nbsp; The total available additional
borrowing capacity at June 30, 2008 was $4,000,000, consisting of $2,000,000 on
the credit line and $2,000,000 on the Tenant Improvement facility.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>In March 2006,
we entered into a ten year mortgage with Union Bank of California for
$1,650,000.&nbsp; Its terms require monthly interest payments at a fixed rate
of 6.73%.&nbsp; The principal payments on the mortgage note are based on a 25
year amortization of the note and are $11,379 per month beginning May 1, 2006.&nbsp;
The outstanding borrowings are secured by our Carson City land and building.&nbsp;
There was a $1,590,260 outstanding balance under the terms of this mortgage as
of June 30, 2008.&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-top:6.0pt;text-align:justify;text-indent:.5in'>There
are certain financial and non-financial covenants that we must meet to be in
compliance with the terms of the November 2007 Wells Fargo credit facility and
the Union Bank mortgage.&nbsp; At June 30, 2008, we&nbsp; &nbsp;were in compliance with the
Union Bank covenant and all but one of the Wells Fargo covenants.&nbsp; In the
fourth quarter of 2008, we had a net loss that exceeded the quarterly $300,000
loss restriction covenant in the Wells Fargo credit facility.&nbsp; This covenant
was waived by Wells Fargo at no charge.&nbsp; Current forecasts indicate that a
quarterly covenant may not be met at the 9/30/2008 measurement date, therefore
we have included $146,000 of
debt related to the term note to short term debt from long term debt.&nbsp; If a
covenant violation does in fact occur, we would request a waiver at that time,
and do not believe the debt would become immediately due.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>At June 30,
2008, we had cash and cash equivalents of $517,000.&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 this and the
next year.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>In September
2002, our Board of Directors authorized the repurchase on the open market of up
to 500,000 shares of our outstanding Common Stock at a share price no greater
than $1.25, 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 fiscal 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 years 2004 through 2008.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>The stock
repurchase was reconfirmed by our Board of Directors in July 2008.&nbsp; In the
period subsequent to June 30, 2008 through September 16, 2008, we repurchased 35,500
shares for $33,575 at an average price of $0.95 per share.&nbsp; Since the
initiation of the buyback in 2002 through September 16, 2008, we have
repurchased 111,200 shares for $77,316 at an average price of $0.69 per share. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-top:6.0pt;text-align:justify'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b>Impact of Inflation and Changing Prices </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
industries in which we compete are labor intensive, often involving personnel
with high-level technical or sales skills. Wages and other expenses increase
during periods of inflation and when shortages in the marketplace occur. In
addition, suppliers pass along rising costs to us in the form of higher prices.
To some extent, we have been able to offset increases in operating costs by
increasing charges, expanding services and implementing cost control measures.
Nevertheless, our ability to increase prices is limited by market conditions,
including international competition in many of our markets.</p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;line-height:normal'>&nbsp;</p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-family:"Times New Roman";text-align:center;line-height:normal'>
<font size="2">-23-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Recent Accounting
Pronouncements</b></p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;line-height:
normal'>&nbsp;</p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;line-height:
normal'>In June 2006, the FASB issued FIN
No.&nbsp;48, <i>Accounting for Uncertainty in Income Taxes &#150; an interpretation
of FASB Statement No.&nbsp;109, </i>which clarifies the accounting for
uncertainty in income taxes recognized in an enterprise&#146;s financial statements
in accordance with FASB Statement No.&nbsp;109, <i>Accounting for Income Taxes.
</i>The interpretation prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN No.&nbsp;48
requires recognition of tax benefits that satisfy a greater than 50%
probability threshold. FIN No.&nbsp;48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition. FIN No.&nbsp;48 is effective for us beginning
July&nbsp;1, 2007. </p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;line-height:
normal'>&nbsp;</p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;line-height:
normal'>In September 2006, the FASB issued FAS
No.&nbsp;157, <i>Fair Value Measurements, </i>which defines fair value,
establishes a framework for fair value measurements, and expands disclosures
about fair value measurements.&nbsp; Where applicable, this Statement simplifies and
codifies related guidance within generally accepted accounting principles
(GAAP).<i> &nbsp;</i>The statement defines that the fair value is the orderly
exchange market-based price received to transfer an asset (exit price).&nbsp; It
defines the fair value to be determined by quoted prices (level 1), observable
inputs (level 2) and unobservable inputs (level 3), in declining order of
significance.&nbsp; FAS No.&nbsp;157 is effective for us beginning July&nbsp;1, 2008.&nbsp;
This FAS was updated in September 2006 to delay application for certain
nonfinancial assets and liabilities until July 1, 2009. &nbsp;&nbsp;We do not expect FAS
157 to have a material financial impact on us, but is will require significant
additional disclosure in the valuation of our intangible assets.</p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;line-height:normal'>&nbsp;</p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;line-height:normal'><b>Item
7.&nbsp;&nbsp; Financial Statements</b></p>

<p style='margin-top:0in;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;line-height:200%;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;line-height:normal'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The financial statements and supplemental data of the Company may be found in
this Report on the pages indicated below.</p>

<div align=center>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse'>
 <tr>
  <td width=492 valign=top style='width:369.0pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><u>
	<a href="#Report_of_Independent_Registered_Public_Accounting_Firm_">Report of Independent Registered Public Company
  Accounting Firm</a>&nbsp; </u></p>
  </td>
  <td width=42 valign=top style='width:31.5pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>27
  </p>
  </td>
 </tr>
 <tr>
  <td width=492 valign=top style='width:369.0pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><a
  href="#prodex10k_htm_consolidated_balance_sheets">Consolidated
  Balance Sheet </a>&nbsp;</p>
  </td>
  <td width=42 valign=top style='width:31.5pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>28
  </p>
  </td>
 </tr>
 <tr>
  <td width=492 valign=top style='width:369.0pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><u>
	<a href="#CONSOLIDATED&nbsp;STATEMENTS&nbsp;OF&nbsp;OPERATIONS_">Consolidated Statements of
  Operations</a></u></p>
  </td>
  <td width=42 valign=top style='width:31.5pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>29<font style="font-size: 10.0pt"> </font></p>
  </td>
 </tr>
 <tr>
  <td width=492 valign=top style='width:369.0pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><a
  href="#prodex10k_htm_consolidated_statements_of_shareholders__equity">Consolidated Statements of Shareholders' Equity </a>&nbsp;</p>
  </td>
  <td width=42 valign=top style='width:31.5pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>30</p>
  </td>
 </tr>
 <tr>
  <td width=492 valign=top style='width:369.0pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><a
  href="#prodex10k_htm_consolidated_statements_of_cash_flows">Consolidated Statements of Cash Flows </a>&nbsp;</p>
  </td>
  <td width=42 valign=top style='width:31.5pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>31
  </p>
  </td>
 </tr>
 <tr>
  <td width=492 valign=top style='width:369.0pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><a
  href="#prodex10k_htm_notes_to_consolidated_financial_statements">Notes to Consolidated Financial Statements </a>&nbsp;</p>
  </td>
  <td width=42 valign=top style='width:31.5pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>32</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-autospace:none; margin-left:0in; margin-right:0in; margin-top:0in' align="center">
<font size="2">-24-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Item 8.&nbsp;&nbsp; Changes
in and Disagreements with Accountants on Accounting and Financial Disclosure. </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>None.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Item 8A(T).&nbsp;&nbsp; Controls
and Procedures.</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp; The Chief
Executive Officer and Chief Financial Officer (the principal executive officer
and principal financial officer, respectively) conducted an evaluation of the
design and operation of our &#147;disclosure controls and procedures&#148; (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (&#147;Exchange Act&#148;)).&nbsp; Based on that evaluation for the quarter ended June
30, 2008, the Chief Executive Officer and the Chief Financial Officer concluded
that the disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in the reports filed or
submitted by the Company under the Exchange Act is accumulated, recorded,
processed, summarized and reported to its management, including its principal
executive officer and its principal financial officer, as appropriate to allow
timely decisions regarding whether or not disclosure is required.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>Our
management is responsible for establishing and maintaining adequate &#147;internal
control over financial reporting<a name="_DV_C17"></a><a name="_DV_X26">&#148;
(as defined in Rule 13a-15(f) under the Exchange Act)</a>.
Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we conducted
an evaluation of the effectiveness of our internal control over financial
reporting based on the framework set forth in <i>Internal Control &#151; Integrated
Framework </i>issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this evaluation, our management concluded that
our internal control over financial reporting was effective as of June 30, 2008.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>Our
internal control over financial reporting is supported by written policies and
procedures, that:</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of our company are
being made only in accordance with authorizations of our management and
directors; and </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a material effect
on the financial statements. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'><a name="_DV_C23">Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risks that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate. </a></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>This annual
report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.&nbsp;
Management&#146;s report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the SEC that permit us to
provide only management&#146;s report in this annual report.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>During the
quarter ended June 30, 2008, there were no changes in the Company's 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, the Company's internal controls over financial reporting.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-25-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>PART
III</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Item 8B.&nbsp;&nbsp; Other Information.
</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>None.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Item 9.&nbsp;&nbsp;
Directors, Executive Officers, Promoters, Control Persons and Corporate
Governance; Compliance With Section 16(a) of the Exchange Act </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>&nbsp;&nbsp;
</b>&nbsp;&nbsp;&nbsp; Information concerning the Company's Directors and
Executive Officers is incorporated by reference from the information contained
in the Company's definitive Proxy Statement for the Company's 2008 Annual
Meeting of Shareholders to be filed with the SEC within 120 days after the end
of the fiscal year ended June 30, 2008 (the &quot;Proxy Statement&quot;). </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Item 10.&nbsp;&nbsp;
Executive Compensation </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>&nbsp;&nbsp;
</b>&nbsp;&nbsp;&nbsp; Information required by this Item is incorporated by
reference from the Proxy Statement. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Item 11.&nbsp;&nbsp; Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Information required
by this Item is incorporated by reference from the Proxy Statement. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Item 12.&nbsp;&nbsp; Certain
Relationships and Related Transactions, and Director Independence </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Information required
by this Item is incorporated by reference from the Proxy Statement. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Item 13.&nbsp;&nbsp; Exhibits
</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; See Exhibit Index.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Item 14.&nbsp;&nbsp;
Principal Accountant Fees and Services </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in'>Information required by this Item
is incorporated by reference from the Proxy Statement. </p>
<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in'>&nbsp;</p>

<p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Arial Unicode MS";margin:0in;margin-bottom:.0001pt'>&nbsp;</p>

<p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:.0001pt; margin-left:0in; margin-right:0in; margin-top:0in'><font style="font-size: 7.5pt">&nbsp;</font></p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-26-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><b>
<a name="Report_of_Independent_Registered_Public_Accounting_Firm_">Report of
Independent Registered Public Accounting Firm</a></b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'><b>To the Stockholders and Board
of Directors of Pro-Dex, Inc.: </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>We have audited
the accompanying consolidated balance sheets of Pro-Dex, Inc. and Subsidiaries
(the Company) as of June 30, 2008 and 2007 and the related consolidated
statements of operations, shareholders&#146; equity and cash flows for each of the
years in the two-year period ended June 30, 2008.&nbsp; These consolidated financial
statements are the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>We conducted our
audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting.&nbsp; Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>In our opinion,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Pro-Dex, Inc. and Subsidiaries as
of June 30, 2008 and 2007, and the results of their operations and their cash
flows for each of the two years in the two-year period ended June 30, 2008 in
conformity with accounting principles generally accepted in the United States
of America. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-indent:24.5pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>/s/&nbsp; Moss Adams LLP</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Moss Adams LLP </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Irvine, California </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>September 18, 2008</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-27-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b>&nbsp;</b></p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=641
 style='width:95%;border-collapse:collapse'>
 <tr style='page-break-inside:avoid;height:.05pt'>
  <td valign=top style='padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><b>
	<font size="2">&nbsp;</font></b></p>
  </td>
  <td valign=top style='padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=top style='padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=top style='padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=top style='padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.0pt'>
  <td colspan=5 valign=bottom style='padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><b>
	<font size="2">PRO-DEX,&nbsp;INC.&nbsp;and&nbsp;SUBSIDIARIES</font></b></p>
  </td>
 </tr>
 <tr style='height:15.05pt'>
  <td colspan=5 valign=bottom style='padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><b>
	<font size="2">CONSOLIDATED&nbsp;BALANCE&nbsp;SHEETS</font></b></p>
  </td>
 </tr>
 <tr style='height:15.0pt'>
  <td valign=bottom style='padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><i>
	<font size="2">30-Jun-08</font></i></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><i>
	<font size="2">30-Jun-07</font></i></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'><b>
	<font size="2">ASSETS</font></b></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Current&nbsp;assets:</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.2pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash&nbsp;and&nbsp;cash&nbsp;equivalents</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</font></p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">517,000&nbsp;</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</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; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">403,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts&nbsp;receivable,&nbsp;net&nbsp;of&nbsp;allowance&nbsp;for&nbsp;doubtful&nbsp;accounts</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of&nbsp;$144,000&nbsp;at&nbsp;June&nbsp;30,&nbsp;2008&nbsp;and&nbsp;$153,000&nbsp;at&nbsp;June&nbsp;30,&nbsp;2007</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2,842,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">3,436,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other&nbsp;Current&nbsp;Receivables</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">205,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">-&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.2pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories,&nbsp;net</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">5,101,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">4,622,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid&nbsp;expenses</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">214,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">205,000&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <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:11pt; padding-left:1.1pt; padding-right:1.1pt; padding-top:0pt; padding-bottom:0pt'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp; Prepaid income taxes</font></td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:11pt; padding-left:1.1pt; padding-right:1.1pt; padding-top:0pt; padding-bottom:0pt'>
  <p align="right"><font size="2">860,000&nbsp;</font></td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; height:11pt; padding-left:1.1pt; padding-right:1.1pt; padding-top:0pt; padding-bottom:0pt'>
  <p align="right">-&nbsp;</td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred&nbsp;income&nbsp;taxes</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">1,176,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">1,091,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total&nbsp;current&nbsp;assets</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">10,915,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">9,757,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:6.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Property,&nbsp;plant,&nbsp;equipment&nbsp;and&nbsp;leasehold&nbsp;improvements,&nbsp;net</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">6,470,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">3,778,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.2pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Other&nbsp;assets:</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2,997,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2,997,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangibles&nbsp;-&nbsp;Patents,&nbsp;net</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">1,221,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">1,321,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred&nbsp;income&nbsp;taxes</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">-&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">229,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.2pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">68,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">25,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total&nbsp;other&nbsp;assets</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">4,286,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">4,572,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:6.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <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; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Total&nbsp;assets</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; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</font></p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">21,671,000&nbsp;</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; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</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;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">18,107,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:5.0pt'>
  <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; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'><b>
	<font size="2">LIABILITIES&nbsp;AND&nbsp;SHAREHOLDERS'&nbsp;EQUITY</font></b></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Current&nbsp;liabilities:</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.2pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Line&nbsp;of&nbsp;credit</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</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; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2,000,000&nbsp;</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</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; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">300,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts&nbsp;payable</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">1,736,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">1,110,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued&nbsp;expenses</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2,053,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">1,183,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income&nbsp;taxes&nbsp;payable</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">114,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">158,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.2pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current&nbsp;portion&nbsp;of&nbsp;term&nbsp;note</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">396,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">250,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current&nbsp;portion&nbsp;of&nbsp;real&nbsp;estate&nbsp;loan</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">30,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">26,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current&nbsp;portion&nbsp;of&nbsp;patent&nbsp;deferred&nbsp;payable</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">-&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">82,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total&nbsp;current&nbsp;liabilities</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">6,329,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">3,109,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:9.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.2pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Long-term&nbsp;liabilities:</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;Term&nbsp;note</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">-&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">396,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;Real&nbsp;estate&nbsp;loan</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">1,560,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">1,593,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;Patent&nbsp;deferred&nbsp;payable</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">44,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">158,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.2pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  &nbsp;&nbsp; <font size="2">Deferred income taxes</font></td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:medium none windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">290,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:medium none windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p align="right">-&nbsp;</td>
 </tr>
 <tr style='height:12.2pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;Deferred&nbsp;rent</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">150,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">-&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total&nbsp;long-term&nbsp;liabilities</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">1,754,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2,147,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:6.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Total&nbsp;liabilities</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">8,259,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">5,256,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Commitments&nbsp;and&nbsp;contingencies</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.2pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Shareholders'&nbsp;equity:</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common&nbsp;shares;&nbsp;no&nbsp;par&nbsp;value;&nbsp;50,000,000&nbsp;shares&nbsp;authorized;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,803,366&nbsp;shares&nbsp;issued&nbsp;and&nbsp;outstanding&nbsp;June&nbsp;30,&nbsp;2008</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,718,366&nbsp;shares&nbsp;issued&nbsp;and&nbsp;outstanding&nbsp;June&nbsp;30,&nbsp;2007</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">16,545,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">16,340,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.2pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated&nbsp;deficit</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(3,247,000)</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(3,489,000)</font></p>
  </td>
 </tr>
 <tr style='height:9.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total&nbsp;shareholders'&nbsp;equity</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">13,298,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">12,851,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <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; padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt; height:11pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:2.25pt double windowtext;border-right:
  1.0pt solid windowtext;padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total&nbsp;liabilities&nbsp;and&nbsp;shareholders'&nbsp;equity</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; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</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;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">21,671,000&nbsp;</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; padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</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;
  padding:1.1pt; height:11pt'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">18,107,000&nbsp;</font></p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><i><font style="font-size: 9.0pt">See notes to consolidated financial statements.</font></i></p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-28-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=617
 style='width:95%;border-collapse:collapse'>
 <tr style='page-break-inside:avoid;height:.05pt'>
  <td valign=top style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>
  </td>
  <td valign=top style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=top style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=top style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=top style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.25pt'>
  <td colspan=5 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><b>
	<font size="2">PRO-DEX,&nbsp;INC.&nbsp;and&nbsp;SUBSIDIARIES</font></b></p>
  </td>
 </tr>
 <tr style='height:15.25pt'>
  <td colspan=5 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><b>
	<font size="2">
	<a name="CONSOLIDATED&nbsp;STATEMENTS&nbsp;OF&nbsp;OPERATIONS_">CONSOLIDATED&nbsp;STATEMENTS&nbsp;OF&nbsp;OPERATIONS</a></font></b></p>
  </td>
 </tr>
 <tr style='height:15.25pt'>
  <td colspan=5 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><b>
	<font size="2">Years&nbsp;ended&nbsp;June&nbsp;30</font></b></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><i>
	<font size="2">2008</font></i></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><i>
	<font size="2">2007</font></i></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Net&nbsp;sales</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</font></p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">25,126,000&nbsp;</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</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; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">21,563,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Cost&nbsp;of&nbsp;sales</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">16,917,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">14,196,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Gross&nbsp;profit</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">8,209,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">7,367,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Operating&nbsp;expenses:</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">1,482,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">1,353,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General&nbsp;and&nbsp;administrative&nbsp;expenses</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">3,265,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2,698,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Irvine&nbsp;facility&nbsp;move&nbsp;related&nbsp;general&nbsp;and&nbsp;administrative&nbsp;expenses</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">274,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">-&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research&nbsp;and&nbsp;development&nbsp;costs</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2,732,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2,474,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Total&nbsp;operating&nbsp;expenses</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">7,753,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">6,525,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Income&nbsp;from&nbsp;operations</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">456,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">842,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Other:</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other&nbsp;(expense),&nbsp;net</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(9,000)</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(4,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Royalty&nbsp;income</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">35,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">38,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest&nbsp;income</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">17,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">18,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest&nbsp;(expense)</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(181,000)</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(319,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Total</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(138,000)</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(267,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Income&nbsp;before&nbsp;provision&nbsp;for&nbsp;income&nbsp;taxes</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">318,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">575,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Provision&nbsp;for&nbsp;Income&nbsp;taxes</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(1,000)</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(69,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Net&nbsp;income</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; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</font></p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">317,000&nbsp;</font></p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</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;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">506,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Net&nbsp;Income&nbsp;per&nbsp;share:</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic</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; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</font></p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">0.03&nbsp;</font></p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</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;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">0.05&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</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; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</font></p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">0.03&nbsp;</font></p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</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;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">0.05&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Weighted&nbsp;average&nbsp;shares&nbsp;outstanding&nbsp;-&nbsp;basic</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">9,736,249&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">9,579,055&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <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; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Weighted&nbsp;average&nbsp;shares&nbsp;outstanding&nbsp;-&nbsp;diluted</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">9,924,350&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">9,739,041&nbsp;</font></p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><i><font style="font-size: 9.0pt">&nbsp;</font></i></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><i><font style="font-size: 9.0pt">See notes to consolidated financial statements.</font></i></p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
- -29-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=614
 style='width:90%;border-collapse:collapse'>
 <tr style='height:14.15pt'>
  <td colspan=11 valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:medium none; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><b>
	<font size="2">PRO-DEX,&nbsp;INC.&nbsp;and&nbsp;SUBSIDIARIES</font></b></p>
  </td>
 </tr>
 <tr style='height:14.15pt'>
  <td colspan=11 valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><b>
	<font size="2">CONSOLIDATED&nbsp;STATEMENTS&nbsp;OF&nbsp;SHAREHOLDERS'&nbsp;EQUITY</font></b></p>
  </td>
 </tr>
 <tr style='height:14.15pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><b>
	<font size="2">Years&nbsp;ended&nbsp;June&nbsp;30</font></b></p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.5pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.45pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-bottom:1px solid #000000; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-bottom:1px solid #000000; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Common&nbsp;Shares</font></p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.5pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Number</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Accumulated</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.45pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">of&nbsp;Shares</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Amount</font></p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Deficit</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Total</font></p>
  </td>
 </tr>
 <tr style='height:11.45pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.45pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Balance&nbsp;2006</font></p>
  </td>
  <td valign=bottom style='border-top:1px solid #000000; border-bottom:1px solid #000000; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:1px solid #000000; border-bottom:1px solid #000000; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">9,539,792&nbsp;</font></p>
  </td>
  <td valign=bottom style='border-top:1px solid #000000; border-bottom:1px solid #000000; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:1px solid #000000; border-bottom:1px solid #000000; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</font></p>
  </td>
  <td valign=bottom style='border-top:1px solid #000000; border-bottom:1px solid #000000; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">16,066,000&nbsp;</font></p>
  </td>
  <td valign=bottom style='border-top:1px solid #000000; border-bottom:1px solid #000000; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</font></p>
  </td>
  <td valign=bottom style='border-top:1px solid #000000; border-bottom:1px solid #000000; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(3,995,000)</font></p>
  </td>
  <td valign=bottom style='border-top:1px solid #000000; border-bottom:1px solid #000000; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:1px solid #000000; border-bottom:1px solid #000000; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</font></p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:1px solid #000000; border-bottom:1px solid #000000; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">12,071,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.45pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Options&nbsp;exercised</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">93,574&nbsp;</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">32,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">32,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:11.45pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:22.95pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Issuance&nbsp;of&nbsp;restricted&nbsp;shares&nbsp;and</font></p>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Stock-Based&nbsp;compenstion</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">85,000&nbsp;</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">242,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">242,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:11.45pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:22.95pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Net&nbsp;Income</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">506,000&nbsp;</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">506,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:11.45pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Balance&nbsp;2007</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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">9,718,366&nbsp;</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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</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; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">16,340,000&nbsp;</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; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</font></p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(3,489,000)</font></p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</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;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">12,851,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.1pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:45.85pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Cumulative&nbsp;retained&nbsp;earnings</font></p>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">adjustment&nbsp;for&nbsp;prior&nbsp;years&nbsp;due&nbsp;to</font></p>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">accounting&nbsp;standards&nbsp;change&nbsp;(FIN</font></p>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">48)</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">-&nbsp;</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">-&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(75,000)</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(75,000)</font></p>
  </td>
 </tr>
 <tr style='height:11.45pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:22.95pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Issuance&nbsp;of&nbsp;restricted&nbsp;shares&nbsp;and</font></p>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Stock-Based&nbsp;compenstion</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">85,000&nbsp;</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">205,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">205,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:11.45pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.45pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Net&nbsp;Income</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">317,000&nbsp;</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">317,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:11.5pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Balance&nbsp;2008</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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">9,803,366&nbsp;</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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</font></p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">16,545,000&nbsp;</font></p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</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; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(3,247,000)</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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</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;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">13,298,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:11.45pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><i><font style="font-size: 9.0pt">See notes to consolidated financial statements.</font></i></p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-30-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=718
 style='width:90%;border-collapse:collapse'>
 <tr style='height:11.95pt'>
  <td colspan=5 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><b>
	<font size="2">PRO-DEX,&nbsp;INC.&nbsp;and&nbsp;SUBSIDIARIES</font></b></p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td colspan=5 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><b>
	<font size="2">CONSOLIDATED&nbsp;STATEMENTS&nbsp;OF&nbsp;CASH&nbsp;FLOWS</font></b></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td colspan=5 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><b>
	<font size="2">Years&nbsp;ended&nbsp;June&nbsp;30</font></b></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><i>
	<font size="2">2008</font></i></p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><i>
	<font size="2">2007</font></i></p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Cash&nbsp;Flows&nbsp;from&nbsp;Operating&nbsp;Activities:</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Net&nbsp;Income</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</font></p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">317,000&nbsp;</font></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</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; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">506,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjustments&nbsp;to&nbsp;reconcile&nbsp;net&nbsp;income&nbsp;to&nbsp;net&nbsp;cash&nbsp;used&nbsp;in&nbsp;operating&nbsp;activities:</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation&nbsp;and&nbsp;amortization</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">538,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">487,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss&nbsp;on&nbsp;disposal</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">-&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">4,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Recovery&nbsp;of)&nbsp;Provision&nbsp;for&nbsp;doubtful&nbsp;accounts</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(9,000)</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">113,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reserve&nbsp;for&nbsp;obsolete&nbsp;inventory</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(18,000)</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">198,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock&nbsp;based&nbsp;compensation</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">204,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">242,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retained&nbsp;earnings&nbsp;adjustment&nbsp;for&nbsp;prior&nbsp;years&nbsp;due&nbsp;to&nbsp;accounting&nbsp;standard&nbsp;change</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(75,000)</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">-&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred&nbsp;taxes</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(434,000)</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(177,000)</font></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes&nbsp;in:</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease&nbsp;in&nbsp;accounts&nbsp;receivable</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">397,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">292,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Increase)&nbsp;in&nbsp;inventories</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(460,000)</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(840,000)</font></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Increase)&nbsp;in&nbsp;prepaid&nbsp;expenses</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(9,000)</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(114,000)</font></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease&nbsp;in&nbsp;other&nbsp;assets</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(43,000)</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">19,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase&nbsp;in&nbsp;accounts&nbsp;payable&nbsp;and&nbsp;accrued&nbsp;expenses</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">1,645,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">371,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase&nbsp;(Decrease)&nbsp;in&nbsp;income&nbsp;taxes&nbsp;payable</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(903,000)</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">379,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Net&nbsp;Cash&nbsp;provided&nbsp;by&nbsp;Operating&nbsp;Activities</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">2,018,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">1,480,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:4.25pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Cash&nbsp;Flows&nbsp;From&nbsp;Investing&nbsp;Activities:</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquisition&nbsp;of&nbsp;Astromec,&nbsp;net&nbsp;of&nbsp;cash&nbsp;acquired</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">-&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(66,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase&nbsp;of&nbsp;equipment&nbsp;and&nbsp;leasehold&nbsp;improvements</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(3,130,000)</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(447,000)</font></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase&nbsp;of&nbsp;Intangible&nbsp;Assets&nbsp;-&nbsp;Patents&nbsp;related&nbsp;to&nbsp;Intraflow</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">-&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(2,000)</font></p>
  </td>
 </tr>
 <tr style='height:4.2pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Net&nbsp;Cash&nbsp;used&nbsp;in&nbsp;Investing&nbsp;Activities</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(3,130,000)</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(515,000)</font></p>
  </td>
 </tr>
 <tr style='height:4.2pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Cash&nbsp;Flows&nbsp;from&nbsp;Financing&nbsp;Activities:</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Principal&nbsp;payments&nbsp;of&nbsp;patent&nbsp;deferred&nbsp;payable</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(196,000)</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(76,000)</font></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net&nbsp;(Payments)&nbsp;Borrowing&nbsp;on&nbsp;Line&nbsp;of&nbsp;Credit</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">1,700,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(600,000)</font></p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Principal&nbsp;payments&nbsp;on&nbsp;Term&nbsp;Note</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(250,000)</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(250,000)</font></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Principal&nbsp;payments&nbsp;on&nbsp;Real&nbsp;Estate&nbsp;Loan</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(28,000)</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(27,000)</font></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds&nbsp;from&nbsp;option&nbsp;and&nbsp;warrant&nbsp;exercise</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">-&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">33,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:4.25pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Net&nbsp;Cash&nbsp;provided&nbsp;by&nbsp;(used&nbsp;in)&nbsp;Financing&nbsp;Activities</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">1,226,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">(920,000)</font></p>
  </td>
 </tr>
 <tr style='height:4.2pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Net&nbsp;(decrease)&nbsp;increase&nbsp;&nbsp;in&nbsp;Cash&nbsp;and&nbsp;Cash&nbsp;Equivalents</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">114,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">45,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Cash&nbsp;and&nbsp;Cash&nbsp;Equivalents,&nbsp;beginning&nbsp;of&nbsp;year</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">403,000&nbsp;</font></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">358,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:4.25pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <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; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Cash&nbsp;and&nbsp;Cash&nbsp;Equivalents,&nbsp;end&nbsp;of&nbsp;year</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; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</font></p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">517,000&nbsp;</font></p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</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;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">403,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:4.2pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td colspan=5 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><i>
	<font size="2">Supplemental&nbsp;Information</font></i></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Cash&nbsp;paid&nbsp;for&nbsp;interest</font></p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</font></p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">181,000&nbsp;</font></p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</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; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">229,000&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <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; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">Cash&nbsp;paid&nbsp;for&nbsp;income&nbsp;taxes</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; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</font></p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">560,000&nbsp;</font></p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">$</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;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">-&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:4.25pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 </table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><i><font style="font-size: 9.0pt">See notes to consolidated financial statements.</font></i></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">&nbsp;</font></p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-31-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>PRO-DEX,
INC. AND SUBSIDIARIES </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>
<b>NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>June
30, 2008 and 2007</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>NOTE 1 &#150; DESCRIPTION OF
BUSINESS </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 7.0pt">&nbsp;</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Pro-Dex, Inc. specializes in bringing speed to
market in the development and manufacture of technology-based solutions that
incorporate embedded motion control, miniature rotary drive systems and
fractional horsepower DC motors, serving the medical, dental, semi-conductor,
scientific research and aerospace markets. Pro-Dex's products are found in
hospitals, dental offices, medical engineering labs, commercial and military
aircraft, scientific research facilities and high tech manufacturing operations
around the world.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>NOTE 2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Principles of Consolidation </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 7.0pt">&nbsp;</font></p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The consolidated
financial statements include the accounts of the Company and its wholly owned
subsidiaries, Pro-Dex Astromec, Inc. and Pro-Dex Management, Inc.&nbsp; Pro-Dex
Management, Inc. is a non-operating subsidiary.&nbsp; All significant inter-company
accounts and transactions have been eliminated.&nbsp;&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Basis of Presentation</b></p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>The accompanying consolidated financial statements have been prepared in
accordance with accounting principals generally accepted in the United States of America. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Revenue Recognition </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 7.0pt">&nbsp;</font></p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in'>Revenue on product sales is
recognized upon shipment to the customer based on its terms of FOB shipping
point, where the risk of loss and title transfer to the customer.&nbsp; We record
sales in accordance with SEC Staff Accounting Bulletin No. 104, <i>Revenue
Recognition</i>.&nbsp; Under these guidelines, revenue is recognized when all of the
following exist: persuasive evidence that a sale arrangement exists, delivery
of the product has occurred, the price is fixed or determinable, and payment is
reasonably assured.&nbsp; We sell some of our products with a warranty that provides
for repairs or replacement of any defective parts for a period after the sale.
At the time of the sale, the Company accrues an estimate of the cost of
providing the warranty based on prior experience.&nbsp; The Company recognizes
revenue under research and development agreements as certain deliverables are
met as specified in each development contract. </p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Cash and Cash Equivalents </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 7.0pt">&nbsp;</font></p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in'>The Company considers all highly
liquid investments with an original maturity of ninety days or less to be cash
equivalents.</p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Accounts Receivable </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 7.0pt">&nbsp;</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Trade receivables are carried at original invoice amount less an estimate
made for doubtful accounts based on a review of all outstanding amounts on a
monthly basis.&nbsp; Management determines the allowance for doubtful accounts by
identifying troubled accounts and using historical experience applied to an aging
of accounts.&nbsp; Trade receivables are written off when deemed uncollectible.&nbsp;
Recoveries of trade receivables previously written off are offset against the
allowance when received. Changes in reserve for allowance for doubtful accounts
are as follows for the years ended June 30, 2008 and 2007:</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center;text-autospace:
none; margin-left:0in; margin-right:0in; margin-top:0in'><font size="2">-32-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=539
 style='width:85%;border-collapse:collapse'>
 <tr style='height:12.6pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
 </tr>
 <tr style='height:12.6pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Balance&nbsp;at&nbsp;the&nbsp;beginning&nbsp;of&nbsp;the&nbsp;year</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>153,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>40,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Increase&nbsp;(Decrease)&nbsp;in&nbsp;doubtful&nbsp;accounts</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(9,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>114,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.8pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Recoveries&nbsp;of&nbsp;bad&nbsp;debt</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(1,000)</p>
  </td>
 </tr>
 <tr style='height:12.6pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Balance&nbsp;at&nbsp;the&nbsp;end&nbsp;of&nbsp;the&nbsp;year</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>144,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>153,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Inventories</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";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 at June 30, 2008 and 2007:</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=513
 style='width:85%;border-collapse:collapse'>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Raw&nbsp;Materials</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,340,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,474,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Work&nbsp;in&nbsp;process</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>992,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>594,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Development&nbsp;costs&nbsp;under&nbsp;contract</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>207,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>141,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Finished&nbsp;goods</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,533,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,403,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Total</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>6,072,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>5,612,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Reserve&nbsp;for&nbsp;slow&nbsp;moving&nbsp;and&nbsp;obsolete&nbsp;items</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(971,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(990,000)</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Total&nbsp;inventories,&nbsp;net</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>5,101,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4,622,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Changes in reserve for slow moving and obsolete inventory for the years
ended June 30, 2008 and 2007 were as follows:</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=486
 style='width:85%;border-collapse:collapse'>
 <tr style='height:12.6pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
 </tr>
 <tr style='height:12.6pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Balance&nbsp;at&nbsp;the&nbsp;beginning&nbsp;of&nbsp;the&nbsp;year</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>990,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>792,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.6pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Increased&nbsp;reserve</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>531,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>261,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.6pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Inventory&nbsp;disposed</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(550,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(63,000)</p>
  </td>
 </tr>
 <tr style='height:12.6pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Balance&nbsp;at&nbsp;the&nbsp;end&nbsp;of&nbsp;the&nbsp;year</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>971,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>990,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Inventory disposed was primarily component parts that were associated
with older development and production contracts that we determined had little
to no chance of being used again due to the availability of newer versions of
the components or there was little chance of the product being sold again.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Warranties</b></p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>The warranty accrual is based on historical costs of warranty repairs and
expected future identifiable warranty expenses.&nbsp; Warranty expenses are
reflected in the financial statements in Cost of Sales (&#147;COS&#148;).&nbsp; The warranty
accrual and expenses for the years ended June 30, 2008 and 2007 are presented
below:</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=586
 style='width:85%;border-collapse:collapse'>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Year&nbsp;Ended&nbsp;June&nbsp;30,</p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Beginning&nbsp;Balance</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>469,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>309,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Cash&nbsp;cost&nbsp;reducing&nbsp;accrual</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(906,000)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(819,000)</p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Increased&nbsp;reserve&nbsp;expensed</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,298,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>979,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Ending&nbsp;Balance</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>861,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>469,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none' align="center"><b>&nbsp;</b><font size="2">-33-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Property, Plant &amp;
Equipment</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Property, plant and
equipment is recorded at cost and consist of the following as of June 30, 2008
and 2007: </p>
<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<div align="center">
	<table class=MsoNormalTable border=0 cellpadding=0 width=490
 style='width:85%;border-collapse:collapse'>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Land</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>757,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>757,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Building</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,470,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,470,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Leasehold&nbsp;Improvements</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,259,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>490,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Equipment</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>6,416,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4,597,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Total</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>10,902,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>7,314,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Accumulated&nbsp;Depreciation</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(4,432,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(3,536,000)</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Total&nbsp;property,&nbsp;plant&nbsp;&amp;&nbsp;equipment,&nbsp;net</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>6,470,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,778,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in;text-autospace:none'>Depreciation is
provided using the straight-line method over the estimated useful lives of the
assets as follows: Building &#150; 39 years, equipment -- 3-10 years; and leasehold
improvements are depreciated over the shorter of the term of the lease or their
estimated useful lives.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Goodwill and Intangible Assets </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>The Company
accounts for Goodwill and Intangible Assets in accordance with SFAS No. 142
&#147;Goodwill and Other Intangible Assets.&#148;&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.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>We performed
impairment tests and recorded no impairment charges in fiscal years ended June
30, 2008 or 2007.&nbsp; We prepare our annual impairment testing on April 1 of each
year and did additional testing as of June 30, 2008.&nbsp; We have compared the
estimated carrying value with the estimated fair value of the reporting unit and
determined that the goodwill was not impaired.&nbsp; Additionally, during the
quarter ended June 30, 2008, management determined that there were no events or
circumstances which have occurred, that would indicate an impairment of the
goodwill had occurred.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>
<div align="center">
	<table class=MsoNormalTable border=0 cellpadding=0 width=490
 style='width:75%;border-collapse:collapse'>
 <tr style='height:12.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
 </tr>
 <tr style='height:12.6pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Goodwill&nbsp;Associated&nbsp;With&nbsp;Micro&nbsp;Motors</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,110,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,110,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Goodwill&nbsp;Associated&nbsp;With&nbsp;Astromec</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,887,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,887,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.55pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Total&nbsp;goodwill</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,997,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,997,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>Intangible
assets include the patents associated Oregon Micro Systems purchase in 1995 and
with the October, 2005 Intravantage asset purchase.&nbsp; The Oregon Micro Systems
patents were fully amortized as of 2001.&nbsp; &nbsp;The Intravantage asset purchase
patents are amortized over a 15 year life.&nbsp; Total amortization expense in 2008
and 2007 was $99,000 and $99,000, respectively.&nbsp; Intangible assets consist of
the following as of June 30, 2008 and 2007: </p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=490
 style='width:75%;border-collapse:collapse'>
 <tr style='height:12.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
 </tr>
 <tr style='height:12.6pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Intangible&nbsp;assets-&nbsp;Patents</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4,178,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4,178,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Accumulated&nbsp;amortization</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(2,956,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(2,857,000)</p>
  </td>
 </tr>
 <tr style='height:12.55pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total&nbsp;Intangible&nbsp;Assets</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,222,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,321,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>Future
amortization expense for the fiscal years ending June 30 is:</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>
<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=169
 style='width:45%;border-collapse:collapse' id="table6">
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:medium none;
  padding:1.1pt;' align="left" width="64%">
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>2009</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext;
  padding:1.1pt;' align="right" width="4%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;' align="right" width="30%">
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>$99,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.6pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext;
  padding:1.1pt;' align="left" width="64%">
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>2010</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;padding:1.1pt;
  ' align="right">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>99,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext;
  padding:1.1pt;' align="left" width="64%">
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>2011</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;padding:1.1pt;
  ' align="right">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>99,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.6pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext;
  padding:1.1pt;' align="left" width="64%">
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>2012</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext;padding:1.1pt;
  ' align="right">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>99,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext;
  padding:1.1pt;' align="left" width="64%">
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>2013</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;' align="right">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>99,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.6pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;padding:1.1pt;' width="64%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext;
  padding:1.1pt;' align="right" width="4%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none;padding:1.1pt;' align="right" width="30%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$495,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center;margin-left:0in; margin-right:0in; margin-top:0in'>
<font size="2">-34-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;page-break-after:avoid;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";font-weight:bold;text-autospace:ideograph-numeric ideograph-other'>Stock Repurchase Plan</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-left:.25in;text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>In September
2002, our Board of Directors authorized the repurchase on the open market of up
to 500,000 shares of our outstanding Common Stock at a share price no greater
than $1.25, 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 fiscal 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 years 2004 through 2008.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>The stock
repurchase was reconfirmed by our Board of Directors in July 2008.&nbsp; In the
period subsequent to June 30, 2008 through September 16, 2008, we repurchased 35,500
shares for $33,575 at an average price of $0.95 per share.&nbsp; Since the
initiation of the buyback in 2002 through September 16, 2008, we have
repurchased 111,200 shares for $77,316 at an average price of $0.69 per share. </p>

<p style='margin:0in;margin-bottom:.0001pt;page-break-after:avoid;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman Bold";font-weight:bold;'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;page-break-after:avoid;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman Bold";font-weight:bold;'>
<font face="Times New Roman">Income Taxes</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred income taxes are provided on a
liability method whereby deferred tax assets are recognized for deductible
temporary differences, operating losses, and tax credit carry forwards.
Deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of
assets and liabilities and their tax bases. Deferred tax assets are reduced by
a valuation allowance when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of changes
in tax laws and rates on the date of enactment. </p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>Shipping
and Handling</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>The Company includes payments from its customers for shipping and
handling in its net revenues line item in accordance with Emerging Issues Task
Force (&#147;EITF&#148;) 00-1-, <i>Accounting for Shipping and Handling Fees and Costs.&nbsp; </i>Shipping
expenses, which consist primarily of payments made to freight companies, are
reported in cost of goods sold.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>Concentration
of Credit Risk</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Financial instruments that potentially subject the Company to credit risk
consist principally of cash and trade receivables.&nbsp; The Company places its cash
with major financial institutions.&nbsp; At June 30, 2008 and 2007 and at various
times throughout 2008 and 2007 the Company had deposits in excess of federally
insured limits.&nbsp; Credit sales are made to resellers located throughout the United States and Europe, and account for a substantial portion of trade receivables.&nbsp; We determine
collateral is not required for such receivables by monitoring the customers
financial position and payment history.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Stock Options and Warrants</b></p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>We are subject to the revised requirements of the Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No. 123 (R) <i>Accounting for Stock-Based
Compensation</i> as revised December 2004.&nbsp; This standard establishes the
accounting standards for equity compensation, and applies to us in the
recognition of the cost of stock options awarded based on the grant-date fair
value of those awards.&nbsp; As a small business issuer, the statement was effective
for us at the beginning of the first fiscal year that began after December 15,
2005, which was our fiscal year ended June 30, 2007. </p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center;text-autospace:
none; margin-left:0in; margin-right:0in; margin-top:0in'><font size="2">-35-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Under SFAS No. 123(R), the fair value of stock-based awards to employees can
be calculated through the use of option pricing models, even though such models
were developed to estimate the fair value of freely tradable, fully
transferable options with vesting restrictions which significantly differ from
the Company&#146;s stock option awards.&nbsp; These models require subjective
assumptions, including future stock price volatility and expected time to
exercise, which greatly affect the calculated value.&nbsp; The volatility assumption
is based on historical actual activity, with the future volatility expected to
equal the past volatility.&nbsp; The expected time to exercise is based on the
simplified model of the vesting time plus &frac12; the option life.&nbsp; The Company&#146;s
calculations for the options granted were made using the Black-Scholes
option-pricing model.&nbsp; The calculations are based on a single-option valuation
approach and forfeitures are recognized.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>The fair value and
associated compensation cost 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 49% to 57% in
2008, of 58% to 63% in 2007; risk-free interest rates of approximately 3.3% to 4.9%
in 2008 and 4.4% to 5.1% in 2007; and expected lives of five to eight years.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Use of Estimates</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in'>The preparation of financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. </p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in'>The Company's operations are
affected by numerous factors including market acceptance, changes in
technologies and new laws and government regulations and policies. The Company
cannot predict what impact, if any, the occurrence of these or other events
might have on the Company's operations. Significant estimates and assumptions
made by management include, but are not limited to: revenue recognition, the
allowance for doubtful accounts, the warranty reserve, the reserve for slow
moving or obsolete inventories, the carrying value of long-lived and intangible
assets impairment of goodwill, and the recovery of deferred income tax assets.</p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in'>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='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Earnings per Share</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Basic earnings per common share data has been
computed on the basis of the weighted-average number of common shares
outstanding during each period presented.&nbsp; Diluted per share amounts assume the
conversion, exercise or issuance of all potential common stock instruments
unless the effect is to increase the income or decrease the loss per common
share from continuing operations. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Fair Value of Financial
Instruments</b></p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 7.0pt">&nbsp;</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The method and assumptions used to estimate
the fair value of notes payable, if any, which approximates the carrying value,
is based on interest rates for instruments with similar terms and remaining
maturities. </p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-autospace:none; margin-left:0in; margin-right:0in; margin-top:0in' align="center">
<font size="2">-36-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Research and Development </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 7.0pt">&nbsp;</font></p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-indent:.5in;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>Company-funded research and development supports the
development of generic rotary drive, motion control and electric motor
technology platforms.&nbsp; We 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 research and
development costs not associated with contracts or purchase orders are expensed
as incurred.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-indent:.5in;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-indent:.5in;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>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 year ended June 30, 2008, $119,000 was recognized as cost of sales,
compared to $124,000 recognized as cost of sales in the year ended June 30, 2007,
reflecting the completion of various development contracts during the year. </p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>NOTE 3 - BANK DEBT </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>On November 1,
2007, our existing credit facility with Wells Fargo was replaced with an
expanded facility with a total borrowing capacity of $6,562,500.&nbsp; Included in
the increase is an increase in the credit line borrowing availability from
$2,000,000 to $4,000,000.&nbsp; The credit line&#146;s terms require monthly interest
payments at the prime rate of interest (5.00% at June 30, 2008); or LIBOR (2.48%
at June 30, 2008) plus 1.75%, at our discretion, based on outstanding
borrowings.&nbsp; The total effective interest rate at June 30, 2008 for borrowings
on the credit line was 4.25%.&nbsp; The credit facility expires on November 1,
2009.&nbsp; In addition to the credit line, a term commitment is available for
borrowings for amounts up to $2,000,000.&nbsp; We can take advances against this
commitment through November 1, 2008, at which time the outstanding borrowings
against this commitment will be converted to a term loan, to be amortized and
repaid over 60 months. The term commitment requires monthly interest payments
at the prime rate of interest; or LIBOR plus 2.0%, at our discretion, based on
outstanding borrowings.&nbsp; The borrowings from the term commitment will be used
for construction financing of tenant improvements for our Irvine, California facility.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>The term loan
that was entered into in January 2006 to finance the Astromec purchase remains
in place.&nbsp; As of June 30, 2008, there was a principal balance on this term loan
of $395,833 which is required to be fully paid-off in January 2010, in
accordance with its amortization schedule.&nbsp; The term loan requires monthly
interest payments at the prime rate of interest; or LIBOR plus 2.5%, at our
discretion, based on outstanding borrowings, with no minimum interest charge.&nbsp;
The total effective interest rate at June 30, 2008 for borrowings on term loan
was 5.00%.&nbsp; All assets of the Company except our Carson City land and building
secure the outstanding borrowings from Wells Fargo. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>There was
$2,000,000 outstanding under the terms of the credit line and nothing outstanding
against term commitment facility as of June 30, 2008.&nbsp; The total eligible
additional borrowing capacity at June 30, 2008 was $4,000,000, consisting of $2,000,000
on the credit line and $2,000,000 on the Tenant Improvement facility.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>In March 2006,
we entered into a ten year mortgage with Union Bank of California for
$1,650,000.&nbsp; Its terms require monthly interest payments at a fixed rate
of 6.73%.&nbsp; The principal payments on the mortgage note are based on a 25
year amortization of the note and are $11,379 per month beginning May 1, 2006.&nbsp;
The outstanding borrowings are secured by our Carson City land and building.&nbsp;
There was a $1,590,260 outstanding balance under the terms of this mortgage as
of June 30, 2008.&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>
There are certain financial and non-financial covenants that we must meet to be
in compliance with the terms of the November 2007 Wells Fargo credit facility,
and the Union Bank mortgage.&nbsp; At June 30, 2008, we were in compliance with
the Union Bank covenant and all but one of the Wells Fargo covenants.&nbsp; In
the fourth quarter of 2008, we had a net loss that exceeded the quarterly
$300,000 loss restriction covenant in the Wells Fargo credit facility.&nbsp;
This covenant was waived by Wells Fargo at no charge.&nbsp;Current forecasts indicate
that a
quarterly covenant may not be met at the 9/30/2008 measurement date, therefore
we have included $146,000 of
debt related to the term note to short term debt from long term debt. If a
covenant violation does in fact occur, we would request a waiver at that time,
and do not believe the debt would become immediately due.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center;margin-left:0in; margin-right:0in; margin-top:0in'>
<font size="2">-37-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>NOTE 4 - COMMITMENTS AND
CONTINGENCIES </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in'>The Company leases its existing
office and warehouse facilities in Irvine, California and Beaverton, Oregon.&nbsp; The Irvine lease expires in March 2018 and the Beaverton lease expires in April
2014. &nbsp;These leases require the Company to pay insurance, taxes, and other
expenses related to the leased space.&nbsp; Total rent expense in 2008 and 2007 was
$625,000 and $310,000, respectively.&nbsp; Future minimum lease payments for the
fiscal year ending June 30 are: </p>
<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=194
 style='width:40%;border-collapse:collapse'>
 <tr style='height:12.65pt'>
  <td width=210 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>2009</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=147 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>450,015&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td width=210 valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>2010</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=147 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>469,137&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td width=210 valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>2011</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=147 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>488,325&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td width=210 valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>2012</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=147 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>507,585&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.6pt'>
  <td width=210 valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>2013</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=147 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>526,917&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td width=210 valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>2014-2018</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=147 valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,408,635&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td width=210 valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td width=147 valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4,850,614&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>On June 23,
2008, the Orange County Water District (&#147;OCWD&#148;) filed a complaint in the
Superior Court of the State of California in the County of Orange concerning
remediation of alleged ground water contamination in the Orange County
Groundwater South Basin; <u>Orange County Water District v. Sabic Innovative Plastics
U.S. LLC, etal</u>., Case No 00078246.&nbsp; The South Basin underlies parts of Santa Ana, California and adjacent cities.&nbsp; The complaint identifies 17 named defendants,
including Pro-Dex, and also designates 400 unnamed Doe defendants.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>The complaint
alleges that the defendants contaminated the South Basin with volatile organic
chemicals (&#147;VOCs&#148;) and perchlorate through various activities at properties
each defendant now controls or has controlled in the past.&nbsp; Through its
lawsuit, the OCWD seeks compensatory relief for all its own remedial
activities, and injunctive relief to compel the defendants to undertake
remedial activities in general.&nbsp; The complaint does not, however, specify any
remedial activities that the OCWD has undertaken to date or any remedial
activities that it seeks any particular defendants to undertake.&nbsp; Moreover,
from our investigation of OCWD&#146;s remedial activities to date, we have
determined that the OCWD is in the early stages of its remedial investigation
for the South Basin groundwater contamination.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>As noted above,
16 other entities are named defendants in this case along with Pro-Dex.&nbsp; While
some may be small businesses, others are larger corporations or their
subsidiaries.&nbsp; Further, as this case progresses, the OCWD is likely to add at
least a few more named defendants to the case from the 400 Doe defendants it
has designated in the current complaint.&nbsp; In the uncertain event that Pro-Dex
would be held liable in the case, OCWD&#146;s total recovery probably would be
allocated among several defendants, each of which would pay only a
proportionate share of that total recovery.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>Because of the
vagueness of the complaint, the early stage of the OCWD&#146;s remedial activities
in the South Basin, and the likelihood that any recovery the OCWD may gain will
be allocated among several defendants, our liability, as well as our costs of
defending, monitoring and concluding our involvement in this case are
uncertain, and those costs cannot now be estimated.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>Our manufacture and distribution of certain products involves a risk of
legal action, and, from time to time, we are named as defendants in lawsuits.
It is not reasonably possible to estimate the awards or damages, or the range
of awards or damages, if any, we might incur in connection with such
litigation.&nbsp; Management is not aware of any other material actual, pending or
threatened litigation at this time.&nbsp; </p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center;text-autospace:
none; margin-left:0in; margin-right:0in; margin-top:0in'><font size="2">-38-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>NOTE 5 - Income Taxes </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in;text-autospace:none'>The provisions
for income taxes for the years ended June 30, 2008 and 2007 are as follows: </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in;text-autospace:none'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=382
 style='width:60%;border-collapse:collapse'>
 <tr style='height:15.65pt'>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:medium none;
  padding:1.1pt;' width="21%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;' width="28%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Fiscal&nbsp;Year&nbsp;ended&nbsp;June&nbsp;30,</p>
  </td>
 </tr>
 <tr style='height:15.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;padding:1.1pt;' width="21%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;' width="28%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
 </tr>
 <tr style='height:15.65pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; ' width="21%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Current:</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="28%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.65pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; ' width="21%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="28%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Federal</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  ' width="3%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="22%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(403,000)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  ' width="3%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="20%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>201,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.7pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; ' width="21%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="28%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>State</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(29,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>45,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.65pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; ' width="21%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Deferred:</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="28%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.7pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; ' width="21%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="28%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Federal</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>425,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(111,000)</p>
  </td>
 </tr>
 <tr style='height:15.65pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; ' width="21%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="28%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>State</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:1px solid #000000; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>8,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:1px solid #000000; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(66,000)</p>
  </td>
 </tr>
 <tr style='height:15.65pt'>
  <td colspan=2 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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Provision&nbsp;for&nbsp;Income&nbsp;taxes</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; ' width="3%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;' width="22%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; ' width="3%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  padding:1.1pt;' width="20%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>69,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-indent:.5in;
text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";text-indent:0in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>A reconciliation of the expected tax to the amount
computed by applying the federal statutory income tax rates to income before
income taxes is as follows: </p>
<p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=564
 style='width:85%;border-collapse:collapse'>
 <tr style='height:15.75pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Fiscal&nbsp;Year&nbsp;ended&nbsp;June&nbsp;30,</p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Federal&nbsp;income&nbsp;tax&nbsp;at&nbsp;the&nbsp;statutory&nbsp;rate</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>108,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>195,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>State&nbsp;Income&nbsp;taxes,&nbsp;net&nbsp;of&nbsp;federal&nbsp;tax&nbsp;benefit</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>39,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>58,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Tax&nbsp;Incentives</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(122,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(195,000)</p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Tax&nbsp;effect&nbsp;of&nbsp;non-deductible&nbsp;items</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>51,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(5,000)</p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>FIN&nbsp;48&nbsp;Liability</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(84,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Other</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>9,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>16,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.75pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Provision&nbsp;for&nbsp;Income&nbsp;taxes</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>69,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in;text-autospace:none'>Deferred income
tax assets and liabilities in the accompanying consolidated balance sheet at
June 30, 2008 and 2007 are as follows: </p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in;text-autospace:none'>&nbsp;</p>
<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=484
 style='width:75%;border-collapse:collapse' id="table7">
 <tr style='height:12.75pt'>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:medium none;
  padding:1.1pt;' width="4%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;' width="52%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Fiscal&nbsp;Year&nbsp;ended&nbsp;June&nbsp;30,</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td colspan=2 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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Current&nbsp;Deferred&nbsp;income&nbsp;tax&nbsp;assets</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</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; padding:1.1pt; ' width="4%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="52%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Deferred&nbsp;tax&nbsp;assets</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</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; padding:1.1pt; ' width="4%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="52%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Accrued&nbsp;expenses</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  ' width="2%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="19%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>535,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  ' width="2%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="19%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>389,000&nbsp;</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; padding:1.1pt; ' width="4%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="52%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Inventories</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>660,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>535,000&nbsp;</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; padding:1.1pt; ' width="4%">
  &nbsp;</td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="52%">
  Net Operating Losses</td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p align="right">73,000&nbsp;</td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p align="right">-&nbsp;</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; padding:1.1pt; ' width="4%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="52%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Income&nbsp;tax&nbsp;credit&nbsp;carry&nbsp;forwards</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>
	-&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>202,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total&nbsp;deferred&nbsp;tax&nbsp;assets</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,268,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,126,000&nbsp;</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; padding:1.1pt; ' width="4%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="52%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Deferred&nbsp;tax&nbsp;liabilities</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</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; padding:1.1pt; ' width="4%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="52%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>State&nbsp;taxes</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; ' width="2%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;' width="19%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(92,000)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; ' width="2%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;' width="19%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(35,000)</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total&nbsp;deferred&nbsp;tax&nbsp;liabilities</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(92,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(35,000)</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; padding:1.1pt; ' width="4%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="52%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td colspan=2 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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Net&nbsp;Current&nbsp;Deferred&nbsp;tax&nbsp;assets</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; ' width="2%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;' width="19%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,176,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; ' width="2%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  padding:1.1pt;' width="19%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,091,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>
<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
- -39-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=526
 style='width:80%;border-collapse:collapse'>
 <tr style='height:12.75pt'>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:medium none;
  padding:1.1pt;' width="3%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;' width="60%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Fiscal&nbsp;Year&nbsp;ended&nbsp;June&nbsp;30,</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td colspan=2 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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Long&nbsp;Term&nbsp;Deferred&nbsp;income&nbsp;tax&nbsp;assets/(liabilities)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</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; padding:1.1pt; ' width="3%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="60%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Deferred&nbsp;tax&nbsp;assets</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</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; padding:1.1pt; ' width="3%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="60%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Intangible&nbsp;assets</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  ' width="2%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="16%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>268,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  ' width="2%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="14%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>450,000&nbsp;</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; padding:1.1pt; ' width="3%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="60%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Non&nbsp;cash&nbsp;stock&nbsp;based&nbsp;compensation</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:medium none windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>113,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:medium none windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>65,000&nbsp;</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; padding:1.1pt; ' width="3%">
  &nbsp;</td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="60%">
  Income tax credit carry forwards</td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p align="right">351,000&nbsp;</td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p align="right">-&nbsp;</td>
 </tr>
 <tr style='height:12.75pt'>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total&nbsp;deferred&nbsp;tax&nbsp;assets</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>
	732,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>515,000&nbsp;</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; padding:1.1pt; ' width="3%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="60%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Deferred&nbsp;tax&nbsp;liabilities</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</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; padding:1.1pt; ' width="3%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="60%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>State&nbsp;taxes</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  ' width="2%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="16%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(57,000)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  ' width="2%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="14%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(97,000)</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; padding:1.1pt; ' width="3%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="60%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Depreciation</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(965,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(189,000)</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total&nbsp;deferred&nbsp;tax&nbsp;liabilities</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(1,022,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(286,000)</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; padding:1.1pt; ' width="3%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; ' width="60%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td colspan=2 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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>
	Net&nbsp;Deferred&nbsp;tax&nbsp;assets/(liabilities)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; ' width="2%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;' width="16%">
  <p align="right">(290,000)</td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; ' width="2%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  padding:1.1pt;' width="14%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>229,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-indent:.5in;
text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>We have state net operating loss carry forwards for June 30, 2008 and
2007 of $1,002,000 and $0, respectively.&nbsp; We have federal tax credits of
$103,000 and $0 for June 30, 2008 and 2007, respectively, and state tax credits
of $248,000 and $202,000 for June 30, 2008 and 2007, respectively.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>In
July&nbsp;2006, the FASB issued FASB Interpretation No.&nbsp;48, &#147;Accounting
for Uncertainty in Income Taxes,&#148; (&#147;FIN 48&#148;), an interpretation of FASB
Statement No.&nbsp;109, &#147;Accounting for Income Taxes,&#148; (&#147;FASB 109&#148;). FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise&#146;s financial statements in accordance with FASB 109. This
Interpretation prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. FIN 48 is effective for fiscal years
beginning after December&nbsp;15, 2006. &nbsp;The cumulative effect of applying FIN
48 is to be reported as an adjustment to the opening balance of retained
earning in the year of adoption.&nbsp; As a result of the implementation of FIN 48,
the Company recorded a decrease of $75,000 to retained earnings, an increase of
$47,000 to net deferred income tax assets and an increase of $122,000 to income
taxes payable as of July 1, 2007.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>As of June 30, 2008, the Company has provided a liability
for $114,000 of unrecognized tax benefits related to various federal and state
income tax matters.&nbsp; Of this total, $62,000 relates to R&amp;D credits and
would reduce the Company&#146;s income tax expense if recognized and would result in
a corresponding decrease in the Company&#146;s effective tax rate. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify; text-indent:0.5in; margin-left:0in; margin-right:0in; margin-top:0in'>A
reconciliation of the beginning and ending amount of unrecognized tax benefits
is as follows:</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=523
 style='width:90%;margin-left:4.65pt;border-collapse:collapse' id="table12">
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</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; border-bottom:medium none; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' colspan="2">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	Year Ended June 30,</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td nowrap 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:0in; padding-bottom:0in' colspan="2">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
	2008</p>
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:medium none;
  height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	Beginning
  Balance</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; border-bottom:medium none; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	&nbsp;$</p>
  </td>
  <td nowrap valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:medium none; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  212,000
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	&nbsp;
  Additions based on tax provisions related to the current year</p>
  </td>
  <td nowrap valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	&nbsp;$</p>
  </td>
  <td nowrap valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  &nbsp;-
  </td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	&nbsp;
  Addtions for tax positions in prior years</p>
  </td>
  <td nowrap valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	&nbsp;$</p>
  </td>
  <td nowrap valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  &nbsp;&nbsp; -</td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	&nbsp; Reductions
  for tax provisions of prior years</p>
  </td>
  <td nowrap valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	&nbsp;$</p>
  </td>
  <td nowrap valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  (98,000)</td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	&nbsp;
  Settlements</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; border-top:medium none; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	&nbsp;$</p>
  </td>
  <td nowrap valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  &nbsp;-</td>
 </tr>
 <tr style='height:12.75pt'>
  <td nowrap valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;
  border-right:medium none;height:12.75pt; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>
	Ending
  Balance</p>
  </td>
  <td nowrap valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:right; margin-left:0in; margin-right:0in; margin-top:0in'>
	&nbsp;$</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; border-top:medium none; padding-left:5.4pt; padding-right:5.4pt; padding-top:0in; padding-bottom:0in' align="right">
  114,000
  </td>
 </tr>
 </table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>We recognize
accrued interest and penalties related to unrecognized tax benefits in income
tax expense. As of June 30, 2008, we had approximately $52,000 in accrued
interest and penalties which is included as a component of the $114,000
unrecognized tax benefit noted above. The liability for the payment of interest
and penalties has increased by approximately $0 for the twelve months ended
June 30, 2008.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>We are undergoing an examination by the Internal Revenue Service (IRS) of
its Federal income tax returns filed for the fiscal years ending June 30, 2004,
June 30, 2005 and June 30, 2006.&nbsp; Findings of the examination indicate that
there may have been differences in the timing of our tax payments due to the
treatment of inventory uniform capitalization rules.&nbsp; As a result of the
examination, we paid approximately $179,000 of additional tax payments in May
2008.&nbsp; Subsequent to year end, we received a final interest invoice and paid $31,000
of interest to the IRS.&nbsp; The interest amounts have been accrued and are
included in accrued expenses and interest as of June 30, 2008.&nbsp; Although we
have not received a final audit closing notification, we believe it will conclude
in the next 12 months and do not believe there will be any material adjustments
resulting from the examination beyond those described above.&nbsp; We believe the
appropriate provisions for all outstanding issues have been made for all years
under audit. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; We
are subject to income tax of multiple state tax jurisdictions. &nbsp;Our state income tax returns are open to audit under the
statute of limitations for the years ended June 30, 2003 through June 30, 2007.
&nbsp;We do not anticipate a significant change to the total amount of
unrecognized tax benefits within the next 12 months.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center;text-autospace:none; margin-left:0in; margin-right:0in; margin-top:0in'>
<font size="2">-40-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font><b>NOTE 6 - SHAREHOLDERS' EQUITY
</b>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Stock Options </b></p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none; text-indent:0.5in; margin-left:0in; margin-right:0in; margin-top:0in'>The Board of Directors and the shareholders of the Company have approved
and adopted two equity compensation plans, pursuant to which i)&nbsp; options to
purchase, or ii) restricted shares, may be granted in an aggregate of 2,500,000
shares of common stock that may be granted to officers, directors, and
employees of the Company.&nbsp;&nbsp; Upon its adoption, the employee stock option plan
had 2,000,000 options to purchase shares or restricted shares issuable and the directors&#146;
plan had 500,000 options to purchase shares. &nbsp;There are options to purchase 346,045
shares remaining under the employee option plan, and options to purchase 130,000
shares remaining under the directors option plan for a total of 476,045 shares
remaining under both option plans at June 30, 2008 that are available to grant
in future years. &nbsp;The aggregate amount of shares available to employees under
the employee stock option plan was increased by 500,000 to the current level of
shares available at the 2006 annual shareholders meeting. &nbsp;New shares are
created as such options are exercised or restricted shares are granted.&nbsp; Share-based
compensation expense reduced the Company&#146;s results of operations as shown:</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>
<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=590
 style='width:75%;border-collapse:collapse'>
 <tr style='height:12.7pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Fiscal&nbsp;Year&nbsp;ended&nbsp;June&nbsp;30,</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td colspan=2 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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Share-based&nbsp;compensation&nbsp;expense&nbsp;recognized:</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>General&nbsp;and&nbsp;administrative,&nbsp;options</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>87,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>86,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>General&nbsp;and&nbsp;administrative,&nbsp;restricted&nbsp;stock</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>117,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>156,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.9pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Related&nbsp;deferred&nbsp;tax&nbsp;benefit</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(47,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(62,000)</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td colspan=2 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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Decrease&nbsp;in&nbsp;net&nbsp;income</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>157,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>180,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Decrease&nbsp;in&nbsp;basic&nbsp;earnings&nbsp;per&nbsp;share</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.02&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.02&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td colspan=2 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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Decrease&nbsp;in&nbsp;diluted&nbsp;earnings&nbsp;per&nbsp;share</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.02&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.02&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>As of June 30, 2008, there was $101,104 of total unrecognized
compensation cost related to 123,000 non vested outstanding stock options with
a per share weighted average value of $0.82.&nbsp; The unrecognized expense is
anticipated to be recognized on a straight-line basis over a weighted average
period of 1.3 years.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>The following is a summary of stock option activity:</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=708
 style='width:95%;border-collapse:collapse'>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=3 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=3 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
 </tr>
 <tr style='height:25.4pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Weighted-</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Average</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Weighted-</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Average</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Fixed&nbsp;Options</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Shares</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Exercise&nbsp;Price</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Shares</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Exercise&nbsp;Price</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Outstanding&nbsp;at&nbsp;beginning&nbsp;of&nbsp;year</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,038,500&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.60&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,204,316&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.68&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Granted</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>101,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.50&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>166,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.49&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Exercised</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(106,816)</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.45&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.9pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Forfeited</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(30,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.86&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(225,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2.52&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Outstanding&nbsp;at&nbsp;end&nbsp;of&nbsp;year</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,109,500&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.58&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,038,500&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.60&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Exercisable&nbsp;at&nbsp;end&nbsp;of&nbsp;year</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>986,500&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.58&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>881,250&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.56&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Weighted-average&nbsp;fair&nbsp;value&nbsp;per</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Option&nbsp;granted&nbsp;during&nbsp;the&nbsp;year</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.79&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.94&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in;text-autospace:none'>The following
table summarizes information regarding options outstanding and options
exercisable at June 30, 2008: </p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-indent:.5in;text-autospace:none'>&nbsp;</p>
<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=684
 style='width:90%;border-collapse:collapse' id="table8">
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=3 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Options&nbsp;Outstanding</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=5 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Options&nbsp;Exercisable</p>
  </td>
 </tr>
 <tr style='height:22.35pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Weighted-</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Average</p>
  </td>
  <td colspan=2 valign=bottom style='border:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Weighted-</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Average</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Aggregate</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Weighted-</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Average</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Aggregate</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Range&nbsp;of</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Number</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Remaining</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Exercise</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Intrinsic</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Number</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Exercise</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Intrinsic</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Exercise&nbsp;Price</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Outstanding</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Contractual&nbsp;Life</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Price</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Value</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Outstanding</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Price</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Value</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>$0.42&nbsp;to&nbsp;$0.81</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>260,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>3.7&nbsp;years</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.70&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>216,200&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>260,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.70&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>216,200&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>$1.08&nbsp;to&nbsp;$1.56</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>432,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>6.4&nbsp;years</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.37&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>68,220&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>327,750&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.34&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>61,958&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>$1.74&nbsp;to&nbsp;$2.18</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>242,500&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>3.7&nbsp;years</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2.04&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>236,250&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.99&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.95pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>$2.44&nbsp;to&nbsp;$3.30</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>175,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>7.0&nbsp;years</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2.77&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>162,500&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2.79&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,109,500&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>5.3&nbsp;years</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.58&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>284,420&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>986,500&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.58&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>278,158&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:justify; margin-left:0in; margin-right:0in; margin-top:0in; text-indent:0.5in'>
&nbsp;</p>
<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-41-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>
<p style="text-indent: 0.5in" align="justify">
<font size="3">The option plans are substantially similar, call for vesting as approved
by the Board of Directors of six months for directors and up to five years for
employees, and allow for the options to be outstanding for a period of up to
ten years but are forfeited
30 days after the holder ceases to be an employee or director.&nbsp; </font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Restricted Stock</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>In connection with the employment agreement with our Chief Executive
Officer, a restricted stock grant of 340,000 shares of common stock was made in
February 2007. &nbsp;These shares vest in four equal installments of 25% or 85,000 shares
per year over 4 years.&nbsp; The common stock price at the date of the grant was
$1.38.&nbsp; New shares are issued with the issuance of each installment of
restricted stock.&nbsp; The fair value of the grant is calculated as the number of
shares multiplied by the grant price.&nbsp; The compensation expense is recognized
over the vesting period of the grant.&nbsp; Approximately $117,000 in compensation
expense for the restricted stock was recognized in fiscal year 2008.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>The following is a summary of restricted share activity:</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=649
 style='width:90%;border-collapse:collapse'>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-right:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=3 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=3 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
 </tr>
 <tr style='height:25.35pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Weighted-</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Average</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Weighted-</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Average</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Restricted&nbsp;shares</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Shares</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Exercise&nbsp;Price</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Shares</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Exercise&nbsp;Price</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Outstanding&nbsp;at&nbsp;beginning&nbsp;of&nbsp;year</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>255,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.38&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Granted</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>340,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.38&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Exercised</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(85,000)</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.38&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(85,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.38&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.9pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Forfeited</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Outstanding&nbsp;at&nbsp;end&nbsp;of&nbsp;year</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>170,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.38&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>255,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.38&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Exercisable&nbsp;at&nbsp;end&nbsp;of&nbsp;year</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>As of June 30, 2008, there was $196,000 of total unrecognized
compensation cost related to 141,667 non vested outstanding restricted shares
with a per share weighted average value of $1.38.&nbsp; The unrecognized expense is
anticipated to be recognized on a straight-line basis over a weighted average
period of 1.7 years.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>
<font size="2">-42-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Stock Warrants </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>At June 30, 2008, warrants to acquire 100,000 shares of common stock were
outstanding. These warrants are fully vested, have a weighted-average exercise
price of $1.25 and a weighted-average remaining life of 1.0 years.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'><b>NOTE 7 - NET INCOME PER SHARE </b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";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 years ended June 30 as indicated.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-top:6.0pt;text-align:justify'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=692
 style='width:95%;border-collapse:collapse'>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Net&nbsp;income</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>317,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>506,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Basic&nbsp;net&nbsp;income&nbsp;per&nbsp;common&nbsp;share:</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;Weighted&nbsp;average&nbsp;number&nbsp;of&nbsp;common&nbsp;shares&nbsp;outstanding</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>9,736,429&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>9,579,055&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Basic&nbsp;net&nbsp;income&nbsp;per&nbsp;common&nbsp;share</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.03&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.05&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Diluted&nbsp;net&nbsp;income&nbsp;per&nbsp;share:</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;Weighted&nbsp;average&nbsp;of&nbsp;common&nbsp;shares&nbsp;outstanding</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>9,736,429&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>9,579,055&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effect&nbsp;of&nbsp;potentially&nbsp;dilutive&nbsp;securities&nbsp;(options)</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>169,761&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>152,434&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effect&nbsp;of&nbsp;potentially&nbsp;dilutive&nbsp;securities&nbsp;(restricted&nbsp;shares)</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>8,160&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effect&nbsp;of&nbsp;potentially&nbsp;dilutive&nbsp;securities&nbsp;(warrants)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>10,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>7,552&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Weighted&nbsp;average&nbsp;number&nbsp;of&nbsp;common&nbsp;and&nbsp;shares&nbsp;-</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Diluted</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>9,924,350&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>9,739,041&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Diluted&nbsp;net&nbsp;income&nbsp;per&nbsp;common&nbsp;share</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.03&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.05&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'><b>&nbsp;</b></p>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'><b>NOTE 8 - MAJOR CUSTOMERS</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>
<b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>We had two major customers (defined as a customer that represented
greater than 10% of the Company&#146;s total revenues) in the year ended June 30,
2008 and 2007.&nbsp;&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=519
 style='width:85%;border-collapse:collapse'>
 <tr style='height:15.2pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=5 valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Year&nbsp;ended&nbsp;June&nbsp;30,</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.15pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2007</p>
  </td>
 </tr>
 <tr style='height:15.2pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Revenues</p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Accts.&nbsp;Rec.</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Revenues</p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Accts.&nbsp;Rec.</p>
  </td>
 </tr>
 <tr style='height:15.2pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Customer&nbsp;1</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4,429,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>408,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>5,059,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>961,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.15pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Customer&nbsp;2</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>8,075,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>621,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,643,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>128,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.3pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>&nbsp;</b></p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-align:center;text-autospace:none; margin-left:0in; margin-right:0in; margin-top:0in'>
<font size="2">-43-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'><b>Part III</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>Item 1.&nbsp; Index to Exhibits</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>

<table class=MsoNormalTable border=0 cellpadding=0 width=726
 style='width:95%;border-collapse:collapse'>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>Exhibit
  No. </b></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b>Document
  </b></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">&nbsp;</font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">3.1</font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">Articles
  of Incorporation (incorporated herein by reference to Exhibit 3.1 to the
  Company&#146;s Form 8-K filed April 23, 2007). </font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">3.2</font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">Bylaws
  (incorporated herein by reference to Exhibit 3.2 to the Company&#146;s Form 8-K
  filed April 23, 2007). </font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">&nbsp;</font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">10.1*</font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">1994
  Employees Stock Option Plan, as amended (incorporated herein by reference to
  Exhibit 10.22 to the Company&#146;s Registration Statement on Form S-4 filed April
  13, 1994).&nbsp;&nbsp; </font></p>
  </td>
 </tr>
 <tr style='height:30.15pt'>
  <td valign=top style='padding:0in;
  ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">10.2*<sup>&nbsp; </sup></font></p>
  </td>
  <td valign=top style='padding:0in;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">1994
  Directors Stock Option Plan as amended (incorporated herein by reference to
  Exhibit 10.22 to the Company&#146;s Registration Statement on Form S-4 filed April
  13, 1994). </font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">10.3*</font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">First
  Amended and Restated 2004 Stock Option Plan (incorporated herein by reference
  to Exhibit 4.0 to the Company&#146;s Form S-8 filed March 9, 2007 ).</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">10.4*</font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">2004
  Directors Stock Option Plan (incorporated herein by reference to Exhibit 4.2
  to the Company&#146;s Form S-8 filed January 23, 2004).</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">10.5</font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">Audit
  Committee Charter (incorporated herein by reference to Exhibit 10.26 to the
  Company&#146;s Form 10-KSB filed October 1, 2002).</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">&nbsp;</font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">10.6</font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">Asset
  Purchase Agreement, dated October 31, 2005 between IntraVantage, Inc.
  (incorporated herein by reference to Exhibit 10.1 to the Company&#146;s Form 8-K
  filed November 2, 2005).</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">10.7</font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">Exclusive
  License Agreement, dated October 31, 2005, between Pro-Dex, Inc. and
  IntraVantage, Inc. (incorporated herein by reference to Exhibit 10.2 to the
  Company&#146;s Form 8-K filed November 2, 2005).</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">10.8&nbsp; </font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">&nbsp;</font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">Royalty
  Agreement, dated October 31, 2005, between Pro-Dex, Inc. and IntraVantage,
  Inc. (incorporated herein by reference to Exhibit&nbsp; 10.3 to the Company&#146;s Form
  8-K filed November 2, 2005).</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">10.9</font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">Asset
  Purchase Agreement, dated January 5, 2006 between Pro-Dex, Astromec, Inc.,
  Astromec, Inc., M.D. Glover, Inc., Malcolm D. Glover, Jr., and Malcolm D.
  Glover, Sr. (incorporated herein by reference to Exhibit 10.1 to the
  Company&#146;s Form 8-K filed January 6, 2006).</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">10.10</font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">Purchase
  and Sale Agreement and Escrow Instructions, dated January 3, 2006, between
  Pro-Dex, Inc. and M.D. Glover, Inc. (incorporated herein by reference to
  Exhibit 10.2 to the Company&#146;s Form 8-K filed January 6, 2006).</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">10.11</font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">Term
  Note, dated January 4, 2006, by Pro-Dex, Inc. and Wells Fargo Bank, National
  Association&nbsp; (incorporated herein by reference to Exhibit 10.3 to the
  Company&#146;s Form 8-K filed January 6, 2006).</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">10.12</font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">Loan
  Agreement, dated January 4, 2006, between Pro-Dex, Inc. and Wells Fargo Bank,
  National Association (incorporated herein by reference to Exhibit 10.4 to the
  Company&#146;s Form 8-K filed January 6, 2006).</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">10.13</font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">Promissory
  Note, dated March 4, 2006, effective March 30, 2006, by Pro-Dex, Inc. in
  favor of Union Bank of California, National Association&nbsp; (incorporated herein
  by reference to Exhibit 10.1 to the Company&#146;s Form 8-K filed April 3, 2006).</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">10.14</font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">Loan
  Agreement, dated March 4, 2006, effective March 30, 2006, by Pro-Dex, Inc. in
  favor of Union Bank of California, National Association (incorporated herein
  by reference to Exhibit 10.2 to the Company&#146;s Form 8-K filed April 3, 2006).</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">10.15*<sup> </sup></font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">Employment
  Agreement with Mark Murphy dated August 14, 2006 (incorporated herein by
  reference to Exhibit 10.44 to the Company&#146;s Form 10-KSB filed September 28,
  2006).</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">10.16<sup> </sup></font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">Lease
  agreement with Irvine Business Properties, dated August 17, 2007&nbsp;
  (incorporated herein by reference to Exhibit 10.1 to the Company&#146;s Form 8-K
  filed August 23, 2007).</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">10.17* </font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">Letter
  Agreement with Patrick Johnson dated October 18, 2006 (incorporated herein by
  reference to Exhibit 10.1 to the Company&#146;s Form 8-K filed October 24, 2006).</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">21.1<sup>xx </sup></font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">List
  of Subsidiaries (incorporated herein by reference to Exhibit 21.1 to the
  Company&#146;s Form 10-KSB filed September 28, 2007).</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">23.1<sup> xx</sup></font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">Consent
  Letter of Moss Adams LLP.</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">31.1<sup> xx</sup></font></p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">Certification
  of the Chief Executive Officer Required by Rule 13a-14(a) of the Securities
  Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the
  Sarbanes-Oxley Act of 2002. </font></p>
  </td>
 </tr>
 </table>
<p style="font-size: 10.0pt; font-family: Times New Roman; text-align: center; margin-left: 0in; margin-right: 0in; margin-top: 0in; margin-bottom: .0001pt">&nbsp;</p>
<p style="font-size: 10.0pt; font-family: Times New Roman; text-align: center; margin-left: 0in; margin-right: 0in; margin-top: 0in; margin-bottom: .0001pt">&nbsp;</p>
<p style="font-size: 10.0pt; font-family: Times New Roman; text-align: center; margin-left: 0in; margin-right: 0in; margin-top: 0in; margin-bottom: .0001pt">
- -44-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<table class=MsoNormalTable border=0 cellpadding=0 width=726
 style='width:95%;border-collapse:collapse' id="table9">
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">31.2<sup> xx</sup></font></p>
  </td>
  <td width=864 valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">Certification
  of the Chief Financial Officer Required by Rule 13a-14(a) of the Securities
  Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the
  Sarbanes-Oxley Act of 2002.</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='padding:0in; ' nowrap>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><font style="font-size: 11.0pt">32<sup> xx</sup></font></p>
  </td>
  <td width=864 valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 11.0pt">Certification
  of the Chief Executive Officer and Chief Financial Officer Pursuant to 18
  U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
  Act of 2002.</font></p>
  </td>
 </tr>
</table>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>

<p style='font-family:"Times New Roman";text-autospace:none; margin-left:0in; margin-right:0in; margin-top:0in'>
<font size="2">*
Denotes management contract or compensatory arrangement required to be filed as
an exhibit to the Form 10-KSB. <br>
</font><sup><font size="2">xx</font></sup><font size="2"> Filed Herewith</font><b><font size="2">
</font> </b></p>
<p style="font-size: 10.0pt; font-family: Times New Roman; text-align: center; margin-left: 0in; margin-right: 0in; margin-top: 0in; margin-bottom: .0001pt">&nbsp;</p>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in' align="center">
<font size="2">-45-</font></p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<font face="Times New Roman">

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


</font>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>SIGNATURES </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0
 style='border-collapse:collapse' width="373">
 <tr>
  <td valign=top style='width:358px;padding:0in; '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-autospace:none; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">PRO-DEX INC. </font> </p>
  </td>
  <td valign=top style='width:15px;padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:358px;padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">/
  s / Mark P. Murphy&nbsp;</font></p>
  </td>
  <td valign=top style='width:15px;padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:358px;padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">---------------------------------&nbsp;
  </font></p>
  </td>
  <td valign=top style='width:15px;padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:358px;padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">Mark
  P. Murphy&nbsp;</font></p>
  </td>
  <td valign=top style='width:15px;padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:358px;padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">President,
  Chief Executive Officer and Director</font></p>
  </td>
  <td valign=top style='width:15px;padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td valign=top style='width:358px;padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">(Principal
  Executive Officer)</font></p>
  </td>
  <td valign=top style='width:15px;padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  </td>
 </tr>
</table>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>In accordance
with the Exchange Act, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-autospace:none'>&nbsp;</p>

<table class=MsoNormalTable border=0 cellpadding=0 width=746
 style='width:90%;margin-left:-1.8pt;border-collapse:collapse'>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">/
  s / Mark P. Murphy&nbsp;</font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">September
  22, 2008</font></p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 8.5pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">---------------------------------&nbsp;
  </font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;------------------------------------
  </font></p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 8.5pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">Mark
  P. Murphy&nbsp;</font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">Date
  </font></p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 8.5pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">President,
  Chief Executive Officer and Director</font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 8.5pt">&nbsp;</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=24><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">(Principal
  Executive Officer)</font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 8.5pt">&nbsp;</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=24><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;&nbsp; </p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;&nbsp; </p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">/
  s / Jeffrey J. Ritchey&nbsp; </font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">September
  22, 2008</font></p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 8.5pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">---------------------------------&nbsp;
  </font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;-------------------------------------
  </font></p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 8.5pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">Jeffrey
  J. Ritchey&nbsp;</font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">Date
  </font></p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 8.5pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">Treasurer,
  Chief Financial Officer &amp; Secretary</font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 8.5pt">&nbsp;</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=24><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">(Principal
  Financial and Accounting Officer) </font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 8.5pt">&nbsp;</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=24><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;&nbsp; </p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;&nbsp; </p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">/
  s / George J. Isaac&nbsp; </font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">September
  22, 2008</font></p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 8.5pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">----------------------------------&nbsp;&nbsp;
  </font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">----------------------------------------
  </font></p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 8.5pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">George
  J. Isaac&nbsp;</font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;Date
  </font></p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 8.5pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">Director</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 8.5pt">&nbsp;</font></p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 8.5pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">/
  s / Michael Mesenbrink&nbsp;</font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">September
  22, 2008</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=24><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">---------------------------------&nbsp;
  </font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">----------------------------------------</font></p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">Michael
  Mesenbrink&nbsp;</font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">Date</font></p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 8.5pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">Director</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 8.5pt">&nbsp;</font></p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 8.5pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">/
  s / Valerio Giannini&nbsp;</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">---------------------------------&nbsp;</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">Valerio
  Gianinni&nbsp;</font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">September
  22, 2008</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">----------------------------------------</font></p>
  </td>
  <td width=24 valign=top style='width:.25in;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 8.5pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">Director</font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;Date</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=24><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">/
  s / William L. Healey&nbsp;</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">---------------------------------&nbsp;</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">William
  L. Healey&nbsp;</font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">September
  22, 2008</font></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">----------------------------------------</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=24><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr>
  <td style='border:none;padding:0in 0in 0in 0in' width=2><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
  <td width=346 valign=top style='width:259.75pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">Director</font></p>
  </td>
  <td width=374 valign=top style='width:280.3pt;padding:0in 0in 0in 0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;Date</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width=24><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 </table>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center;text-autospace:none'><b><font style="font-size: 16.0pt">End of Filing</font></b></p>

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>
<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>-46-</p>

<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>

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

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

&nbsp;</div>

</body>

</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>2
<FILENAME>ex23-1.htm
<TEXT>
<html>

<head>
<title>EXHIBIT 23.1</title>
</head>

<body>

&nbsp;<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-align:justify;font-size:11.0pt;font-family:"Times New Roman";text-align:left'><b>&nbsp;EXHIBIT 23.1</b></p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-align:justify;font-size:11.0pt;font-family:"Times New Roman";text-align:left'><b>&nbsp;</b></p>

<p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:.0001pt;text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'><b>Consent of Independent Registered Public
Accounting Firm</b></p>

<p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Arial Unicode MS";margin:0in;margin-bottom:.0001pt'>&nbsp;</p>

<p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:.0001pt;text-align:justify; margin-left:0in; margin-right:0in; margin-top:0in'>We consent to the incorporation by
reference in the Registration Statements (Form S-8 Nos. 333-112133, 333-141178)
pertaining to the Pro-Dex, Inc. 2004 Stock Option Plan and the Pro-Dex, Inc.
2004 Directors&#146; Stock Option Plan, Inc., of our report dated September 27, 2007
with respect to the consolidated financial statements of Pro-Dex, Inc. and
Subsidiaries included in the Annual Report (Form 10-KSB) for the year ended
June 30, 2007.</p>

<p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Arial Unicode MS";margin:0in;margin-bottom:.0001pt'>&nbsp;</p>

<p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:.0001pt; margin-left:0in; margin-right:0in; margin-top:0in'>/s/
Moss Adams LLP</p>

<p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Arial Unicode MS";margin:0in;margin-bottom:.0001pt'>&nbsp;</p>

<p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:.0001pt; margin-left:0in; margin-right:0in; margin-top:0in'>Irvine, California</p>

<p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:.0001pt; margin-left:0in; margin-right:0in; margin-top:0in'>September
27, 2007</p>
<p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:.0001pt; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>
<p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Times New Roman";margin-bottom:.0001pt; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

</body>

</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>3
<FILENAME>ex31-1.htm
<TEXT>
<html>

<head>

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

<body>

<div style='page:Section1;'>

&nbsp;<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-align:justify;font-family:"Times New Roman"'><b>
<font size="2">&nbsp;EXHIBIT 31.1</font></b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">&nbsp;</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">I, Mark P. Murphy, certify
that:</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">&nbsp;</font></p>

<table border="0" style="border-collapse: collapse" width="100%" id="table2">
	<tr>
		<td width="4%" nowrap valign="top"><font style="font-size: 10.0pt">1.</font></td>
		<td colspan="2" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">I have reviewed this Form 10-KSB of
Pro-Dex, Inc.;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top"><font style="font-size: 10.0pt">2.</font></td>
		<td colspan="2" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">Based on my knowledge, this annual
report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with
respect to the period covered by this report; </font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top"><font style="font-size: 10.0pt">3.</font></td>
		<td colspan="2" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">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 small business issuer as of, and for, the periods
presented in this report; </font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top"><font style="font-size: 10.0pt">4. </font>
		</td>
		<td width="95%" colspan="2" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">The small business issuer&#146;s other
certifying officer(s) and I am responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f)) for the small business issuer and have:</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top"><font style="font-size: 10.0pt">a) </font>
		</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">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 small business issuer , 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%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top"><font size="2">b)</font></td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">Designed such internal control
over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally
accepted accounting principles;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top"><font style="font-size: 10.0pt">c) </font>
		</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">Evaluated the
effectiveness of the small business issuer&#146;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%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top"><font style="font-size: 10.0pt">d)</font></td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">Disclosed in this report
any change in the small business issuer&#146;s internal control over financial
reporting that occurred during the small business issuer&#146;s&nbsp; most recent fiscal
quarter (the registrant&#146;s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant&#146;s internal control over financial reporting;&nbsp; and</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top"><font style="font-size: 10.0pt">5. </font>
		</td>
		<td width="95%" colspan="2" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">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 small business issuer&#146;s auditors
and the audit committee of small business issuer&#146;s board of directors (or
persons performing the equivalent functions):</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top"><font style="font-size: 10.0pt">a) </font>
		</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">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 small business issuer&#146;s&nbsp; ability to record, process, summarize and
report financial information; and </font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top"><font style="font-size: 10.0pt">b) </font>
		</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">Any fraud, whether or not
material, that involves management or other employees who have a significant
role in the small business issuer&#146;s internal control over financial reporting.</font></p>

		</td>
	</tr>
</table>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>
<font style="font-size: 10.0pt">&nbsp;</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">Date: September
22, 2008</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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><u>
<font size="2">/s/
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mark P. Murphy</font></u><font style="font-size: 10.0pt"> _______</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mark
P. Murphy</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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 style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>


</div>

</body>

</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>4
<FILENAME>ex31-2.htm
<TEXT>
<html>

<head>

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

<body>

<div style='page:Section1;'>


<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b>EXHIBIT 31.2</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">I, Jeffrey J. Ritchey,
certify that: </font></p>
<p style='margin-bottom:.0001pt;font-size:10pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>
<table border="0" style="border-collapse: collapse" width="100%" id="table2">
	<tr>
		<td width="4%" nowrap valign="top"><font style="font-size: 10.0pt">1.</font></td>
		<td colspan="2" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">I have reviewed this Form 10-KSB of
Pro-Dex, Inc.;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top"><font style="font-size: 10.0pt">2.</font></td>
		<td colspan="2" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">Based on my knowledge, this annual
report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with
respect to the period covered by this report; </font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top"><font style="font-size: 10.0pt">3.</font></td>
		<td colspan="2" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">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 small business issuer as of, and for, the periods
presented in this report; </font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top"><font style="font-size: 10.0pt">4. </font>
		</td>
		<td width="95%" colspan="2" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">The small business issuer&#146;s other
certifying officer(s) and I am responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f)) for the small business issuer and have:</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top"><font style="font-size: 10.0pt">a) </font>
		</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">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 small business issuer , 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%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top"><font size="2">b)</font></td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">Designed such internal control
over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally
accepted accounting principles;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top"><font style="font-size: 10.0pt">c) </font>
		</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">Evaluated the
effectiveness of the small business issuer&#146;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%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top"><font style="font-size: 10.0pt">d)</font></td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">Disclosed in this report
any change in the small business issuer&#146;s internal control over financial
reporting that occurred during the small business issuer&#146;s&nbsp; most recent fiscal
quarter (the registrant&#146;s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant&#146;s internal control over financial reporting;&nbsp; and</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top"><font style="font-size: 10.0pt">5. </font>
		</td>
		<td width="95%" colspan="2" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">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 small business issuer&#146;s auditors
and the audit committee of small business issuer&#146;s board of directors (or
persons performing the equivalent functions):</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top"><font style="font-size: 10.0pt">a) </font>
		</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">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 small business issuer&#146;s&nbsp; ability to record, process, summarize and
report financial information; and </font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top">&nbsp;</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="4%" nowrap valign="top">&nbsp;</td>
		<td width="4%" valign="top"><font style="font-size: 10.0pt">b) </font>
		</td>
		<td width="91%" valign="top">

<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;margin-top:0in'>
<font style="font-size: 10.0pt">Any fraud, whether or not
material, that involves management or other employees who have a significant
role in the small business issuer&#146;s internal control over financial reporting.</font></p>

		</td>
	</tr>
</table>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">&nbsp;</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">&nbsp;</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">Date: September
22, 2008</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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><u>/s/
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; JEFFREY J. RITCHEY</u><font style="font-size: 10.0pt"> _______</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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</font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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 style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>

</div>

</body>

</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>5
<FILENAME>ex32.htm
<TEXT>
<html>

<head>

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

<body>

<div style='page:Section1;'>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><font style="font-size: 10.0pt">&nbsp;</font></p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-align:justify;font-size:11.0pt;font-family:"Times New Roman";'><b>EXHIBIT 32</b></p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-align:justify;font-size:11.0pt;font-family:"Times New Roman";margin-top:0in;margin-right:0in;margin-bottom:0in;
margin-left:3.0in;margin-bottom:.0001pt;text-indent:-3.0in'>&nbsp;</p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-align:justify;font-size:11.0pt;font-family:"Times New Roman";margin-top:0in;margin-right:0in;
margin-bottom:0in;margin-left:3.0in;margin-bottom:.0001pt;text-align:center;
text-indent:-3.0in'>&nbsp;</p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-align:justify;font-size:11.0pt;font-family:"Times New Roman";margin-top:0in;text-align:center'><b>CERTIFICATIONS
OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER</b></p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-align:justify;font-size:11.0pt;font-family:"Times New Roman";margin-top:0in;text-align:center'><b>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 style='margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-align:justify;font-size:11.0pt;font-family:"Times New Roman";margin-top:0in;text-align:center'><b>&nbsp;</b></p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-align:justify;font-size:11.0pt;font-family:"Times New Roman";margin-top:0in;text-align:center'><b>Certifications
of Chief Executive Officer and Chief Financial Officer</b></p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-indent:.5in;font-size:11.0pt;font-family:"Times New Roman";'>&nbsp;</p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-indent:.5in;font-size:11.0pt;font-family:"Times New Roman";margin-top:0in;text-align:justify'>In connection with the
annual report on Form 10-KSB of Pro-Dex Inc. (the &#147;Company&#148;) for the annual
period ended June 30, 2008 (the &#147;Report&#148;), 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='margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-indent:.5in;font-size:11.0pt;font-family:"Times New Roman";text-align:justify'>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='margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;text-indent:.5in;font-size:11.0pt;font-family:"Times New Roman";text-align:justify'>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>

<p style='margin:0in;margin-bottom:.0001pt;font-size:10.0pt;font-family:"Courier New";text-align:justify'>&nbsp;</p>

<table border="0" style="border-collapse: collapse" width="100%" id="table1">
	<tr>
		<td nowrap width="33%"><font size="2">Dated: September 22, 2008 </font></td>
		<td width="653">

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>By:<u>
/s/&nbsp;&nbsp;&nbsp;
MARK P. MURPHY&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u></p>

		</td>
	</tr>
	<tr>
		<td nowrap width="33%">&nbsp;</td>
		<td width="653">

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>Mark
P. Murphy</p>

		</td>
	</tr>
	<tr>
		<td nowrap width="33%">&nbsp;</td>
		<td width="653">

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>Chief
Executive Officer and President<u><br>
</u></p>

		</td>
	</tr>
	<tr>
		<td nowrap width="33%">&nbsp;</td>
		<td width="653">

<p style='margin:0in;margin-bottom:.0001pt;font-size:10.0pt;font-family:"Courier New";text-align:justify'>&nbsp;</p>

		</td>
	</tr>
	<tr>
		<td nowrap width="33%"><font size="2">Dated: September 22, 2008</font></td>
		<td width="653">

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>By:<u>
/s/ &nbsp;&nbsp; JEFFREY J. RITCHEY&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u></p>

		</td>
	</tr>
	<tr>
		<td nowrap width="33%">&nbsp;</td>
		<td width="653">

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>Jeffrey
J. Ritchey</p>

		</td>
	</tr>
	<tr>
		<td width="33%">&nbsp;</td>
		<td width="653">

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>Chief Financial Officer</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:10.0pt;font-family:"Courier New";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>A signed original of this written statement required by
Section 906, or other document authenticating, acknowledging, or otherwise
adopting the signatures that appear in typed form within the electronic version
of this written statement required by Section 906, has been provided to the
Company and will be retained by the Company and Furnished to the Securities and
Exchange Commission or its staff upon request.</p>

</div>

</body>

</html>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
