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<SEC-DOCUMENT>0001003297-09-000249.txt : 20091029
<SEC-HEADER>0001003297-09-000249.hdr.sgml : 20091029
<ACCEPTANCE-DATETIME>20091029145946
ACCESSION NUMBER:		0001003297-09-000249
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	20090930
FILED AS OF DATE:		20091029
DATE AS OF CHANGE:		20091029

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PRO DEX INC
		CENTRAL INDEX KEY:			0000788920
		STANDARD INDUSTRIAL CLASSIFICATION:	SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841]
		IRS NUMBER:				841261240
		STATE OF INCORPORATION:			CO
		FISCAL YEAR END:			0630

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-14942
		FILM NUMBER:		091144331

	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>10-Q
<SEQUENCE>1
<FILENAME>espdex10q.htm
<TEXT>
<html>

<head>
<!-- Document Prepared With IDEAxfiler Software-->
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<title>PRO DEX INC(Form: 10Q)</title>



</head>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-right:-14.85pt;text-autospace:none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-right:-14.85pt;text-autospace:none'>&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>
<div style='layout-flow:horizontal-ideographic'>&nbsp;</div>
<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-right:-14.85pt;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'>
<font style="font-size: 24.0pt">FORM
  10-Q</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;
  QUARTERLY REPORT PURSUANT TO 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 quarterly period ended September 30, 2009</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 PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.&nbsp;&nbsp;
  FOR THE TRANSITION PERIOD FROM&nbsp; <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>TO&nbsp;
  <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; .</u></b></p>
<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>
<div align="center">
	<table class=MsoNormalTable border=0 cellpadding=0 width=721
 style='width:90%;border-collapse:collapse'>
		<tr>
			<td colspan=2 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>Commission
  File Number&nbsp;&nbsp;&nbsp; 0-14942 </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">&nbsp;</font></b></p></td>
		</tr>
		<tr>
			<td colspan=2 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>&nbsp;</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">&nbsp;</font></b></p></td>
		</tr>
		<tr>
			<td colspan=2 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: 24.0pt">PRO-DEX, INC.&nbsp;&nbsp;&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">&nbsp;</font></b></p></td>
		</tr>
		<tr>
			<td colspan=2 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>(Exact
  name of registrant as specified in its charter)&nbsp;&nbsp;&nbsp;&nbsp; </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">&nbsp;</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-autospace:none'>
			<b>&nbsp;&nbsp; </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-autospace:none'>
			<b>&nbsp;&nbsp;&nbsp;&nbsp; </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-autospace:none'>
			<b><font style="font-size: 10.0pt">&nbsp;</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>Colorado </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>84-1261240
  </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><font style="font-size: 10.0pt">&nbsp;</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>(State
  or Other Jurisdiction of&nbsp;&nbsp;&nbsp; </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>(IRS
  Employer Identification 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><font style="font-size: 10.0pt">&nbsp;</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>Incorporation
  or Organization)&nbsp;&nbsp;&nbsp; </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-autospace:none'>
			<b>&nbsp;&nbsp; </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-autospace:none'>
			<b><font style="font-size: 10.0pt">&nbsp;</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-autospace:none'>
			<b>&nbsp;&nbsp; </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-autospace:none'>
			<b>&nbsp;&nbsp;&nbsp;&nbsp; </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-autospace:none'>
			<b><font style="font-size: 10.0pt">&nbsp;</font></b></p></td>
		</tr>
		<tr>
			<td colspan=2 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>2361 McGaw Avenue, Irvine, California 92614&nbsp;&nbsp;&nbsp;</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><font style="font-size: 10.0pt">&nbsp;</font></b></p></td>
		</tr>
		<tr>
			<td colspan=2 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>(Address
  of Principal Executive Offices)&nbsp;&nbsp;&nbsp;&nbsp; </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">&nbsp;</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-autospace:none'>
			<b><font style="font-size: 10.0pt">&nbsp;&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-autospace:none'>
			<b><font style="font-size: 10.0pt">&nbsp;&nbsp; &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-autospace:none'>
			<b><font style="font-size: 10.0pt">&nbsp;</font></b></p></td>
		</tr>
		<tr>
			<td colspan=2 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>Registrant's
  telephone number: <u>949-769-3200&nbsp;&nbsp;&nbsp;</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><font style="font-size: 10.0pt">&nbsp;</font></b></p></td>
		</tr>
	</table></div>
<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-align:justify;text-autospace:none'>
<font style="font-size: 10.0pt">Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding twelve months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past ninety days.&nbsp;&nbsp;&nbsp; Yes [X] No [ ]
</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-align:justify;text-autospace:none'>
<font style="font-size: 10.0pt">Indicate by check mark whether the registrant has
submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).&nbsp; Yes [] No [
]&nbsp;&nbsp; </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-autospace:none'>Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company under&nbsp; Rule 12b-2 of the
Exchange Act. (Check one):</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'>Large accelerated filer [ ] Accelerated
filer [ ]&nbsp; Non-accelerated filer [ ]&nbsp; Smaller reporting company [ X ]
</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";margin-right:-14.85pt;text-autospace:none'>
<font style="font-size: 10.0pt">Indicate whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [&nbsp; ] No [X]</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";margin-right:-14.85pt;text-autospace:none'>
<font style="font-size: 10.0pt">Indicate the number of shares outstanding of each of
the Registrant&#146;s classes of Common Stock outstanding as of the latest
practicable date:&nbsp; 9,668,671 shares of Common Stock, no par value, as of October
28, 2009. </font></p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-right:-14.85pt;text-autospace:none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-right:-14.85pt;text-autospace:none'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&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>


<div style='page:Section2;'>

<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'><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'>&nbsp;</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'>INDEX </p>

<p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Times New Roman";margin-top:9.0pt;margin-right:0in;margin-bottom:0in;
margin-left:0in;margin-bottom:.0001pt;text-align:center'>Pro-Dex, Inc.</p>

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

<div align=center>

<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width="100%"
 style='width:100.3%;border-collapse:collapse'>
 <tr style='height:1.05pt'>
  <td width=658 colspan=2 style='width:493.35pt;padding:0in 0in 0in 0in;
  height:1.05pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b><font style="font-size: .5pt">&nbsp;</font></b></p>
  </td>
  <td width=64 colspan=2 style='width:48.25pt;padding:0in 0in 0in 0in;
  height:1.05pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: .5pt">&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  height:17.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b><font style="font-size: 10.0pt">Part I.&nbsp;Financial
  Information </font></b></p>
  </td>
  <td nowrap colspan=2 style='height:17.1pt; padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:0in;margin-left:0in;font-family:"Times New Roman";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:0in;text-align:right;text-indent:2.3pt'><font size="2">2</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:8.55pt'>
  <td style='padding:0in;height:8.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 6.0pt">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  height:8.55pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:-2.3pt;text-align:right;
  text-indent:2.3pt; margin-right:0in; margin-top:0in'><font size="2">&nbsp;</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  height:17.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">
	<a href="#Financial_Statements">Item&nbsp;1.&nbsp;Financial
  Statements: </a> </font></p>
  </td>
  <td nowrap colspan=2 style='height:17.1pt; padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:0in;margin-left:0in;font-family:"Times New Roman";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:0in;text-align:right;text-indent:2.3pt'><font size="2">2</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:8.55pt'>
  <td style='padding:0in;height:8.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 6.0pt">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  height:8.55pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:-2.3pt;text-align:right;
  text-indent:2.3pt; margin-right:0in; margin-top:0in'><font size="2">&nbsp;</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  height:17.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">
	<a href="#CONDENSED&nbsp;CONSOLIDATED&nbsp;BALANCE&nbsp;SHEETS_">Condensed
  consolidated balance sheets &#150; June 30, 2009 and September 30, 2009
  (unaudited)</a> </font></p>
  </td>
  <td nowrap colspan=2 style='height:17.1pt; padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:0in;margin-left:0in;font-family:"Times New Roman";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:0in;text-align:right;text-indent:2.3pt'><font size="2">2</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:8.55pt'>
  <td style='padding:0in;height:8.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 6.0pt">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  height:8.55pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:-2.3pt;text-align:right;
  text-indent:2.3pt; margin-right:0in; margin-top:0in'><font size="2">&nbsp;</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  height:17.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">
	<a href="#CONDENSED&nbsp;CONSOLIDATED&nbsp;STATEMENTS&nbsp;OF&nbsp;OPERATIONS_">Condensed consolidated
  statements of operations (unaudited) &#150; Three months ended September 30, 2009
  and 2008</a></font></p>
  </td>
  <td nowrap colspan=2 style='height:17.1pt; padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:0in;margin-left:0in;font-family:"Times New Roman";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:0in;text-align:right;text-indent:2.3pt'><font size="2">3</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:9.0pt'>
  <td style='padding:0in;height:9.0pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 6.0pt">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  height:9.0pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:-2.3pt;text-align:right;
  text-indent:2.3pt; margin-right:0in; margin-top:0in'><font size="2">&nbsp;</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  height:17.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">
	<a href="#NOTES_TO_CONSOLIDATED_FINANCIAL_STATEMENTS__">Condensed consolidated
  statements of cash flows (unaudited) &#150; Three months ended September 30, 2009
  and 2008</a></font></p>
  </td>
  <td nowrap colspan=2 style='height:17.1pt; padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:0in;margin-left:0in;font-family:"Times New Roman";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:0in;text-align:right;text-indent:2.3pt'><font size="2">4</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:8.55pt'>
  <td style='padding:0in;height:8.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 6.0pt">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  height:8.55pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:-2.3pt;text-align:right;
  text-indent:2.3pt; margin-right:0in; margin-top:0in'><font size="2">&nbsp;</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  height:17.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">
	<a href="#NOTES_TO_CONSOLIDATED_FINANCIAL_STATEMENTS__">Notes to
  condensed consolidated financial statements (unaudited) &#150; September 30, 2009</a></font></p>
  </td>
  <td nowrap colspan=2 style='height:17.1pt; padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:0in;margin-left:0in;font-family:"Times New Roman";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:0in;text-align:right;text-indent:2.3pt'><font size="2">5</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:8.55pt'>
  <td style='padding:0in;height:8.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 6.0pt">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  height:8.55pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:-2.3pt;text-align:right;
  text-indent:2.3pt; margin-right:0in; margin-top:0in'><font size="2">&nbsp;</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  height:17.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">
	<a href="#MDandA">Item&nbsp;2.&nbsp;Management&#146;s
  Discussion and Analysis of Financial Condition and Results of Operations</a></font></p>
  </td>
  <td nowrap colspan=2 style='height:17.1pt; padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:0in;margin-left:0in;font-family:"Times New Roman";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:0in;text-align:right;text-indent:2.3pt'><font size="2">13</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:8.55pt'>
  <td style='padding:0in;height:8.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 6.0pt">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  height:8.55pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:-2.3pt;text-align:right;
  text-indent:2.3pt; margin-right:0in; margin-top:0in'><font size="2">&nbsp;</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  height:17.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">
	<a href="#Q3Item3">Item&nbsp;3.&nbsp;Quantitative
  and Qualitative Disclosures About Market Risk</a></font></p>
  </td>
  <td nowrap colspan=2 style='height:17.1pt; padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:0in;margin-left:0in;font-family:"Times New Roman";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:0in;text-align:right;text-indent:2.3pt'><font size="2">21</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:8.55pt'>
  <td style='padding:0in;height:8.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 6.0pt">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  height:8.55pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:-2.3pt;text-align:right;
  text-indent:2.3pt; margin-right:0in; margin-top:0in'><font size="2">&nbsp;</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  height:17.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">
	<a href="#Q3Item4T">Item
  4T.&nbsp; Controls and Procedures</a></font></p>
  </td>
  <td nowrap colspan=2 style='height:17.1pt; padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:0in;margin-left:0in;font-family:"Times New Roman";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:0in;text-align:right;text-indent:2.3pt'><font size="2">21</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:8.55pt'>
  <td style='padding:0in;height:8.55pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 6.0pt">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  height:8.55pt' align="right">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:-2.3pt;text-align:right;
  text-indent:2.3pt; margin-right:0in; margin-top:0in'><font size="2">&nbsp;</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:18.15pt'>
  <td valign=top style='padding:0in;
  height:18.15pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b><font style="font-size: 10.0pt">Part II.&nbsp;Other
  Information </font></b></p>
  </td>
  <td nowrap colspan=2 style='height:18.15pt; padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:0in;margin-left:0in;font-family:"Times New Roman";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:0in;text-align:right;text-indent:2.3pt'><font size="2">21</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:6.75pt'>
  <td valign=top style='padding:0in;
  height:6.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 6.0pt">&nbsp;</font></p>
  </td>
  <td nowrap colspan=2 style='height:6.75pt; padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Arial Unicode MS";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-2.3pt;text-align:right;text-indent:2.3pt'>&nbsp;</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=top style='padding:0in;
  height:15.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">
	<a href="#Q3Item1A">Item&nbsp;1.&nbsp;Legal
  Proceedings</a></font></p>
  </td>
  <td colspan=2 style='padding:0in;
  height:15.75pt' align="right">
  <p style='margin-right:0in;margin-left:0in;font-family:"Times New Roman";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:0in;text-align:right;text-indent:2.3pt'><font size="2">21</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:4.0pt'>
  <td valign=top style='padding:0in;
  height:4.0pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 6.0pt">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  height:4.0pt' align="right">
  <p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Arial Unicode MS";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-2.3pt;text-align:right;text-indent:2.3pt'>&nbsp;</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:12.6pt'>
  <td valign=top style='padding:0in;
  height:12.6pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">
	<a href="#Q3Item1A">Item
  1A. Risk Factors</a></font></p>
  </td>
  <td colspan=2 style='padding:0in;
  height:12.6pt' align="right">
  <p style='margin-right:0in;margin-left:0in;font-family:"Times New Roman";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:0in;text-align:right;text-indent:2.3pt'><font size="2">22</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:9.0pt'>
  <td valign=top style='padding:0in;
  height:9.0pt'>
  <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>
  </td>
  <td colspan=2 style='padding:0in;
  height:9.0pt' align="right">
  <p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Arial Unicode MS";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-2.3pt;text-align:right;text-indent:2.3pt'>&nbsp;</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:.25in'>
  <td valign=top style='padding:0in;
  height:.25in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">
	<a href="#Q3Item1A">Item&nbsp;2.
  Unregistered Sales of Equity Securities and Use of&nbsp; Proceeds</a></font></p>
  </td>
  <td colspan=2 style='padding:0in;
  height:.25in' align="right">
  <p style='margin-right:0in;margin-left:0in;font-family:"Times New Roman";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:0in;text-align:right;text-indent:2.3pt'><font size="2">22</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:4.5pt'>
  <td valign=top style='padding:0in;
  height:4.5pt'>
  <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>
  </td>
  <td colspan=2 style='padding:0in;
  height:4.5pt' align="right">
  <p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Arial Unicode MS";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-2.3pt;text-align:right;text-indent:2.3pt'>&nbsp;</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=top style='padding:0in;
  height:15.75pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">
	<a href="#Q3Item1A">Item&nbsp;3.
  Defaults Upon Senior Securities </a></font></p>
  </td>
  <td colspan=2 style='padding:0in;
  height:15.75pt' align="right">
  <p style='margin-right:0in;margin-left:0in;font-family:"Times New Roman";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:0in;text-align:right;text-indent:2.3pt'><font size="2">22</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:4.5pt'>
  <td valign=top style='padding:0in;
  height:4.5pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 6.0pt">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  height:4.5pt' align="right">
  <p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Arial Unicode MS";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-2.3pt;text-align:right;text-indent:2.3pt'>&nbsp;</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  height:17.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">
	<a href="#Q3OtherInfo">Item&nbsp;4.
  Submissions of Matters to a Vote of Securities Holders</a></font></p>
  </td>
  <td nowrap colspan=2 style='height:17.1pt; padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:0in;margin-left:0in;font-family:"Times New Roman";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:0in;text-align:right;text-indent:2.3pt'><font size="2">22</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:7.65pt'>
  <td valign=top style='padding:0in;
  height:7.65pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 6.0pt">&nbsp;</font></p>
  </td>
  <td nowrap colspan=2 style='height:7.65pt; padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Arial Unicode MS";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-2.3pt;text-align:right;text-indent:2.3pt'>&nbsp;</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  height:17.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">
	<a href="#Q3OtherInfo">Item&nbsp;5.
  Other Information </a></font></p>
  </td>
  <td nowrap colspan=2 style='height:17.1pt; padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:0in;margin-left:0in;font-family:"Times New Roman";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:0in;text-align:right;text-indent:2.3pt'><font size="2">22</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:5.4pt'>
  <td style='padding:0in;height:5.4pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 6.0pt">&nbsp;</font></p>
  </td>
  <td nowrap colspan=2 style='height:5.4pt; padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Arial Unicode MS";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-2.3pt;text-align:right;text-indent:2.3pt'>&nbsp;</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:18.9pt'>
  <td valign=top style='padding:0in;
  height:18.9pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">
	<a href="#Q3OtherInfo">Item&nbsp;6.&nbsp;Exhibits</a></font></p>
  </td>
  <td colspan=2 style='padding:0in;
  height:18.9pt' align="right">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right;text-indent:2.3pt'><font style="font-size: 10.0pt">22</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:8.1pt'>
  <td style='padding:0in;height:8.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 6.0pt">&nbsp;</font></p>
  </td>
  <td nowrap colspan=2 style='height:8.1pt; padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:0in;margin-left:0in;font-size:12.0pt;font-family:"Arial Unicode MS";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-2.3pt;text-align:right;text-indent:2.3pt'>&nbsp;</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr style='height:18.9pt'>
  <td valign=top style='padding:0in;
  height:18.9pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><font style="font-size: 10.0pt">
	<a href="#Q3Signatures">Signatures</a></font></p>
  </td>
  <td nowrap colspan=2 style='height:18.9pt; padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in' align="right">
  <p style='margin-right:0in;margin-left:0in;font-family:"Times New Roman";margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:0in;text-align:right;text-indent:2.3pt'><font size="2">23</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in'><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</td>
 </tr>
 <tr height=0>
  <td style='border:none'></td>
  <td style='border:none' align="right"></td>
  <td style='border:none' align="right"></td>
  <td style='border:none'></td>
 </tr>
</table>

</div>

<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-align:center'>- 1 -</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&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";'><b><font style="font-size: 11.0pt">Item 1. &nbsp;&nbsp;&nbsp;&nbsp; </font>
<a name="Financial_Statements">Financial
Statements</a></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";'><b>&nbsp;</b></p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=565
 style='width:100%;border-collapse:collapse'>
 <tr style='height:15.25pt'>
  <td colspan=5 valign=bottom style='background:#FFFFFF;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><b>PRO-DEX,&nbsp;INC.&nbsp;and&nbsp;SUBSIDIARIES</b></p>
  </td>
 </tr>
 <tr style='height:15.25pt'>
  <td colspan=5 valign=bottom style='background:white;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><b>
	<a name="CONDENSED&nbsp;CONSOLIDATED&nbsp;BALANCE&nbsp;SHEETS_">CONDENSED&nbsp;CONSOLIDATED&nbsp;BALANCE&nbsp;SHEETS</a></b></p>
  </td>
 </tr>
 <tr style='height:9.45pt'>
  <td valign=bottom style='background:#FFFFFF;
  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; background:#FFFFFF; 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; background:#FFFFFF; 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:24.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><i>9/30/2009</i></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><i>(Unaudited)</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";' align="center"><i>6/30/2009</i></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";' align="center"><i>(Audited)</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b>ASSETS</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; background:#CBDBD1; 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; background:#CBDBD1; 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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Current&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; background:white; 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; background:white; 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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash&nbsp;and&nbsp;cash&nbsp;equivalents</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,378,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,124,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.8pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts&nbsp;receivable,&nbsp;net&nbsp;of&nbsp;allowance&nbsp;for&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; background:white; 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; background:white; 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;
  background:#CBDBD1;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;of&nbsp;$46,000&nbsp;in&nbsp;2010&nbsp;and&nbsp;$52,000&nbsp;in&nbsp;2009</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,830,000&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,515,000&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other&nbsp;Current&nbsp;Receivables</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>49,000&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; background:white; 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: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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,532,000&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,365,000&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>146,000&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; background:white; 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>
 </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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid&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;
  background:#CBDBD1;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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>118,000&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;
  background:white;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;&nbsp;&nbsp;&nbsp;Total&nbsp;current&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>8,052,000&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>7,255,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:6.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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; background:#CBDBD1; 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; background:#CBDBD1; 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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Property,&nbsp;plant,&nbsp;equipment&nbsp;and&nbsp;leasehold&nbsp;improvements,&nbsp;net</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>5,846,000&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>5,981,000&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Other&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; background:white; 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; background:white; 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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; 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 colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; 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>
 <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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangibles&nbsp;-&nbsp;Patents,&nbsp;net</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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 colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>147,000&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&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;
  background:#CBDBD1;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;
  background:#CBDBD1;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>
 </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;
  background:white;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;&nbsp;&nbsp;&nbsp;Total&nbsp;other&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,228,000&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,231,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:5.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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;
  background:#CBDBD1;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;
  background:#CBDBD1;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-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total&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; background:#CBDBD1; 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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>17,126,000&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; background:#CBDBD1; 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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>16,467,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:.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;
  background:white;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; background:white; 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;
  background:white;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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><b>LIABILITIES&nbsp;AND&nbsp;SHAREHOLDERS'&nbsp;EQUITY</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; background:white; 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; background:white; 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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Current&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; background:#CBDBD1; 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; background:#CBDBD1; 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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts&nbsp;payable</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,402,000&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>827,000&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,354,000&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,394,000&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income&nbsp;taxes&nbsp;payable</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>54,000&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>53,000&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current&nbsp;Portion&nbsp;of&nbsp;T.I.&nbsp;Loan</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>400,000&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>400,000&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current&nbsp;portion&nbsp;of&nbsp;real&nbsp;estate&nbsp;loan</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>33,000&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>33,000&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;
  background:#CBDBD1;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;&nbsp;&nbsp;Total&nbsp;current&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,243,000&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,707,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:6.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;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; background:white; 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; background:white; 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:10.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Long-term&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; background:white; 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; background:white; 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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Notes&nbsp;Payable&nbsp;-&nbsp;T.I.&nbsp;Loan</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,267,000&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,367,000&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Real&nbsp;estate&nbsp;loan</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,519,000&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,528,000&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Deferred&nbsp;income&nbsp;taxes</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>173,000&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>171,000&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Deferred&nbsp;rent</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>224,000&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>212,000&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;
  background:#CBDBD1;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;&nbsp;&nbsp;Total&nbsp;long-term&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,183,000&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,278,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:6.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;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;
  background:white;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;
  background:white;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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total&nbsp;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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>6,426,000&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>5,985,000&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Commitments&nbsp;and&nbsp;contingencies</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; 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; background:#CBDBD1; 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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Shareholders'&nbsp;equity:</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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; background:white; 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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common&nbsp;shares;&nbsp;no&nbsp;par&nbsp;value;&nbsp;50,000,000&nbsp;shares&nbsp;authorized;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; 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; background:#CBDBD1; 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;
  background:white;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;&nbsp;&nbsp;&nbsp;9,668,671&nbsp;shares&nbsp;issued&nbsp;and&nbsp;outstanding&nbsp;Sept&nbsp;30,&nbsp;2009</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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; background:white; 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;
  background:#CBDBD1;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;&nbsp;&nbsp;&nbsp;9,668,671&nbsp;shares&nbsp;issued&nbsp;and&nbsp;outstanding&nbsp;June&nbsp;30,&nbsp;2009</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>16,609,000&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>16,574,000&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated&nbsp;deficit</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(5,909,000)</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(6,092,000)</p>
  </td>
 </tr>
 <tr style='height:5.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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; background:#CBDBD1; 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; background:#CBDBD1; 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;
  background:#CBDBD1;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;Total&nbsp;shareholders'&nbsp;equity</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>10,700,000&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>10,482,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:6.5pt'>
  <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; background:white; 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;
  background:white;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;
  background:white;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-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total&nbsp;liabilities&nbsp;and&nbsp;shareholders'&nbsp;equity</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; background:white; 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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>17,126,000&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; background:white; 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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>16,467,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:17.45pt'>
  <td colspan=5 valign=bottom style='background:#FFFFFF;
  padding:1.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><i>See&nbsp;notes&nbsp;to&nbsp;condensed&nbsp;consolidated&nbsp;financial&nbsp;statements.</i></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><i><font style="font-size: 11.0pt">&nbsp;</font></i></b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><b><i><font style="font-size: 11.0pt"><br clear=all>
</font></i></b></p>

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

<table class=MsoNormalTable border=0 cellpadding=0 width=653
 style='width:90%;border-collapse:collapse'>
 <tr style='height:16.45pt'>
  <td colspan=5 valign=bottom style='background:#FFFFFF;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><b>PRO-DEX,&nbsp;INC.&nbsp;and&nbsp;SUBSIDIARIES</b></p>
  </td>
 </tr>
 <tr style='height:16.45pt'>
  <td colspan=5 valign=bottom style='background:white;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><b>
	<a name="CONDENSED&nbsp;CONSOLIDATED&nbsp;STATEMENTS&nbsp;OF&nbsp;OPERATIONS_">CONDENSED&nbsp;CONSOLIDATED&nbsp;STATEMENTS&nbsp;OF&nbsp;OPERATIONS</a></b></p>
  </td>
 </tr>
 <tr style='height:16.45pt'>
  <td colspan=5 valign=bottom style='background:#FFFFFF;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><b>Three&nbsp;months&nbsp;ended&nbsp;September&nbsp;30&nbsp;(unaudited)</b></p>
  </td>
 </tr>
 <tr style='height:13.35pt'>
  <td valign=bottom style='background:white;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; background:white; 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; background:white; 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:13.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:#FFFFFF;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;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><i>2009</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;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><i>2008</i></p>
  </td>
 </tr>
 <tr style='height:13.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;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; background:white; 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; background:white; 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:13.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>5,633,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>5,656,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;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; background:white; 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; background:white; 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:13.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,759,000&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,902,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,874,000&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,754,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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; background:#CBDBD1; 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; background:#CBDBD1; 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:13.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Operating&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; background:white; 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; background:white; 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:13.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>289,000&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>344,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>727,000&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>835,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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;
  background:#CBDBD1;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 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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>731,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total&nbsp;operating&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,637,000&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,910,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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;
  background:#CBDBD1;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;
  background:#CBDBD1;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:13.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Income&nbsp;(loss)&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>237,000&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(156,000)</p>
  </td>
 </tr>
 <tr style='height:13.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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; background:#CBDBD1; 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; background:#CBDBD1; 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:13.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Other&nbsp;income&nbsp;(expense):</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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; background:white; 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:13.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Royalty&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; background:#CBDBD1; 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 colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest&nbsp;expense</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(51,000)</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(61,000)</p>
  </td>
 </tr>
 <tr style='height:13.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(50,000)</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(59,000)</p>
  </td>
 </tr>
 <tr style='height:13.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;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; background:white; 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; background:white; 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:13.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Income&nbsp;(loss)&nbsp;before&nbsp;provision&nbsp;(benefit)&nbsp;for&nbsp;income&nbsp;taxes</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>187,000&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(215,000)</p>
  </td>
 </tr>
 <tr style='height:13.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;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; background:white; 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; background:white; 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:13.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Provision&nbsp;(benefit)&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4,000&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;
  background:#CBDBD1;padding:1.1pt;'>
  <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:13.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Net&nbsp;income&nbsp;(loss)</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>183,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(118,000)</p>
  </td>
 </tr>
 <tr style='height:13.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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; background:#CBDBD1; 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; background:#CBDBD1; 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:13.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Net&nbsp;income&nbsp;(loss)&nbsp;per&nbsp;share:</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;
  background:white;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;
  background:white;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:13.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.02&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(0.01)</p>
  </td>
 </tr>
 <tr style='height:13.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.02&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(0.01)</p>
  </td>
 </tr>
 <tr style='height:13.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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;
  background:#CBDBD1;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;
  background:#CBDBD1;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:13.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Weighted&nbsp;average&nbsp;shares&nbsp;outstanding&nbsp;-&nbsp;basic</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>9,668,671&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>9,783,407&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.35pt'>
  <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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Weighted&nbsp;average&nbsp;shares&nbsp;outstanding&nbsp;-&nbsp;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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>9,675,437&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>9,783,407&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'>&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: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 condensed 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'><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">&nbsp;</font></i></p>

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

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=620
 style='width:100%;border-collapse:collapse'>
 <tr style='height:10.55pt'>
  <td colspan=5 valign=bottom style='background:#FFFFFF;
  padding:1.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><b>PRO-DEX,&nbsp;INC.&nbsp;and&nbsp;SUBSIDIARIES</b></p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td colspan=5 valign=bottom style='background:white;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><b>CONDENSED&nbsp;CONSOLIDATED&nbsp;STATEMENTS&nbsp;OF&nbsp;CASH&nbsp;FLOWS</b></p>
  </td>
 </tr>
 <tr style='height:10.5pt'>
  <td colspan=5 valign=bottom style='background:#FFFFFF;
  padding:1.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><b>Three&nbsp;months&nbsp;ended&nbsp;September&nbsp;30&nbsp;(unaudited)</b></p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=bottom style='background:white;
  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; background:white; 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; background:white; 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:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:#FFFFFF;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;
  background:#FFFFFF;padding:1.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><i>2009</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;
  background:#FFFFFF;padding:1.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><i>2008</i></p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Cash&nbsp;Flows&nbsp;from&nbsp;Operating&nbsp;Activities:</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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; background:white; 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:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Net&nbsp;income&nbsp;(loss)</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>183,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(118,000)</p>
  </td>
 </tr>
 <tr style='height:10.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Adjustments&nbsp;to&nbsp;reconcile&nbsp;net&nbsp;income&nbsp;to&nbsp;net&nbsp;cash&nbsp;provided&nbsp;by&nbsp;operating&nbsp;activities:</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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; background:white; 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:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Depreciation&nbsp;and&nbsp;amortization</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>185,000&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>222,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>(Recovery)&nbsp;of&nbsp;provision&nbsp;for&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(6,000)</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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(14,000)</p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Stock&nbsp;based&nbsp;compensation</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>35,000&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>42,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>(Decrease)&nbsp;in&nbsp;deferred&nbsp;taxes</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Changes&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; background:#CBDBD1; 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; background:#CBDBD1; 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:10.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>(Increase)&nbsp;in&nbsp;accounts&nbsp;receivable</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(343,000)</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; background:white; 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>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>(Increase)&nbsp;Decrease&nbsp;&nbsp;in&nbsp;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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(167,000)</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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>461,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>(Increase)&nbsp;in&nbsp;prepaid&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; background:white; 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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(50,000)</p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Decrease&nbsp;in&nbsp;other&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; background:#CBDBD1; 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-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>5,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;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;accounts&nbsp;payable&nbsp;and&nbsp;accrued&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>547,000&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(756,000)</p>
  </td>
 </tr>
 <tr style='height:10.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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;income&nbsp;taxes&nbsp;payable</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4,000&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(124,000)</p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Net&nbsp;Cash&nbsp;provided&nbsp;(used)&nbsp;by&nbsp;Operating&nbsp;Activities</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>409,000&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(459,000)</p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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; background:#CBDBD1; 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; background:#CBDBD1; 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:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Cash&nbsp;Flows&nbsp;From&nbsp;Investing&nbsp;Activities:</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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; background:white; 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:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Purchases&nbsp;of&nbsp;equipment&nbsp;and&nbsp;leasehold&nbsp;improvements</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;
  background:#CBDBD1;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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(144,000)</p>
  </td>
 </tr>
 <tr style='height:10.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;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; background:white; 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; background:white; 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:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Net&nbsp;Cash&nbsp;used&nbsp;in&nbsp;Investing&nbsp;Activities</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;
  background:#CBDBD1;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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(144,000)</p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;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; background:white; 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; background:white; 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:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Cash&nbsp;Flows&nbsp;from&nbsp;Financing&nbsp;Activities:</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; 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; background:#CBDBD1; 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:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Net&nbsp;borrowing&nbsp;on&nbsp;line&nbsp;of&nbsp;credit</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>600,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Principal&nbsp;payments&nbsp;on&nbsp;term&nbsp;note</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; 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-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; 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:10.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Principal&nbsp;payments&nbsp;on&nbsp;TI&nbsp;Loan</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(100,000)</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; background:white; 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:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Principal&nbsp;payments&nbsp;on&nbsp;mortgage</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(8,000)</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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(7,000)</p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Stock&nbsp;repurchases</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;
  background:white;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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(60,000)</p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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; background:#CBDBD1; 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; background:#CBDBD1; 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:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Net&nbsp;Cash&nbsp;(used)&nbsp;provided&nbsp;by&nbsp;Financing&nbsp;Activities</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(108,000)</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>470,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:10.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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; background:#CBDBD1; 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; background:#CBDBD1; 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:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Net&nbsp;increase&nbsp;(decrease)&nbsp;in&nbsp;Cash&nbsp;and&nbsp;Cash&nbsp;Equivalents</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>254,000&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(133,000)</p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Cash&nbsp;and&nbsp;Cash&nbsp;Equivalents,&nbsp;beginning&nbsp;of&nbsp;period</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,124,000&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>517,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;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; background:white; 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; background:white; 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:10.55pt'>
  <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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Cash&nbsp;and&nbsp;Cash&nbsp;Equivalents,&nbsp;end&nbsp;of&nbsp;period</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,378,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>384,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:10.5pt'>
  <td valign=bottom style='background:white;
  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='background:white;
  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='background:white;
  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:10.55pt'>
  <td colspan=5 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'><i>Supplemental&nbsp;Information</i></p>
  </td>
 </tr>
 <tr style='height:10.55pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Cash&nbsp;payments&nbsp;for&nbsp;interest</p>
  </td>
  <td valign=bottom style='border:medium none;background:white;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>52,000&nbsp;</p>
  </td>
  <td valign=bottom style='border:medium none;background:white;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>56,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:8.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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; background:#CBDBD1; 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; background:#CBDBD1; 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:10.55pt'>
  <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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Cash&nbsp;payments&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:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:white;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'><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'><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'><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">&nbsp;</font></i></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'><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">&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">&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 condensed 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:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>-
4 -</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&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";'>&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>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><a name="NOTES_TO_CONSOLIDATED_FINANCIAL_STATEMENTS__">NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS </a> </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: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>NOTE 1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BASIS OF PRESENTATION</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'>The accompanying unaudited condensed consolidated financial statements of
Pro-Dex, Inc. (&#147;we&#148;, &#147;us&#148;, &#147;our&#148;, &#147;Pro-Dex&#148; or the &quot;Company&quot;) have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Regulation S-K. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. These financial statements should be read in conjunction
with the audited financial statements presented in our Annual Report for the
fiscal year ended June 30, 2009.&nbsp; In the opinion of management, all adjustments
considered necessary for a fair presentation have been included. The results of
operations for such interim periods are not necessarily indicative of the
results that may be expected for the full year. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended June 30, 2009. </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 2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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:</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=575
 style='width:75%;border-collapse:collapse'>
 <tr style='height:12.45pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#FFFFFF; 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; background:#FFFFFF; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>September&nbsp;30,&nbsp;2009</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;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>June&nbsp;30,&nbsp;2009</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>(unaudited)</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>(audited)</p>
  </td>
 </tr>
 <tr style='height:12.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,591,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,290,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>750,000&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>867,000&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; background:#CBDBD1; 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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,191,000&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,208,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.45pt'>
  <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; background:white; 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</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,532,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,365,000&nbsp;</p>
  </td>
 </tr>
 </table>

</div>

<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>NOTE 3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; WARRANTY</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'>The warranty reserve is based on historical costs of warranty repairs and
expected future identifiable warranty expenses.&nbsp; As of September 30, 2009,
within our accrued expenses, we carried a warranty reserve of $569,000, which
was comprised of $28,000 for future warranty expenses related to medical products
that have been received back from the field and are currently in the process of
being repaired, $474,000 for future warranty expenses related to medical and
aerospace products that are still in the field, and $67,000 for our legacy
dental and industrial products.&nbsp; Warranty expenses are reflected in the
financial statements in cost of sales (&#147;COS&#148;).&nbsp; The total warranty expense reflected
in the COS for the quarter ended September 30, 2009 was $184,000.&nbsp; The
total warranty expense reflected in the COS for the quarter ended September 30,
2008 was $194,000.</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'>Changes in our warranty accrual and (benefit)/expenses for the three
months ended September 30, 2009 and 2008 are presented below (unaudited):</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=541
 style='width:75%;border-collapse:collapse' id="table1">
 <tr style='height:10.9pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#FFFFFF; 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;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Three&nbsp;months&nbsp;Ended&nbsp;September&nbsp;30,</p>
  </td>
 </tr>
 <tr style='height:10.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2009</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;
  background:white;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>
 </tr>
 <tr style='height:10.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>518,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; 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>
 </tr>
 <tr style='height:10.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;Warranties&nbsp;issued&nbsp;during&nbsp;period</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>162,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>165,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:10.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Adjustments&nbsp;to&nbsp;pre-existing&nbsp;warranties</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; 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; background:#CBDBD1; 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:10.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;due&nbsp;to&nbsp;assumption&nbsp;changes</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>22,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>29,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:10.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Settlements&nbsp;(actual&nbsp;expenditures)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(133,000)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(177,000)</p>
  </td>
 </tr>
 <tr style='height:10.9pt'>
  <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; background:white; 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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>569,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>878,000&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;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:center'>-
5 -</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&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";text-align:justify;text-indent:.5in;text-autospace:
none'>The method of calculating the reserve remained the same as in previous
periods, but by updating the estimates and assumptions for current repair cost
and return profile data, the accrued warranty was increased by $22,000 in the
quarter ended September 30, 2009 compared to an increase of $29,000 in the
quarter ended September 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'><b>NOTE 4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NET
INCOME (LOSS) PER SHARE </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";margin-top:6.0pt;text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
following table reconciles the weighted average shares outstanding for basic
and diluted net income per share for the periods indicated.&nbsp; &nbsp;&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'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=721
 style='width:90%;border-collapse:collapse'>
 <tr style='height:14.9pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#FFFFFF; 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;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Three&nbsp;Months&nbsp;Ended&nbsp;September&nbsp;30,</p>
  </td>
 </tr>
 <tr style='height:14.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2009</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;
  background:white;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>
 </tr>
 <tr style='height:14.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Net&nbsp;income&nbsp;(loss)</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>183,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(118,000)</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;
  background:white;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;(loss)&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; background:white; 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; background:white; 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:14.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>9,668,671&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>9,783,407&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;
  background:white;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;(loss)&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.02&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(0.01)</p>
  </td>
 </tr>
 <tr style='height:14.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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; background:#CBDBD1; 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; background:#CBDBD1; 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:14.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;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; background:white; 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; background:white; 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:14.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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;(loss)&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; background:#CBDBD1; 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; background:#CBDBD1; 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:14.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>9,668,671&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>9,783,407&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;
  background:#CBDBD1;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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>6,766&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; background:#CBDBD1; 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-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;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; background:white; 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-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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:14.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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;
  background:#CBDBD1;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;
  background:#CBDBD1;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:14.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;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; background:white; 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; background:white; 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:14.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>9,675,437&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>9,783,407&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.95pt'>
  <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; background:white; 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;(loss)&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.02&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(0.01)</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-top:6.0pt;text-align:center'>&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-align:justify;text-indent:.5in;text-autospace:
none'>Potentially dilutive securities not included in the diluted loss per
share calculation due to net losses from continuing operations and for options
that have a strike price higher than the market price for our common stock (no
intrinsic value) are as follows (unaudited):</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>

<table class=MsoNormalTable border=0 cellpadding=0 width=771
 style='width:100%;border-collapse:collapse' id="table2">
 <tr style='height:14.9pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#FFFFFF; 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;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Three&nbsp;Months&nbsp;Ended&nbsp;September&nbsp;30,</p>
  </td>
 </tr>
 <tr style='height:14.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2009</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;
  background:white;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>
 </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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;Options&nbsp;to&nbsp;purchase&nbsp;common&nbsp;shares</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; 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-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,139,500&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;Restricted&nbsp;Shares</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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>
 </tr>
 <tr style='height:14.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;Warrants&nbsp;to&nbsp;purchase&nbsp;common&nbsp;shares</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>100,000&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total&nbsp;potentially&nbsp;dilutive&nbsp;securities&nbsp;due&nbsp;to&nbsp;net&nbsp;loss</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;
  background:white;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-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,409,500&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.1pt'>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; 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; background:#CBDBD1; 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; background:#CBDBD1; 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:14.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;Options&nbsp;to&nbsp;purchase&nbsp;common&nbsp;shares</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>873,000&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; background:white; 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:14.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;Restricted&nbsp;Shares</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>85,000&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; background:#CBDBD1; 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-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;Warrants&nbsp;to&nbsp;purchase&nbsp;common&nbsp;shares</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;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-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;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:14.9pt'>
  <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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total&nbsp;potentially&nbsp;dilutive&nbsp;securities&nbsp;due&nbsp;to&nbsp;no&nbsp;intrinsic&nbsp;value</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>958,000&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;
  background:#CBDBD1;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:12.1pt'>
  <td valign=bottom style='background:white;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='background:white;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='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</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:center'>-
6 -</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&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";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 5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; CREDIT FACILITIES</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'>We have a credit
facility with Wells Fargo and a mortgage with Union Bank.</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'><i><u>Wells Fargo Credit Facility</u></i></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'>As of September
30, 2009, the Wells Fargo credit facility had two components:&nbsp; </p>

<ul>
	<li>
	<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-left:0.5in;text-align:justify;margin-right:0in; margin-top:0in'>a revolving Credit Line Note (&#147;line of credit&#148;) of up to $1,000,000
in borrowing availability, and</p></li>
	<li>
	<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-left:0.5in;text-align:justify;margin-right:0in; margin-top:0in'>a Five year Term Note (the &#147;TI Loan&#148;) with an initial balance of&nbsp;
$2,000,000, of which $1,666,667 was outstanding as of September 30, 2009. </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'>If borrowings
under the line of credit exceed $500,000, the maximum amount of borrowing is limited
to the lesser of $1,000,000 or 70% of the eligible accounts receivable plus 40%
of the eligible inventory. &nbsp;Its terms require monthly interest payments at
either (i) the prime rate of interest (3.25% at September 30, 2009) plus 1.50%,
or (ii) three month LIBOR (0.287% at September 30, 2009) plus 2.50%, at our
discretion, based on outstanding borrowings.&nbsp; The line of credit expires
on November 1, 2009.&nbsp; We are charged an unused credit line fee of 0.25% per
annum payable quarterly on the average balance of the line of credit that is
not used. <font style="font-size: 10.0pt">&nbsp;</font>There was no outstanding
balance under the credit line as of September 30, 2009.&nbsp; Therefore, the
total eligible additional borrowing capacity under the line of credit as of September
30, 2009 was $1,000,000.</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 TI Loan had
an initial balance of $2,000,000.&nbsp; The borrowings from this term
commitment were used for construction of tenant improvements for our Irvine, California facility.&nbsp; Its terms require monthly principal and interest
payments over the 60-month life of the loan, based on outstanding
borrowings.&nbsp; The interest rate is fixed at 5.72% over the life of the
loan.&nbsp; There was a $1,666,667 outstanding balance under the TI Loan as of September
30, 2009.&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'>All assets of
the Company except our Carson City land and building secure the outstanding
borrowings under the Wells Fargo credit 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;text-autospace:
none'><i><u>Union Bank Mortgage</u></i></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'>In March 2006, we entered into a ten-year mortgage with Union Bank for
$1,650,000.&nbsp; The principal balance of the mortgage bears interest at a
fixed annual rate of 6.73%.&nbsp; Payments on the mortgage are $11,379 per
month (based on a 25 year amortization), with the balance of $1,291,666 in
principal due on April&nbsp;1, 2016.&nbsp; The mortgage is secured by our Carson City land and building.&nbsp; There was $1,552,331 in principal outstanding under
the mortgage as of September 30, 2009.</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'>There are
certain financial and non-financial covenants that the Company must meet to be
in compliance with the terms of the Wells Fargo credit facility and mortgage
with Union Bank.&nbsp; As of the quarter ended September 30, 2009, we were in compliance
with the Wells Fargo and Union Bank covenants.</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-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 6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; INCOME TAXES</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'>Deferred income taxes are provided on a liability method whereby deferred
tax assets and liabilities are recognized for temporary differences.&nbsp; Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases.&nbsp; Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.</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:center'>-
7 -</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&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";'>&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'>&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 in determining our provision for income taxes
and the recoverability of our deferred tax asset.&nbsp; Such determination is based primarily
on our historical taxable income, with some consideration given to our
estimates of future taxable income by jurisdictions in which we operate and the
period over which our deferred tax assets will be recoverable.&nbsp; Due to
cumulative taxable losses during the past three years, we recorded $2,241,000
valuation allowance against our deferred tax assets in the year ended June 30,
2009.&nbsp; As of September 30, 2009, the valuation allowance against our deferred
tax assets was approximately $2,206,000.</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'>As of September 30, 2009, pursuant to FASB ASC 740-10-25-6
(formerly FASB Interpretation No. 48, &quot;Accounting for Uncertainty in
Income Taxes&quot;), we have accrued $54,000 of uncertain tax positions related
to state income tax matters that 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;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 September 30, 2008, the Internal
Revenue Service settled its audit of our federal income tax returns for the fiscal
years ended June 30, 2004 through June 30, 2006.&nbsp; This settlement resulted in
the reversal of $41,000 of unrecognized tax benefits associated with Section
263A costs we reported, which reduced our tax expense by $6,000.&nbsp; During the
quarter ended March 31, 2009, we filed amended state returns for the fiscal
years ended June 30, 2004 through June 30, 2006 to report the related changes
to the Section 263A costs.&nbsp; The filing of the amended state tax returns
resulted in the reversal of $9,000 of unrecognized tax benefits associated with
the Section 263A costs we reported, which reduced our tax expense by $1,000.&nbsp;
Our remaining liability for uncertain tax positions, related to the fiscal
years ended June 30, 2005 through June 30, 2009 is $54,000 as of September 30,
2009.&nbsp; We have not identified any new unrecognized tax benefits.</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'>A
reconciliation of the beginning and ending amount of unrecognized tax benefits
is as follows (unaudited)::</p>

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

<table border="0" style="border-collapse: collapse" width="60%" id="table3">
	<tr>
		<td width="631">

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;page-break-after:avoid'>&nbsp;Balance
at July 1, 2009</p></td>
		<td align="right">$&nbsp; 54,000</td>
	</tr>
	<tr>
		<td width="631" bgcolor="#CBDBD1">

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;page-break-after:avoid'>
Additions based on tax positions related to the current year</p></td>
		<td align="right" bgcolor="#CBDBD1">0</td>
	</tr>
	<tr>
		<td width="631">

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;page-break-after:avoid'>
Additions for tax positions of prior years</p></td>
		<td align="right">0</td>
	</tr>
	<tr>
		<td width="631" bgcolor="#CBDBD1">

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;page-break-after:avoid'>
Reductions for tax positions of prior years</p></td>
		<td align="right" bgcolor="#CBDBD1">0</td>
	</tr>
	<tr>
		<td width="631">

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

		</td>
		<td align="right">0</td>
	</tr>
	<tr>
		<td width="631" bgcolor="#CBDBD1">

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

		</td>
		<td align="right" bgcolor="#CBDBD1">------------</td>
	</tr>
	<tr>
		<td width="631">

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify'>
Balance at September 30, 2009</p></td>
		<td align="right">$&nbsp; 54,000</td>
	</tr>
</table>


<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 recognize
accrued interest and penalties related to unrecognized tax benefits in income
tax expense. As of September 30, 2009, we had
approximately $13,000 in accrued interest and penalties which is included as a
component of the $54,000 unrecognized tax benefit noted above. The liability
for the payment of interest and penalties has increased by approximately $500
for the three months ended September 30, 2009.&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'>Pro-Dex and its
subsidiaries are subject to U.S. federal income tax, as well as income tax of
multiple state tax jurisdictions. We are currently
open to audit under the statute of limitations by the Internal Revenue Service
for the years ended June 30, 2007 and June 30, 2008.&nbsp; Our state income tax
returns are open to audit under the statute of limitations for the years ended
June 30, 2005 through June 30, 2008. &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'>&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-align:center'>-
8 -</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&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'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-autospace:none'><b>NOTE 7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SHARE-BASED COMPENSATION</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'>&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'>Share-based compensation expense pursuant to
FASB ASC 718-10-10-2 (formerly SFAS 123(R)) for the three months ended September
30, 2009 and 2008 was $35,000 and $42,000, respectively, which was related to
stock options and restricted stock grants.&nbsp; Share-based compensation expense
reduced our 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-indent:.5in;text-autospace:
none'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=651
 style='width:90%;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;text-autospace:none'><b>&nbsp;</b></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>
  <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:12.7pt'>
  <td valign=bottom style='background:#FFFFFF;
  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; background:#FFFFFF; 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;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Three&nbsp;months&nbsp;ended&nbsp;September&nbsp;30,</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='background:white;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; background:white; 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-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>(unaudited)</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#FFFFFF; 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;
  background:#FFFFFF;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;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2009</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;
  background:#FFFFFF;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>
 </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;
  background:white;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-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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; background:white; 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; background:#CBDBD1; 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; background:#CBDBD1; 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-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>6,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>13,000&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; background:white; 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; background:white; 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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>29,000&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>29,000&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Subtotal&nbsp;expense</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>35,000&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>42,000&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; background:white; 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; background:white; 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;
  background:white;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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(12,000)</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; background:#CBDBD1; 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 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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>35,000&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; background:#CBDBD1; 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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>30,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:7.5pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:white; 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; background:white; 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; background:white; 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; background:white; 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 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;
  background:white;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='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.00&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.00&nbsp;</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; background:#CBDBD1; 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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.00&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.00&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-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 September 30, 2009, there was $42,000 of total unrecognized compensation
cost related to 77,250 non-vested outstanding stock options with a per share
weighted average value of $1.00.&nbsp; The unrecognized expense is anticipated to be
recognized on a straight-line basis over a weighted average period of 0.8 years.&nbsp;
The following is a summary of stock option activity in the three months ending September
30, 2009 and 2008 (unaudited):</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'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=688
 style='width:100%;border-collapse:collapse'>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#FFFFFF; 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;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2009</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;
  background:#FFFFFF;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; background:#FFFFFF; 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>
 </tr>
 <tr style='height:25.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;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='background:white;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; background:white; 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='background:white;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='background:white;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; background:white; 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;background:#CBDBD1;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; background:#CBDBD1; 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; background:#CBDBD1; 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='background:#CBDBD1;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; background:#CBDBD1; 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;
  background:#CBDBD1;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; background:white; 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;fiscal&nbsp;year&nbsp;(7/1)</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>933,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;background:white;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.42&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,109,500&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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>
 </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; background:#CBDBD1; 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='background:#CBDBD1;padding:
  1.1pt;'>
  <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 colspan=2 valign=bottom style='background:#CBDBD1;
  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>
  <td valign=bottom style='background:#CBDBD1;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='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>30,000&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.96&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; background:white; 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='background:white;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='background:white;
  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='background:white;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='background:white;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-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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:14.9pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:#CBDBD1; 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; background:#CBDBD1; 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:1.0pt solid windowtext; background:#CBDBD1; 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='background:#CBDBD1;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; background:#CBDBD1; 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;
  background:#CBDBD1;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; background:white; 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;period&nbsp;(9/30)</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>948,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;background:white;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.40&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,139,500&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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>
 </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; background:#CBDBD1; 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='background:#CBDBD1;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='background:#CBDBD1;
  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='background:#CBDBD1;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='background:#CBDBD1;
  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; background:#CBDBD1; 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; background:white; 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;period&nbsp;(9/30)</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>870,750&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.42&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>992,750&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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; background:#CBDBD1; 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='background:#CBDBD1;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='background:#CBDBD1;
  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='background:#CBDBD1;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='background:#CBDBD1;
  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; background:#CBDBD1; 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; background:white; 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='background:white;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='background:white;
  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='background:white;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='background:white;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; background:white; 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;background:#CBDBD1;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;period</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; 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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.19&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:#CBDBD1;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>
</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-align:justify;text-indent:.5in;text-autospace:
none'>The intrinsic value indicated in the table below is based on the closing
stock price at September 30, 2009 of $0.59 per common share.&nbsp; The following
table summarizes information regarding options outstanding and options
exercisable at September 30, 2009 (unaudited):</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=684
 style='width:100%;border-collapse:collapse'>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:medium none;
  background:#FFFFFF;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;
  background:#FFFFFF;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;
  background:#FFFFFF;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;
  background:#FFFFFF;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; background:#FFFFFF; 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; background:#FFFFFF; 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:24.85pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:white; 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='background:white;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='background:white;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;
  background:white;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='background:white;
  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='background:white;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='background:white;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; background:white; 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;
  background:white;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:14.1pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:#CBDBD1; 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='background:#CBDBD1;
  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='background:#CBDBD1;
  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='background:#CBDBD1;
  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='background:#CBDBD1;
  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='background:#CBDBD1;
  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='background:#CBDBD1;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='background:#CBDBD1;
  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; background:#CBDBD1; 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:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;background:white;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; background:white; 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; background:white; 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; background:white; 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; background:white; 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='background:white;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; background:white; 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; background:white; 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;
  background:white;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:14.1pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:#CBDBD1; 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;$0.81</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>311,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>4.1&nbsp;years</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.65&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>19,200&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>290,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.67&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>16,500&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>$1.00&nbsp;to&nbsp;$1.56</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>357,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>4.7&nbsp;years</p>
  </td>
  <td colspan=2 valign=bottom style='background:white;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.33&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='background:white;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='background:white;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='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>307,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='background:white;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.31&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;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; background:white; 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:14.05pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:#CBDBD1; 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;$2.18</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>190,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>1.9&nbsp;years</p>
  </td>
  <td colspan=2 valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2.07&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  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='background:#CBDBD1;
  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='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>190,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2.07&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  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; background:#CBDBD1; 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:16.6pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:white; 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;$3.30</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>90,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>5.8&nbsp;years</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2.89&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; 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='background:white;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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>83,750&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2.91&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>948,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>4.1&nbsp;years</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.40&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>19,200&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>870,750&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.46&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; background:#CBDBD1; 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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>16,500&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'><b>&nbsp;</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>
- - 9 -</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&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";'>&nbsp;</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'>&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 in the three months
ending September 30, 2009 and 2008, respectively (unaudited):</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>

<table class=MsoNormalTable border=0 cellpadding=0 width=784
 style='width:100%;border-collapse:collapse'>
 <tr style='height:13.0pt'>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:medium none;
  background:#FFFFFF;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;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>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; background:#FFFFFF; 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; background:#FFFFFF; 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>
 </tr>
 <tr style='height:26.05pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:white; 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='background:white;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; background:white; 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='background:white;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='background:white;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;
  background:white;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:13.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;background:#CBDBD1;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; background:#CBDBD1; 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; background:#CBDBD1; 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='background:#CBDBD1;
  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; background:#CBDBD1; 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;
  background:#CBDBD1;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:13.05pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:white; 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;fiscal&nbsp;year&nbsp;(7/1)</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>85,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;background:white;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.38&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>170,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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:13.0pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:#CBDBD1; 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='background:#CBDBD1;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='background:#CBDBD1;
  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='background:#CBDBD1;
  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='background:#CBDBD1;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-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; 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:13.0pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;&nbsp;&nbsp;&nbsp;Vested</p>
  </td>
  <td valign=bottom style='background:white;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='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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:15.3pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:#CBDBD1; 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; background:#CBDBD1; 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:1.0pt solid windowtext; background:#CBDBD1; 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='background:#CBDBD1;
  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; background:#CBDBD1; 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;
  background:#CBDBD1;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:13.05pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:white; 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;period&nbsp;(9/30)</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>85,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;background:white;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1.38&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>170,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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:13.0pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:#CBDBD1; 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='background:#CBDBD1;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='background:#CBDBD1;
  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='background:#CBDBD1;
  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='background:#CBDBD1;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; background:#CBDBD1; 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:13.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;background:white;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;period&nbsp;(9/30)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; 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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:white;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>
</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>

<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 September 30, 2009, there was $48,875 of total unrecognized
compensation cost related to 85,000 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 0.4 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>NOTE 8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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 represents greater
than 10% of our total revenues) in the three months ended September 30, 2009 and
2008. </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=523
 style='width:65%;border-collapse:collapse'>
 <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; background:#FFFFFF; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=9 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Three&nbsp;months&nbsp;ended&nbsp;Septmeber&nbsp;30&nbsp;(unaudited),</p>
  </td>
 </tr>
 <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; background:white; 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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2009</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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;
  background:white;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>
 </tr>
 <tr style='height:15.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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; background:#CBDBD1; 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; background:#CBDBD1; 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; background:#CBDBD1; 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; background:#CBDBD1; 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; background:#CBDBD1; 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;
  background:white;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='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;background:white;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,050,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>508,000&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; background:white; 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='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,046,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>409,000&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; background:#CBDBD1; 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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,522,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,130,000&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; background:#CBDBD1; 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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,408,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>978,000&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-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 9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; COMMITMENTS AND CONTINGENCIES</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'>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; Other than the case pending with the Orange County Water District
discussed below, management is not aware of any material actual, pending or
threatened litigation at this time.</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 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, et al.</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.&nbsp; We moved out of this Santa Ana site in April, 2008 and have no
remaining operations there.</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:center'>
- - 10-</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&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";'>&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: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 are 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 indeterminable event that we
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'>One of our past
insurers has committed to pay most of our defense costs for the lawsuit, while
reserving its rights as to whether it will cover any damages awarded against us,
or any settlement payment to which Pro-Dex agrees to resolve the lawsuit, under
past policies issued to us for a three-year period, March 31, 1983 to March 31,
1986.&nbsp; The policies of these years have&nbsp;occurrence payment limits of
$500,000.&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>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'>Overall, the
OCWD complaint remains vague, the OCWD is in an early stage of its remedial
activities in the South Basin, the lawsuit is in the early stages of discovery,
one of our insurers has committed to pay most defense costs and has reserved
rights under one&nbsp;three-year set of&nbsp;policies and is continuing to
consider extending coverage to us under other past policies, and any recovery
the OCWD may gain through the lawsuit is likely to be allocated among several
defendants.&nbsp; Therefore, our liabilities, 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";'>&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 10. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FAIR VALUE MEASUREMENTS</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'><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b><i>Fair Value
Measurements</i>&nbsp;&#151; Effective July&nbsp;1, 2008, the Company adopted FASB ASC 820-10-35-19 (formerly Statement of
Financial Accounting Standards No.&nbsp;157, &#147;Fair Value Measurements&#148;)&nbsp;for
financial assets and liabilities measured at fair value on a recurring basis. &nbsp;ASC
820-10-35-19 defines fair value, establishes a framework for measuring fair
value in accordance with generally accepted accounting principles, and expands
disclosures about fair value measurements. &nbsp;In addition to expanding the
disclosures surrounding fair value measurements, ASC 820-10-35-19 indicates
that fair value represents the amount that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants. As such, fair value is determined based upon assumptions that
market participants would use in pricing an asset or liability. As a basis for
considering such assumptions, ASC 820-10-35-19 establishes a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value as
follows: </p>

<ul>
	<li>
	<p style='margin-bottom:.0001pt;line-height:12.05pt;text-autospace:none;font-size:12.0pt;font-family:"HelveticaNeue LT 55 Roman";text-align:justify;margin-right:0in; margin-top:0in'>
	<font face="Times New Roman">Level 1 - Valuations based on unadjusted quoted prices in
active markets for identical assets or liabilities that the Company has the
ability to access. </font></p></li>
	<li>
	<p style='margin-bottom:.0001pt;line-height:12.05pt;text-autospace:none;font-size:12.0pt;font-family:"HelveticaNeue LT 55 Roman";text-align:justify;margin-right:0in; margin-top:0in'>
	<font face="Times New Roman">Level 2 - Valuations
based on quoted prices in markets that are not active or for which all
significant inputs are observable, either directly or indirectly. </font></p>
	</li>
</ul>
<p style='margin:0in;margin-bottom:.0001pt;line-height:12.05pt;text-autospace:none;font-size:12.0pt;font-family:"HelveticaNeue LT 55 Roman";margin-left:.5in;text-align:justify;text-indent:-.25in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&nbsp;-
11 -</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&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>
<ul>
	<li>
	<p style='margin-bottom:.0001pt;line-height:12.05pt;text-autospace:none;font-size:12.0pt;font-family:"HelveticaNeue LT 55 Roman";text-align:justify;margin-right:0in; margin-top:0in'>
	<font face="Times New Roman">Level 3 - Valuations
based on inputs that are unobservable and significant to the overall fair value
measurement.</font></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'>In many cases, a
valuation technique used to measure fair value includes inputs from multiple
levels of the fair value hierarchy described above. The lowest level of
significant input determines the placement of the entire fair value measurement
in the hierarchy. </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;text-autospace:
none'>The following valuation methodology was used for the Company&#146;s assets to
measure fair value at September 30, 2009:</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'><i>Cash and cash equivalents:&nbsp; </i>The carrying value of cash and cash
equivalents is considered to be representative of their fair values based on
the short term nature of these instruments.&nbsp; As such these investments are
classified within level 1 of the valuation hierarchy.</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'><i>Goodwill and intangible assets:&nbsp; </i>The carrying value of these
assets is based on valuations based on inputs that are unobservable and
significant to the overall fair value measurement.&nbsp; As such these investments
are classified within level 3 of the valuation hierarchy.</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'>Although the
methods above may produce a fair value calculation that may not be indicative
of the net realizable value or reflective of future fair values, the company
believes its valuation methods are appropriate.&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'>The use of different methodologies or assumptions to determine the fair
value of certain financial instruments could result in a different fair value
measurement at the reporting date.</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 following fair value hierarchy table presents information about the
company&#146;s assets measured at fair value on a recurring basis as of September
30, 2009:</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-autospace:none'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=523
 style='width:75%;border-collapse:collapse'>
 <tr style='height:12.25pt'>
  <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; background:#FFFFFF; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Description</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;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Level&nbsp;1</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;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Level&nbsp;2</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;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Level&nbsp;3</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; background:#FFFFFF; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Total</p>
  </td>
 </tr>
 <tr style='height:7.95pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:white; 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='background:white;
  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='background:white;
  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='background:white;
  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; background:white; 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:12.25pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <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='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,378,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,378,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:7.95pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:white; 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='background:white;
  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='background:white;
  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='background:white;
  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; background:white; 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:12.25pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Goodwill</p>
  </td>
  <td colspan=2 valign=bottom style='background:#CBDBD1;
  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='background:#CBDBD1;
  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='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,997,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; 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>
 <tr style='height:7.95pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:white; 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='background:white;
  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='background:white;
  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='background:white;
  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; background:white; 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:12.25pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Intangibles&nbsp;-&nbsp;Patents</p>
  </td>
  <td colspan=2 valign=bottom style='background:#CBDBD1;
  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='background:#CBDBD1;
  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='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>144,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; 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>
 </tr>
 <tr style='height:7.95pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; background:white; 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; background:white; 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; background:white; 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; background:white; 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;
  background:white;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:12.25pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;background:#CBDBD1;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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:medium none;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,378,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; 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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,141,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4,519,000&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-autospace:none'>The following
table presents a summary of changes in the fair value of the company&#146;s level 3
assets for the three months ended September 30, 2009:</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=396
 style='width:60%;border-collapse:collapse'>
 <tr style='height:12.25pt'>
  <td valign=bottom style='border-left:1px solid #000000; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; background:#FFFFFF; padding:1.1pt; '>
  &nbsp;</td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; background:#FFFFFF; padding:1.1pt; '>
  &nbsp;</td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; background:#FFFFFF; padding:1.1pt; '>
  <b>Carrying&nbsp;Value</b></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;
  background:#FFFFFF;padding:1.1pt;'>
  &nbsp;</td>
 </tr>
 <tr style='height:12.25pt'>
  <td valign=bottom style='border-left:1px solid #000000; border-right:medium none; border-bottom:medium none; border-top:medium none windowtext; background:#FFFFFF; padding:1.1pt; '>
  <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>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:medium none windowtext; background:#FFFFFF; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";' align="center">6/30/2009</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:medium none windowtext; background:#FFFFFF; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";' align="center">Amortization</p>
  </td>
  <td valign=bottom style='border-top:medium none windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";' align="center">9/30/2009</p>
  </td>
 </tr>
 <tr style='height:12.25pt'>
  <td valign=bottom style='border-left:1px solid #000000; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt'>
  Goodwill</td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt' align="right">
  $&nbsp; &nbsp;2,997,000</td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt' align="right">
  $&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</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;
  background:#CBDBD1;padding:1.1pt' align="right">
  $&nbsp; &nbsp;&nbsp;2,997,000</td>
 </tr>
 <tr style='height:12.25pt'>
  <td valign=bottom style='border-left:1px solid #000000; border-right:medium none; border-bottom:medium none; border-top:medium none windowtext; background:#FFFFFF; padding:1.1pt; '>
  Intangibles&nbsp;-&nbsp;Patents</td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:medium none windowtext; background:#FFFFFF; padding:1.1pt; ' align="right">
  $&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;147,000</td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:medium none windowtext; background:#FFFFFF; padding:1.1pt; ' align="right">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>$&nbsp;&nbsp; (3,000)</p>
  </td>
  <td valign=bottom style='border-top:medium none windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1px solid windowtext;
  background:#FFFFFF;padding:1.1pt;' align="right">
  $&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;144,000&nbsp;</td>
 </tr>
 <tr style='height:12.25pt'>
  <td valign=bottom style='border-left:1px solid #000000; border-right:medium none; border-bottom:1px solid #000000; border-top:medium none windowtext; background:#CBDBD1; padding:1.1pt'>
  Total</td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:1px solid #000000; border-top:medium none windowtext; background:#CBDBD1; padding:1.1pt' align="right">
  $&nbsp; &nbsp;3,144,000</td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:1px solid #000000; border-top:medium none windowtext; background:#CBDBD1; padding:1.1pt' align="right">
  $&nbsp; &nbsp;(3,000)</td>
  <td valign=bottom style='border-top:medium none windowtext;
  border-left:medium none;border-bottom:1px solid #000000;border-right:1px solid windowtext;
  background:#CBDBD1;padding:1.1pt' align="right">
  $&nbsp;&nbsp; 3,141,000&nbsp;</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-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'>&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:center'>&nbsp;-
12 -</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&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-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>NOTE 11. SUBSEQUENT EVENTS</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'>We have evaluated events or transactions that
occurred after the balance sheet date of September 30, 2009 through October 29,
2009, which is the date the financial statements were issued.&nbsp; There were no
subsequent events identified that required adjustment to 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;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'>On October 27, 2009, we entered into an
agreement to extend the Credit Agreement and Revolving Line of Credit Note
through November 1, 2010.&nbsp; The terms of the note remained the same except the
unused line fee was increased from 0.25% to 1.5% beginning November 1, 2009. </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'><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 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations<a
name=MDandA></a></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";'><b>COMPANY OVERVIEW</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;text-autospace:
none'>The following discussion and analysis provides information that our
management believes is relevant to an assessment and understanding of our
results of operations and financial condition for each of the three month
periods ended September 30, 2009 and 2008, 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. &nbsp;The cautionary statements
included herein should be read as being applicable to all related
forward-looking statements wherever they may appear.&nbsp; Our actual future results
could differ materially from those discussed herein.&nbsp; Our critical accounting
policies relate to inventory valuation for slow moving items, impairment of
goodwill, warranty reserves, and recoverability of deferred income taxes.</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'>Except for the historical information contained herein, the matters
discussed in this Quarterly Report on Form 10-Q, including discussions of our
product development plans, business strategies and market factors influencing
our results, are forward-looking statements that involve certain risks and
uncertainties. Actual results may differ from those anticipated by us as a
result of various factors, both foreseen and unforeseen, including, but not
limited to, our ability to continue to develop new products and increase
systems sales in markets characterized by rapid technological evolution,
consolidation within our target marketplace and among our competitors, and
competition from larger, better capitalized competitors.&nbsp; Many other economic,
competitive, governmental and technological factors could impact our ability to
achieve our goals.&nbsp; Interested persons are urged to review the risks described
herein, as well as in our other public disclosures and filings with the
Securities and Exchange Commission.&nbsp; We refer you to the risk factors and
cautionary language contained in our reports filed with the Securities and
Exchange Commission from time to time, including, but not limited to, those
risks and uncertainties which may be listed in our Annual Report on Form 10-K.</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'>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 power
and control products used in medical, aerospace, military, research and
industrial applications.&nbsp; Experience in multi-axis motion control, fractional
horsepower motors and rotary drive systems allows us to develop products that
require high precision in harsh environments.&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;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. &nbsp;The 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'>&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-autospace:none'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>- 13 -</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&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-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;text-indent:.5in;text-autospace:
none'>Pro-Dex&#146;s principal headquarters are located at 2361 McGaw Avenue, Irvine, California 92614 and our phone number is 949-769-3200.&nbsp; Our Internet address is  www.pro-dex.com .&nbsp; Our annual reports on Form
10-K quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to
those reports and other Securities and Exchange Commission (&#147;SEC&#148;) 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  www.sec.gov and company specific information at<u> </u> www.sec.gov <u>/edgar/searchedgar/companysearch.html</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";'><b>Critical Accounting Estimates and Judgments</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";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 our 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";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'>&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; <b>Inventory</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;&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.&nbsp;&nbsp; We determine a reduced market value of our inventory based on the age
of inventory on hand.&nbsp; We define &#147;aging of inventory&#148; as inventory that exceeds
an estimated 12 months of usage and exceeds orders on hand.&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'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Accounts
Receivable </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 determine the reserve for our accounts receivable by examining the
aging of the receivables.&nbsp; We define &#147;aging of receivables&#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 old, 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";margin-left:.75in;text-align:justify;text-indent:
..25in'><i>&nbsp;</i></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:justify;text-indent:.5in'><b>Goodwill</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
identifies two reporting units for purposes of its annual goodwill impairment
testing, based on the ASC 350-10-05-5 (formerly
SFAS No.&nbsp;142) requirements arising from its acquisitions of Micro Motors
and Astromec. The Company&#146;s Carson City reporting unit corresponds to the
operations resulting from the Astromec acquisition, while its Irvine reporting
unit corresponds to the operations resulting from the Micro Motors acquisition.&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'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>- 14 -</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&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-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'>We monitor
current market conditions and review for potential triggering events quarterly
to determine if there is a need for interim impairment testing. We did not
determine that a triggering event for the Astromec and Micro Motors goodwill
occurred in the past 12 months.&nbsp; Our standard annual impairment testing is done
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'>&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 determining
if a triggering event has occurred, we consider not only expectations for
growth in the entire US economy, but also expectations for regional growth
specific to our sales markets and specific to our industry and product lines. &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'><b>Warranties</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 warranty accrual is determined by reviewing the return rates and
warranty repair costs for warranty eligible products.&nbsp; We accrue an amount of expected
repair cost based on these factors projected for the future applicable warranty
period.&nbsp; If actual return rates or repair costs differ from our estimates,
actual results could vary from the projected accrual.&nbsp; The repair return rates
and cost assumptions are reviewed quarterly. </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-indent:.5in;text-autospace:none'><b>Property,
Plant, Equipment &amp; Leasehold Improvements, Net</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; Property, plant and equipment is recorded at
cost and consists of the following: </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;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=495
 style='width:75%;border-collapse:collapse'>
 <tr style='height:12.25pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#FFFFFF; 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; background:#FFFFFF; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>9/30/2009</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;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>6/30/2009</p>
  </td>
 </tr>
 <tr style='height:12.25pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Unaudited</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Audited</p>
  </td>
 </tr>
 <tr style='height:12.25pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>757,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; 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:12.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Building</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,470,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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:12.25pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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 valign=bottom style='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,284,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,283,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.25pt'>
  <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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Equipment</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>6,666,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>6,620,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.25pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>11,177,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>11,130,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.25pt'>
  <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; background:white; 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 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(5,331,000)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(5,149,000)</p>
  </td>
 </tr>
 <tr style='height:12.25pt'>
  <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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total&nbsp;property,&nbsp;pland&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>5,846,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>5,981,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<h2 style='margin:0in;margin-bottom:.0001pt;text-align:center;page-break-after:avoid;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman";font-weight:normal;text-decoration:underline;'>&nbsp;</h2>

<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-indent:.5in;text-autospace:none'>Depreciation is
provided using the straight-line method over the estimated useful lives of the
assets as follows: Building - 39 years, equipment - 3 to10 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-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'><b>Stock-Based Compensation</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'>&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 FASB ASC 718-10-10-10
(formerly 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. </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";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Income Taxes</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'>&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, inventory reserves and net operating loss carry forwards.&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;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>- 15 -</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&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-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'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Significant
management judgment is required in determining our provision for income taxes
and the recoverability of our deferred tax asset.&nbsp; Such determination is based primarily
on our historical taxable income, with some consideration given to our
estimates of future taxable income by jurisdictions in which we operate and the
period over which our deferred tax assets will be recoverable.&nbsp; We carry a valuation
allowance against our deferred tax assets and changes in this allowance are reflected
through income tax expense.&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";'><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; 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.&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";text-autospace:ideograph-numeric ideograph-other'>Our
revenue is derived from five main customer types.&nbsp; The proportion of total
sales (including repair sales) to each customer type and sales by location are
noted in the tables below (unaudited):</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;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="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=506
 style='width:75%;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; background:#FFFFFF; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</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;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Three&nbsp;months&nbsp;Ended&nbsp;September&nbsp;30,</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;
  background:white;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;($'000)</p>
  </td>
  <td colspan=3 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2009</p>
  </td>
  <td colspan=3 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2008</p>
  </td>
 </tr>
 <tr style='height:15.2pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Dental</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>592&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>11%&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; background:#CBDBD1; 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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>774&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>14%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.2pt'>
  <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; background:white; 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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,890&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;
  background:white;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 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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,072&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>54%&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; background:#CBDBD1; 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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>489&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,005&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>18%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.2pt'>
  <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; background:white; 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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>613&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>11%&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>767&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>14%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.2pt'>
  <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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Government&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>49&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;
  background:#CBDBD1;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 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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>38&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;
  background:#CBDBD1;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:15.2pt'>
  <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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total&nbsp;Sales</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; 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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>5,633&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>100%&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; background:white; 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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>5,656&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>100%&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;text-autospace:ideograph-numeric ideograph-other'>&nbsp;</p>

<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'>The majority of the Irvine-based sales include medical 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; In Beaverton, we 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; Our Carson City products include high reliability fractional horsepower DC motors designed for
harsh environments, primarily for the aerospace and medical markets.</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 hold the following three independently verified certifications: ISO
9001:2000, ISO 13485 revised 1998, and Medical Device Directive 93\42\EEC Annex
II company.</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 within sixty
days.&nbsp; At September 30, 2009, we had a backlog, including orders for delivery
beyond sixty days, of $8.1 million compared with a backlog of $8.0 million at September
30, 2008 and $9.9 million at June 30, 2009.&nbsp; We expect to ship most of our
backlog in fiscal year 2010 and the remainder in fiscal years 2011 and 2012.&nbsp;
The backlog compared to September 30, 2008 is relatively flat and is down
compared to June 30, 2009 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 such bookings due
to the timing of major new product launches.&nbsp; Similarly, we do not typically
experience seasonal fluctuations in our shipments and revenues.&nbsp; </p>

<p style='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-align:center'>- 16 -</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&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>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>For the Three-Month periods
ended September 30, 2009 and 2008</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";'><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b>The following table sets forth the
percentage of net revenues represented by each item in our Consolidated
Statements of Operations. </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>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=644
 style='width:90%;border-collapse:collapse'>
 <tr style='height:14.9pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#FFFFFF; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</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;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Three&nbsp;Months&nbsp;Ended&nbsp;September&nbsp;30,&nbsp;(unaudited)</p>
  </td>
 </tr>
 <tr style='height:14.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>(in&nbsp;thousands)</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2009</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;
  background:white;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>
 </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;
  background:#CBDBD1;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='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>5,633&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>100%&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>5,656&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>100%&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;
  background:white;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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,759&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>67%&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3,902&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;
  background:white;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>
 </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;
  background:#CBDBD1;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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,874&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>33%&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,754&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; background:#CBDBD1; padding:1.1pt; '>
  <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:14.85pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:white;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; background:white; 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; background:white; 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; background:white; 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; background:white; 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:14.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,016&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>18%&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,179&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>21%&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;
  background:white;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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>621&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>11%&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>731&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>13%&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;
  background:#CBDBD1;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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>237&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4%&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(156)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; 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: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;
  background:white;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; background:white; 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; background:white; 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; background:white; 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; background:white; 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:14.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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;expense</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>50&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; background:#CBDBD1; 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 colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>59&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; background:#CBDBD1; 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: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;
  background:white;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;
  background:white;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;
  background:white;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;
  background:white;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;
  background:white;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:14.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Earnings&nbsp;before&nbsp;provision&nbsp;for&nbsp;income&nbsp;taxes</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>187&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; background:#CBDBD1; 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>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(215)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-4%&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;
  background:white;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; background:white; 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; background:white; 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; background:white; 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; background:white; 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:14.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4&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;
  background:#CBDBD1;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>
  <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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(97)</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-2%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.6pt'>
  <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; background:white; 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:2.25pt double windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>183&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>3%&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(118)</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>-2%&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'><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>Net Sales.</b>&nbsp;
Consolidated sales decreased $23,000 from $5,656,000 to $5,633,000 for the
quarter ended September 30, 2009 compared to the quarter ended September 30, 2008.&nbsp;
The decrease was primarily due to a reduction in dental sales and a substantial
decrease in industrial motion control sales as that industry has been severely
negatively impacted by the current economic climate. &nbsp;The offsetting increase
in medical sales was due to the increased volume to a single medical customer as
their volume returned to their historic average.&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'>Although
selective price increases and decreases were implemented in response to market
conditions, the majority of the sales changes for each product line are 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'>&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>.&nbsp; Our consolidated gross profit for the quarter ended
September 30, 2009 increased $120,000 or 7% compared to the same quarter in the
previous year.&nbsp; Gross profit as a percentage of sales was 2% higher at 33% for
the quarter ended September 30, 2009 compared to 31% for the quarter ended September
30, 2008. Net gross profit margins were higher than the same quarter in the
previous year due to a favorable sales mix that included a higher proportion of
high margin medical products and fewer lower margin dental products.&nbsp; The
margin benefit of the medical products was offset slightly by minor reductions
in the industrial motion control sales.&nbsp; Gross profit and gross profit as a
percentage of sales were as follows (unaudited):</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:center'>- 17 -</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&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-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>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width=492
 style='width:75%;border-collapse:collapse'>
 <tr style='height:13.0pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#FFFFFF; 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-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; background:#FFFFFF; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Three&nbsp;Months&nbsp;Ended&nbsp;September&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;
  background:#FFFFFF;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:13.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2009</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; background:white; 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:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;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:13.0pt'>
  <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; background:#CBDBD1; 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 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,874,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,754,000&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>7%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.0pt'>
  <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; background:white; padding:1.1pt; '>
  <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 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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>33%&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>31%&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;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'><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'><b>Selling, General and Administrative Costs (S, G&amp;A)</b>.&nbsp;
Consolidated S, G&amp;A costs decreased $164,000 or 14% to $1,016,000 for the
quarter ended September 30, 2009 from $1,180,000 for the quarter ended September
30, 2008.&nbsp; The $55,000 decrease in selling cost is mainly due to lower advertising
product promotion and trade show fees. Operational general and administrative
costs were lower by $109,000 due to $45,000 in lower labor and related expenses,
$30,000 in decreased expense relating to Sarbanes Oxley compliance and $22,000
in lower amortization expense related to the write down of the Intra-Flow
intangible patent asset .&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-indent:.5in;text-autospace:
none'>As a percentage of sales, S, G&amp;A expenses decreased to 18% from 21%
of sales for the three months ended September 30, 2009 and 2008 respectively.&nbsp;
S, G&amp;A costs were as follows (unaudited):</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-autospace:none'>&nbsp;</p>

<table class=MsoNormalTable border=0 cellpadding=0 width=660
 style='width:90%;border-collapse:collapse'>
 <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; background:#FFFFFF; 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;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Three&nbsp;Months&nbsp;Ended&nbsp;September&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;
  background:#FFFFFF;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:15.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2009</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;
  background:white;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:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;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:15.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Selling</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>289,000&nbsp;</p>
  </td>
  <td valign=bottom style='background:#CBDBD1;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>344,000&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(16%)</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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>General&nbsp;and&nbsp;administrative</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>727,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>836,000&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(13%)</p>
  </td>
 </tr>
 <tr style='height:15.1pt'>
  <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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Total&nbsp;Sales&nbsp;General&nbsp;&amp;&nbsp;Administrative</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,016,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,180,000&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(14%)</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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Sales&nbsp;General&nbsp;&amp;&nbsp;Administrative&nbsp;Percentage&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>18%&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>21%&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
</table>

<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'><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>Research and
Development (R&amp;D) Costs</b>. &nbsp;Research and development cost decreased
$110,000 to $621,000 for the quarter ended September 30, 2009 from $731,000 for
the quarter ended September 30, 2008, a decrease of 15%.&nbsp; The decrease was due
mainly to $99,000 in lower labor and related costs and $9,000 in reduced small
motor development costs.&nbsp; Research and development costs were as follows
(unaudited):</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=652
 style='width:90%;border-collapse:collapse'>
 <tr style='height:15.4pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#FFFFFF; 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;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>Three&nbsp;Months&nbsp;Ended&nbsp;September&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;
  background:#FFFFFF;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:15.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2009</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;
  background:white;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:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;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:15.4pt'>
  <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; background:#CBDBD1; 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 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>621,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>731,000&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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(15%)</p>
  </td>
 </tr>
 <tr style='height:15.4pt'>
  <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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Research&nbsp;&amp;&nbsp;Development&nbsp;as&nbsp;a&nbsp;Percentage&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>11%&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>13%&nbsp;</p>
  </td>
  <td valign=bottom style='background:white;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-indent:.5in'>&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'><b>Operating
Profit (loss)</b>.&nbsp; Our resulting consolidated operating profit for the
quarter ended September 30, 2009 increased to $237,000 compared to an operating
loss of $156,000 for the same quarter in the previous year.&nbsp; The increase in
operating profit was due to a better mix of higher margin revenue and, as
previously described, lower S, G&amp;A and R&amp;D expenses.&nbsp; Operating profit
as a percentage of sales increased to 4% for the quarter ended September 30,
2009 compared to -3% for the quarter ended September 30, 2008.&nbsp; Operating
profit and margin were as follows (unaudited): </p>

<table class=MsoNormalTable border=0 cellpadding=0 width=636
 style='width:90%;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;text-indent:.5in;
  text-autospace:none'><b>&nbsp;</b></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>
  <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:15.2pt'>
  <td colspan=5 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#FFFFFF; padding:1.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>Three&nbsp;Months&nbsp;Ended&nbsp;September&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;
  background:#FFFFFF;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:15.2pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2009</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;
  background:white;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:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;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:15.2pt'>
  <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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Operating&nbsp;Profit&nbsp;(Loss)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>237,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>(156,000)</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>N/A&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.2pt'>
  <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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Operating&nbsp;Profit&nbsp;(Loss)&nbsp;as&nbsp;a&nbsp;Percentage&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4%&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;
  background:white;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>
  <td valign=bottom style='background:white;padding:
  1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
  </td>
 </tr>
</table>

<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;&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>Royalties and Other Income. </b>&nbsp;We earned and received $1,000 royalty
income in the quarter ended September 30, 2009, compared to $1,600 in royalty income
in the same period during the prior year.&nbsp; We had no &#147;Other Income&#148; in either
period.</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:center'>- 18 -</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&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-align:justify;text-indent:.5in;text-autospace:
none'><b>Net Interest Expense. </b>&nbsp;Net interest expense for the quarter ended September
30, 2009 was $51,000 compared to $61,000 in the quarter ended September 30, 2008
due to the lower debt levels.</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'><b>Income Tax Provision</b>. Our estimated effective combined federal and
state tax rate on income from operations for the quarter ended September 30,
2009 resulted in a 2% provision of earnings before tax compared to a 45% credit
of earnings before tax for the quarter ended September 30, 2008.&nbsp; The
difference in the 2009 rate is due to the reduction of the deferred tax asset valuation
allowance previously against our current and long term deferred tax assets. The
deferred tax valuation allowance is more fully described in Note 6 of the
accompanying Unaudited Condensed Consolidated Financial Statements, Income Taxes.&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;text-autospace:
none'><b>Net Income/(Loss).</b>&nbsp; Our net income for the three months ended September
30, 2009 was $183,000 or $0.02 per share on a basic and diluted basis, as
compared to net loss of $118,000 or $0.01 per share for the three months ended September
30, 2008.</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";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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></p>

<p 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>

<table class=MsoNormalTable border=0 cellpadding=0 width=690
 style='width:90%;border-collapse:collapse'>
 <tr style='height:13.55pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:#FFFFFF; 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;
  background:#FFFFFF;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>As&nbsp;of&nbsp;September&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;
  background:#FFFFFF;padding:1.1pt;'>
  <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:13.55pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>2009</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; 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-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>June&nbsp;30,&nbsp;2009</p>
  </td>
 </tr>
 <tr style='height:13.6pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:#CBDBD1;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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>(Unaudited)</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>(Unaudited)</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>(Audited)</p>
  </td>
 </tr>
 <tr style='height:13.55pt'>
  <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; background:white; padding:1.1pt; '>
  <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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,378,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>384,000&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,124,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.55pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Working&nbsp;Capital&#185;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4,810,000&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4,544,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4,548,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.55pt'>
  <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; background:white; padding:1.1pt; '>
  <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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,600,000&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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.6pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>Net&nbsp;Debt&#179;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>1,840,000&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; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>4,087,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:#CBDBD1; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:#CBDBD1;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>2,204,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.55pt'>
  <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; background:white; padding:1.1pt; '>
  <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; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.78&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; background:white; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>$</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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.92&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; background:white; 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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>0.76&nbsp;</p>
  </td>
 </tr>
 <tr style='height:16.75pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  background:#CBDBD1;padding:1.1pt;'>
  <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; background:#CBDBD1; 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; background:#CBDBD1; 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; background:#CBDBD1; 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:16.75pt'>
  <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; background:white; padding:1.1pt; '>
  <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<sup><font size="2">4</font></sup>&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>46&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>51&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;
  background:white;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:right'>41&nbsp;</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-indent:.5in;text-autospace:
none'>The following table presents selected financial information as of the end
of the first quarter of fiscal 2009 and 2008, respectively, as well as of the
year ended June 30, 2009:</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";margin-left:.5in;text-align:justify;text-autospace:
none'><sup>1</sup> Working Capital = Ending Current Assets less Ending Current
Liabilities.</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) - Goodwill) / (basic
outstanding shares).</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>3</sup> Net Debt = Total Ending Long Term plus Current Portion of
Debt plus Credit Line less Cash</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>4</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-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 working capital at September 30, 2009 increased to $4.8 million
compared to $4.5 million at September 30, 2008 and was $0.3 million higher than
the $4.5 million at June 30, 2009. &nbsp;Cash flow provided by operations was $409,000
in the three months ended September 30, 2009 compared to a cash flow used by
operations of $459,000 for the three months ended September 30, 2008.&nbsp; The increase
in working capital and operating cash flow was due to an increase in payables
and accrued expenses within our normal payment processing cycle.&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'>At September 30,
2009, we had cash and cash equivalents of $1,378,000.&nbsp; We believe that our
cash and cash equivalents on hand, together with cash flows from operations, if
any, and amounts available, if any, under our credit facilities will be
sufficient to meet our working capital and capital expenditure requirements for
the next twelve months.&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:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>- 19 -</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&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-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: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; 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; During the 2009 fiscal year, we repurchased 219,695 shares of
common stock for $133,472, at an average price of $0.61 per share. Since the
initiation of the buyback program in 2002 through June 30, 2009, we have
repurchased 295,395 shares for $177,213 at an average price of $0.60 per share.
&nbsp;Our Board suspended the buyback authorization in May 2009 and has not set a
reinitiation date for the purchase of our shares pursuant to this program.</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'>As of September
30, 2009, we had a credit facility with Wells Fargo comprised of two components:&nbsp;
</p>

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

<ul>
	<li>
	<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-left:0.5in;text-align:justify;margin-right:0in; margin-top:0in'>a revolving Credit Line Note (&#147;line of credit&#148;) of up to $1,000,000
in borrowing availability, and</p></li>
	<li>
	<p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-left:0.5in;text-align:justify;margin-right:0in; margin-top:0in'>a Five year Term Note (the &#147;TI Loan&#148;) with an initial balance of&nbsp;
$2,000,000, of which $1,666,667 was outstanding as of September 30, 2009. </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'>The line of
credit borrowing availability is a maximum of $1,000,000.&nbsp; If borrowings
under the line of credit exceed $500,000, the maximum amount of borrowing is limited
to 70% of the eligible accounts receivable plus 40% of the eligible inventory. &nbsp;Its
terms require monthly interest payments at either (i) the prime rate of
interest (3.25% at September 30, 2009) plus 1.50%, or (ii) three month LIBOR (0.287%
at September 30, 2009) plus 2.50%, at our discretion, based on outstanding
borrowings.&nbsp; The line of credit expires on November 1, 2009.&nbsp; We are
charged an unused credit line fee of 0.25% per annum payable quarterly on the
average balance of the line of credit that is not used. <font style="font-size: 10.0pt">&nbsp;</font>There was no outstanding balance under the credit line as of September
30, 2009 and there continues to be no borrowing under such credit line as of
October 16, 2009.&nbsp; Therefore, the total eligible additional borrowing
capacity under the line of credit as of September 30, 2009 was $1,000,000 and
as of October 16, 2009 is $1,000,000.</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 TI Loan had
an initial balance of $2,000,000.&nbsp; The borrowings from this term
commitment were used for construction of tenant improvements for our Irvine, California facility.&nbsp; Its terms require monthly principal and interest
payments over the 60 month life of the loan, based on outstanding
borrowings.&nbsp; The interest rate is fixed at 5.72% over the life of the
loan.&nbsp; There was a $1,666,667 outstanding balance under the TI Loan as of September
30, 2009.&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'>All assets of
the Company except our Carson City land and building secure the outstanding
borrowings under the Wells Fargo credit 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;text-autospace:
none'>In March 2006, we entered into a ten year mortgage with Union Bank for
$1,650,000.&nbsp; The principal balance of the mortgage bears interest at a
fixed annual rate of 6.73%.&nbsp; Payments on the mortgage are $11,379 per
month (based on a 25 year amortization), with the balance of $1,291,666 in
principal due on April&nbsp;1, 2016.&nbsp; The mortgage is secured by our Carson City land and building.&nbsp; There was $1,552,331 in principal outstanding under
the mortgage as of September 30, 2009.</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'>There are
certain financial and non-financial covenants that the Company must meet to be
in compliance with the terms of the Wells Fargo credit facility and mortgage
with Union Bank.&nbsp; As of the quarter ended September 30, 2009, we were in
compliance with the Wells Fargo and Union Bank covenants.</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:center'>- 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";text-align:justify;text-autospace:none'>
<b>Item 3. Quantitative and Qualitative Disclosures About Market Risk<a
name=Q3Item3></a></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-autospace:none'>Not
applicable.</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>&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>Item 4T.
Controls and Procedures<a name=Q3Item4T></a></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 September
30, 2009, the Chief Executive Officer and Chief Financial Officer concluded
that the disclosure controls and procedures are effective.</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'>During the
quarter ended September 30, 2009, there were no direct changes in our internal
controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f)
under the Exchange Act) that have materially affected, or are reasonably likely
to materially affect, our internal controls over financial reporting.&nbsp; </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'><b>PART II</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>OTHER
INFORMATION</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-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>
<font size="3">Item 1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Legal Proceedings</font></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-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, et al.</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.&nbsp; We moved out of this Santa Ana site in April, 2008 and have no
remaining operations there.</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: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 are 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 indeterminable event that we
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'>One of our past
insurers has committed to pay most of our defense costs for the lawsuit, while
reserving its rights as to whether it will cover any damages awarded against us,
or any settlement payment to which Pro-Dex agrees to resolve the lawsuit, under
past policies issued to us for a three-year period, March 31, 1983 to March 31,
1986.&nbsp; The policies of these years have&nbsp;occurrence payment limits of
$500,000.&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: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:center'>- 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";text-align:justify;text-indent:.5in'>&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'>Overall, the
OCWD complaint remains vague, the OCWD is in an early stage of its remedial
activities in the South Basin, the lawsuit is in the early stages of discovery,
one of our insurers has committed to pay most defense costs and has reserved
rights under one&nbsp;three-year set of&nbsp;policies and is continuing to
consider extending coverage to us under other past policies, and any recovery
the OCWD may gain through the lawsuit is likely to be allocated among several
defendants.&nbsp; Therefore, our liabilities, 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'><a name=eolPage14></a><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>Item 1A.&nbsp; Risk Factors.<a name=Q3Item1A></a></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";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-top:.25in;text-align:justify;text-indent:.5in'>In addition to the other information set forth in this
report, you should carefully consider the factors discussed in Part&nbsp;I,
Item&nbsp;1A. &#147;Risk Factors&#148; in our Annual Report on Form 10-K for our fiscal
year ended June 30, 2009 and in our subsequent quarterly reports on Form 10-Q. &nbsp;The
risks discussed in our Annual Report on Form&nbsp;10-K and in our subsequent
quarterly reports on Form 10-Q could materially affect our business, financial
condition and future results. The risks described in our Annual Report on
Form&nbsp;10-K and in our subsequent quarterly reports on Form 10-Q are not the
only risks facing us. Additional risks and uncertainties not currently known to
us or that we currently deem to be immaterial also may materially and adversely
affect our business, financial condition or operating results.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";margin-top:.25in;text-align:justify;text-indent:.5in'>&nbsp;</p>

<table border="0" style="border-collapse: collapse" width="100%" id="table4">
	<tr>
		<td><b><font size="3">Item 2. </font></b> </td>
		<td width="1300" colspan="2"><b><font size="3">Unregistered Sales of
		Equity Securities and Use of Proceeds. </font></b><font size="3">&nbsp;</font></td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="1300" colspan="2">&nbsp;</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">&nbsp;</td>
		<td width="1243">

None.</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">&nbsp;</td>
		<td width="1243">

&nbsp;</td>
	</tr>
	<tr>
		<td><b><font size="3">Item 3. </font></b> </td>
		<td width="1300" colspan="2"><b><font size="3">Defaults Upon Senior
		Securities. </font></b></td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">&nbsp;</td>
		<td width="1243">

&nbsp;</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">&nbsp;</td>
		<td width="1243">

None.</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">&nbsp;</td>
		<td width="1243">

&nbsp;</td>
	</tr>
	<tr>
		<td><b><font size="3">Item 4.</font></b></td>
		<td width="1300" colspan="2"><b><font size="3">Submissions of Matters to a Vote
of Securities Holders.</font></b></td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">&nbsp;</td>
		<td width="1243">

&nbsp;</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">&nbsp;</td>
		<td width="1243">

None.</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">&nbsp;</td>
		<td width="1243">

&nbsp;</td>
	</tr>
	<tr>
		<td><b><font size="3">Item 5.</font></b></td>
		<td width="1300" colspan="2"><b><font size="3">Other Information.</font></b></td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">&nbsp;</td>
		<td width="1243">

&nbsp;</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">&nbsp;</td>
		<td width="1243">

None.</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">&nbsp;</td>
		<td width="1243">

&nbsp;</td>
	</tr>
	<tr>
		<td><a
name=Q3OtherInfo></a><b><font size="3">Item 6. </font></b> </td>
		<td width="1300" colspan="2"><b><font size="3">Exhibits.</font></b></td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">&nbsp;</td>
		<td width="1243">

&nbsp;</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">&nbsp;</td>
		<td width="1243">

<u>Exhibits</u>:</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">&nbsp;</td>
		<td width="1243">

&nbsp;</td>
	</tr>
	<tr>
		<td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </td>
		<td width="55">10.1</td>
		<td width="1243">

<p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-right:0in; margin-top:0in'>
Revolving Line of Credit Note and
Amendment 5 to the existing credit agreement with Wells Fargo Bank, National
Association dated November 1, 2010.</p>

		</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">&nbsp;</td>
		<td width="1243">

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

		</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">31.1</td>
		<td width="1243">

<p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-right:0in; margin-top:0in'>
Certifications of Chief Executive Officer
Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended,
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</p>

		</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">&nbsp;</td>
		<td width="1243">

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

		</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">31.2
</td>
		<td width="1243">

<p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-right:0in; margin-top:0in'>
Certifications of Chief Financial
Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as
amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</p>

		</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">&nbsp;</td>
		<td width="1243">

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

		</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">32&nbsp; </td>
		<td width="1243">

<p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-right:0in; margin-top:0in'>
Certification of the Chief Executive
Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</p>

		</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="55">&nbsp;</td>
		<td width="1243">

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

<p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>SIGNATURES <a
name=Q3Signatures></a></p>

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

<p style='margin-bottom:.0001pt;font-family:"Times New Roman";text-indent:.5in; margin-left:0in; margin-right:0in; margin-top:0in'>In
accordance with the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.</p>

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

<table class=MsoNormalTable border=0 cellpadding=0 width=684
 style='width:90%;border-collapse:collapse'>
 <tr>
  <td width=306 valign=top style='width:229.5pt;padding:0in 0in 0in 0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>Date:&nbsp; October 29, 2009</p>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>PRO-DEX INC. </p>
  </td>
  <td width=378 valign=top style='width:283.5pt;padding:0in 0in 0in 0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>Date:&nbsp; October 29, 2009</p>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>PRO-DEX INC. </p>
  </td>
 </tr>
 <tr>
  <td width=306 valign=top style='width:229.5pt;padding:0in 0in 0in 0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>By: / s / Mark Murphy </p>
  </td>
  <td width=378 valign=top style='width:283.5pt;padding:0in 0in 0in 0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>By: / s / Jeffrey J.
  Ritchey </p>
  </td>
 </tr>
 <tr>
  <td width=306 valign=top style='width:229.5pt;padding:0in 0in 0in 0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>
  </td>
  <td width=378 valign=top style='width:283.5pt;padding:0in 0in 0in 0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=306 valign=top style='width:229.5pt;padding:0in 0in 0in 0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>Mark Murphy</p>
  </td>
  <td width=378 valign=top style='width:283.5pt;padding:0in 0in 0in 0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>Jeffrey J. Ritchey </p>
  </td>
 </tr>
 <tr>
  <td width=306 valign=top style='width:229.5pt;padding:0in 0in 0in 0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>Chief Executive Officer</p>
  </td>
  <td width=378 valign=top style='width:283.5pt;padding:0in 0in 0in 0in'>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>Secretary and Chief
  Financial Officer</p>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman"; margin-left:0in; margin-right:0in; margin-top:0in'>(Principal Financial and
  Accounting Officer)</p>
  </td>
 </tr>
</table>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>- 23 -</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";text-align:center'>&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>

&nbsp;</div>

</body>

</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>ex10-1.htm
<TEXT>
<html>

<head>
<title>EXHIBIT 10.1</title>
</head>

<body>


<div style='page:Section2;'>


<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>

</div>

<div style='page:Section3;'>

<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-family:"Times New Roman";margin-right:.5in'><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-family:"Times New Roman";margin-top:12.0pt;margin-right:.5in;
margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;text-align:left'><b>EXHIBIT
10.1</b></p>

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

<table border="0" style="border-collapse: collapse" width="100%" id="table5">
	<tr>
		<td width="952" style="border-bottom:1px solid #000000; " valign="top">

<p style='margin-bottom:.0001pt;text-autospace:none;font-family:"Times New Roman";2; margin-left:0in; margin-right:0in; margin-top:0in'><b>WELLS FARGO</b></p>

		</td>
		<td style="border-bottom:1px solid #000000; " valign="top"><b>REVOLVING LINE OF CREDIT
		NOTE</b></td>
	</tr>
	<tr>
		<td width="952" style="border-bottom-color: #000000" valign="top">

&nbsp;&nbsp;

		</td>
		<td style="border-bottom-color: #000000" valign="top">&nbsp;</td>
	</tr>
	<tr>
		<td width="952" valign="top">

<p style='margin-bottom:.0001pt;text-autospace:none;font-family:"Times New Roman";2; margin-left:0in; margin-right:0in; margin-top:0in'><b>$1,000,000.00</b></p>

		</td>
		<td valign="top"><b>Irvine, California</b> <b><br>
		November 1, 2009</b></td>
	</tr>
</table>

<p style='text-autospace:none;font-family:"Times New Roman";2; margin-left:0in; margin-right:0in'>FOR
VALUE RECEIVED, the undersigned <b>Pro-Dex, Inc. </b>(&quot;Borrower&quot;)
promises to pay to the order of WELLS FARGO BANK, NATIONAL
ASSOCIATION (&quot;Bank&quot;) at its office at <b>Orange County RCBO, 2030
Main Street, Suite #900, Irvine, CA 92614, </b>or
at such other place as the holder hereof may designate, in lawful money of the United
States of America and in immediately available funds, the principal sum of <b>$1,000,000.00,
</b>or so much thereof as may be advanced and be outstanding, with
interest thereon, to be computed on each advance from the date of its
disbursement as set forth herein.</p>

<p style='text-autospace:none;font-family:"Times New Roman";2; margin-left:0in; margin-right:0in'><b>DEFINITIONS:</b></p>

<p style='text-autospace:none;font-family:"Times New Roman";2; margin-left:0in; margin-right:0in'>As
used herein, the following terms shall have the meanings set forth after each,
and any other term defined in this Note shall have the meaning set forth at the
place defined:</p>

<p style='text-autospace:none;font-family:Times New Roman;margin-left:0in; margin-right:0in; 2'>1.1&nbsp;&nbsp; &quot;Business Day&quot; means any day except a
Saturday, Sunday or any other day on which commercial banks in<br>
California are authorized or required by law to close.</p>

<p style='text-autospace:none;font-family:"Times New Roman";2; margin-left:0in; margin-right:0in'>1.2 &nbsp; &quot;Fixed
Rate Term&quot; means a period commencing on a Business Day and continuing for <b>3
months, as </b>designated by Borrower, during which all or a portion of
the outstanding principal balance of this Note bears interest determined in
relation to LIBOR; provided however, that no Fixed Rate Term may be selected
for a principal amount less than <b>$100,000.00; </b>and provided further, that
no Fixed Rate Term shall extend beyond the scheduled maturity date hereof. If any
Fixed Rate Term would end on a day which is not a Business Day, then such Fixed Rate Term shall be
extended to the next succeeding Business Day.</p>

<p style='text-autospace:none;font-family:Times New Roman;margin-left:0in; margin-right:0in; 2'>1.3&nbsp;&nbsp; &quot;LIBOR&quot; means the rate per annum
(rounded upward, if necessary, to the nearest whole 1/8 of 1%)
determined by dividing Base LIBOR by a percentage equal to 100% less any
LIBOR Reserve Percentage.</p>

<p style='text-autospace:none;font-family:"Times New Roman";2; margin-left:0.25in; margin-right:0in' align="justify">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &quot;Base
LIBOR&quot; means the rate per annum for United States dollar deposits quoted
by Bank as the Inter-Bank Market Offered Rate, with the understanding
that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans making reference thereto, on the first
day of a Fixed Rate Term for delivery of funds on said date for a period of
time approximately equal to the number of days in such Fixed Rate
Term and in an amount approximately equal to the principal amount to which such
Fixed Rate Term applies. Borrower understands and agrees that Bank may base its
quotation of the Inter-Bank Market Offered Rate upon such offers or other
market indicators of the Inter-Bank Market as Bank in its discretion deems
appropriate including, but not limited to, the rate offered for U.S. dollar
deposits on the London
Inter-Bank Market.</p>

<p style='text-autospace:none;font-family:"Times New Roman";2; margin-left:0.25in; margin-right:0in' align="justify">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&quot;LIBOR Reserve Percentage&quot; means the reserve
percentage prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for &quot;Eurocurrency Liabilities&quot; (as
defined in Regulation D of the Federal Reserve Board, as
amended), adjusted by Bank for expected changes in such reserve percentage during
the applicable Fixed Rate Term.</p>

<p style='text-autospace:none;font-family:"Times New Roman";2; margin-left:0in; margin-right:0in'>1.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &quot;Prime
Rate&quot; means at any time the rate of interest most recently announced
within Bank at its principal office as its Prime Rate, with the understanding
that the Prime Rate is one of Bank's base rates and serves as the basis upon
which effective rates of interest are calculated for those loans making
reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.</p>
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<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='font-size:12.0pt;font-family:"Times New Roman";line-height:1.0pt; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>

<p style='margin-top:1.8pt;margin-right:0in;margin-left:0in;text-align:justify;text-autospace:none;font-family:Times New Roman;3'>2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>INTEREST:</b></p>

<p style='margin-top:1.8pt;margin-right:0in;margin-left:0in;text-align:justify;text-autospace:none;font-family:Times New Roman;3'>2.1 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Interest</u>. The outstanding
principal balance of this Note shall bear interest (computed on the basis of a <b>360</b>-day
year, actual days elapsed) either (a) at a fluctuating rate per annum <b>1.50000%
</b>above the Prime Rate in effect
from time to time, or (b) at a fixed rate per annum determined by Bank to be <b>2.50000%
</b>above LIBOR in effect on the first
day of the applicable Fixed Rate Term. When interest is determined in relation
to the Prime Rate, each change in the
rate of interest hereunder shall become effective on the date each Prime Rate
change is announced within Bank. With
respect to each LIBOR selection option selected hereunder, Bank is hereby
authorized to note the date, principal amount, interest rate and Fixed Rate
Term applicable thereto and any payments made thereon on Bank's books and
records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations
shall be prima facie evidence of the accuracy of the information noted.</p>

<p style='margin-top:1.8pt;margin-right:0in;margin-left:0in;text-align:justify;text-autospace:none;font-family:Times New Roman;3'>2.2 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Selection of Interest Rate Options</u>.
At any time any portion of this Note bears interest determined in relation to LIBOR, it may be continued by Borrower
at the end of the Fixed Rate Term applicable thereto so that all or a portion
thereof bears interest determined in relation to the Prime Rate or to LIBOR for
a new Fixed Rate Term designated by
Borrower. At any time any portion of this Note bears interest determined in
relation to the Prime Rate, Borrower
may convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate
Term designated by Borrower. At such time as Borrower requests an advance hereunder
or wishes to select a LIBOR option
for all or a portion of the outstanding principal balance hereof, and at the
end of each Fixed Rate Term, Borrower
shall give Bank notice specifying: (a) the interest rate option selected by Borrower; (b) the principal amount subject
thereto; and (c) for each LIBOR selection, the length of the applicable Fixed Rate Term. Any such notice may be given by
telephone (or such other electronic method as Bank may permit) so long as, with
respect to each LIBOR selection, (i) if requested by Bank, Borrower provides to
Bank written confirmation thereof not
later than 3 Business Days after such notice is given, and (ii) such notice is
given to Bank prior to 10:00 a.m. on
the first day of the Fixed Rate Term, or at a later time during any Business
Day if Bank, at it's sole option but
without obligation to do so, accepts Borrower's notice and quotes a fixed rate
to Borrower. If Borrower does not immediately accept a fixed rate when quoted
by Bank, the quoted rate shall expire
and any subsequent LIBOR request from Borrower shall be subject to a
redetermination by Bank of the applicable
fixed rate. If no specific designation of interest is made at the time any
advance is requested hereunder or at
the end of any Fixed Rate Term, Borrower shall be deemed to have made a Prime
Rate interest selection for such advance or the principal amount to
which such Fixed Rate Term applied.</p>

<p style='margin-top:1.8pt;margin-right:0in;margin-left:0in;text-align:justify;text-autospace:none;font-family:Times New Roman;3'>2.3 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Taxes and Regulatory Costs. </u>Borrower
shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any
and all (a) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise
taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and
(b) future, supplemental, emergency or other changes in the LIBOR Reserve Percentage, assessment rates imposed
by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or
foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or
not having the force of law) from any central bank or other governmental authority and related in any manner
to LIBOR to the extent they are not included in the calculation of LIBOR. In determining which of the foregoing are
attributable to any LIBOR option available to Borrower hereunder, any reasonable allocation made by Bank
among its operations shall be conclusive and binding upon Borrower.</p>

<p style='margin-top:1.8pt;margin-right:0in;margin-left:0in;text-align:justify;text-autospace:none;font-family:Times New Roman;3'>2.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Payment of Interest</u>. Interest accrued on this Note shall be payable on
the <b>1st </b>day of each month, commencing <b>December 1, 2009.</b></p>

<p style='text-autospace:none;font-family:"Times New Roman";2; margin-left:0in; margin-right:0in; margin-top:0in'>2.5
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Default Interest</u>. From and after the maturity date of this Note,
or such earlier date as all principal owing hereunder becomes due
and payable by acceleration or otherwise, or at Bank's option upon the
occurrence, and during the continuance of an Event of
Default, the outstanding principal balance of this Note shall bear interest at an
increased rate per annum (computed on the basis of a 360-day year, actual days
elapsed) equal to 4% above the rate of interest from time to time applicable to
this Note.</p>

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

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

<p style='margin-top:1.8pt;margin-right:0in;margin-left:0in;text-align:justify;text-autospace:none;font-family:Times New Roman;3'><b>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BORROWING AND REPAYMENT:</b></p>

<p style='margin-top:1.8pt;margin-right:0in;margin-left:0in;text-align:justify;text-autospace:none;font-family:Times New Roman;3'>3.1 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Borrowing and Repayment</u>. Borrower
may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and
reborrow, subject to all of the limitations, terms and conditions of this Note and of the Credit Agreement between
Borrower and Bank defined below; provided however, that the total outstanding borrowings under this Note shall
not at any time exceed the principal amount stated above. The unpaid principal balance of this obligation at
any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments
made hereon by or for Borrower, which balance may be endorsed hereon from time
to time by the holder. The outstanding principal balance of this Note shall be
due and payable in full on <b>November 1,
2010.</b></p>

<p style='margin-top:1.8pt;margin-right:0in;margin-left:0in;text-align:justify;text-autospace:none;font-family:Times New Roman;3'>3.2 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Advances</u>. Advances hereunder, to
the total amount of the principal sum available hereunder, may be made by the holder at the oral or written request
of (a) <b>Mark P. Murphy or Jeffrey Ritchey, </b>any one acting alone, who are authorized to request advances and direct
the disposition of any advances until written notice of the revocation of such
authority is received by the holder at the office designated above, or (b) any
person, with respect to advances
deposited to the credit of any deposit account of Borrower, which advances,
when so deposited, shall be
conclusively presumed to have been made to or for the benefit of Borrower
regardless of the fact that persons
other than those authorized to request advances may have authority to draw
against such account. The holder shall
have no obligation to determine whether any person requesting an advance is or
has been authorized by Borrower.</p>

<p style='margin-top:1.8pt;margin-right:0in;margin-left:0in;text-align:justify;text-autospace:none;font-family:Times New Roman;3'>3.3 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Application
of Payments</u>. Each payment made on this Note shall be credited first, to any
interest then due and second, to the
outstanding principal balance hereof. All payments credited to principal shall
be applied first, to the outstanding principal balance of this Note which bears
interest determined in relation to the Prime Rate, if any, and second, to the outstanding principal
balance of this Note which bears interest determined in relation to LIBOR,
with such payments applied to the oldest Fixed Rate Term first.</p>

<p style='margin-top:1.8pt;margin-right:0in;margin-left:0in;text-align:justify;text-autospace:none;font-family:Times New Roman;3'><b>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PREPAYMENT:</b></p>

<p style='margin-top:1.8pt;margin-right:0in;margin-left:0in;text-align:justify;text-autospace:none;font-family:Times New Roman;3'>4.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Prime Rate</u>.
Borrower may prepay principal on any portion of this Note which bears interest
determined in relation to the Prime Rate at any time, in any amount and
without penalty.</p>

<p style='margin-top:1.8pt;margin-right:0in;margin-left:0in;text-align:justify;text-autospace:none;font-family:Times New Roman;3'>4.2 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>LIBOR</u>. Borrower may prepay
principal on any portion of this Note which bears interest determined in relation to LIBOR at any time and in the minimum
amount of <b>$100,000.00; </b>provided however, that if the outstanding principal balance of such portion of
this Note is less than said amount, the minimum prepayment amount shall be the entire outstanding principal
balance thereof. In consideration of Bank providing this prepayment option to Borrower, or if any such
portion of this Note shall become due and payable at any time prior to the last day of the Fixed Rate Term
applicable thereto by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is the sum
of the discounted monthly differences for each month from the month of prepayment through the month in
which such Fixed Rate Term matures, calculated as follows for each such
month:</p>

<p style='text-autospace:none;font-family:"Times New Roman";3; margin-left:0.25in; margin-right:0in; margin-top:0in'>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Determine</u> the amount of interest
which would have accrued each month on the amount prepaid at the
interest rate applicable to such amount had it remained outstanding until the
last day of the Fixed Rate Term applicable thereto.</p>

<p style='text-autospace:none;font-family:"Times New Roman";3; margin-left:0.25in; margin-right:0in; margin-top:0in'>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Subtract</u> from the amount
determined in (a) above the amount of interest which would have accrued for the same
month on the amount prepaid for the remaining term of such Fixed Rate Term at
LIBOR in effect on the date of prepayment for new loans made for such term and in
a principal amount equal to the amount prepaid.</p>

<p style='text-autospace:none;font-family:"Times New Roman";3; margin-left:0.25in; margin-right:0in; margin-top:0in'>(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the result obtained in (b) for any month is greater
than zero, discount that difference by LIBOR used in (b) above.</p>

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<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>

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<p style='text-autospace:none;font-family:"Times New Roman";2; margin-left:0in; margin-right:0in'>Borrower
acknowledges that prepayment of such amount may result in Bank incurring
additional costs, expenses and/or
liabilities, and that it is difficult to ascertain the full extent of such
costs, expenses and/or liabilities. Borrower,
therefore, agrees to pay the above-described prepayment fee and agrees that
said amount represents a reasonable
estimate of the prepayment costs, expenses and/or liabilities of Bank. If
Borrower fails to pay any prepayment
fee when due, the amount of such prepayment fee shall thereafter bear interest
until paid at a rate per annum <b>2.000%
</b>above the Prime Rate in effect from time to time (computed on the basis of
a 360-day year, actual days elapsed).</p>

<p style='text-autospace:none;font-family:"Times New Roman";2; margin-left:0in; margin-right:0in'><b>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EVENTS OF DEFAULT:</b></p>

<p style='text-autospace:none;font-family:"Times New Roman";2; margin-left:0in; margin-right:0in'>This Note is made pursuant to and is subject to
the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of <b>November
1, 2007, </b>as amended from time to time (the &quot;Credit Agreement&quot;). Any default in the payment or
performance of any obligation under this Note, or any defined event of
default under the Credit Agreement, shall constitute an &quot;Event of
Default&quot; under this Note.</p>

<p style='text-autospace:none;font-family:"Times New Roman";2; margin-left:0in; margin-right:0in'><b>6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MISCELLANEOUS:</b></p>

<p style='text-autospace:none;font-family:"Times New Roman";2; margin-left:0in; margin-right:0in'>6.1 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Remedies</u>. Upon the occurrence of
any Event of Default, the holder of this Note, at the holder's option, may declare all sums of principal and interest
outstanding hereunder to be immediately due and payable without presentment,
demand, notice of nonperformance, notice of protest, protest or notice of
dishonor, all of which are expressly
waived by Borrower, and the obligation, if any, of the holder to extend any
further credit hereunder shall
immediately cease and terminate. Borrower shall pay to the holder immediately
upon demand the full amount of all
payments, advances, charges, costs and expenses, including reasonable
attorneys' fees (to include outside
counsel fees and all allocated costs of the holder's in-house counsel),
expended or incurred by the holder in connection with the enforcement of the
holder's rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution
or defense of any action in any way related to this Note, including without limitation, any action for
declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including
any of the foregoing incurred in connection with any bankruptcy proceeding (including without
limitation, any adversary proceeding, contested matter or motion brought
by Bank or any other person) relating to Borrower or any other person or
entity.</p>

<p style='text-autospace:none;font-family:"Times New Roman";2; margin-left:0in; margin-right:0in'>
6.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Obligations Joint and Several.</u> Should more than one person or entity sign this Note as a Borrower, the
obligations of each such Borrower shall be joint and several.</p>

<p style='text-autospace:none;font-family:"Times New Roman";2; margin-left:0in; margin-right:0in'>6.3 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Governing Law</u>. This Note shall
be governed by and construed in accordance with the laws of the State of California.</p>

<p style='text-autospace:none;font-family:"Times New Roman";2; margin-left:0in; margin-right:0in'>IN WITNESS WHEREOF, the undersigned has executed
this Note as of the date first written above. Pro-Dex, Inc.</p>

<p style='margin-bottom:.0001pt;text-autospace:none;font-family:"Times New Roman";2; margin-left:0in; margin-right:0in; margin-top:0in'><img border=0 width=350 height=158
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	<font size="2">PROMNOTE.CA (05/09)</font></p>
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	<font size="2">Revolving Line of Credit Note<br>
	02695, #7216808711</font></p>
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<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-bottom:.0001pt;text-autospace:none;font-family:"Times New Roman";2; margin-left:0in; margin-right:0in; margin-top:0in' align="center">FIFTH AMENDMENT TO CREDIT
AGREEMENT</p>

<p style='margin-top:.2in;margin-right:0in;margin-left:0in;text-indent:.45in;text-autospace:none;font-family:Times New Roman;5'>THIS
AMENDMENT TO CREDIT AGREEMENT (this &quot;Amendment&quot;) is entered into as
of November 1, 2009, by and between PRO-DEX, INC., a Colorado corporation
(&quot;Borrower&quot;), and WELLS FARGO BANK, NATIONAL ASSOCIATION
(&quot;Bank&quot;).</p>

<p style='text-autospace:none;font-family:"Times New Roman";5; margin-left:0in; margin-right:0in; margin-top:0in' align="center"><u>RECITALS</u></p>

<p style='text-autospace:none;font-family:"Times New Roman";5; text-indent:0.45in; margin-left:0in; margin-right:0in; margin-top:0in'>WHEREAS, Borrower is currently
indebted to Bank pursuant to the terms and conditions of that certain Credit Agreement between Borrower and
Bank dated as of November 1, 2007, as amended from time to time (&quot;Credit
Agreement&quot;).</p>

<p style='margin-top:.2in;margin-right:0in;margin-left:0in;text-indent:.45in;text-autospace:none;font-family:Times New Roman;5'>WHEREAS, Bank and Borrower have
agreed to certain changes in the terms and conditions set forth in the Credit
Agreement and have agreed to amend the Credit Agreement to reflect said
changes.</p>

<p style='text-autospace:none;font-family:"Times New Roman";5; text-indent:0.45in; margin-left:0in; margin-right:0in; margin-top:0in'>NOW, THEREFORE, for valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree that the Credit Agreement shall be amended as follows:</p>

<p style='margin-top:.2in;margin-right:0in;margin-left:0in;text-indent:.45in;text-autospace:none;font-family:Times New Roman;5'>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 1.1. (a) is hereby amended by
deleting &quot;November 1, 2009&quot; as the last day on which Bank will make advances under the Line of Credit, and by
substituting for said date &quot;November 1, 2010,&quot; with such change to be
effective upon the execution and delivery to Bank of a promissory note dated as
of November 1, 2009 (which promissory note shall replace and be deemed the Line
of Credit Note defined in and made pursuant to the Credit Agreement) and
all other contracts, instruments and documents required by Bank to evidence
such change.</p>

<p style='text-autospace:none;font-family:"Times New Roman";5; text-indent:0.45in; margin-left:0in; margin-right:0in; margin-top:0in'>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 1.4. (c) is hereby
deleted in its entirety. and the following substituted therefor:</p>

<p style='text-autospace:none;font-family:"Times New Roman";5; margin-left:1in; margin-right:0in; margin-top:0in'>&quot;(c) <u>Unused Commitment Fee. </u>Borrower shall pay to Bank a fee equal to one and one-half percent (1.50%)
per annum (computed on the basis of a 360-day
year, actual days elapsed) on the average daily unused amount of the
Line of Credit, which fee shall be calculated on a quarterly basis by Bank and
shall be due and payable by Borrower in
arrears on each March 31, June 30, September 30 and December 31.&quot;</p>

<p style='text-autospace:none;font-family:"Times New Roman";5; text-indent:0.45in; margin-left:0in; margin-right:0in; margin-top:0in'>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 4.9. (c) is hereby
deleted in its entirety, and the following substituted therefor:</p>

<p style='text-autospace:none;font-family:"Times New Roman";5; margin-left:1in; margin-right:0in; margin-top:0in'>&quot;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net income after taxes not less than $1.00 on
a trailing 12 month basis, determined
as of each fiscal year end, and pre-tax
profit not less than $1.00 on a quarterly basis, determined as of each
fiscal quarter end.&quot;</p>

<p style='margin-top:.2in;margin-right:0in;margin-left:0in;text-indent:.45in;text-autospace:none;font-family:Times New Roman;5'>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 4.9. (d) is hereby deleted in
its entirety, without substitution.</p>

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	<font size="2">GATEAM1\0C\AMEND\Prodex.1109.Amend5.C-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br>
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<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='text-autospace:none;font-family:"Times New Roman";2; text-indent:0.45in; margin-left:0in; margin-right:0in; margin-top:0in'>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Section 6.1. is hereby deleted in its entirety, and the
following substituted therefor:</p>

<p style='text-autospace:none;font-family:"Times New Roman";2; margin-left:1in; margin-right:0in; margin-top:0in'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &quot;SECTION 6.1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The occurrence of any of the following shall constitute an &quot;Event
of Default&quot; under this Agreement:</p>

<p style='margin-top:12.6pt;margin-right:.4in;margin-left:.95in;text-indent:.45in;text-autospace:none;font-family:Times New Roman;2'>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Borrower shall fail to pay when due
any principal, interest, fees or other amounts payable under any of the Loan
Documents.</p>

<p style='text-autospace:none;font-family:"Times New Roman";2; text-indent:0.45in; margin-left:0.95in; margin-right:0in; margin-top:0in'>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any financial statement or
certificate furnished to Bank in connection
with, or any representation or warranty made by Borrower or any other
party under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished or made.</p>

<p style='margin-top:12.6pt;margin-right:.4in;margin-left:.95in;text-indent:.45in;text-autospace:none;font-family:Times New Roman;2'>(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any
default in the performance of or compliance with any obligation, agreement or other provision contained herein or
in any other Loan Document (other than those specifically described as an
&quot;Event of Default&quot; in this section 6.1), and with respect to any such
default that by its nature can be cured, such default shall continue for a
period of twenty (20) days from its occurrence.</p>

<p style='margin-top:12.6pt;margin-right:.4in;margin-left:.95in;text-indent:.45in;text-autospace:none;font-family:Times New Roman;2'>(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any default in the payment or
performance of any obligation, or any defined event of default, under the terms
of any contract, instrument or document (other than any of the Loan Documents) pursuant to which Borrower, any
guarantor hereunder or any general
partner or joint venturer in Borrower if a partnership or joint venture
(with each such guarantor, general partner and/or joint venturer referred to
herein as a &quot;Third Party Obligor&quot;) has incurred any debt or other
liability to any person or entity, including Bank.</p>

<p style='text-autospace:none;font-family:"Times New Roman";2; text-indent:0.45in; margin-left:0.95in; margin-right:0in; margin-top:0in'>(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Borrower or any Third Party
Obligor shall become insolvent, or shall
suffer or consent to or apply for the appointment of a receiver,
trustee, custodian or liquidator of itself or any of its property, or shall generally fail to pay its debts
as they become due, or shall make a
general assignment for the benefit of creditors; Borrower or any Third
Party Obligor shall file a voluntary petition
in bankruptcy, or seeking reorganization, in order to effect a plan or other arrangement with creditors or any
other relief under the Bankruptcy Reform Act, Title 11 of the United
States Code, as amended or recodified from time to time (&quot;Bankruptcy
Code&quot;), or under any state or federal law granting relief to debtors,
whether now or hereafter in effect; or Borrower or any Third Party Obligor
shall file an answer admitting the jurisdiction of the court and the material allegations of any involuntary
petition; or Borrower or any Third
Party Obligor shall be adjudicated a bankrupt, or an order for relief
shall be entered against Borrower</p>

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	<font size="2">GATEAM1\0C\AMEND\Prodex.1109.Amend5.C-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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<div style='page:Section9;'>

<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='text-autospace:none;font-family:"Times New Roman";2; margin-left:0.95in; margin-right:0in; margin-top:0in'>or any
Third Party Obligor by any court of competent jurisdiction under the Bankruptcy Code or any other applicable
state or federal law relating to bankruptcy, reorganization or other
relief for debtors.</p>

<p style='margin-top:.1in;margin-right:.95in;margin-left:.9in;text-indent:.5in;text-autospace:none;font-family:"Times New Roman";2'>(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The filing of a notice of judgment
lien against Borrower or any Third Party Obligor; or the recording of any abstract of judgment against Borrower or any Third
Party Obligor in any county in which
Borrower or such Third Party Obligor has an interest in real property; or the service of a notice of levy and/or
of a writ of attachment or execution, or other like process, against the
assets of Borrower or any Third Party Obligor; or the entry of a judgment
against Borrower or any Third Party Obligor; or any involuntary petition or proceeding pursuant to the Bankruptcy Code
or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors is filed or commenced against
Borrower or any Third Party Obligor.</p>

<p style='margin-top:.1in;margin-right:.95in;margin-left:.9in;text-indent:.5in;text-autospace:none;font-family:"Times New Roman";2'>(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There shall exist or occur any event or condition that Bank in good faith believes impairs, or is
substantially to impair, the prospect of payment or performance by
Borrower, any Third Party Obligor, or the
general partner of either if such entity is a partnership, of its
obligations under any of the Loan Documents.</p>

<p style='margin-top:.1in;margin-right:.95in;margin-left:.9in;text-indent:.5in;text-autospace:none;font-family:"Times New Roman";2'>(h)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The death or incapacity of Borrower or any Third Party Obligor if an
individual. The dissolution or liquidation of Borrower or any Third
Party Obligor if a corporation, partnership, joint venture or other type of
entity; or Borrower or any such Third Party Obligor, or any of its directors,
stockholders or members, shall take action seeking to effect the dissolution or
liquidation of Borrower or such Third Party Obligor.</p>

<p style='margin-top:.1in;margin-right:.95in;margin-left:.9in;text-indent:.5in;text-autospace:none;font-family:"Times New Roman";2'>(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any change in control of Borrower or any entity or combination of
entities that directly or indirectly control Borrower, with
&quot;control&quot; defined as ownership of an aggregate of twenty-five percent
(25%) or more of the common stock, members' equity or other ownership interest (other than a limited partnership interest).&quot;</p>

<p style='text-autospace:none;font-family:"Times New Roman";2; text-indent:0.45in; margin-left:0in; margin-right:0in; margin-top:0in'>6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Except as specifically provided
herein, all terms and conditions of the Credit Agreement remain in full force
and effect, without waiver or modification. All terms defined in the Credit
Agreement shall have the same meaning when used in this Amendment. This
Amendment and the Credit Agreement shall be read together, as one document.</p>

<p style='text-autospace:none;font-family:"Times New Roman";2; text-indent:0.45in; margin-left:0in; margin-right:0in; margin-top:0in'>7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Borrower hereby remakes all
representations and warranties contained in the Credit Agreement and reaffirms all covenants set forth therein. Borrower
further certifies that as of the date
of this Amendment there exists no Event of Default as defined in the Credit Agreement, nor any condition, act or event which
with the giving of notice or the passage of time or both would
constitute any such Event of Default.</p>

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	<font size="2">GATEAM1\0C\AMEND\Prodex.1109.Amend5.C-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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	<font size="3">-3-</font><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>

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<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-bottom:.0001pt;text-autospace:none;font-family:"Times New Roman";2; margin-left:0in; margin-right:0in; margin-top:0in'>IN WITNESS
WHEREOF, the parties hereto have caused this Amendment to be executed as of
the day and year first written above.</p>

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<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-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:12.0pt;margin-right:.5in;margin-bottom:
0in;margin-left:.5in;margin-bottom:.0001pt'>&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";margin-top:12.0pt;margin-right:.5in;margin-bottom:
0in;margin-left:.5in;margin-bottom:.0001pt'><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-family:"Times New Roman";margin-top:12.0pt;margin-right:.5in;margin-bottom:
0in;margin-left:.5in;margin-bottom:.0001pt'><b>&nbsp;&nbsp;</b></p>

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

</div>

</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:Section10;'>

<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";margin-top:12.0pt;margin-right:.5in;margin-bottom:
0in;margin-left:.5in;margin-bottom:.0001pt'><b>EXHIBIT 31.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></p>

<p 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:center'><b><u>CERTIFICATIONS</u></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 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="table3">
	<tr>
		<td width="5%" valign="top">
		<p align="justify"><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-Q of
Pro-Dex, Inc.;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify"><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 quarterly
report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with
respect to the period covered by this quarterly report; </font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify"><font style="font-size: 10.0pt">3.</font></td>
		<td width="94%" valign="top" colspan="2">

<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 registrant as of, and for, the periods presented in this
report; </font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify"><font style="font-size: 10.0pt">4.</font></td>
		<td width="94%" valign="top" colspan="2">

<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="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify"><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 registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this
report is being prepared;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify"><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">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="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify"><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 registrant's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify"><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 registrant&#146;s internal control over financial reporting that
occurred during the registrant&#146;s 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; and</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify"><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 registrant's auditors and the
audit committee of registrant's board of directors (or persons performing the
equivalent functions):</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify"><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 registrant's ability to record, process, summarize and report
financial information; and </font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify"><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 registrant'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";margin-left:1.0in;text-align:justify;text-indent:
- -.5in'><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: October 29, 2009&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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; MARK MURPHY<font style="font-size: 10.0pt"> _______</font></u></p>

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

&nbsp;</div>

</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:Section10;'>

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

<p 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:center'><b><u>CERTIFICATIONS</u></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:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman";'>&nbsp;</p>
<table border="0" style="border-collapse: collapse" width="100%" id="table1">
	<tr>
		<td width="5%" valign="top">
		<p align="justify"><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-Q of
Pro-Dex, Inc.;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify"><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 quarterly
report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with
respect to the period covered by this quarterly report; </font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify"><font style="font-size: 10.0pt">3.</font></td>
		<td width="94%" valign="top" colspan="2">

<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 registrant as of, and for, the periods presented in this
report; </font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify"><font style="font-size: 10.0pt">4.</font></td>
		<td width="94%" valign="top" colspan="2">

<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="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify"><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 registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this
report is being prepared;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify"><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">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="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify"><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 registrant's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify"><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 registrant&#146;s internal control over financial reporting that
occurred during the registrant&#146;s 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; and</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify"><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 registrant's auditors and the
audit committee of registrant's board of directors (or persons performing the
equivalent functions):</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify"><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 registrant's ability to record, process, summarize and report
financial information; and </font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify">&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="5%" valign="top">
		<p align="justify">&nbsp;</td>
		<td width="3%" valign="top">
		<p align="justify"><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 registrant'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";margin-left:1.0in;text-align:justify;text-indent:
- -.5in'><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: October 29, 2009&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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";'>&nbsp;</p>

</div>

</body>

</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>5
<FILENAME>ex32.htm
<TEXT>
<html>

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

<body>

<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'>&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
quarterly report on Form 10-Q of Pro-Dex Inc. (the &#147;Company&#148;) for the quarterly
period ended September 30, 2009 (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>Dated: October 29, 2009 </td>
		<td width="946">

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

		</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="946">

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

		</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="946">

<p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Chief
Executive Officer and President<u><br>
</u></p>

		</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="946">

<p style='margin:0in;margin-bottom:.0001pt;font-size:10.0pt;font-family:"Courier New";text-align:justify'>&nbsp;</p>

		</td>
	</tr>
	<tr>
		<td>Dated: October 29, 2009</td>
		<td width="946">

<p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>By:<u>
/s/ &nbsp;&nbsp;&nbsp;&nbsp; JEFFREY J. RITCHEY&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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>&nbsp;</td>
		<td width="946">

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

		</td>
	</tr>
	<tr>
		<td>&nbsp;</td>
		<td width="946">

<p style='margin-bottom:.0001pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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";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'><font style="font-size: 11.0pt">A signed original of this written statement required
by Section 906, or other document authenticating, acknowledging, or otherwise
adopting the signatures that appear in typed form within the electronic version
of this written statement required by Section 906, has been provided to the
Company and will be retained by the Company and Furnished to the Securities and
Exchange Commission or its staff upon request.</font></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>

</body>

</html>
</TEXT>
</DOCUMENT>
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<TYPE>GRAPHIC
<SEQUENCE>6
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#```[
`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
