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<SEC-DOCUMENT>0001003297-10-000101.txt : 20100429
<SEC-HEADER>0001003297-10-000101.hdr.sgml : 20100429
<ACCEPTANCE-DATETIME>20100429160220
ACCESSION NUMBER:		0001003297-10-000101
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20100331
FILED AS OF DATE:		20100429
DATE AS OF CHANGE:		20100429

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:		10781692

	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>pdex10q.htm
<TEXT>
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<title>PRO DEX INC Form 10Q</title>



</head>

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

<div style='page:Section1;'>

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

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

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

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

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center;text-autospace:none'>&nbsp;<a name="fis_top_of_document"></a><a
name="prodex10q_htm"></a><a name="fis_form_10qsb"></a></p>

  <h4 style='margin:0in;margin-bottom:.0001pt;text-align:center;page-break-after:avoid;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";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","serif";font-weight:bold;text-align:center'>Washington, D.C. 20549</h5>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><b><font style="font-size: 6.0pt">&nbsp;</font></b></p>
  <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","serif";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","serif";text-align:center;text-autospace:none'><b>&nbsp;</b></p>
  <table border="0" width="100%">
	<tr>
		<td width="5%" valign="top"><b>[X]</b></td>
		<td width="95%" valign="top">
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-autospace:
  none; margin-right:0in; margin-top:0in'><b>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.</b></p>
  		</td>
	</tr>
	</table>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-autospace:none'><b>&nbsp;</b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center;text-autospace:none'><b>For
  the quarterly period ended March 31, 2010</b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";text-align:center'>&nbsp;</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><b>OR</b></p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-autospace:none'><b>&nbsp;</b></p>
  <table border="0" width="100%" cellspacing="0" cellpadding="0">
	<tr>
		<td width="5%" valign="top"><b>[&nbsp; ]</b></td>
		<td width="95%" valign="top">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";margin-left:.75in;text-indent:-.75in;text-autospace:
  none'><b>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.&nbsp;&nbsp;
  FOR THE TRANSITION PERIOD FROM&nbsp; <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>TO&nbsp;
  <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; .</u></b></p>
  		</td>
	</tr>
	</table>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-autospace:none'><b>&nbsp;</b></p>

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

<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='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","serif";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","serif";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","serif";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","serif";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","serif";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","serif";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","serif";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","serif";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","serif";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","serif";text-autospace:none'>&nbsp;</p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";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","serif";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","serif";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","serif";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","serif";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","serif";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","serif";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","serif";text-autospace:none'>&nbsp;</p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";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","serif";text-autospace:none'>&nbsp;</p>
  </td>
  <td valign=top style='padding:0in; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";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","serif";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","serif";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","serif";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","serif";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","serif";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","serif";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","serif";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","serif";text-align:center;text-autospace:none'><b><font style="font-size: 10.0pt">&nbsp;</font></b></p>
  </td>
 </tr>
</table>

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

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

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

<p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif";text-autospace:none; margin-left:0in; margin-right:0in; margin-top:0in'>
<font size="2">Large accelerated filer [ ] Accelerated
filer [ ]&nbsp; Non-accelerated filer [ ] &nbsp;Smaller reporting company [ X ]
</font> </p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-autospace:none'><font style="font-size: 10.0pt">Yes
[&nbsp; ] No [X]<a name=Verdatum></a></font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";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 as of the latest practicable date:&nbsp; 9,753,671 shares of Common Stock, no
par value, as of April 28, 2010. </font></p>

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

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

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

</div>

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

<font face="Times New Roman,serif">

<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","serif";line-height:1.0pt'>&nbsp;</p>

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

<p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Times New Roman&#039;,serif";margin-right:0in;margin-left:0in;margin-bottom:.0001pt;text-align:center; margin-left:0in; margin-right:0in; margin-top:0in'>INDEX </p>

<p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Times New Roman&#039;,serif";margin-right:0in;margin-left:0in;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='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Arial Unicode MS&#039;,sans-serif";margin-right:0in;margin-left:0in;margin-bottom:.0001pt;page-break-after:avoid; margin-left:0in; margin-right:0in; margin-top:0in'>&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 colspan=2 style='padding:0in;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'><b>
	<font size="2">&nbsp;</font></b></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><b><font style="font-size: 10.0pt">Part I.&nbsp;Financial
  Information </font></b></p>
  </td>
  <td nowrap colspan=2 style='padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in'>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Times New Roman&#039;,serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'><font size="2">2</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:8.55pt'>
  <td style='padding:0in;' width="92%">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif";margin-left:-.1in;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' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><a href="#Item_1"><font style="font-size: 10.0pt">Item&nbsp;1.&nbsp;Financial
  Statements:</font></a><font style="font-size: 10.0pt"> </font></p>
  </td>
  <td nowrap colspan=2 style='padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in'>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Times New Roman&#039;,serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'><font size="2">2</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:8.55pt'>
  <td style='padding:0in;' width="92%">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif";margin-left:-.1in;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' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><a href="#Item_1"><font style="font-size: 10.0pt">Condensed
  consolidated balance sheets &#150; June 30, 2009 and March 31, 2010 (unaudited)</font></a></p>
  </td>
  <td nowrap colspan=2 style='padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in'>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Times New Roman&#039;,serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'><font size="2">2</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:8.55pt'>
  <td style='padding:0in;' width="92%">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif";margin-left:-.1in;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' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><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 March 31, 2010 and 2009</a></font></p>
  </td>
  <td nowrap colspan=2 style='padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in'>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Times New Roman&#039;,serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'><font size="2">3</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:8.1pt'>
  <td style='padding:0in;' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><font style="font-size: 10.0pt">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";margin-left:-.1in;text-align:right;
  text-indent:2.3pt'><font style="font-size: 10.0pt">&nbsp;</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:16.65pt'>
  <td style='padding:0in;' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><font style="font-size: 10.0pt">
	<a href="#CONDENSED&nbsp;CONSOLIDATED&nbsp;STATEMENTS&nbsp;OF&nbsp;OPERATIONS_">Condensed consolidated
  statements of operations (unaudited) &#150; Nine months ended March 31, 2010 and 2009</a></font></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";margin-left:-.1in;text-align:right;
  text-indent:2.3pt'><font style="font-size: 10.0pt">4</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:5.4pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><font style="font-size: 10.0pt">&nbsp;</font></p>
  </td>
  <td nowrap colspan=2 style='padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in'>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Arial Unicode MS&#039;,sans-serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'>&nbsp;</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><font style="font-size: 10.0pt">
	<a href="#CONDENSED&nbsp;CONSOLIDATED&nbsp;STATEMENTS&nbsp;OF&nbsp;CASH&nbsp;FLOWS_">Condensed consolidated
  statements of cash flows (unaudited) &#150; Nine months ended March 31, 2010 and 2009</a></font></p>
  </td>
  <td nowrap colspan=2 style='padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in'>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Times New Roman&#039;,serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'><font size="2">5</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:8.55pt'>
  <td style='padding:0in;' width="92%">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif";margin-left:-.1in;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' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><a href="#Notes"><font style="font-size: 10.0pt">Notes to
  condensed consolidated financial statements (unaudited) &#150; March 31, 2010</font></a></p>
  </td>
  <td nowrap colspan=2 style='padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in'>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Times New Roman&#039;,serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'><font size="2">6</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:8.55pt'>
  <td style='padding:0in;' width="92%">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif";margin-left:-.1in;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' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><a href="#Item_2"><font style="font-size: 10.0pt">Item&nbsp;2.&nbsp;Management&#146;s
  Discussion and Analysis of Financial Condition and Results of Operations</font></a><font style="font-size: 10.0pt"> </font></p>
  </td>
  <td nowrap colspan=2 style='padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in'>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Times New Roman&#039;,serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'><font size="2">15</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:8.55pt'>
  <td style='padding:0in;' width="92%">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif";margin-left:-.1in;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' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><a href="#Item_3"><font style="font-size: 10.0pt">Item&nbsp;3.&nbsp;Quantitative
  and Qualitative Disclosures About Market Risk</font></a><font style="font-size: 10.0pt"> </font></p>
  </td>
  <td nowrap colspan=2 style='padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in'>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Times New Roman&#039;,serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'><font size="2">26</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:8.55pt'>
  <td style='padding:0in;' width="92%">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif";margin-left:-.1in;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' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><a href="#Item_4T"><font style="font-size: 10.0pt">Item
  4T.&nbsp; Controls and Procedures</font></a></p>
  </td>
  <td nowrap colspan=2 style='padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in'>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Times New Roman&#039;,serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'><font size="2">26</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%">
	<p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</td>
 </tr>
 <tr style='height:8.55pt'>
  <td style='padding:0in;' width="92%">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif";margin-left:-.1in;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' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:18.15pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><b><font style="font-size: 10.0pt">
	<a href="#OTHER_INFORMATION_">Part II.&nbsp;Other
  Information </a> </font></b></p>
  </td>
  <td nowrap colspan=2 style='padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in'>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Times New Roman&#039;,serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'><font size="2">27</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:6.75pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;</font></p>
  </td>
  <td nowrap colspan=2 style='padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in'>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Arial Unicode MS&#039;,sans-serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'>&nbsp;</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><a href="#Part_II"><font style="font-size: 10.0pt">Item&nbsp;1.&nbsp;Legal
  Proceedings</font></a><font style="font-size: 10.0pt"> </font></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Times New Roman&#039;,serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'><font size="2">27</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:4.0pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Arial Unicode MS&#039;,sans-serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'>&nbsp;</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:12.6pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><a href="#Item_1A"><font style="font-size: 10.0pt">Item 1A.
  Risk Factors</font></a><font style="font-size: 10.0pt"> </font></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Times New Roman&#039;,serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'><font size="2">28</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:7.65pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><font style="font-size: 10.0pt">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Arial Unicode MS&#039;,sans-serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'>&nbsp;</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:.25in'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><a href="#Unregistered"><font style="font-size: 10.0pt">Item&nbsp;2.
  Unregistered Sales of Equity Securities and Use of&nbsp; Proceeds</font></a></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Times New Roman&#039;,serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'><font size="2">29</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:4.5pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><font style="font-size: 10.0pt">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Arial Unicode MS&#039;,sans-serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'>&nbsp;</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:15.75pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><a href="#Defaults"><font style="font-size: 10.0pt">Item&nbsp;3.
  Defaults Upon Senior Securities</font></a><font style="font-size: 10.0pt"> </font></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Times New Roman&#039;,serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'><font size="2">29</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:4.5pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;</font></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Arial Unicode MS&#039;,sans-serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'>&nbsp;</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><font style="font-size: 10.0pt">
	<a href="#Submissions">Item&nbsp;4. (Removed and
  Reserved). &nbsp;</a>&nbsp;</font></p>
  </td>
  <td nowrap colspan=2 style='padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in'>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Times New Roman&#039;,serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'><font size="2">29</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:7.65pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;</font></p>
  </td>
  <td nowrap colspan=2 style='padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in'>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Arial Unicode MS&#039;,sans-serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'>&nbsp;</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:17.1pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><a href="#Other"><font style="font-size: 10.0pt">Item&nbsp;5.
  Other Information</font></a><font style="font-size: 10.0pt"> </font></p>
  </td>
  <td nowrap colspan=2 style='padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in'>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Times New Roman&#039;,serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'><font size="2">29</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:5.4pt'>
  <td style='padding:0in;' width="92%">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;</font></p>
  </td>
  <td nowrap colspan=2 style='padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in'>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Arial Unicode MS&#039;,sans-serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'>&nbsp;</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:18.9pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><a href="#Exhibits"><font style="font-size: 10.0pt">Item&nbsp;6.&nbsp;Exhibits</font></a><font style="font-size: 10.0pt"> </font></p>
  </td>
  <td colspan=2 style='padding:0in;
  '>
  <p style='margin-bottom:.0001pt;font-size:10pt;font-family:"Times New Roman","serif";margin-left:-.1in;text-align:right;
  text-indent:2.3pt; margin-right:0in; margin-top:0in'>29</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:8.1pt'>
  <td style='padding:0in;' width="92%">
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font size="2">&nbsp;</font></p>
  </td>
  <td nowrap colspan=2 style='padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in'>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Arial Unicode MS&#039;,sans-serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'>&nbsp;</p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%"><p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</td>
 </tr>
 <tr style='height:18.9pt'>
  <td valign=top style='padding:0in;
  ' width="92%">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><a href="#SIGNATURES"><font style="font-size: 10.0pt">Signatures</font></a><font style="font-size: 10.0pt"> </font></p>
  </td>
  <td nowrap colspan=2 style='padding-left:.1in; padding-right:0in; padding-top:0in; padding-bottom:0in'>
  <p style='mso-style-name:"Normal \(Web\)\&#039;,ClientStyle1; font-size: 12.0pt; font-family: Times New Roman&#039;,serif";margin-right:0in;margin-left:0in;margin-top:0in;margin-right:0in;margin-bottom:.75pt;
  margin-left:-.1in;text-align:right;text-indent:2.3pt'><font size="2">30</font></p>
  </td>
  <td style='border:none;padding:0in 0in 0in 0in' width="3%">
	<p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</td>
 </tr>
 </table>

</div>

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

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>1</p>
  </td>
 </tr>
</table>

</div>

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

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

</div>

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

<font face="Times New Roman,serif">

<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","serif";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><b><font style="font-size: 11.0pt">Item 1. &nbsp;&nbsp;&nbsp;&nbsp; </font>Financial
Statements<a name="prodex10q_htm_item_1___legal_proceedings"></a><a
name="Item_1"></a></b></p>


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

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

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

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='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","serif";text-align:center'><b><i><font style="font-size: 11.0pt">&nbsp;</font></i></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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:16.65pt'>
  <td colspan=5 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><b>PRO-DEX,&nbsp;INC.&nbsp;and&nbsp;SUBSIDIARIES</b></p>
  </td>
 </tr>
 <tr style='height:16.6pt'>
  <td colspan=5 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><b>CONDENSED&nbsp;CONSOLIDATED&nbsp;BALANCE&nbsp;SHEETS&nbsp;(unaudited)</b></p>
  </td>
 </tr>
 <tr style='height:16.65pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.85pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";' align="center"><i>3/31/2010</i></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";' align="center"><i>6/30/2009</i></p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash&nbsp;and&nbsp;cash&nbsp;equivalents</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,352,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,124,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of&nbsp;$51,000&nbsp;at&nbsp;03/31/2010&nbsp;and&nbsp;$52,000&nbsp;at&nbsp;6/30/09</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,776,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,515,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>16,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,856,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,365,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>232,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>117,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>118,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,216,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>7,255,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:4.75pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>5,551,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>5,981,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,997,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>147,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>87,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>87,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total&nbsp;other&nbsp;assets</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,084,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,231,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Total&nbsp;assets</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>17,851,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>16,467,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:8.7pt'>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts&nbsp;payable</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>829,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>827,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,069,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,394,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>53,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>400,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>34,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>33,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,332,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,707,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,067,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,367,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,502,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,528,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>188,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>171,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>247,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>212,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total&nbsp;long-term&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,004,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,278,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>6,336,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>5,985,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,680,149&nbsp;shares&nbsp;issued&nbsp;and&nbsp;outstanding&nbsp;Mar&nbsp;31,&nbsp;2010</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:16.65pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>16,670,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>16,574,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(5,155,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(6,092,000)</p>
  </td>
 </tr>
 <tr style='height:3.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.5pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>11,515,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>10,482,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:7.1pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.25pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>17,851,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>16,467,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><b><i><font style="font-size: 11.0pt">&nbsp;</font></i></b></p>
<div style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>

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

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

</div>

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

<font face="Times New Roman,serif">

<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","serif";'>&nbsp;</p>

<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='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","serif";text-align:center'>&nbsp;</p>
  </td>
  <td valign=top style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.3pt'>
  <td colspan=5 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><b>PRO-DEX,&nbsp;INC.&nbsp;and&nbsp;SUBSIDIARIES</b></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.35pt'>
  <td colspan=5 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.3pt'>
  <td colspan=5 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><b>Three&nbsp;months&nbsp;ended&nbsp;March&nbsp;31&nbsp;(unaudited)</b></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.45pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><i>2010</i></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><i>2009</i></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Net&nbsp;sales</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>6,161,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>4,608,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Cost&nbsp;of&nbsp;sales</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,869,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,497,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Gross&nbsp;profit</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,292,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,111,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp; Selling&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>383,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>315,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>886,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>781,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp; Impairment&nbsp;of&nbsp;intangible&nbsp;asset</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>997,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>614,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>686,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,883,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,779,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>409,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(1,668,000)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>40,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(56,000)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(10,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(56,000)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>399,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(1,724,000)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Provision&nbsp;for&nbsp;income&nbsp;taxes</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>225,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,287,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Net&nbsp;Income&nbsp;(Loss)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>174,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(3,011,000)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.02&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(0.31)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.02&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(0.31)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,703,615&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,684,071&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,721,693&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,684,071&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
</table>

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

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

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>3</p>
  </td>
 </tr>
</table>

</div>

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

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

</div>

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

<font face="Times New Roman,serif">

<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","serif";line-height:1.0pt'>&nbsp;</p>

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

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='border-collapse:collapse'>
 <tr style='page-break-inside:avoid;height:.05pt'>
  <td valign=top style='padding:1.1pt;
  '><font face="Times New Roman,serif"><a name="PL_6"></a>
  </font>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>&nbsp;</p>
  </td>
  <td valign=top style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.75pt'>
  <td colspan=5 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><b>PRO-DEX,&nbsp;INC.&nbsp;and&nbsp;SUBSIDIARIES</b></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.75pt'>
  <td colspan=5 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><b>CONDENSED&nbsp;CONSOLIDATED&nbsp;STATEMENTS&nbsp;OF&nbsp;OPERATIONS</b></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.75pt'>
  <td colspan=5 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><b>
	<a name="Nine&nbsp;months&nbsp;ended&nbsp;March&nbsp;31&nbsp;(unaudited)_">Nine&nbsp;months&nbsp;ended&nbsp;March&nbsp;31&nbsp;(unaudited)</a></b></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.9pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><i>2010</i></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><i>2009</i></p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Net&nbsp;sales</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>17,490,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>15,501,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Cost&nbsp;of&nbsp;sales</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>11,324,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>10,703,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Gross&nbsp;profit</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>6,166,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>4,798,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp; Selling&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,025,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>988,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,412,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,461,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp; Impairment&nbsp;of&nbsp;intangible&nbsp;asset</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>140,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>997,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,811,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,083,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>5,388,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>6,529,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>778,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(1,731,000)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>44,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(154,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(176,000)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(110,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(167,000)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Income&nbsp;(Loss)&nbsp;before&nbsp;(benefit)&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>668,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(1,898,000)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>(Benefit)&nbsp;Provision&nbsp;for&nbsp;income&nbsp;taxes</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(269,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,149,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Net&nbsp;Income&nbsp;(loss)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>937,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(3,047,000)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.10&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(0.31)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.10&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(0.31)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.9pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,680,149&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,722,408&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,699,138&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,722,408&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
</table>

</div>

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

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

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

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

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>4</p>
  </td>
 </tr>
</table>

</div>

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

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

</div>

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

<font face="Times New Roman,serif">

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


</font>

<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='border-collapse:collapse'>
 <tr style='page-break-inside:avoid;height:.05pt'>
  <td valign=top style='padding:1.1pt;
  '><font face="Times New Roman,serif"><a name=CF></a>
  </font>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><font style="font-size: 10.0pt">&nbsp;</font></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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td colspan=5 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><b>PRO-DEX,&nbsp;INC.&nbsp;and&nbsp;SUBSIDIARIES</b></p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td colspan=5 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><b>
	<a name="CONDENSED&nbsp;CONSOLIDATED&nbsp;STATEMENTS&nbsp;OF&nbsp;CASH&nbsp;FLOWS_">CONDENSED&nbsp;CONSOLIDATED&nbsp;STATEMENTS&nbsp;OF&nbsp;CASH&nbsp;FLOWS</a></b></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td colspan=5 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><b>Nine&nbsp;months&nbsp;ended&nbsp;March&nbsp;31&nbsp;(unaudited)</b></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><i>2010</i></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><i>2009</i></p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Net&nbsp;Income&nbsp;(loss)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>937,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(3,047,000)</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.05in; margin-right:0in; margin-top:0in'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.25in; margin-right:0in; margin-top:0in'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>546,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>611,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.25in; margin-right:0in; margin-top:0in'>Impairment&nbsp;of&nbsp;intangible&nbsp;asset</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>140,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>997,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.25in; margin-right:0in; margin-top:0in'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>96,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>129,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.25in; margin-right:0in; margin-top:0in'>Recovery&nbsp;of&nbsp;doubtful&nbsp;accounts</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(1,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(35,000)</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.25in; margin-right:0in; margin-top:0in'>Increase&nbsp;(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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(923,000)</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.25in; margin-right:0in; margin-top:0in'>Increase&nbsp;in&nbsp;deferred&nbsp;tax&nbsp;allowance</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>118,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,960,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.25in; margin-right:0in; margin-top:0in'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.5in; margin-right:0in; margin-top:0in'>(Increase)&nbsp;Decrease&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(245,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,043,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.5in; margin-right:0in; margin-top:0in'>Decrease&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>509,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,347,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.5in; margin-right:0in; margin-top:0in'>(Increase)&nbsp;Decrease&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(115,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>55,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.5in; margin-right:0in; margin-top:0in'>(Increase)&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(20,000)</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.5in; margin-right:0in; margin-top:0in'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>712,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(1,341,000)</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.5in; margin-right:0in; margin-top:0in'>(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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(36,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>64,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Net&nbsp;Cash&nbsp;provided&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,661,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>840,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.05in; margin-right:0in; margin-top:0in'>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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(109,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(181,000)</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(109,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(181,000)</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.05in; margin-right:0in; margin-top:0in'>Net&nbsp;(payments)&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(2,000,000)</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.05in; margin-right:0in; margin-top:0in'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(396,000)</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.05in; margin-right:0in; margin-top:0in'>Net&nbsp;Principal&nbsp;(Payments)&nbsp;borrowing&nbsp;&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(300,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,866,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.05in; margin-right:0in; margin-top:0in'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(24,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(23,000)</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-left:0.05in; margin-right:0in; margin-top:0in'>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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(119,000)</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Net&nbsp;Cash&nbsp;used&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(324,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(672,000)</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,228,000&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(13,000)</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>517,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,352,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:2.25pt double windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:2.25pt double windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>504,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:9.15pt'>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'><i>Supplemental&nbsp;Information</i></p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Cash&nbsp;payments&nbsp;for&nbsp;interest</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>157,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>178,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>87,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.0pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.95pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
</table>

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

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>5</p>
  </td>
 </tr>
</table>

</div>

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

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

</div>

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

<font face="Times New Roman,serif">

<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","serif";line-height:1.0pt'>&nbsp;</p>

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

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

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

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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 on Form
10-K 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 our Annual Report on Form 10-K for the fiscal year ended
June 30, 2009. </p>

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories
are stated at the lower of cost (the first-in, first-out method) or market and
consist of the following: </p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="80%"
 style='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","serif";text-align:center;text-autospace:none'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:1px solid #000000; border-top:1.0pt solid windowtext; padding:1.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>March&nbsp;31,&nbsp;2010</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:1px solid #000000;border-right:1.0pt solid windowtext;
  padding:1.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>June&nbsp;30,&nbsp;2009</p>
  </td>
 </tr>
 <tr style='height:12.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <div style="border-top: 1px solid #000000">
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Raw&nbsp;Materials</p>
  </div>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,167,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,290,000&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Work&nbsp;in&nbsp;process</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>557,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>867,000&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Finished&nbsp;goods</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,132,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,208,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.25pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;&nbsp;Total&nbsp;inventories</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,856,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";text-align:center;text-autospace:none'>&nbsp;</p>

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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 March 31, 2010, within
our accrued expenses, we carried a warranty reserve of $734,000 which was
comprised of $686,000 for medical products, $8,000 for aerospace products and $40,000
for dental and industrial products.&nbsp; Warranty expenses are reflected in the
financial statements in cost of sales (&#147;COS&#148;).&nbsp; Adjustments to pre-existing
warranties are due to assumption changes resulting from updating the cost to
repair and warranty return rates to the current estimated cost and return
rates.&nbsp; The total warranty expense reflected in the COS for the quarter ended March
31, 2010 was $218,000 and for the nine-months ended March 31, 2010 was $586,000.&nbsp;
The total warranty expense reflected in the COS for the quarter ended March 31,
2009 was $26,000 and for the nine-months ended March 31, 2009 was $184,000.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>The warranty accrual and expenses for the three and nine-months ended March
31, 2010 and 2009 are presented below:</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>
<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="80%"
 style='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","serif";text-align:center;text-autospace:none'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Three&nbsp;months&nbsp;Ended&nbsp;March&nbsp;31,</p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2009</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Beginning&nbsp;Balance</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>649,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>685,000&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;Warranties&nbsp;issued&nbsp;during&nbsp;period</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>161,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>167,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;&nbsp;due&nbsp;to&nbsp;assumption&nbsp;changes</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>57,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(141,000)</p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(133,000)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(132,000)</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Ending&nbsp;Balance</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>734,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>579,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
	<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
	<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>6</p>
  </td>
 </tr>
</table>

</div>

<font face="Times New Roman,serif">

<br clear=ALL>

</font>

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

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

</div>

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

<font face="Times New Roman,serif">

<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","serif";line-height:1.0pt'>&nbsp;</p>

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

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="75%"
 style='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","serif";text-align:center'><font style="font-size: 10.0pt">&nbsp;</font></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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Nine&nbsp;months&nbsp;Ended&nbsp;March&nbsp;31,</p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2009</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Beginning&nbsp;Balance</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>518,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>861,000&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;Warranties&nbsp;issued&nbsp;during&nbsp;period</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>538,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>524,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;&nbsp;due&nbsp;to&nbsp;assumption&nbsp;changes</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>48,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(340,000)</p>
  </td>
 </tr>
 <tr style='height:12.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(370,000)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(466,000)</p>
  </td>
 </tr>
 <tr style='height:12.4pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Ending&nbsp;Balance</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>734,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>579,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>

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

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

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

<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='border-collapse:collapse'>
 <tr style='page-break-inside:avoid;height:.05pt'>
  <td width=417 valign=top style='width:312.5pt;padding:1.1pt;
  height:.05pt; border-bottom-style:none; border-bottom-width:medium'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";margin-top:6.0pt;text-align:center'>&nbsp;</p>
  </td>
  <td width=14 valign=top style='width:10.25pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;
  height:.05pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td width=110 valign=top style='width:82.85pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;
  height:.05pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td width=16 valign=top style='width:11.85pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;
  height:.05pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td width=108 valign=top style='width:81.25pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;
  height:.05pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-left:medium none windowtext; border-right:1.0pt solid windowtext; border-top:medium none windowtext; border-bottom:medium none; padding:1.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Three&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-left:medium none windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2009</p>
  </td>
 </tr>
 <tr style='height:11.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Net&nbsp;Income&nbsp;(loss)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>174,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(3,011,000)</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;Weighted&nbsp;average&nbsp;number&nbsp;of&nbsp;common&nbsp;shares&nbsp;outstanding</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,703,615&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,684,071&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.02&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(0.31)</p>
  </td>
 </tr>
 <tr style='height:11.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;Weighted&nbsp;average&nbsp;of&nbsp;common&nbsp;shares&nbsp;outstanding</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,703,615&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,684,071&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>18,078&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Weighted&nbsp;average&nbsp;number&nbsp;of&nbsp;common&nbsp;and&nbsp;shares&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,721,693&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,684,071&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.02&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(0.31)</p>
  </td>
 </tr>
</table>

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

<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='border-collapse:collapse'>
 <tr style='page-break-inside:avoid;height:.05pt'>
  <td width=425 valign=top style='width:319.05pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;
  height:.05pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";margin-top:6.0pt;text-align:center'>&nbsp;</p>
  </td>
  <td width=14 valign=top style='width:10.3pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;
  height:.05pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td width=111 valign=top style='width:82.9pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;
  height:.05pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td width=16 valign=top style='width:11.85pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;
  height:.05pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td width=108 valign=top style='width:81.35pt;padding:1.1pt 1.1pt 1.1pt 1.1pt;
  height:.05pt'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Nine&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2009</p>
  </td>
 </tr>
 <tr style='height:11.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Net&nbsp;income&nbsp;(loss)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>937,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(3,047,000)</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Basic&nbsp;net&nbsp;income&nbsp;per&nbsp;common&nbsp;share:</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;Weighted&nbsp;average&nbsp;number&nbsp;of&nbsp;common&nbsp;shares&nbsp;outstanding</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,680,149&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,722,408&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.10&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(0.31)</p>
  </td>
 </tr>
 <tr style='height:11.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Diluted&nbsp;net&nbsp;income&nbsp;per&nbsp;share:</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;Weighted&nbsp;average&nbsp;of&nbsp;common&nbsp;shares&nbsp;outstanding</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,680,149&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,722,408&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>18,989&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Weighted&nbsp;average&nbsp;number&nbsp;of&nbsp;common&nbsp;and&nbsp;shares&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,699,138&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>9,722,408&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.10&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(0.31)</p>
  </td>
 </tr>
</table>

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

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

<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='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","serif";text-align:center;text-autospace:none'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Three&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2009</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	415,500&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,032,691&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>50,993&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>59,993&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Total&nbsp;potentially&nbsp;dilutive&nbsp;securities&nbsp;excluded&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	415,500&nbsp;&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,143,677&nbsp;</p>
  </td>
 </tr>
</table>

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

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>7</p>
  </td>
 </tr>
</table>

</div>

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

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

</div>

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

<font face="Times New Roman,serif">

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


</font>

<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='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","serif";text-align:center;text-autospace:none'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Nine&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2009</p>
  </td>
 </tr>
 <tr style='height:11.35pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>29,715&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Total&nbsp;potentially&nbsp;dilutive&nbsp;securities&nbsp;excluded&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>29,715&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.35pt'>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	415,500&nbsp;&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,111,989&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>50,993&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>59,993&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.35pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Total&nbsp;potentially&nbsp;dilutive&nbsp;securities&nbsp;excluded&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	415,500&nbsp;&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,222,975&nbsp;</p>
  </td>
 </tr>
 <tr style='height:11.4pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
</table>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify'>We have a credit facility with Wells
Fargo Bank, N.A. (&#147;Wells Fargo&#148;) and a mortgage with Union Bank of California, N.A (&#147;Union Bank&#148;).</p>

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>As of March 31,
2010, 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","serif";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","serif";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 $1,466,667 was outstanding as of March 31, 2010. </p></li>
</ul>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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 March 31, 2010) plus 1.50%, or
(ii) three-month LIBOR (0.292% at March 31, 2010) plus 2.50%, at our
discretion, based on outstanding borrowings.&nbsp; The line of credit expires
on November 1, 2010.&nbsp; We are charged an unused credit line fee of 1.5% 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 March 31, 2010.&nbsp; The total eligible
additional borrowing capacity under the line of credit as of March 31, 2010 was
$1,000,000.</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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 $1,466,667 outstanding balance under the TI Loan as of March
31, 2010.&nbsp;</p>

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

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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 $1,536,063 in principal outstanding under
the mortgage as of March 31, 2010.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>8</p>
  </td>
 </tr>
</table>

</div>

<font face="Times New Roman,serif">

<br clear=ALL>

</font>

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

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

</div>

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

<font face="Times New Roman,serif">

<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","serif";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 March 31, 2010, 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","serif";text-align:justify'>&nbsp;</p>

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";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","serif";text-align:justify;text-indent:.5in'>Significant
management judgment is required in determining our provision for income taxes
and the recoverability of our deferred tax assets.&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 a $2,241,000
valuation allowance against our deferred tax assets in the year ended June 30,
2009.</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>&nbsp; As of March
31, 2010, the valuation allowance against our deferred tax assets is
approximately $1,810,000.&nbsp; The change in valuation allowance is due primarily
to realization of the Company's deferred tax asset for the federal net
operating loss carryover generated in the year ended June 30, 2009.&nbsp; Federal
legislation enacted on November 6, 2009 provided for a five year carry back of
certain Net Operating Losses increasing the time period eligible to take the
benefit of these losses from two years.</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>As of March 31,
2010, pursuant to ASC 740 (formerly FASB Interpretation No. 48,
&quot;Accounting for Uncertainty in Income Taxes&quot;), we have accrued
$63,000 of unrecognized tax benefits 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","serif";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify'>A reconciliation of the beginning
and ending amount of unrecognized tax benefits is as follows:</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;page-break-after:avoid'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p>
<table border="0" width="80%">
	<tr>
		<td width="5%">&nbsp;</td>
		<td width="80%">

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;page-break-after:avoid'>
Balance at July 1, 2009&nbsp;&nbsp; </p>

		</td>
		<td align="right" width="15%">$&nbsp; 54,000</td>
	</tr>
	<tr>
		<td width="5%">&nbsp;</td>
		<td width="80%">

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

		</td>
		<td align="right" width="15%">0</td>
	</tr>
	<tr>
		<td width="5%">&nbsp;</td>
		<td width="80%">

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;page-break-after:avoid'>
Additions for tax positions of prior years&nbsp; </p>

		</td>
		<td align="right" width="15%">9,000</td>
	</tr>
	<tr>
		<td width="5%">&nbsp;</td>
		<td width="80%">

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;page-break-after:avoid'>
Reductions for tax positions of prior years</p>

		</td>
		<td align="right" width="15%">0</td>
	</tr>
	<tr>
		<td width="5%">&nbsp;</td>
		<td width="80%">

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

		</td>
		<td align="right" width="15%">0</td>
	</tr>
	<tr>
		<td width="5%">&nbsp;</td>
		<td width="80%">

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

		</td>
		<td align="right" width="15%">------------</td>
	</tr>
	<tr>
		<td width="5%">&nbsp;</td>
		<td width="80%">

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify'>
Balance at March 31, 2010 </p>

		</td>
		<td align="right" width="15%">$&nbsp; 63,000</td>
	</tr>
</table>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>We recognize
accrued interest and penalties related to unrecognized tax benefits in income
tax expense when applicable. As of March 31, 2010, there was no interest or
penalties applicable to our unrecognized tax benefits since the Company has
sufficient tax attributes available to fully offset any potential assessment of
additional tax.&nbsp; </p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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 through June 30, 2009.&nbsp; Our state income tax returns are open to audit
under the statute of limitations for the years ended June 30, 2006 through June
30, 2009.&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","serif";text-align:justify'>&nbsp;</p>

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>9</p>
  </td>
 </tr>
</table>

</div>

<font face="Times New Roman,serif">

<br clear=ALL>

</font>

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

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

</div>

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

<font face="Times New Roman,serif">

<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","serif";line-height:1.0pt'>&nbsp;</p>

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

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

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>Share-based compensation pre-tax expense pursuant
to ASC 718 (formerly SFAS 123(R)) was $25,000 and $42,000 for the three
months and was $96,000 and $129,000 for the nine months ended March 31, 2010
and 2009, respectively, which were 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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="90%"
 style='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","serif";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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Three&nbsp;months&nbsp;ended&nbsp;March&nbsp;31,</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2009</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>General&nbsp;and&nbsp;administrative,&nbsp;options</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>6,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>General&nbsp;and&nbsp;administrative,&nbsp;restricted&nbsp;stock</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>19,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>25,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>42,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(9,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td colspan=2 valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Decrease&nbsp;in&nbsp;net&nbsp;income</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>16,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>42,000&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Decrease&nbsp;in&nbsp;basic&nbsp;earnings&nbsp;per&nbsp;share</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.00&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Decrease&nbsp;in&nbsp;diluted&nbsp;earnings&nbsp;per&nbsp;share</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.00&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="90%"
 style='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","serif";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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Nine&nbsp;months&nbsp;ended&nbsp;March&nbsp;31,</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2009</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>General&nbsp;and&nbsp;administrative,&nbsp;options</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>18,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>41,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>General&nbsp;and&nbsp;administrative,&nbsp;restricted&nbsp;stock</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>78,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>88,000&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>96,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>129,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(33,000)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.65pt'>
  <td colspan=2 valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Decrease&nbsp;in&nbsp;net&nbsp;income</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>63,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>129,000&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Decrease&nbsp;in&nbsp;basic&nbsp;earnings&nbsp;per&nbsp;share</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.01&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.01&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Decrease&nbsp;in&nbsp;diluted&nbsp;earnings&nbsp;per&nbsp;share</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.01&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.01&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>As of March 31, 2010, there was $17,000 of total unrecognized
compensation cost related to 102,500 non-vested outstanding stock options with
a per share weighted average value of $0.96.&nbsp; The unrecognized expense is
anticipated to be recognized on a straight-line basis over a weighted average
period of 0.6 years.&nbsp; The following is a summary of stock option activity in
the nine months ending March 31, 2010 and 2009 (unaudited):</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>
<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="90%"
 style='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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=3 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=3 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2009</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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Weighted-</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Average</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Weighted-</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Average</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Options</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Shares</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Exercise&nbsp;Price</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Shares</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Exercise&nbsp;Price</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Outstanding&nbsp;at&nbsp;beginning&nbsp;of&nbsp;fiscal&nbsp;year&nbsp;(7/1)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>933,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.42&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,109,500&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.58&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;&nbsp;Granted</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>66,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.52&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>106,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.62&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;&nbsp;Exercised</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;&nbsp;Forfeited</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(417,500)</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.43&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(22,500)</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.92&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Outstanding&nbsp;at&nbsp;end&nbsp;of&nbsp;period&nbsp;(3/31)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>581,500&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.31&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,193,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.49&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Exercisable&nbsp;at&nbsp;end&nbsp;of&nbsp;period&nbsp;(3/31)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>479,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.39&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,019,500&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.56&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Weighted-average&nbsp;fair&nbsp;value&nbsp;per</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.7pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.22&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.28&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
	<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
	<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>10</p>
  </td>
 </tr>
</table>

</div>

<font face="Times New Roman,serif">

<br clear=ALL>

</font>

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

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

</div>

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

<font face="Times New Roman,serif">

<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","serif";line-height:1.0pt'>&nbsp;</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-indent:.5in;text-autospace:none'>The following
table summarizes information regarding options outstanding and options
exercisable at March 31, 2010 (unaudited). The intrinsic value indicated on the
table below is based on the stock price at March 31, 2010 of $0.51 per common
share.&nbsp; </p>

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

<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='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","serif";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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.15pt'>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=3 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Options&nbsp;Outstanding</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=5 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Options&nbsp;Exercisable</p>
  </td>
 </tr>
 <tr style='height:28.25pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Weighted-</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Average</p>
  </td>
  <td colspan=2 valign=bottom style='border:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Weighted-</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Average</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Aggregate</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Weighted-</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Average</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Aggregate</p>
  </td>
 </tr>
 <tr style='height:14.15pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Range&nbsp;of</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Number</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Remaining</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Exercise</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Intrinsic</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Number</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Exercise</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Exercise&nbsp;Price</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";' align="center">
	Outstanding </p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p align="center">Contractual&nbsp;Life</td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Price</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Value</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Outstanding</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Price</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Value</p>
  </td>
 </tr>
 <tr style='height:14.15pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:left; margin-left:0in; margin-right:0in; margin-top:0in'>$0.42&nbsp;to&nbsp;$0.81</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>249,500&nbsp;</p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>5.7&nbsp;years</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.56&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>8,920&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>194,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.56&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>8,230&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.15pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:left; margin-left:0in; margin-right:0in; margin-top:0in'>$1.00&nbsp;to&nbsp;$1.56</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>182,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>6.3&nbsp;years</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.39&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>135,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.37&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&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; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:left; margin-left:0in; margin-right:0in; margin-top:0in'>$1.74&nbsp;to&nbsp;$2.18</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>60,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>4.7&nbsp;years</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.84&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>60,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.84&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
 <tr style='height:16.65pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:left; margin-left:0in; margin-right:0in; margin-top:0in'>$2.55&nbsp;to&nbsp;$3.30</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>90,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>5.3&nbsp;years</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2.89&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>90,000&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.15pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Total</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>581,500&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>5.7&nbsp;years</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.31&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>8,920&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>479,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.39&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>8,230&nbsp;</p>
  </td>
 </tr>
</table>

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

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>The following is a summary of restricted share activity in the nine months
ending March 31, 2010 and 2009 respectively (unaudited):</p>

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

<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='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","serif";text-align:center;text-autospace:none'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.3pt'>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:1.0pt solid windowtext;border-bottom:medium none;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=3 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=3 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2009</p>
  </td>
 </tr>
 <tr style='height:24.55pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Weighted-Average</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Weighted-</p>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Average</p>
  </td>
 </tr>
 <tr style='height:12.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Restricted&nbsp;shares</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Shares</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Exercise&nbsp;Price</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Shares</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Exercise&nbsp;Price</p>
  </td>
 </tr>
 <tr style='height:12.3pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Outstanding&nbsp;at&nbsp;beginning&nbsp;of&nbsp;fiscal&nbsp;year&nbsp;(7/1)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>85,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.38&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>170,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.38&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;&nbsp;Granted</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.3pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;&nbsp;Issued</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(85,000)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.38&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(85,000)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.38&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.45pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;&nbsp;&nbsp;&nbsp;Forfeited</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.3pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Outstanding&nbsp;at&nbsp;end&nbsp;of&nbsp;period&nbsp;(3/31)</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>85,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.38&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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:1.0pt solid windowtext;border-right:
  medium none;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Exercisable&nbsp;at&nbsp;end&nbsp;of&nbsp;period&nbsp;(3/31)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
</table>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>As of March 31, 2010, there was no remaining unrecognized compensation
cost related to non-vested outstanding restricted shares.&nbsp; </p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>We had two major customers (defined as a customer that represents greater
than 10% of the Company&#146;s total revenues) in the nine months ended March 31,
2010 and 2009.&nbsp;&nbsp; </p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>
<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="75%"
 style='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","serif";text-align:justify;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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=5 valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Nine&nbsp;months&nbsp;ended&nbsp;March&nbsp;31,</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.3pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=5 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Revenues</p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Accts.&nbsp;Rec.</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Revenues</p>
  </td>
  <td colspan=2 valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Accts.&nbsp;Rec.</p>
  </td>
 </tr>
 <tr style='height:12.3pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Customer&nbsp;1</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,727,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>269,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,070,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>720,000&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Customer&nbsp;2</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>6,584,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>869,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>4,509,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>527,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>We have been notified by Customer 2 that they are in the
process of developing, and plan to eventually manufacture, their own surgical
hand pieces which are functionally comparable to the two products currently
provided by the Company.&nbsp; Pro-Dex has been the exclusive manufacturer of these
products since they were developed.&nbsp; </p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>11</p>
  </td>
 </tr>
</table>

</div>

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

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

</div>

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

<font face="Times New Roman,serif">

<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","serif";line-height:1.0pt'>&nbsp;</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>The Customer has not provided firm transition dates or
volumes due to the inherent uncertainty in the design, testing, and
qualification process.&nbsp; </p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>In March, 2010 the Company received purchase
orders from this customer for production of the first product for quantities
that would support the Customer&#146;s historical consumption rates through the
Company&#146;s fourth quarter of fiscal year 2011.&nbsp;&nbsp;Because the Customer has
stated it intends to build inventory, it has requested to take delivery of all
of these hand pieces by the end of October 2010.&nbsp;&nbsp;</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>Regarding the second product, the customer&#146;s original
planning communicated in December 2009 was extended by six months through at
least June 2011 and the Company received a purchase order for normal deliveries
through February 2011, with a follow-on P.O. for the balance expected by us
toward the end of this calendar year as indicated by the customer&#146;s latest
communication.&nbsp;&nbsp;The purchase orders for products one and two totaled
$4.2 million.&nbsp;&nbsp;Additionally, the Customer indicated both in December
2009 and March 2010 that they intend to continue purchasing some portion of
these products from the Company for up to three years to support existing
customers with additional and replacement units of the same type and in
specific geographic markets where regulatory registration for the replacement
units requires an extended period of time.&nbsp; </p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>The design and production of these products is quite
technologically challenging, as such devices are exposed to extremely harsh
surgical and sterilization conditions.&nbsp; A different large customer of the
Company pursued a similar course of action several years ago and ultimately
canceled its in-sourcing project, continuing its purchases from Pro-Dex.&nbsp; The Customer currently pursuing this course has indicated a high commitment to proceeding cautiously.&nbsp;
Accordingly, the actual occurrence of, and certainly the specific timing of any
transition is very difficult to estimate.</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>The Company intends to find additional business and reduce
its operating costs as necessary to minimize the impact of a potential revenue
reduction.&nbsp; In the event that the Customer's future purchases are reduced
beyond the additional business won and the cost savings realized, the Company
is likely to experience a material and adverse impact on its business.</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>The Company has no commitment from the Customer that it
will update the Company with the status of its product development efforts and
the Customer has no obligation to do so.&nbsp; Accordingly, the Company is unable to
know or predict the status of the Customer's initiative on an ongoing basis.&nbsp;
The name of the Customer is protected by a confidentiality agreement. </p>

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

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

&nbsp;<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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.&nbsp; Since January 1, 2009, OCWD has named 11
additional defendants by multiple amendments to its complaint.</p>

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

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>12</p>
  </td>
 </tr>
</table>

</div>

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

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

</div>

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

<font face="Times New Roman,serif">

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</font>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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.&nbsp; In two recent Case Management
Conferences before the court, OCWD has refused defendants&#146; request to designate
a date by which it will disclose its proposed soil and groundwater cleanup
remedies.</p>

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>One of our past
insurers has committed to pay most of our defense costs for the lawsuit, and
has done so to date, 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","serif";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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-top:12.0pt;margin-right:0in;margin-bottom:3.0pt;margin-left:0in;page-break-after:avoid;font-family:"Times New Roman,serif";text-align:justify;text-indent:35.0pt'>
<font size="3">On February 3, 2010,
the Company and Patrick Johnson, the Company's Executive Vice President and
Chief Business Development Officer, entered into a Separation Agreement and
General Release of All Claims (&#147;Separation Agreement&#148;) concerning the
conclusion of Mr.&nbsp;Johnson's employment services with the Company effective
as of February&nbsp;5, 2010 (the &#147;Separation Date&#148;).&nbsp; </font>
</p>

<p style='margin-right:0in;margin-left:0in;page-break-after:avoid;font-size:16.0pt;font-family:"Times New Roman,serif";text-align:justify;text-indent:35.0pt'>
<font size="3">As part of the
separation agreement, the Company will:&nbsp; (i) pay Mr. Johnson, over a period of
six months beginning on the Separation Date, in regular installments, a gross
amount equal to Mr. Johnson&#146;s last regular bi-weekly salary until the total
gross payments have reached the amount of $105,000, less applicable legal
deductions and withholdings; (ii) provided Mr. Johnson elects coverage under
the Company&#146;s group health insurance program prior to the Separation Date, and
makes a timely election for continued coverage pursuant to COBRA, pay the
Company&#146;s portion of the monthly premiums for such continued coverage under the
Company&#146;s group health insurance program for a period from the Separation Date
through July 31, 2010, with continuing coverage thereafter at Mr. Johnson's
election and sole expense, as available; and (iii) make available to Mr.
Johnson the following Additional Contingent Separation Payment (&#147;ACSP&#148;),
subject to the provisions of the Separation Agreement:&nbsp; </font></p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>&nbsp;</p>

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>13</p>
  </td>
 </tr>
</table>

</div>

<font face="Times New Roman,serif">

<br clear=ALL>

</font>

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

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

</div>

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

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</font>


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

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

<ul>
	<li>
	<p style='margin-left:0in;page-break-after:avoid;font-size:16.0pt;font-family:"Times New Roman,serif";margin-left:
0.35in;text-align:justify;page-break-after:
auto'><font size="3">at any time between March 8, 2010, through August 7, 2010,
Mr. Johnson shall be entitled to notify the Company in writing that he wishes
to cause the Company to calculate and pay him all or a portion of the ACSP, in
which event the Company:</font></li>
</ul>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:3.0pt;margin-left:0in;page-break-after:avoid;font-family:"Times New Roman,serif";margin-left:1.0in;text-align:justify'>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shall
calculate the average closing price of its common stock for the five trading
days immediately preceding the date of the receipt of Mr. Johnson&#146;s written
notice (the &#147;Five Day Price&#148;).&nbsp; If the Five Day Price is greater than $1.50,
then $1.50 shall be used as the Five Day Price; </p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:3.0pt;margin-left:0in;page-break-after:avoid;font-family:"Times New Roman,serif";margin-left:1.0in;text-align:justify'>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shall,
with respect to one or more such option grants as Mr. Johnson shall have
identified in his written notice that were (i) previously held by Mr. Johnson
under grant dates from June 30, 2001 through September 6, 2002, (ii)
outstanding as of the Separation Date, and (iii) not exercised by Mr. Johnson
between the Separation Date and March 7, 2010 (each a &#147;Reference Grant&#148;),
subtract from the Five Day Price the strike (i.e., exercise) price of each
Reference Grant identified in the written notice; and </p>

<p style='margin-top:12.0pt;margin-right:0in;margin-bottom:3.0pt;margin-left:0in;page-break-after:avoid;font-family:"Times New Roman,serif";margin-left:1.0in;text-align:justify'>(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shall
pay to Mr. Johnson an ACSP equal to the product of (i) amount arrived at in (b)
above, multiplied by (ii) the total number of options that are contained in
each Reference Grant specified by Mr.&nbsp;Johnson in his written notice;</p>

<ul>
	<li>
	<p style='margin-left:0in;page-break-after:avoid;font-family:"Times New Roman,serif";margin-left:
0.35in;text-align:justify;page-break-after:
auto'>the maximum aggregate ACSP shall in no event exceed
$117,125;<br>
&nbsp;</li>
<li>
<p style='margin-left:0in;page-break-after:avoid;font-family:"Times New Roman,serif";margin-left:
0.35in;text-align:justify;page-break-after:
auto'>Mr. Johnson&#146;s eligibility to request payment of the ACSP is
further subject to the following provisions:&nbsp; (a) at no time from the
Separation Date through August 7, 2010, shall Mr. Johnson take any action with
a purpose of influencing the stock price of the Company&#146;s common stock, and (b)
at no time from March 8, 2010, through August 7, 2010, shall Mr. Johnson trade,
for himself or anyone acting in concert with him, in the stock, options or
other equity of the Company; and<br>
&nbsp;</li>
<li>
<p style='margin-left:0in;page-break-after:avoid;font-family:"Times New Roman,serif";margin-left:
0.35in;text-align:justify;page-break-after:
auto'>the numbers and amount used in calculating the ACSP are to
be proportionately adjusted in the event of any reverse or forward stock split
or other adjustment to the capital structure of the Company.</li>
</ul>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-indent:.5in'>At the closing NASDAQ market price
of $0.51 as of March 31, 2010, there is no positive value for the ACSP.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-indent:.5in'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="50%"
 style='border-collapse:collapse'>
 <tr style='page-break-inside:avoid;height:.05pt'>
  <td width="34%" valign=top style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center;text-indent:.5in'>&nbsp;</p>
  </td>
  <td width="9%" valign=top style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td width="25%" valign=top style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td width="8%" valign=top style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td width="23%" valign=top style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.25pt'>
  <td colspan=5 valign=bottom style='border:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Reference&nbsp;Grant</p>
  </td>
 </tr>
 <tr style='height:12.25pt'>
  <td width="34%" valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Shares</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Strike&nbsp;Price</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Value</p>
  </td>
 </tr>
 <tr style='height:12.3pt'>
  <td width="34%" valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>112,500&nbsp;</p>
  </td>
  <td width="9%" valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td width="25%" valign=bottom style='border:medium none;padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.81&nbsp;</p>
  </td>
  <td width="8%" valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td width="23%" valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.25pt'>
  <td width="34%" valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>75,000&nbsp;</p>
  </td>
  <td width="9%" valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td width="25%" valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.06&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.25pt'>
  <td width="34%" valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>100,000&nbsp;</p>
  </td>
  <td width="9%" valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td width="25%" valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1.42&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
 </tr>
 <tr style='height:12.25pt'>
  <td width="34%" valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:1.0pt solid windowtext;border-right:
  medium none;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>287,500&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td width="8%" valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td width="23%" valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";text-align:center;text-indent:.5in'>&nbsp;</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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 ASC 820 (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 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 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
establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value as follows: </p>

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

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>14</p>
  </td>
 </tr>
</table>

</div>

<font face="Times New Roman,serif">

<br clear=ALL>

</font>

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

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

</div>

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

<font face="Times New Roman,serif">

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


</font>


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

<ul>
	<li>
	<p style='mso-style-name:Pa0;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman,serif";text-align:justify;'>Level 1 - Valuations based on unadjusted quoted prices in
active markets for identical assets or liabilities that the Company has the
ability to access. </p></li>
	<li>
	<p style='mso-style-name:Pa0;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman,serif";text-align:justify;'>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. </p></li>
	<li>
	<p style='mso-style-name:Pa0;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman,serif";text-align:justify;'>Level 3 - Valuations
based on inputs that are unobservable and significant to the overall fair value
measurement.</p></li>
</ul>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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 March 31, 2010:</p>

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

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

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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 March 31, 2010
(unaudited):</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>
<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="80%"
 style='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","serif";text-align:center;text-autospace:none'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Total</p>
  </td>
 </tr>
 <tr style='height:7.9pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Cash&nbsp;and&nbsp;cash&nbsp;equivalents</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,352,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,352,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:7.9pt'>
  <td valign=bottom style='border-right:medium none; border-top:medium none; border-bottom:medium none; border-left:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Total</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:medium none;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,352,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,352,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";text-autospace:none'><b>NOTE 11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SUBSEQUENT EVENTS</b></p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>We have evaluated events or transactions that
occurred after the balance sheet date of March 31, 2010 through April 28, 2010,
which is the date the financial statements were issued.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";margin-top:.25in;text-align:justify;text-indent:.5in'>On
April 7, 2010 we issued a press release and filed a Form 8-K announcing that the
NASDAQ Hearing Panel determined to grant the Company&#146;s request for continued
listing on The NASDAQ Capital Market subject to the condition that, on or
before July 12, 2010, the Company evidence a closing bid price of $1 or more
for a minimum of ten consecutive trading days.<font style="font-size: 10.0pt">&nbsp;</font>&nbsp;
</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-autospace:none'><b>Item 2.<a name="Item_2"></a>
Management's Discussion and Analysis of Financial Condition and Results of
Operations</b></p>

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

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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 the results
of operations and financial condition of Pro-Dex, Inc. (&#147;Company&#148;, &#147;Pro-Dex&#148;,
&#147;we&#148;, &#147;our&#148; or &#147;us&#148;) &nbsp;for each of the three and nine month periods ended March
31, 2010 and 2009, respectively.&nbsp; This discussion should be read in conjunction
with the Consolidated Financial Statements and the Notes thereto included
elsewhere in this report. This report contains certain forward-looking
statements and information. The cautionary statements included herein should be
read as being applicable to all related forward-looking statements wherever
they may appear.&nbsp; Our actual future results could differ materially from those
discussed herein.&nbsp; Our critical accounting policies relate to revenue
recognition, inventory valuation for slow moving items, impairment of goodwill
and intangibles, 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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>15</p>
  </td>
 </tr>
</table>

</div>

<font face="Times New Roman,serif">

<br clear=ALL>

</font>

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

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

</div>

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

<font face="Times New Roman,serif">

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


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

&nbsp;</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>Except for the historical information contained herein, the matters
discussed in this report, including, but not limited to, 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;You are urged to review the risks, uncertainties and other
cautionary language described in this report, as well as in our other public
disclosures and reports filed with the Securities and Exchange Commission
(&#147;SEC&#148;) from time to time, including, but not limited to, the risks,
uncertainties and other cautionary language discussed in our Annual Report on
Form 10-K for our fiscal year ended June 30, 2009.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";text-align:justify;text-indent:.5in'>With operations in Irvine, California, Beaverton, Oregon and Carson City, Nevada, we provide 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","serif";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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>Our products are found in hospitals, dental offices,
medical engineering labs, commercial and military aircraft, scientific research
facilities and high-tech manufacturing operations around the world. The
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","serif";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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>Our 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 SEC filings, are available free of charge through our
website as soon as reasonably practicable after such reports are electronically
filed with, or furnished to, the SEC.&nbsp; In addition, our Code of Ethics and
other corporate governance documents may be found on our website at the
Internet address set forth above.&nbsp; Our filings with the SEC may also be read and copied at the SEC&#146;s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.&nbsp; You may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330.&nbsp; The SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC at  www.sec.gov  and company specific information at<u> </u> www.sec.gov <u>/edgar/searchedgar/companysearch.html</u>. &nbsp;</p>

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

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

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

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

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>16</p>
  </td>
 </tr>
</table>

</div>

<font face="Times New Roman,serif">

<br clear=ALL>

</font>

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

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

</div>

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

<font face="Times New Roman,serif">

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


</font>

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

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

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

<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman","serif";text-indent:.5in'>Revenue on product sales is
recognized upon shipment to the customer based on its terms of FOB shipping
point, where the risk of loss and title transfer to the customer.&nbsp; We record
sales in accordance with SEC Staff Accounting Bulletin No. 104, <i>Revenue
Recognition</i>.&nbsp; Under these guidelines, revenue is recognized when all of the
following exist: persuasive evidence that a sale arrangement exists, delivery
of the product has occurred, the price is fixed or determinable, and payment is
reasonably assured.&nbsp; We sell some of our products with a warranty that provides
for repairs or replacement of any defective parts for a period after the sale.
At the time of the sale, the Company accrues an estimate of the cost of
providing the warranty based on prior experience, but does not accrue an
allowance for sales returns.&nbsp; The Company recognizes revenue under research and
development agreements as certain deliverables are met as specified in each
development contract. </p>

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

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

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

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

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>In accordance with Statement of Financial Accounting
Standards (&#147;SFAS&#148;), ASC 360 (formerly SFAS&nbsp;No.&nbsp;144), &#147;Accounting for
the Impairment or Disposal for Long-Lived Assets&#148; long-lived assets and
intangible assets with definite lives are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Impairment indicators include, among other
conditions, cash flow deficits, historic or anticipated declines in revenue or
operating profit and adverse legal or regulatory developments. If it is
determined that such indicators are present and the review indicates that the
assets will not be fully recoverable, based on undiscounted estimated cash flow
over the remaining amortization periods, their carrying values are reduced to
estimated fair market value. Estimated fair market value is determined
primarily using the anticipated cash flow discounted at a rate commensurate
with the risk involved. For the purposes of identifying and measuring
impairment, long-lived assets are grouped with other assets and liabilities at
the lowest level for which identifiable cash flow are largely independent of
the cash flow of other assets and liabilities.&#148;&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","serif";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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 determined
that a triggering event for the Astromec and Micro Motors goodwill occurred in
the quarter ending December 31, 2009 as a large current customer notified us
they were developing a product that would take the place of one that we
currently sell them and another customer chose not to enter into a production
contract for a product we developed for them.&nbsp; We also determined that a
triggering event occurred in the quarter ending December 31, 2009 with the patent
intangible asset because no distribution partner or acquirer surfaced since the
previous fiscal year end.&nbsp; No triggering event occurred in the quarter ending
March 31, 2010.&nbsp; </p>

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

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>17</p>
  </td>
 </tr>
</table>

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</font>

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

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

</div>

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

<font face="Times New Roman,serif">

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


</font>

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;While our
operating units are influenced by changes in the general economic outlook of
the United States, they are most heavily influenced by changes specific to the
medical device industry.&nbsp; Furthermore, the magnitude of economic changes within
the industry is viewed alongside the outlooks and forecasts specific to the
reporting units to obtain a better sense of the likelihood that goodwill may be
impaired.&nbsp; Declines within the industry&#146;s outlook are reflected in the unit&#146;s
revenue projections. &nbsp;</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>We identify two
reporting units for purposes of our annual goodwill impairment testing arising
from its acquisitions of Micro Motors and Astromec. &nbsp;In accordance with ASC 350
(formerly SFAS No.&nbsp;142), goodwill is not amortized and is assessed
annually for impairment (as of April 1) or whenever events or changes in
circumstances indicate that the carrying value of such assets may not be
recoverable. &nbsp;Our Carson City reporting unit corresponds to the operations
resulting from the Astromec acquisition, while our Irvine reporting unit
corresponds to the operations resulting from the Micro Motors acquisition.&nbsp; Our
intangible asset was related to the interosseous patents associated with the
&#147;Intraflow&#148; acquisition.&nbsp; We did not test for impairment in the quarter ending
March 31, 2010 as no triggering event occurred.</p>

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

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

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

<table class=MsoNormalTable border=0 cellpadding=0 width="70%"
 style='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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-bottom:medium none; border-top:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>3/31/2010</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Land</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>757,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Building</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,470,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Leasehold&nbsp;Improvements</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,287,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>6,725,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Total</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>11,239,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(5,688,000)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>5,551,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>5,981,000&nbsp;</p>
  </td>
 </tr>
</table>

</div>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;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","serif";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","serif";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","serif";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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>We are subject to ASC 718 (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","serif";'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>18</p>
  </td>
 </tr>
</table>

</div>

<font face="Times New Roman,serif">

<br clear=ALL>

</font>

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

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

</div>

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

<font face="Times New Roman,serif">

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


</font>

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

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

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

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

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

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

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

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

<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='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","serif";text-align:center'>&nbsp;</p>
  </td>
  <td valign=top style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.75pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>
	Three&nbsp;months&nbsp;Ended&nbsp;March&nbsp;31,</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>
	Nine&nbsp;months&nbsp;Ended&nbsp;March&nbsp;31,</p>
  </td>
 </tr>
 <tr style='height:14.7pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>
	2010</p>
  </td>
  <td colspan=3 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=3 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>
	2010</p>
  </td>
  <td colspan=3 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>
	2009</p>
  </td>
 </tr>
 <tr style='height:14.75pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>
	Medical</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	3,546&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	58%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	2,912&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	63%&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	10,324&nbsp;</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	59%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	8,275&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	53%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.7pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>
	Aerospace</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	964&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	16%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	387&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	8%&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	2,403&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	14%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	1,809&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	12%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.75pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>
	Industrial</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	593&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	10%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	243&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	5%&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	1,705&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	10%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	2,054&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	13%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.75pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>
	Dental</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	508&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	8%&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	574&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	12%&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	1,527&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	9%&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	1,883&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	12%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.7pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>
	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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	550&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	492&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	11%&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	1,532&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	1,480&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	10%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.75pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>
	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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	6,161&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	4,608&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	100%&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	17,491&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	15,501&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>
	100%&nbsp;</p>
  </td>
 </tr>
</table>

<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","serif";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","serif";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","serif";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","serif";text-align:justify'>&nbsp;</p>

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>19</p>
  </td>
 </tr>
</table>

</div>

<font face="Times New Roman,serif">

<br clear=ALL>

</font>

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

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

</div>

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

<font face="Times New Roman,serif">

<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","serif";line-height:1.0pt'>&nbsp;</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>At the present time, we are generally able to fill orders within 60
days.&nbsp; At March 31, 2010, we had a backlog, including orders for delivery
beyond 60 days, of $13.2 million compared with a backlog of $11.6 million at March
31, 2009 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 year 2011 and 2012.&nbsp; The
increased backlog compared to March 2009 and June 2009 is related to orders by
our largest customer (see Note 8). &nbsp;We experience some seasonal fluctuations in
our new order bookings as increases in our fiscal second quarter orders
correspond to new calendar year advance orders from our major customers. We may
experience variability in our new order bookings due to the timing of major new
product launches and customer planned inventory builds.&nbsp; However, 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","serif";text-autospace:none'><b>&nbsp;</b></p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-autospace:none'><b>For the Three-Month periods
ended March 31, 2010 and 2009</b></p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b>The following table sets forth the
periods indicated and 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","serif";'>&nbsp;</p>
<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="75%"
 style='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","serif";text-align:center'>&nbsp;</p>
  </td>
  <td valign=top style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>(In&nbsp;Thousands)</p>
  </td>
  <td colspan=6 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Three&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=3 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td colspan=3 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2009</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Net&nbsp;sales:</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>6,161&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>100%&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>4,608&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>100%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Cost&nbsp;of&nbsp;sales</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,869&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>63%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,497&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>76%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Gross&nbsp;Profit</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,292&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>37%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,111&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>24%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Selling,&nbsp;general&nbsp;and&nbsp;administrative&nbsp;expenses</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,269&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>21%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,096&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>24%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Impairment&nbsp;of&nbsp;intangible&nbsp;asset</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>997&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>22%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Research&nbsp;and&nbsp;development&nbsp;costs</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>614&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>10%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>686&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>15%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>409&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>7%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(1,668)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-36%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(10)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(56)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-1%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Provision&nbsp;for&nbsp;income&nbsp;taxes</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>225&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,287&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>28%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Net&nbsp;income</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>174&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3%&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(3,011)</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-65%&nbsp;</p>
  </td>
 </tr>
</table>

</div>

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'><b>Net Sales.</b>&nbsp;
Consolidated sales increased $1,553,000 to $6,161,000 from $4,608,000 for the
quarter ended March 31, 2010 compared to the quarter ended March 31, 2009.&nbsp;
The increase was primarily due to a partial recovery from the large downturn in
the third quarter of fiscal year 2009.&nbsp; The third quarter of 2009 saw a
substantial decrease in industrial motion control sales, as that industry was
severely negatively impacted by the economic climate.&nbsp; Aerospace sales were
negatively impacted by the timing of deliveries on certain contracts that had
lower requirements during the quarter ended March 31, 2009. &nbsp;Finally, the
election of a customer to forego commercial production of a product resulted in
a $250,000 fee in the quarter ended March 31, 2010.</p>

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

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

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

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>20</p>
  </td>
 </tr>
</table>

</div>

<font face="Times New Roman,serif">

<br clear=ALL>

</font>

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

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

</div>

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

<font face="Times New Roman,serif">

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


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

&nbsp;</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'><b>Gross Profit and Gross Profit Percentage of Sales</b>.&nbsp; Our
consolidated gross profit for the quarter ended March 31, 2010 increased $1,181,000
or 106% over the same quarter in the previous year due to the higher sales volume
and fee.&nbsp; Gross profit as a percentage of sales was 13% higher at 37% for the
quarter ended March 31, 2010 compared to 24% for the quarter ended March 31,
2009. &nbsp;Gross profit margins were increased from the same quarter in the
previous year due to better facility utilization from the higher sales levels
and a favorable sales mix that included additional high margin industrial
motion control products.&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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="75%"
 style='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","serif";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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.65pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Three&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.65pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Increase</p>
  </td>
 </tr>
 <tr style='height:14.65pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,292,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,111,000&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>106%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.65pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>37%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>24%&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";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","serif";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 expenses decreased to $1,269,000 for the quarter ended March
31, 2010 from $2,094,000 for the quarter ended March 31, 2009.&nbsp; The decrease in
total S, G &amp; A costs was due to the intangible impairment charge ($997,000)
during the quarter ending March 31, 2009.&nbsp; The decrease related to the intangible
impairment charge was offset by increases in both Selling and General and
Administrative expense.&nbsp; The Selling expenses increased due to the ramping up of
marketing expenditures ($61,000). &nbsp;G&amp;A expense increased due to higher net severance
expense ($68,000) and larger legal expenses ($61,000), which were offset by
lower patent amortization cost ($25,000).&nbsp; As a percentage of sales, S, G&amp;A
expenses decreased to 21% of sales from 45% of sales for the quarter ended March
31, 2010 and 2009 respectively.&nbsp; The impairment charge accounted for 22% of
sales in the quarter ended March 31, 2009.&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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='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","serif";text-align:center'>&nbsp;</p>
  </td>
  <td valign=top style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Three&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.25pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Increase</p>
  </td>
 </tr>
 <tr style='height:15.2pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Selling</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>383,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>315,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>22%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.25pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Impairment&nbsp;of&nbsp;intangible&nbsp;asset</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>997,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>886,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>782,000&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>13%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.25pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Total&nbsp;S,&nbsp;G&amp;A</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,269,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,094,000&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-39%&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Selling,&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>21%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>45%&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
</table>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'><b>Research and
Development (R&amp;D) Costs</b>. &nbsp; Research and development cost decreased
$72,000 to $614,000 for the quarter ended March 31, 2010 from $686,000 for the
quarter ended March 31, 2009, a decrease of 10%.&nbsp; The decrease was due mainly to
lower labor costs ($73,000).&nbsp; Company-funded 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","serif";text-align:justify;text-indent:.5in'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="75%"
 style='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","serif";text-align:center;text-indent:.5in'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Three&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>614,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>686,000&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-10%&nbsp;</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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>R&nbsp;&amp;&nbsp;D&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>10%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>15%&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
</table>

</div>

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'><b>Operating
Profit and Operating Profit Percentage of Sales</b>.&nbsp; Our resulting
consolidated operating profit for the quarter ended March 31, 2010 increased to
$409,000 compared to an operating loss of ($1,668,000) for the same quarter in
the previous year.&nbsp; Operating profit as a percentage of sales increased to 7%
for the quarter ended March 31, 2010 compared to -36% for the quarter ended March
31, 2009.&nbsp; Operating profit and margin were as follows (unaudited): </p>

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

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="75%"
 style='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","serif";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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Three&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Operating&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>409,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(1,668,000)</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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Operating&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>7%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-36%&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
</table>

</div>

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

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>21</p>
	<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
</table>

</div>

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

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

</div>

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

<font face="Times New Roman,serif">

<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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'><b>Royalties and Other Income. </b>&nbsp;We received $40,000 in royalty income
in the three months ended March 31, 2010, compared to no royalty income in the quarter
ended March 31, 2009.&nbsp; The $40,000 royalty was a one-time final payment ending
the royalty obligation.&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","serif";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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'><b>Net Interest Expense. </b>&nbsp;Net interest expense for the quarter ended March
31, 2010 was $50,000 compared to $56,000 in the quarter ended March 31, 2009
due to lower debt levels.</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'><b>Income Tax (Benefit)</b>. Our estimated effective combined federal and
state tax rate on income from operations for the quarter ended March 31, 2010 resulted
in a provision of 56% to earnings before tax compared to a -75% provision to earnings
before tax for the quarter ended March 31, 2009.&nbsp; The inflated 2010 rate is due
primarily to booking $93,000 in credits last quarter that were freed up for
future use and not refunded, which, combined with the realization of alternative
minimum tax $131,000 created for the current quarter. &nbsp;The reason for the
higher 2009 rate was due to a $1,960,000 valuation allowance against our
current and long term deferred tax assets. &nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'><b>Net Income.</b>&nbsp; Our net income for the three months ended March 31,
2010 was $174,000 or $0.02 per share on a basic and diluted basis, as compared
to a net loss of $(3,011,000) or $0.31 per share on a basic and diluted basis
for the three months ended March 31, 2009.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-autospace:none'><b>For the Nine-Month periods
ended March 31, 2010 and 2009</b></p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b>The following table sets forth the
periods indicated and 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","serif";'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="80%"
 style='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","serif";text-align:center'>&nbsp;</p>
  </td>
  <td valign=top style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>(In&nbsp;Thousands)</p>
  </td>
  <td colspan=6 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Nine&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=3 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td colspan=3 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2009</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Net&nbsp;sales:</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>17,490&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>100%&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>15,501&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>100%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Cost&nbsp;of&nbsp;sales</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>11,324&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>65%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>10,703&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>69%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Gross&nbsp;Profit</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>6,166&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>35%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>4,798&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>31%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Selling,&nbsp;general&nbsp;and&nbsp;administrative&nbsp;expenses</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,437&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>20%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,449&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>22%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Impairment&nbsp;of&nbsp;intangible&nbsp;asset</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>140&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>997&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>6%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Research&nbsp;and&nbsp;development&nbsp;costs</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,811&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>10%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,083&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>13%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>778&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(1,731)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-11%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.1pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(110)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(167)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-1%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>(Benefit)&nbsp;provision&nbsp;for&nbsp;income&nbsp;taxes</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(269)</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-2%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,149&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>7%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.05pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Net&nbsp;Income&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-right:1.0pt solid windowtext; border-top:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>937&nbsp;</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>5%&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(3,047)</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-20%&nbsp;</p>
  </td>
 </tr>
</table>

</div>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'><b>Net Sales.</b>&nbsp;
Consolidated net sales increased $1,989,000 from $15,501,000 for the nine
months ended March 31, 2009 to $17,490,000 for the nine months ended March 31,
2010.&nbsp; The increase was due to the delivery of a newly developed product to a
major medical customer which began during the second quarter of fiscal year 2010
and has continued into the third quarter in addition to a 46% increase in
revenue from our largest customer. Also, we saw the partial recovery from the economic
downturn, especially in motion control sales, in the third quarter of fiscal
year 2009.&nbsp; Finally, the election of a customer to forego commercial production
of a product resulted in a $250,000 fee in the quarter ended March 31, 2010.</p>

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

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>22</p>
  </td>
 </tr>
</table>

</div>

<font face="Times New Roman,serif">

<br clear=ALL>

</font>

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

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

</div>

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

<font face="Times New Roman,serif">

<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","serif";text-align:justify;text-indent:.5in'>&nbsp;</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'><b>Gross Profit and Gross Profit Percentage of Sales</b>.&nbsp; Our
consolidated gross profit for the nine months ended March 31, 2010 increased $
1,368,000 or 29% over the same period in the previous year due to higher sales
volume. &nbsp;Gross profit as a percentage of sales was 4% higher at 35% for the nine
months ended March 31, 2010, compared to 31% for the same period ended March
31, 2009.&nbsp; Gross profit and gross profit as a percentage of sales were as
follows (unaudited): &nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="75%"
 style='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","serif";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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.65pt'>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Nine&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.65pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Increase</p>
  </td>
 </tr>
 <tr style='height:14.65pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>6,166,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>4,798,000&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>29%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:14.65pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>35%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>31%&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
</table>

</div>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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 expenses decreased to $3,577,000 for the nine months ended March 31,
2010 from $4,447,000 for the nine months ended March 31, 2009.&nbsp; S, G&amp;A
costs were lower in the first nine months of 2010 compared to the first nine
months of 2009 due to the intangible impairment charge ($997,000) during the
quarter ending March 31, 2009.&nbsp; The remainder of the unamortized patent related
intangible was determined to be impaired during the quarter ended December 31,
2009 and expensed ($140,000).&nbsp; The decrease related to the impairment charge
was offset by an increase in Selling expense due to increased headcount
($52,000). &nbsp;General and administrative costs were lower due to reduced
consulting expense related to Sarbanes-Oxley compliance ($50,000).&nbsp; As a
percentage of sales, S, G&amp;A expenses decreased to 20% of sales from 29% of
sales for the nine months ended March 31, 2010 and 2009, respectively.&nbsp; The
impairment accounted for 1% and 6% of sales for the nine months ending March
31, 2010 and 2009 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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='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","serif";text-align:center'>&nbsp;</p>
  </td>
  <td valign=top style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Nine&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.25pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Decrease</p>
  </td>
 </tr>
 <tr style='height:15.2pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Selling</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,025,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>988,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>4%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.25pt'>
  <td valign=bottom style='border-top:medium none;border-left:
  1.0pt solid windowtext;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>General&nbsp;and&nbsp;administrative</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,412,000&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,462,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-2%&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Impairment&nbsp;of&nbsp;intangible&nbsp;asset</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>140,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>997,000&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-86%&nbsp;</p>
  </td>
 </tr>
 <tr style='height:15.25pt'>
  <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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Total&nbsp;S,&nbsp;G&amp;A</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,577,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>4,447,000&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-20%&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Selling,&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>20%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>29%&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
</table>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";text-align:justify;text-indent:.5in'><b>Research and
Development (R&amp;D) Costs</b>.&nbsp; Research and development expenses decreased $272,000
to $1,811,000 for the nine months ended March 31, 2010 from $2,083,000 for the nine
months ended March 31, 2009, a decrease of 13%.&nbsp; The decrease was primarily due
to decreased labor and related costs ($271,000). 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","serif";text-align:justify;text-indent:.5in'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="75%"
 style='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","serif";text-align:center;text-indent:.5in'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Nine&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Decrease</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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,811,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>2,083,000&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-13%&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>R&nbsp;&amp;&nbsp;D&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>10%&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>13%&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
</table>

</div>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'><b>Operating
Profit (loss) and Operating Profit (loss) Percentage of Sales</b>.&nbsp;
Our consolidated operating profit for the nine months ended March 31, 2010 was
$778,000 compared to an operating loss of ($1,731,000) for the same period in
the previous year.&nbsp; Operating profit as a percentage of sales increased to 4%
for the nine months ended March 31, 2010 compared to an operating loss of (11%)
for the nine months ended March 31, 2009.&nbsp; Operating profit and margin were as
follows (unaudited): </p>

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

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>23</p>
  </td>
 </tr>
</table>

</div>

<font face="Times New Roman,serif">

<br clear=ALL>

</font>

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

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

</div>

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

<font face="Times New Roman,serif">

<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","serif";text-align:justify;text-indent:.5in'>&nbsp;</p>

<div align="center">

<table class=MsoNormalTable border=0 cellpadding=0 width="75%"
 style='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","serif";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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>Nine&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</p>
  </td>
  <td valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>778,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(1,731,000)</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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Operating&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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>-11%&nbsp;</p>
  </td>
  <td valign=bottom style='padding:1.1pt;
  '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
</table>

</div>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center;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","serif";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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'><b>Royalties and Other Income. </b>&nbsp;We received $44,000 in royalty
payments in the nine months ended March 31, 2010, compared to $9,000 in royalty
payments in the nine months ended March 31, 2009.&nbsp; $40,000 of the $44,000 in
the nine months ended March 31, 2010 was related to a final one-time payment
ending the royalty obligation.&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","serif";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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'><b>Net Interest Income/Expense. </b>&nbsp;Net interest expense for the nine
months ending March 31, 2010 was $154,000 compared to net interest expense of $176,000
in the nine months ended March 31, 2009, due to lower debt balances.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'><b>Income Tax (Benefit) Provision</b>. Our estimated effective combined
federal and state tax rate on income from operations for the nine months ended March
31, 2010 resulted in a benefit to earnings before tax of 40% compared to a provision
of -61% to earnings before tax for the nine months ended March 31, 2009.&nbsp; The
difference in the 2009 rate is due primarily to the realization of a portion of
the Company's deferred tax asset for the federal net operating loss carryover
generated in the year ended June 30, 2009.&nbsp; Federal legislation enacted on
November 6, 2009 provided for a five year carry back of certain NOLs.&nbsp; The reason
for the inflated 2009 rate was due to a $1,960,000 valuation allowance against
our current and long term deferred tax assets.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'><b>Net Income/Loss.</b>&nbsp; Our net income for the nine months ended March
31, 2010 was $937,000 or $0.10 per share, as compared to a loss of $3,047,000
or $0.31 per share on a basic and diluted basis for the nine months ended March
31, 2009.&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","serif";text-autospace:none'><b>&nbsp;</b></p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>The following table presents selected financial information as of the end
of the third quarter of fiscal 2010 and 2009, respectively, as well as of the year
ended June 30, 2009:</p>

<table class=MsoNormalTable border=0 cellpadding=0 width="100%"
 style='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","serif";text-align:justify;text-indent:.5in;text-autospace:
  none'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&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","serif";'>&nbsp;</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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=4 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>As&nbsp;of&nbsp;March&nbsp;31,</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:1.0pt solid windowtext;
  border-left:medium none;border-bottom:medium none;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>As&nbsp;of</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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>2010</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center'>June&nbsp;30,&nbsp;2009</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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Cash&nbsp;and&nbsp;cash&nbsp;equivalents</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,352,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>504,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>1,124,000&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.55pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Working&nbsp;Capital&#185;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>5,842,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>4,264,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Credit&nbsp;Line&nbsp;outstanding&nbsp;balance</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0&nbsp;</p>
  </td>
 </tr>
 <tr style='height:13.6pt'>
  <td valign=bottom style='border-left:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-top:medium none; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Net&nbsp;(Cash) Debt&#179;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>(349,000)</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>3,465,000&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Tangible&nbsp;book&nbsp;value/common&nbsp;share&#178;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.87&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>0.73&nbsp;</p>
  </td>
  <td valign=bottom style='border-left:medium none; border-right:medium none; border-top:medium none; border-bottom:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>$</p>
  </td>
  <td valign=bottom style='border-top:medium none;border-left:
  medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>Number&nbsp;of&nbsp;days&nbsp;of&nbsp;sales&nbsp;outstanding&nbsp;(DSO)&nbsp;in</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-left:medium none; border-top:medium none; border-bottom:medium none; border-right:1.0pt solid windowtext; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&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; padding:1.1pt; '>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>accounts&nbsp;receivable&nbsp;at&nbsp;end&nbsp;of&nbsp;quarter
  <sup>4&nbsp;</sup></p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>41&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:right'>40&nbsp;</p>
  </td>
  <td colspan=2 valign=bottom style='border-top:medium none;
  border-left:medium none;border-bottom:1.0pt solid windowtext;border-right:1.0pt solid windowtext;
  padding:1.1pt;'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";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","serif";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","serif";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","serif";margin-left:.5in;text-align:justify;text-autospace:
none'><sup>3</sup> Net (Cash) 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","serif";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","serif";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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>&nbsp;</p>

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>Our working capital at March 31, 2010 increased to $5.8 million compared
to $4.3 million at March 31, 2009 and was $1.3 million higher than the $4.5
million at June 30, 2009.&nbsp;&nbsp; Cash flow provided by operations was $2,661,000 during
the nine months ended March 31, 2010 compared to cash flow provided by
operations of $840,000 during the nine months ended March 31, 2009.&nbsp; Fiscal
year 2010 cash increased mainly because of increased profitability combined
with increases in accrued expenses and decreases in inventory offset by an increase
in trade accounts receivable. </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";text-align:justify;text-indent:.5in'>During the quarter ended December 31, 2010 one of our largest
customers (the &#147;Customer&#148;) informed us they are in the process of developing,
and plan to eventually manufacture their own surgical hand pieces which are
functionally comparable to the two products currently provided by the Company.&nbsp;
Pro-Dex has been the exclusive manufacturer of these products since they were
developed.&nbsp; </p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";text-align:justify;text-indent:.5in'>The Customer has not provided firm transition dates or
volumes due to the inherent uncertainty in the design, testing, and
qualification process.&nbsp; </p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>In March, 2010 the Company received purchase
orders from this customer for production of the first product for quantities
that would support the Customer&#146;s historical consumption rates through the
Company&#146;s fourth quarter of fiscal year 2011.&nbsp;&nbsp;Because the Customer has
stated it intends to build inventory, it has requested to take delivery of all
of these hand pieces by the end of October 2010.&nbsp;&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>Regarding the second product, the customer&#146;s original
planning communicated in December 2009 was extended by six months through at
least June 2011 and the Company received a purchase order for normal deliveries
through February 2011, with a follow-on P.O. for the balance expected by us
toward the end of this calendar year as indicated by the customer&#146;s latest
communication.&nbsp;&nbsp;The purchase orders for products one and two totaled
$4.2 million.&nbsp;&nbsp;Additionally, the Customer indicated both in December
2009 and March 2010 that they intend to continue purchasing some portion of
these products from the Company for up to three years to support existing
customers with additional and replacement units of the same type and in
specific geographic markets where regulatory registration for the replacement
units requires an extended period of time.&nbsp; </p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>The design and production of these products is quite
technologically challenging, as such devices are exposed to extremely harsh
surgical and sterilization conditions.&nbsp; A different large customer of the
Company pursued a similar course of action several years ago and ultimately
canceled its in-sourcing project, continuing its purchases from Pro-Dex.&nbsp; The Customer currently pursuing this course has indicated a high commitment to proceeding cautiously.&nbsp;
Accordingly, the actual occurrence of, and certainly the specific timing of any
transition is very difficult to estimate.</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>The Company intends to find additional business and reduce
its operating costs as necessary to minimize the impact of a potential revenue
reduction.&nbsp; In the event that the Customer's future purchases are reduced
beyond the amount of any additional business won and any cost savings realized,
the Company is likely to experience a material and adverse impact on its
business and revenue</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>The Company has no commitment from the Customer
that it will update the Company with the status of its product development
efforts and the Customer has no obligation to do so.&nbsp; Accordingly, the Company
is unable to know or predict the status of the Customer's initiative on an
ongoing basis.&nbsp; The name of the Customer is protected by a confidentiality
agreement.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";text-align:justify;text-indent:.5in'>We have a credit facility with Wells Fargo Bank, N.A. (&#147;Wells
Fargo&#148;) and a mortgage with Union Bank of California, N.A (&#147;Union Bank&#148;).</p>

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

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

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

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>As of March 31,
2010, 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","serif";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","serif";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 $1,466,667 was outstanding as of March 31, 2010. </p></li>
</ul>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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 March 31, 2010) plus 1.50%, or
(ii) three-month LIBOR (0.292% at March 31, 2010) plus 2.50%, at our
discretion, based on outstanding borrowings.&nbsp; The line of credit expires
on November 1, 2010.&nbsp; We are charged an unused credit line fee of 1.5% 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 March 31, 2010.&nbsp; The total eligible
additional borrowing capacity under the line of credit as of March 31, 2010 was
$1,000,000.</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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 $1,466,667 outstanding balance under the TI Loan as of March
31, 2010.&nbsp;</p>

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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 $1,536,063 in principal outstanding under
the mortgage as of March 31, 2010.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";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 March 31, 2010, 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","serif";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>At March 31,
2010, we had cash and cash equivalents of $3,352,000.&nbsp; We believe that our
cash and cash equivalents on hand, together with cash flows from operations, if
any, and amounts available under the credit facilities will be sufficient to
meet our working capital and capital expenditure requirements for this and the
next year.&nbsp; </p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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; Since the
initiation of the buyback program in 2002 through March 31, 2010, 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","serif";text-align:justify;text-autospace:none'><b><br clear=all>
Item 3<a name="Item_3"></a>. Quantitative and Qualitative Disclosures
About Market Risk</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>Not applicable.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";text-align:justify;text-autospace:none'><b>Item 4T<a
name="Item_4T"></a>. Controls and Procedures</b></p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-autospace:none'>&nbsp;</p>

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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 March
31, 2010, the Chief Executive Officer and Chief Financial Officer concluded
that the disclosure controls and procedures are effective to ensure that
information required to be disclosed by us in the reports filed or submitted by
us under the Exchange Act is accumulated, recorded, processed, summarized and
reported to management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, and to allow timely decisions regarding
whether or not disclosure is required.</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>During the
quarter ended March 31, 2010, there were no changes in our internal controls
over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the
Exchange Act) that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.&nbsp; </p>

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify'><b>PART II</b><a name="Part_II"></a></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:center;text-autospace:none'><b>
<a name="OTHER_INFORMATION_">OTHER
INFORMATION</a></b></p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>
<font size="3">Item 1.&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","serif";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","serif";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.&nbsp; Since January 1, 2009, OCWD has named 11
additional defendants by multiple amendments to its complaint.</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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.&nbsp; In two recent Case Management Conferences before
the court, OCWD has refused defendants&#146; request to designate a date by which it
will disclose its proposed soil and groundwater cleanup remedies.</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>As noted above, 27
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","serif";text-align:justify;text-indent:.5in'>&nbsp;</p>
<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>One of our past
insurers has committed to pay most of our defense costs for the lawsuit, and
has done so to date, 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","serif";text-align:justify;text-indent:.5in'>&nbsp;</p>

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
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  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>
	27</p>
	<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>&nbsp;</p>
  </td>
 </tr>
</table>

</div>

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

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

</div>

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

<font face="Times New Roman,serif">

<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","serif";'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";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","serif";text-align:justify;text-indent:.5in'><font style="font-size: 10.0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify'><a name=eolPage14></a><b>Item 1A<a name="Item_1A"></a>.&nbsp; Risk
Factors.</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";margin-top:.25in;text-align:justify;text-indent:.5in'>
Except as noted below, there have been no material changes to
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.&nbsp; In
addition to the information below and 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, which could
materially affect our business, financial condition and future results. The
risks described in this report and in our Annual Report on Form&nbsp;10-K 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","serif";line-height:1.0pt'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";margin-top:.25in;text-align:justify'><b>Our common stock could be delisted from NASDAQ, which could
have a material adverse effect on the price of our common stock.</b></p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";margin-top:.25in;text-align:justify;text-indent:.5in'>We
have previously disclosed that our common stock would be subject to delisting
from the NASDAQ Capital Market after January 7, 2010 if our common stock did not
meet the $1.00 minimum bid price requirement set forth in NASDAQ&#146;s Listing Rule
5550(a)(2) by that date.&nbsp; On January 11, 2010, the NASDAQ Staff notified us
that our common stock was subject to delisting for failing to comply with the
minimum bid price requirement.&nbsp; In accordance with the Listing Rules, we
requested an oral hearing before a NASDAQ Listing Qualification Panel (&#147;Panel&#148;),
which automatically stayed the delisting of our common stock pending the
issuance of the Panel&#146;s decision after the hearing.&nbsp; Based on our hearing, the
Panel has determined to grant our request for continued listing on the NASDAQ
Capital Market subject to the condition that, on or before July&nbsp;12, 2010, our
common stock achieves a closing bid price of $1.00 or more for a minimum of ten
consecutive trading days.&nbsp; However, there can be no assurances that our common
stock will achieve the minimum bid price requirement by July 12, 2010 or that
our other efforts to maintain the listing of our common stock on NASDAQ will be
successful.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";margin-top:.25in;text-align:justify;text-indent:.5in'>If
our common stock is delisted from the NASDAQ Capital Market, then the market
liquidity for our common stock would likely be negatively affected, which would
likely have a material adverse effect on the price of our common stock.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";margin-top:6.0pt;text-align:justify;text-indent:.5in'>&nbsp;</p>

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

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>We have few
significant customers that contribute a significant portion of our revenue.&nbsp;
Our loss of one or more of such customers could severely impact us, including a
material adverse effect on our business, financial condition, cash flows,
revenue and results of operations.</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>In December, 2010 one of our largest customers (the
&#147;Customer&#148;) informed us they are in the process of developing, and plan to
eventually manufacture their own surgical hand pieces which are functionally
comparable to the two products currently provided by the Company.&nbsp; Pro-Dex has
been the exclusive manufacturer of these products since they were developed.&nbsp; </p>

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

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

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>28</p>
  </td>
 </tr>
</table>

</div>

<font face="Times New Roman,serif">

<br clear=ALL>

</font>

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

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

</div>

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

<font face="Times New Roman,serif">

<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","serif";text-align:justify'>&nbsp;</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>The Customer has not provided firm transition dates or
volumes due to the inherent uncertainty in the design, testing, and
qualification process.&nbsp; </p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>In March, 2010 the Company received purchase
orders from this customer for production of the first product for quantities
that would support the Customer&#146;s historical consumption rates through the
Company&#146;s fourth quarter of fiscal year 2011.&nbsp;&nbsp;Because the Customer has
stated it intends to build inventory, it has requested to take delivery of all
of these hand pieces by the end of October 2010.&nbsp;&nbsp;</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>Regarding the second product, the customer&#146;s original
planning communicated in December 2009 was extended by six months through at
least June 2011 and the Company received a purchase order for normal deliveries
through February 2011, with a follow-on P.O. for the balance expected by us
toward the end of this calendar year as indicated by the customer&#146;s latest
communication.&nbsp;&nbsp;The purchase orders for products one and two totaled
$4.2 million.&nbsp;&nbsp;Additionally, the Customer indicated both in December
2009 and March 2010 that they intend to continue purchasing some portion of
these products from the Company for up to three years to support existing customers
with additional and replacement units of the same type and in specific
geographic markets where regulatory registration for the replacement units requires
an extended period of time.&nbsp;&nbsp; </p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>The design and production of these products is quite
technologically challenging, as such devices are exposed to extremely harsh
surgical and sterilization conditions.&nbsp; A different large customer of the
Company pursued a similar course of action several years ago and ultimately
canceled its in-sourcing project, continuing its purchases from Pro-Dex.&nbsp; The Customer currently pursuing this course has indicated a high commitment to proceeding cautiously.&nbsp;
Accordingly, the actual occurrence of, and certainly the specific timing of any
transition is very difficult to estimate.</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in'>The Company intends to find additional business and reduce
its operating costs as necessary to minimize the impact of a potential revenue
reduction.&nbsp; In the event that the Customer's future purchases are reduced
beyond the additional business won and the cost savings realized, the Company
is likely to experience a material and adverse impact on its business.</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;text-indent:.5in;text-autospace:
none'>The Company has no commitment from the Customer
that it will update the Company with the status of its product development
efforts and the Customer has no obligation to do so.&nbsp; Accordingly, the Company
is unable to know or predict the status of the Customer's initiative on an
ongoing basis.&nbsp; The name of the Customer is protected by a confidentiality
agreement.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";margin-top:.25in;text-align:justify'><b>
<font size="3">Item 2<a name=Unregistered></a>. &nbsp; Unregistered Sales
of Equity Securities and Use of Proceeds. </font></b><font size="3">&nbsp;</font></p>

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

<p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif";margin-left:.5in;text-indent:.5in; margin-right:0in; margin-top:0in'>None.</p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'><b>
<font size="3">Item 3<a name=Defaults></a>.
&nbsp; Defaults Upon Senior Securities. </font></b><font size="3">&nbsp;</font></p>

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

<p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif";margin-left:.5in;text-indent:.5in; margin-right:0in; margin-top:0in'>None.</p>

<p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif";margin-top:.25in;text-align:justify; margin-left:0in; margin-right:0in'><b>
<a name="Submissions">Item 4. &nbsp;&nbsp; (Removed
and Reserved).</a></b></p>

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

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";margin-top:.25in;text-align:justify'><b>
<font size="3">Item 5<a name=Other></a>. &nbsp; Other Information. </font></b>
<font size="3">&nbsp;</font></p>

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

<p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif";margin-left:.5in;text-indent:.5in; margin-right:0in; margin-top:0in'>None.</p>

<p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";margin-top:.25in;text-align:justify'><b>
<font size="3">Item 6<a name=Exhibits></a>. &nbsp; Exhibits. </font></b>
<font size="3">&nbsp;</font></p>

<div>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
 <tr>
  <td valign=top align=left style='padding-top:0in;padding-right:0in;
  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>29</p>
  </td>
 </tr>
</table>

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

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

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

</div>

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

<font face="Times New Roman,serif">

<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","serif";line-height:1.0pt'>&nbsp;</p>

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

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

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

<table border="0" width="100%">
	<tr>
		<td width="4%">&nbsp;</td>
		<td width="6%" valign="top">

<u>
<font size="3">Exhibits</font></u><font size="3">:</font></td>
		<td width="90%" valign="top">

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

		</td>
	</tr>
	<tr>
		<td width="4%">&nbsp;</td>
		<td width="6%" valign="top">

&nbsp;</td>
		<td width="90%" valign="top">

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

		</td>
	</tr>
	<tr>
		<td width="4%">&nbsp;</td>
		<td width="6%" valign="top">

31.1</td>
		<td width="90%" valign="top">

<p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif";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 width="4%">&nbsp;</td>
		<td width="6%" valign="top">

&nbsp;</td>
		<td width="90%" valign="top">

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

		</td>
	</tr>
	<tr>
		<td width="4%">&nbsp;</td>
		<td width="6%" valign="top">

31.2</td>
		<td width="90%" valign="top">

<p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif";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 width="4%">&nbsp;</td>
		<td width="6%" valign="top">

&nbsp;</td>
		<td width="90%" valign="top">

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

		</td>
	</tr>
	<tr>
		<td width="4%">&nbsp;</td>
		<td width="6%" valign="top">

32</td>
		<td width="90%" valign="top">

<p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif";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 width="4%">&nbsp;</td>
		<td width="6%" valign="top">

&nbsp;</td>
		<td width="90%" valign="top">

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

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

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

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

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

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


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

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

<table class=MsoNormalTable border=0 cellpadding=0 width=684
 style='width:100%;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","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>Date:&nbsp; April 29, 2010</p>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; 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","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>Date:&nbsp; April 29, 2010</p>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>&nbsp;</p>
  <p style='margin-bottom:.0001pt;font-family:"Times New Roman","serif"; 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","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font style="text-decoration:underline">By: / s / Mark Murphy </font></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","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>
	<font style="text-decoration:underline">By: / s / Jeffrey J.
  Ritchey </font></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","serif"; 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","serif"; 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","serif"; 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","serif"; 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","serif"; margin-left:0in; margin-right:0in; margin-top:0in'>(Principal Financial and
  Accounting Officer)</p>
  </td>
 </tr>
</table>

<div>

<p style="font-size: 12.0pt; font-family: 'Times New Roman',serif; margin-left: 0in; margin-right: 0in; margin-top: 0in; margin-bottom: .0001pt">&nbsp;</p>
<p style="font-size: 12.0pt; font-family: 'Times New Roman',serif; margin-left: 0in; margin-right: 0in; margin-top: 0in; margin-bottom: .0001pt">&nbsp;</p>
<p style="font-size: 12.0pt; font-family: 'Times New Roman',serif; margin-left: 0in; margin-right: 0in; margin-top: 0in; margin-bottom: .0001pt">&nbsp;</p>
<p style="font-size: 12.0pt; font-family: 'Times New Roman',serif; margin-left: 0in; margin-right: 0in; margin-top: 0in; margin-bottom: .0001pt">&nbsp;</p>
<p style="font-size: 12.0pt; font-family: 'Times New Roman',serif; margin-left: 0in; margin-right: 0in; margin-top: 0in; margin-bottom: .0001pt">&nbsp;</p>
<p style="font-size: 12.0pt; font-family: 'Times New Roman',serif; margin-left: 0in; margin-right: 0in; margin-top: 0in; margin-bottom: .0001pt">&nbsp;</p>
<p style="font-size: 12.0pt; font-family: 'Times New Roman',serif; margin-left: 0in; margin-right: 0in; margin-top: 0in; margin-bottom: .0001pt">&nbsp;</p>
<p style="font-size: 12.0pt; font-family: 'Times New Roman',serif; margin-left: 0in; margin-right: 0in; margin-top: 0in; margin-bottom: .0001pt">&nbsp;</p>
<p style="font-size: 12.0pt; font-family: 'Times New Roman',serif; margin-left: 0in; margin-right: 0in; margin-top: 0in; margin-bottom: .0001pt">&nbsp;</p>
<p style="font-size: 12.0pt; font-family: 'Times New Roman',serif; margin-left: 0in; margin-right: 0in; margin-top: 0in; margin-bottom: .0001pt" align="center"><b><font style="font-size: 16.0pt">End of Filing</font></b></p>
<p style="font-size: 12.0pt; font-family: 'Times New Roman',serif; margin-left: 0in; margin-right: 0in; margin-top: 0in; margin-bottom: .0001pt">&nbsp;</p>
<p style="font-size: 12.0pt; font-family: 'Times New Roman',serif; margin-left: 0in; margin-right: 0in; margin-top: 0in; margin-bottom: .0001pt">&nbsp;</p>

<table cellspacing=0 cellpadding=0 hspace=0 vspace=0 align=center>
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  padding-bottom:0in;padding-left:0in'>
  <p style='margin:0in;margin-bottom:.0001pt;font-size:12.0pt;font-family:"Times New Roman","serif";'>
	30</p>
  </td>
 </tr>
</table>

</div>

<font face="Times New Roman,serif">

<br clear=ALL>

</font>

</div>

</body>

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

<head>

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

<body>


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

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

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

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

<p style='mso-style-name:"Flush Left\&#039;,fl; text-align: justify; font-size: 11.0pt; font-family: Times New Roman&#039;,serif";margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;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='mso-style-name:"Flush Left\&#039;,fl; text-align: center; font-size: 11.0pt; font-family: Times New Roman&#039;,serif";margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;' align="center"><b><u>CERTIFICATIONS</u></b></p>

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

<table border="0" width="100%">
	<tr>
		<td colspan="3" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-top:0' align="justify"><font style="font-size: 10.0pt">I, Mark Murphy, certify that:</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-top:0' align="justify"><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		1.</font></td>
		<td colspan="2" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		2. </font></td>
		<td colspan="2" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		3.
</font></td>
		<td width="94%" colspan="2" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		4. </font></td>
		<td width="94%" colspan="2" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		a)</font></td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		b)</font></td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify; margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		c)</font></td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		d)</font></td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		5.</font></td>
		<td width="92%" valign="top" colspan="2">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		a)</font></td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		b)</font></td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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","serif";margin-left:1.0in;text-align:justify;text-indent:
- -.5in'><font style="font-size: 10.0pt">&nbsp;</font></p>

<table border="0" width="100%" cellspacing="0" cellpadding="0">
	<tr>
		<td width="50%"><font style="font-size: 10.0pt">Date: April 29, 2010 </font>
		</td>
		<td width="50%">

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

		</td>
	</tr>
	<tr>
		<td width="50%">&nbsp;</td>
		<td width="50%">

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

		</td>
	</tr>
	<tr>
		<td width="50%">&nbsp;</td>
		<td width="50%">

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

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

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

</body>

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

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

<body>

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

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

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

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

<p style='mso-style-name:"Flush Left\&#039;,fl; text-align: justify; font-size: 11.0pt; font-family: Times New Roman&#039;,serif";margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;'><b>EXHIBIT
31.2&nbsp;</b></p>

<p style='mso-style-name:"Flush Left\&#039;,fl; text-align: center; font-size: 11.0pt; font-family: Times New Roman&#039;,serif";margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;' align="center"><b><u>CERTIFICATIONS</u></b></p>

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

<table border="0" width="100%">
	<tr>
		<td colspan="3" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-top:0' align="justify"><font style="font-size: 10.0pt">I, Jeffrey J. Ritchey,
certify that: </font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif"; margin-top:0' align="justify"><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		1.</font></td>
		<td colspan="2" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		2. </font></td>
		<td colspan="2" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		3.
</font></td>
		<td width="94%" colspan="2" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		4. </font></td>
		<td width="94%" colspan="2" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		a)</font></td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		b)</font></td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify; margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		c)</font></td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		d)</font></td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		5.</font></td>
		<td width="92%" valign="top" colspan="2">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		a)</font></td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'><font style="font-size: 10.0pt">&nbsp;</font></p>

		</td>
	</tr>
	<tr>
		<td width="5%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
		<td width="4%" valign="top">
		<p align="justify" style="margin-top: 0; margin-bottom: 0"><font style="font-size: 10.0pt">
		b)</font></td>
		<td width="88%" valign="top">

<p style='margin-bottom:0;font-size:12.0pt;font-family:"Times New Roman","serif";text-align:justify;margin-top:0'>
<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","serif";'><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","serif";margin-left:1.0in;text-align:justify;text-indent:
- -.5in'><font style="font-size: 10.0pt">&nbsp;</font></p>

<table border="0" width="100%" cellspacing="0" cellpadding="0">
	<tr>
		<td width="50%"><font style="font-size: 10.0pt">Date: April 29, 2010 </font>
		</td>
		<td width="50%">

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

		</td>
	</tr>
	<tr>
		<td width="50%">&nbsp;</td>
		<td width="50%">

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

		</td>
	</tr>
	<tr>
		<td width="50%">&nbsp;</td>
		<td width="50%">

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

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

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

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

</body>

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

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

<body>

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

<p style='mso-style-name:"Flush Left\&#039;,fl; text-align: justify; font-size: 11.0pt; font-family: Times New Roman&#039;,serif";margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;'><b>EXHIBIT 32</b></p>

<p style='mso-style-name:"Flush Left\&#039;,fl; text-align: justify; font-size: 11.0pt; font-family: Times New Roman&#039;,serif";margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-top:0in;margin-right:0in;margin-bottom:0in;
margin-left:3.0in;margin-bottom:.0001pt;text-indent:-3.0in'>&nbsp;</p>

<p style='mso-style-name:"Flush Left\&#039;,fl; text-align: center; font-size: 11.0pt; font-family: Times New Roman&#039;,serif";margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-top:0in;margin-right:0in;
margin-bottom:0in;margin-left:3.0in;margin-bottom:.0001pt;text-indent:-3.0in'>&nbsp;</p>

<p style='mso-style-name:"Flush Left\&#039;,fl; text-align: center; font-size: 11.0pt; font-family: Times New Roman&#039;,serif";margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-top:0in;' align="center"><b>CERTIFICATIONS
OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER</b></p>

<p style='mso-style-name:"Flush Left\&#039;,fl; text-align: center; font-size: 11.0pt; font-family: Times New Roman&#039;,serif";margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-top:0in;' 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='mso-style-name:"Flush Left\&#039;,fl; text-align: center; font-size: 11.0pt; font-family: Times New Roman&#039;,serif";margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-top:0in;'><b>&nbsp;</b></p>

<p style='mso-style-name:"Flush Left\&#039;,fl; text-align: center; font-size: 11.0pt; font-family: Times New Roman&#039;,serif";margin-top:12.0pt;margin-right:0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-top:0in;' align="center"><b>Certifications
of Chief Executive Officer and Chief Financial Officer</b></p>

<p style='mso-style-name:"Body\,b\,stdBod";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","serif";'>&nbsp;</p>

<p style='mso-style-name:"Body\,b\,stdBod";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","serif";margin-top:0in;text-align:justify'>&nbsp;</p>

<p style='mso-style-name:"Body\,b\,stdBod";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","serif";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 March 31, 2010 (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='mso-style-name:"Body\,b\,stdBod";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","serif";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='mso-style-name:"Body\,b\,stdBod";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","serif";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" width="100%" cellspacing="0" cellpadding="0">
	<tr>
		<td width="40%"><font size="2" face="Times New Roman">Dated: April 29,
		2010</font></td>
		<td width="60%">

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

		</td>
	</tr>
	<tr>
		<td width="40%">&nbsp;</td>
		<td width="60%">

<p style='margin-bottom:.0001pt;font-size:10.0pt;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; Mark Murphy</p>

		</td>
	</tr>
	<tr>
		<td width="40%">&nbsp;</td>
		<td width="60%">

<p style='margin-bottom:.0001pt;font-size:10.0pt;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; Chief
Executive Officer and President<u><br>
</u></p>

		</td>
	</tr>
	<tr>
		<td width="40%">&nbsp;</td>
		<td width="60%">

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

		</td>
	</tr>
	<tr>
		<td width="40%"><font size="2" face="Times New Roman">Dated: April 29,
		2010</font></td>
		<td width="60%">

<p style='margin-bottom:.0001pt;font-size:10.0pt;font-family:"Times New Roman";margin-left:0in; margin-right:0in; margin-top:0in'>By:<u>
/s/ &nbsp;&nbsp; JEFFREY J. RITCHEY&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u></p>

		</td>
	</tr>
	<tr>
		<td width="40%">&nbsp;</td>
		<td width="60%">

<p style='margin-bottom:.0001pt;font-size:10.0pt;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; Jeffrey
J. Ritchey</p>

		</td>
	</tr>
	<tr>
		<td width="40%">&nbsp;</td>
		<td width="60%">

<p style='margin-bottom:.0001pt;font-size:10.0pt;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; 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","serif";text-autospace:none'>&nbsp;</p>

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

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

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