Commenting on the Company's financial performance, Pro-Dex's newly appointed President and CEO, Patrick Johnson, said, "Given the tremendous progress we've made in restructuring the Company in the past year, it's disappointing to report poor financial results. Particularly given the dramatic turn-around this past year at Micro Motors, we'd hoped that the consolidated financial results would better demonstrate the significant strides we have made in repositioning the Company and returning it to profitability. The divestiture of our Biotrol and Challenge subsidiaries at the close of fiscal year 2001 had a substantial favorable impact on our financial performance for that year. Conversely, we were unfavaorably impacted in fiscal 2002 by the same transactions, making it a challenge to see the true performance of the Company as it moves forward. Despite the unfavorable financial results we are reporting today, we are confident that we have made the right decisions in restructuring the company, decisions that will begin to prove themselves as we move into fiscal 2003."

Consolidated net sales decreased 29% to $10.5 million for the year ended June 30, 2002 from $14.8 million in the year ended June 30, 2001. The sales decline was primarily due to the decrease in sales at the Company's OMS subsidiary, reflecting continued slowness in the semiconductor fabrication industry.

At the Company's Micro Motor subsidiary, sales for the year ended June 30, 2002 increased 7% from the year ended June 30, 2001. Sales increased in all of Micro Motors' standard product lines, realizing the benefit of the investment it has made in the design and development of powered rotary drive systems for use in the medical market and increases in its core dental business. Regarding Micro Motor's sales, Mr. Johnson noted, "We've not focused just on increasing sales . . . . we've focused on increasing profitable sales. This has meant developing new products and new customer relationships, re-defining existing customer relationships and aggressively re-structuring our pricing models."

Sales at OMS decreased 68% from the previous year. The decline was a result of the continued slowdown in the electronics and semiconductor industry that began in November 2000. Commenting on OMS's reduced sales, Mr. Johnson stated, "OMS continues to develop a business strategy to reduce its exposure to the cycles of the semiconductor equipment manufacture industry. Included in that strategy is the development of a new family of embedded motion control products based on the PowerPC(R) power chip and expansion into new markets."

Consolidated gross profit decreased 39% from $6.8 million to $4.1 million for the year ended June 30, 2002 compared to the year ended June 30, 2001. The sharp decrease in gross profit was directly related to the decrease in sales at OMS. Gross profit margin at OMS also decreased given the cost of excess fixed cost capacity due to lower revenue and increased reserves for slow moving inventory. "OMS worked all year to 'right-size' its operations in relation to the diminished sales level, tracking at a profitable rate of performance as it exited the fiscal year," stated Mr. Johnson. Gross profit and gross profit margins at Micro Motors however improved dramatically as the result of more efficient manufacturing practices, better inventory control, reduced building rental costs and favorable pricing on recently developed products.

During the year, the Company reduced its operating expenses 9% from $6,236,000 for the year ended June 30, 2002 compared to $6,839,000 for the year ended June 30, 2001 (excluding unusual non-recurring charge incurred in fiscal year 2001). Micro Motors has dramatically consolidated its operations and reduced the expenses related to those operations, while continuing to grow overall sales and develop new products. This resulted in an operating expense reduction of $306,000 or nearly 12%. OMS also drastically reduced its number of employees, made deep cuts in sales and marketing expenses and focused on maximizing the sales of existing product to existing customers. These efforts resulted in an operational expense savings of $389,000 or 15%, despite OMS's accelerated development activities related to their new PowerPC(R) based motion control products. Mr. Johnson also noted, "Operational expense related to corporate activities remained flat at $1,808,000, but based on structural changes made late in the year, corporate expenses should decrease by more than $1 million in fiscal year 2003."

Commenting on the Company's on-going operations, Mr. Johnson noted, "We incurred several non-recurring significant expenses during the year that directly impacted our operational profitability, expenses that we will not have in fiscal year 2003. Specifically, OMS had amortization expenses of $404,000 last year related to patents. This expense item we anticipate will only be $32,000 in fiscal year 2003. In addition, given changes in accounting regulations, we expensed all of the goodwill remaining on OMS's books, incurring a one-time charge of $154,000, another expense we will not incur in fiscal year 2003. We also don't anticipate any further impact from the Biotrol and Challenge divestitures, transactions that resulted in $668,000 in unfavorable expenses to the Company during the year from discontinued operations."

Addressing the near future of the Company, Mr. Johnson said, "Fiscal year 2002 was a significant transitional year for Pro-Dex. We moved our corporate operations to California following the sale of Biotrol and Challenge and brought to closure all the open issues related to that sale. We downsized the operations of both Micro Motors and OMS, while we continued to focus on developing new products, new markets and new customers. . . . all of this with an eye to increasing the profitability of the Company. We successfully established a new banking relationship with Wells Fargo, including a $3 million credit facility. We entered into several new development contracts that should lead to increased sales through exclusive manufacturing agreements. We are on the threshold of a new era for Pro-Dex and we are very excited about where we have positioned the Company. We are confident our stockholders will share that feeling as we work to produce healthy operating results during this current fiscal year and beyond."

Pro-Dex, Inc., is a California-based holding company with the following wholly-owned operating subsidiaries: Micro Motors, Inc., located in Santa Ana, California, manufactures miniature electric, pneumatic and battery powered rotary drive systems for use in the high tech medical, dental and industrial industries; and Oregon Micro Systems, Inc., located in Beaverton, Oregon, manufactures motion control products used in factory automation and the semiconductor industries.

For more information, visit the Company's website at www.pro-dex.com.

Statements herein concerning the Company's plans, growth and strategies may include 'forward-looking statements' within the context of the federal securities laws. Statements regarding the Company's future events, developments and future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. The Company's actual results may differ materially from those suggested as a result of various factors. Interested parties should refer to the disclosure concerning the operational and business concerns of the Company set forth in the Company's filings with the Securities and Exchange Commission.