Dear Shareholders, Tapping into a company's potential and turning that potential into tangible results is synonymous with the process of transforming that company from good to great. Company leadership needs to be passionate about what it does, it needs to focus on a single thing it believes it can do better than any other company in the world and it needs to constantly assess the effectiveness of that focus, confirming that it is driving the Company toward greater success. At Pro-Dex, we believe we are on the right path from good to great and that we traveled a great distance on that path in the last year. Pro-Dex's leadership team is indeed passionate about what is does. Finding new ways to improve the Company's performance is what gets us out of bed in the morning and has us coming back for more day after day. This passion has resulted in the total assessment of the Company, what it does well and what is does poorly, where there is room for improvement and where there isn't, and how we create value and how we don't. Wanting passionately to do our jobs better everyday helps turn potential into results. But mere desire does not make a company great . . . a company needs to stay singularly focused to attain greatness. At Pro-Dex, we provide technology-based solutions to our customers making their products and service more valuable to their customers. We do this by leveraging our expertise in rotary drive systems and multi-axis motion control and delivering solutions in a form and in a timeframe and at a cost that is unmatched. We give them what they don't know so they can focus on what they do. Staying focused on what we do better than anyone else helps turn potential into results. As a provider of technology-based solutions, Pro-Dex is committed to the constant development of new technologies and new products based on those technologies. In recent years, the Company has invested significantly in research and development, creating multiple new revenue and profit streams for the Company in the process. The incremental increase in profit from new product sales is the truest measure of the Company's passion and focus. Converting R&D investment into increased profit helps turn potential into results. Last year, Pro-Dex increased sales by 14% and increased gross profit by 20%. Making those numbers more impressive is the fact that 25% of last years sales were derived products developed in the last 12 months and 40% of last years sales came from products developed in the last 24 months. Pro-Dex reduced its operating expenses by 37%, saving close to $1,000,000 in corporate expenses alone. The Company generated a positive cash-flow of $509,000 compared to the prior years negative cash-flow of <$1,757,000> and reduced outstanding liabilities by 37% or nearly $600,000. In short, the Company turned real potential into real results and in so doing, moved the Company much closer to greatness. Look for more of the same in 2004. Respectfully Yours, Patrick L. Johnson President & CEO PS . . . . If you've not read Jim Collins'; book "Good to Great", I highly recommend it.