Posted on Tuesday, March 16, 2004 - 10:55 pm:

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BACKLOG

Our backlog of orders was approximately $3.2 million at December 31, 2003, as
compared to approximately $5.2 million at December 31, 2002 and approximately
$6.0 million at December 31, 2001. We have noticed a trend, particularly with
our major customers, of receiving fewer long-term blanket orders than in the
past. We anticipate that substantially all of the backlog present as of
December 31, 2003 will be delivered within 12 months.

On March 22, 2002, the Company entered into a three-year revolving
line of credit and term loan with CIT for maximum borrowings of $8 million,
which are subject to certain limitations based on a percentage of eligible
accounts receivable and inventories as defined in the agreement. Interest on
the revolving line of credit is payable monthly at the JPMorgan Chase Bank prime
rate (4% at December 31, 2003), plus 2% per annum. The Company is required to
pay a commitment fee of 0.375% per annum on any unused portion of the credit
facility. Borrowings under the line are secured by substantially all of the
Company's assets. The terms of the agreement, among other matters, places
restrictions on capital expenditures and prohibits the payment of dividends. In
addition, the Company entered into a $100,000 term loan with CIT. The principal
was repaid to CIT in twelve equal monthly installments of $8,333, which began
May 1, 2002 and was paid in full on April 1, 2003. Interest on the term note
was at the JPMorgan Chase Bank prime plus 2.25%.

During 2003, CIT also provided the Company with an additional $300,000
over-advance facility. On December 8, 2003, the Company entered into a
Forbearance Agreement with CIT through December 8, 2004. CIT agreed to forbear
from (i) establishing additional availability reserves related to the inventory
advance percentage and (ii) demanding immediate payment of the overadvance. To
induce CIT not to take the forbearance actions, it was mutually agreed that the
maximum borrowings would be reduced from $8 million to $3 million and would
exclude eligible inventory from the borrowing base; the existing eligible
inventory loan of $845,000 would be converted into a term loan with payments of
$25,000 due in December 2003 and $10,000 per month thereafter; certain
limitations on eligible accounts receivable from a major customer would be
established and certain financial covenants would be established after June
2004. The Company had borrowings on the line of credit totaling $690,000 and
$2,034,000 as of December 31, 2003 and 2002, respectively. The balance on the
term loan was $825,000 at December 31, 2003.

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