##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K


(Mark One)

(X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)



| |  | For the fiscal year ended October 31, 2003
| |  | ------------------------------------------

OR

(  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from  to



| |  | Commission File No. 0-9081
| |  | --------------------------

CERTRON CORPORATION

(Exact name of registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|California                                                     |  | 95-2461404                          
|                                                               |  |                                     
|(State or other jurisdiction of
incorporation of organization) |  | (I.R.S. Employer
Identification No.)

|                                                               |  |            |       | 
|-------------------------------------------------------------- |  | ---------- | ----- | 
|11845 W. Olympic Boulevard, Suite 1080
Los Angeles, California |  |            | 90064 | 
|                                                               |  |            |       | 
|(Address of principal executive offices)                       |  | (Zip Code)



| |  | Registrants telephone number, including area code: (310) 914-0300
| |  | ------------------------------------------------------------------
|
| |  | Securities registered pursuant to Section 12(b) of the Act:       

|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of each class |  | Name of each exchange
on which registered
|                    |  |                                          
|None                |  | None                                     



| |  | Securities registered pursuant to Section 12(g) of the Act:
| |  | -----------------------------------------------------------

Common Stock, no par value

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report(s), and (2) has been subject to
such filing requirements for the past 90 days. Yes
(x) No (  )

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K (  ).

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes
(  ) No (x)

The aggregate market value of registrants voting and none-voting common equity
held by non-affiliates as of July 31, 2003, based upon the average bid and
asked price of such stock as reported by Reuters Limited for that day, was
$191,059.

As of January 27, 2004, registrant had outstanding 3,128,306 shares of its
common stock, no par value, its only authorized class of common stock.





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TABLE OF CONTENTS



|              |                                                                                                                      |  |  |  |  |  |  | 
|------------- | -------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I       
|              | Item 1. Business                                                                                                    
|              | Item 2. Properties                                                                                                  
|              | Item 3. Legal Proceedings                                                                                           
|              | Item 4. Submission of Matters to a Vote of Security Holders                                                         
|PART II      
|              | Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|              | Item 6. Selected Financial Data                                                                                     
|              | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations                       
|              | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                                                 
|              | Item 8. Financial Statements and Supplementary Data                                                                 
|              | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                        
|              | Item 9A. Controls and Procedures                                                                                    
|Part III     
|              | Item 10. Directors and Executive Officers of the Registrant                                                         
|              | Item 11. Executive Compensation                                                                                     
|              | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder matters             
|              | Item 13. Certain Relationships and Related Transactions                                                             
|              | Item 14.Principal Accountant Fees and Services                                                                      
|PART IV      
|              | Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K                                            
|SIGNATURES   
|EXHIBIT INDEX
|EXHIBIT 23.1 
|EXHIBIT 23.2 
|EXHIBIT 31   
|EXHIBIT 32   



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PART I




Item 1. Business.

Certron Corporation is referred to herein as the Company or Certron and
such reference includes both the corporation and its subsidiary unless
otherwise indicated. Certron was incorporated under the laws of the State of
California in 1966.

Certrons business in fiscal 2003 consisted primarily of the distribution of
magnetic media products, primarily blank audio and video cassettes. The
Company also distributed magnetic media accessories for computers. Prior to
fiscal 2002, the Company was also engaged in the contract assembly of products
for others in Mexicali, Mexico.

On September 7, 2001, the Company closed its Mexicali, Mexico plant and its
contract assembly operations which were conducted at that facility. This
closure was in response to a decline in the market for micro cassettes which
also had been assembled at the Mexicali, Mexico facility, the loss of an
existing contract assembly customer and the negative outlook for the retention
of its then sole remaining contract assembly customer and additional contract
assembly business. In the opinion of management, all expenses associated with
the closing of Mexico operations were either paid or fully accrued in fiscal
2001.

As described in Item 7 Managements Discussion and Analysis of Financial
Condition and Results of Operations-Results of Operations, during fiscal 2003,
due to continuing intense price competition and technological changes in the
marketplace for its products, the Company lost its remaining significant
customers and disposed of or wrote off its remaining inventory. As a result of
these occurrences, the Company concluded that its audio and videotape
businesses were no longer viable and some of its product lines were obsolete
and the company placed its emphasis on attempting to find a Buyer for the
Company.

The following table sets forth, for the years ended October 31, 2003, 2002, and
2001, the amounts of net sales and operating profit before general corporate
expense and interest expense, together with identifiable assets at October 31,
2003, 2002 and 2001 attributable to each of the Companys industry segments,
its magnetic media products segment and its contract assembly segment which is
shown as discontinued operations.

|                                                          |                         |  |                        |     |      |  |      |     |  |  |   |       | 
|--------------------------------------------------------- | ----------------------- |  | ---------------------- | --- | ---- |  | ---- | --- |  |  | - | ----- | 
|                                                          |                         |  | Year ended October 31,
|                                                          |                         |  |                       
|                                                          |                         |  | 2003                   |     | 2002 |  | 2001
|                                                          |                         |  |                        |     |      |  |     
|                                                          |                         |  | (In Thousands)        
|Net sales to unaffiliated customers:                      |                         |  |                        |     |      |  |      |     |  |  |   |      
|                                                          | Magnetic Media products |  | $                      | 300 |      |  | $    | 750 |  |  | $ | 1,475 | 
|                                                          | Discontinued operations |  |                        |    |      |  |      |    |  |  | $ | 603   | 
|Operating profit (loss) before general
corporate expense: |                         |  |                        |     |      |  |      |     |  |  |   |      
|                                                          | Magnetic Media products |  | $                      | (53 | )    |  | $    | 78  |  |  | $ | 131   | 
|                                                          | Discontinued operations |  |                        |    |      |  |      |    |  |  |   | 158   | 
|Identifiable assets:                                      |                         |  |                        |     |      |  |      |     |  |  |   |      
|                                                          | Magnetic Media products |  | $                      | 76  |      |  | $    | 346 |  |  | $ | 918   | 
|                                                          | Discontinued operations |  |                        |    |      |  |      |    |  |  |   | 11    | 

1



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The Companys magnetic media products consist primarily of blank audio and
video cassettes. The Company also distributes magnetic media accessories for
computers. All video tape and most audio tape and related plastics were
procured by the Company primarily from offshore sources. During the fiscal
years ended October 31, 2003, 2002 and 2001, net sales of the Companys
magnetic media products were as follows:

|                             |  |           |     |      |  |      |     |  |  |   |       | 
|---------------------------- |  | --------- | --- | ---- |  | ---- | --- |  |  | - | ----- | 
|                             |  | Net Sales
|                             |  |           |     |      |  |     
|Product                      |  | 2003      |     | 2002 |  | 2001
|                             |  |           |     |      |  |     
|Audio magnetic tape products |  | $         | 170 |      |  | $    | 621 |  |  | $ | 1,160 | 
|Video cassettes              |  |           | 130 |      |  |      | 129 |  |  |   | 315   | 
|                             |  |           |     |      |  |      |     |  |  |   |       | 
|                             |  | $         | 300 |      |  | $    | 750 |  |  | $ | 1,475 | 
|                             |  |           |     |      |  |      |     |  |  |   |       | 

Competition

In all areas of Certrons magnetic media business, competition has been active
and intense. The principal methods of competition in the magnetic media market
involve price, quality and advertisement, with the promotional priced audio
tape products and video cassettes being the most price sensitive. Since the
Company has not spent substantial amounts in consumer advertising of its high
performance blank tape products, and video cassettes, it has been at a
competitive disadvantage in these areas and has had to charge a lower per unit
price than some competitors selling comparable products having strong brand
recognition. The Company has experienced extensive price competition from Far
East manufacturers and distributors of low-cost audio cassettes and from other
manufacturers and distributors for sales of video cassettes, which made it
difficult for the Company to maintain prices. See Item 7. Managements
Discussion and Analysis of Financial Condition and
Results of Operation  Results of Operations. The release of digital products
has had an adverse impact on the Companys magnetic media sales and operations.

Employees

At January 1, 2004, Certron employed five full and part time people at its
facility at 11845 Olympic Blvd., Los Angeles, California.

2



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Item 2. Properties.

The principal facilities of the Company are as follows:

|                                      |  |              |        |               |  |                     |          |               |       |   |        |               |  |                |  | 
|------------------------------------- |  | ------------ | ------ | ------------- |  | ------------------- | -------- | ------------- | ----- | - | ------ | ------------- |  | -------------- |  | 
|                                      |  | Approx. Area |        |               |  |                     |          | Approx.       |       |   |        |              
|Location                              |  | Sq. ft.      |        | Lease Expires |  | annual rent         |          | Principal use
|                                      |  |              |        |               |  |                     |          |              
|422 N. Smith Avenue                   |  |              | 17,186 |               |  |                     | 8-31-03  | (1)           |       | $ | 87,000 |               |  | Warehouse and 
|Corona, CA                            |  |              |        |               |  |                     |          |               |       |   |        |               |  | packaging     
|11845 W.
Olympic Blvd
Los Angeles, CA |  |              | 1, 543 |               |  |                     | 10-31-04 | (1)           |       | $ | 29,000 |               |  | Administration
|1600 So. Broadway
1620 So. Broadway   |  |              | 750    |               |  | month to month  (1) |          | $             | 5,400 |   |        | Warehouse and
|Los Angeles, CA                       |  |              |        |               |  |                     |          |               |       |   |        |               |  | packaging     



---

(1)  422 N. Smith Avenue, 1600 So. Broadway, 1620 So. Broadway are
leased from Louart Corporation, a principal stockholder of Certron. 11845 W.
Olympic Boulevard Los Angeles California is leased from an unrelated party.

The lease at 422 N. Smith Avenue was extended to November 30, 2003. The
Company as of December 2, 2003 moved out of that property. The Company has
leased storage, warehouse and packaging area at 1600 and 1620 So. Broadway.

The Company believes that its facilities are maintained in satisfactory
operating conditions and are adequate for its needs.




Item 3. Legal Proceedings.

There are no material pending legal proceedings to which the Company is a
party. The Company was notified by a letter dated June 2, 2000 received June 6,
2000 that the Company may have a potential liability from waste disposal in the
Casmalia Disposal Site at Santa Barbara County, California. The Company was
given a choice of either signing an agreement that would toll the statute of
limitations for eighteen (18) months in order to allow the Company to resolve
any liability with the government without incurring costs associated with being
named a defendant in a lawsuit, or becoming an immediate defendant in a
lawsuit. The Company signed the tolling agreement. On November 20, 2001, the
tolling agreement was extended for an additional 18 months and on May 20, 2003
the tolling agreement was again extended for an additional 18 months. While
the amount which will be required to settle this matter is not expected to be
material, Certron is unable to estimate the amount that may be required to
settle this matter. The company is waiting for written communication from the
government concerning settlement of this claim. In verbal communications, the
EPA has indicated that the United States Department of Forestry along with an
EPA division of the State of California will not give a release on the Casmalia
Disposal site unless both Departments receive a cash reserve account from the
defendants to pay for any future environmental problems. The representative of
the EPA did not feel that the amount would be significant.

The statement that the Company does not expect the amount to be material is a
forward-looking statement which involves risks and uncertainties that could
cause actual results to differ including, among other things, an increase in
the alleged amount of waste disposal by the Company at the site over that which
is alleged in the letter of June 2, 2000 or a refusal by the government to
settle

3



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based upon the amount of waste disposal by the Company.




Item 4. Submission of Matters to a Vote of Security Holders

No matter was submitted during the fourth quarter of the fiscal year covered by
this report to a vote of security holders, through the solicitation of proxies
or otherwise.

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PART II




Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The common stock of the Company is traded in the NASDAQ Bulletin Board under
the symbol CRTN. The following table shows the high and low bid quotations for
such stock for each fiscal quarter during the fiscal years ended October 31,
2002 and October 31, 2003 as furnished by Bloomberg. These quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not necessarily represent actual transactions.

|               |  |      |     |     |  |  |     | 
|-------------- |  | ---- | --- | --- |  |  | --- | 
|Fiscal period  |  | High |     | Low
|               |  |      |     |    
|2002           |  |      |     |     |  |  |     | 
|First quarter  |  |      | .21 |     |  |  | .17 | 
|Second quarter |  |      | .23 |     |  |  | .15 | 
|Third quarter  |  |      | .23 |     |  |  | .15 | 
|Fourth quarter |  |      | .17 |     |  |  | .11 | 
|2003           |  |      |     |     |  |  |     | 
|First quarter  |  |      | .12 |     |  |  | .12 | 
|Second quarter |  |      | .11 |     |  |  | .11 | 
|Third quarter  |  |      | .12 |     |  |  | .12 | 
|Fourth quarter |  |      | .11 |     |  |  | .11 | 

As of January 12, 2004, the approximate number of holders of record of the
Companys Common Stock was 1324. The Company has never paid a cash dividend on
its Common Stock. The high and the low bid price of the companys common
stock on January 9, 2004 was $0.20, $0.20.

5



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Item 6. Selected Financial Data

|                                             |  |      |         |      |  |      |           |      |  |      |           |   |  |    |           |   |  |    |           |  
|-------------------------------------------- |  | ---- | ------- | ---- |  | ---- | --------- | ---- |  | ---- | --------- | - |  | -- | --------- | - |  | -- | --------- | -
|                                             |  | 2003 |         | 2002 |  | 2001 |           | 2000 |  | 1999
|                                             |  |      |         |      |  |      |           |      |  |     
|Net Sales                                    |  | $    | 300,000 |      |  | $    | 750,000   |      |  | $    | 1,475,000 |   |  | $  | 2,272,000 |   |  | $  | 2,765,000 |  
|Net (loss)
income from
continuing
operations |  | ($   | 664,000 | )    |  | ($   | 945,000   | )    |  | ($   | 451,000   | ) |  | ($ | 329,000   | ) |  | ($ | 339,000   | )
|Net loss from
discontinued
operations        |  |      |        |      |  |      |          |      |  | ($   | 30,000    | ) |  | ($ | 112,000   | ) |  | ($ | 121,000   | )
|Net (loss)
income                            |  | ($   | 664,000 | )    |  | ($   | 945,000   | )    |  | ($   | 481,000   | ) |  | ($ | 441,000   | ) |  | ($ | 460,000   | )
|Net (loss)
income per
common share           |  | ($   | 0.21    | )    |  | ($   | 0.30      | )    |  | ($   | 0.15      | ) |  | ($ | 0.14      | ) |  | ($ | .15       | )
|Total assets                                 |  | $    | 563,000 |      |  | $    | 1,203,000 |      |  | $    | 2,220,000 |   |  | $  | 3,037,000 |   |  | $  | 3,446,000 |  
|Long-term debt                               |  |      |        |      |  |      |          |      |  |      |          |   |  |    |          |   |  |    |          |  
|Working capital                              |  | $    | 357,000 |      |  | $    | 911,000   |      |  | $    | 1,831,000 |   |  | $  | 2,196,000 |   |  | $  | 2,744,000 |  
|Stockholders
equity                         |  | $    | 415,000 |      |  | $    | 1,065,000 |      |  | $    | 2,014,000 |   |  | $  | 2,550,000 |   |  | $  | 3,017,000 |  

No cash dividends have been paid during the five-year period ended October
31, 2003.




Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.

As described below under Results of Operations, during fiscal 2003, due to
continuing intense price competition and technological changes in the
marketplace for its products, the Company lost its remaining significant
customers and disposed of or wrote off its remaining inventory. As a result of
these occurrences, the Company concluded that its audio and videotape
businesses were no longer viable and some of its product lines were obsolete
and placed its emphasis on attempting to find a Buyer for the Company.

Liquidity and Capital Resources

As demonstrated by the following chart, the Companys working capital decreased
at October 31, 2003 as compared to that at October 31, 2002, which was
primarily due to a decline in sales and increased reserves against inventory.
Cash decreased by $ 310,000;
accounts receivable decreased by $ 45,000; inventories decreased by $ 252,000;
prepaid expenses decreased by $ 42,000; and other current assets decreased by $
4,000. Current liabilities increased by $ 52,000. During the fourth quarter
of fiscal 2003, the Company increased its cash position by surrendering for its
cash value of $162,000 life insurance policy on the life of Marshall Kass,
Chairman and Chief Executive Officer of the Company.

|                        |  |            |         |          |  |           |         |   |  |    |           |  
|----------------------- |  | ---------- | ------- | -------- |  | --------- | ------- | - |  | -- | --------- | -
|                        |  | October 31
|                        |  |            |         |          |  |          
|                        |  | 2003       |         | 2002     |  | 2001     
|                        |  |            |         |          |  |          
|Working Capital         |  | $          | 357,000 |          |  | $         | 911,000 |   |  | $  | 1,831,000 |  
|Current Ratio           |  | 1.91 to 1  |         | 7.6 to 1 |  | 9.89 to 1
|Cash Used in Operations |  | ($         | 210,000 | )        |  | ($        | 423,000 | ) |  | ($ | 516,000   | )

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Results of Operations

For a considerable number of years, intense price competition in the magnetic
media field has made it difficult for the Company to maintain prices of its
magnetic media products and has continually reduced the Companys margins on
these products. As a result, the Company discontinued sales of certain
magnetic media products and refused to sell magnetic media products at prices
not resulting in certain minimum margin returns. More recently, the
introduction of digital products and the substantial reduction in the cost of
DVD players have rendered some of the Companys products noncompetitive or
obsolete and had a material adverse impact on the Companys magnetic media
operations and sales. Digital answering devices have substantially replaced
telephone answering devices using magnetic tape cassettes, substantially
reducing the Companys sales of microcassettes. The sale of DVD players at
substantially reduced prices has curtailed sales of VHS T120s and T160s
recording tapes used in VCRs. As a result of the intense price competition and
the technological changes, Certron has been unable to compete at a profit in
this marketplace.

During the last two fiscal years the Company has lost three significant
customers who accounted in the aggregate for approximately 77% of Certrons
sales during fiscal 2002 and 41% of Certrons sales during fiscal 2003. In the
fourth quarter of fiscal 2002, one of these customers informed the Company of
its intent to cease ordering products from the Company by the end of the third
quarter of fiscal 2003. In the fourth quarter of fiscal 2003, another one of
these customers who was the Companys then largest customer informed the
Company that due to technological changes it could no longer commit to purchase
the quantities of private-label products needed by Certron to make the business
worthwhile and would no longer use Certron as a resource. The third of these
customers who was the Companys second largest customer during fiscal 2003 was
a private-label customer for VHS T120 products. Due to the substantial
reduction in VHS tape sales
and the fact that the Company had to carry a substantial inventory of VHS tapes
for this customer, the profit margin on this product for Certron diminished to
such an extent that Certron chose to cease fulfilling this customers orders.
As a result of these occurrences, the Company concluded that its audio and
videotape businesses were no longer viable and some of its product lines were
obsolete.

Since concluding that primarily due to price competition, there was no
meaningful opportunities for it to substantially increase sales and operating
profit of its magnetic media products through traditional outlets, the Company
attempted without success to acquire other businesses or product lines. In the
last several years it has also attempted to maximize shareholder value through
the sale of the Company.

In December, 2003, the Company announced that it was having discussions with a
privately-held foreign corporation concerning the possible acquisition by
Certron of the foreign corporation in exchange for shares of common stock of
Certron that would aggregate approximately 90% of the shares of common stock of
Certron outstanding after the transaction. The foreign corporation is a
development company specializing in high tech medical products. The parties
have exchanged information but no definitive agreements have been signed.
Discussions which are continuing are still at a preliminary stage and the
foreign corporation has indicated that it will not proceed unless it obtains
additional financing. No assurance can be given that the transaction will be
consummated. If this transaction is not consummated, Certron will continue to
search for a buyer of the Company.

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The Company expects that it will continue during fiscal 2004 to sell a small
amount of magnetic media products. It is presently estimating that the amount
of sales for the 2004 fiscal year will be between $50,000 to $100,000. The
Company does not intend to maintain any additional inventory, and it is
liquidating its holdings of marketable securities. Most of the Companys
products which are purchased from the Far East are available from multiple
sources. As a result of the expected lack of revenue during fiscal 2004, the
cost of maintaining a minimal number of employees and the accounting, legal and
other costs of remaining a public company, the Company expects to have a
negative cash flow during 2004. The Company is unable to predict how long it
will be able to have a sufficient amount of cash to continue as a viable
entity.

Fiscal 2003 Compared to Fiscal 2002

During fiscal 2003, the Company had an operating loss of $724,000 and a net
loss of $705,000 on sales of $300,000 as compared to an operating loss of
$963,000 and a net loss from continuing operations of $945,000 on sales of
$750,000 for fiscal 2002. Gross profit increased by $ 59,000 between fiscal
2003 and fiscal 2002. Inventory holding loss increased by $74,000; selling,
general and administrative expenses decreased by $ 96,000; depreciation and
amortization expense increased by $ 5,000; interest income decreased by $
11,000, realized gain on marketable securities increased by $ 12,000 and the
surrender of an executive life insurance policy for its cash value resulted in
an offset to expense of approximately $162,000.

Sales of magnetic media products were $300,000 in fiscal 2003 as compared to
$750,000 in fiscal 2002. The decrease of 60% represents a decrease in sales of
micro cassettes of $128,000, a decrease in sales of video cassettes of $84,000,
and a decrease in sales of audio cassettes and other office products of
$238,000 as a result of price competition and technological changes.

Total gross margin as a percentage of net sales was 44% in fiscal 2003 and 10%
in fiscal 2002. Margins increased from $78,000 in fiscal 2002 to $137,000 in
fiscal 2003 due primarily to a decrease in sales of low margin magnetic media.

For the fourth quarter of fiscal 2003, the Company incurred a loss from
continuing operations of $ 8,000. The amount of the loss was reduced by
approximately $162,000 in reduction of expenses as a result of the surrender of
an executive life insurance policy for payment of its cash value. Due to the
Companys declining sales and the loss of customers, during the fourth quarter
of fiscal 2003, the Company established a reserve reducing the value of its
inventory. Primarily as a result of this reserve, inventory holding loss
increased from $ 250,000 in fiscal 2002 to $ 332,000 in fiscal 2003.

Selling, general and administrative expense decreased by $ 94,000 during fiscal
2003. The decrease from $ 766,000 in 2002 to $ 670,000 in 2003 was due
primarily decrease in personnel expenses of $143,000 that was offset by an
increase in other selling, general and administrative expenses of $42,000.

During fiscal 2003, the Company invested cash not needed in operations, in
publicly traded common stocks of other companies. Investments in common stocks
are subject to risks of the market, and market prices may fluctuate and be
adversely affected by the operating results of the issuer, as well as general
economic, political and market conditions. As of October 31, 2003, the Company
held common stocks which had a cost of approximately $134,000 and market value
of approximately $58,000.

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In accordance with generally accepted accounting principles, the Company has
recorded the value of its investments in marketable securities on its balance
sheet at market value and the difference of approximately $76,000 between cost
and market value is recorded as an unrealized holding loss, a separate
component of equity (see Notes 1 and 3 of Notes to Consolidated Financial
Statements). Upon the expected sale of these securities, the Company will
recognize a loss in its statement of operations equal to the amount of the
unrealized holding loss, reduced by any increase in market value since October
31, 2003 and increased by any decrease in market
value since October 31, 2003.

Fiscal 2002 Compared to Fiscal 2001

During fiscal 2002, the Company had an operating loss of $963,000 and a net
loss from continuing operations of $945,000 on sales of $750,000 as compared to
an operating loss of $528,000 and a net loss from continuing operations of
$451,000 for fiscal 2001 on sales of $1,475,000. Gross profit decreased by
$266,000 between fiscal 2002 and fiscal 2001. Inventory holding loss increased
by $229,000; selling, general and administrative expenses decreased by $33,000;
depreciation and amortization expense decreased by $27,000; interest income
decreased by $54,000 and realized gain on marketable securities decreased by
$5,000.

Sales of magnetic media products were $750,000 in fiscal 2002 as compared to
$1,475,000 in fiscal 2001. The decrease of 49% was primarily the result of the
decrease in sales of micro cassettes of $128,000, decrease in sales of video
cassettes of $186,000, and decrease in sales of audio cassettes and other
office products of $411,000.

Total gross margin as a percentage of net sales was 10% in fiscal 2002 and 23%
in fiscal 2001. Margins decreased from $266,000 in fiscal 2001 to $78,000 in
fiscal 2002 due primarily to a decrease in the sales of magnetic media.

For the fourth quarter of fiscal 2002, the Company incurred a loss from
continuing operations of $403,000 of which approximately $222,000 was
represented by a write-down of finished goods inventory. Due to the Companys
declining sales and excess inventory, during the fourth quarter of fiscal 2002,
the Company established reserve reducing the value of its inventory to market
value. Primarily as a result of this reserve, inventory holding loss increased
from $29,000 in fiscal 2001 to $250,000 in fiscal 2002.

Selling, general and administrative expense decreased by $33,000 during fiscal
2002. The decrease from $799,000 in 2001 to $766,000 in 2002 was due primarily
to a decrease in personnel expenses of $74,000 that was offset by an increase
in other selling, general and administrative expenses of $41,000.

During fiscal 2002, the Company invested cash not needed in operations, in
publicly traded common stocks of other companies and may purchase additional
common stocks in the future. Investments in common stocks are subject to risks
of the market, and market prices may fluctuate and be adversely affected by the
operating results of the issuer, as well as general economic, political and
market conditions. As of October 31, 2002, the Company held common stocks
which had a cost of approximately $210,000 and market value of approximately
$119,000.

In accordance with generally accepted accounting principles, the Company has
recorded the value of its investments in marketable securities on its balance
sheet at market value and the difference of approximately $91,000 between cost
and market value as of October 31, 2002 is recorded as an unrealized holding
loss, a separate component of equity (see Notes 1 and 3 of Notes to
Consolidated

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##### Table of Contents



Financial Statements). If the Company sells these securities, the
Company would recognize such loss in its statement of operations.

In fiscal 2002, the Company was advised that its largest customer would no
longer be using the Company as a primary vendor. Although the customer
continued to place orders with the Company during fiscal 2002, the Company
expects that it will not receive significant orders from this customer after
January 31, 2003.

Forward-Looking Statements

Certain statements herein, including statements as to the Companys
negotiations with a potential buyer, its ability to consummate a sale
transaction, its estimate as to the amount of sales for the 2004 fiscal year,
its expected negative cash flow and the Companys uncertainty as to its future
are forward-looking statements. These statements involve risks and
uncertainties that could cause actual results to differ materially from these
forward-looking statements. Factors which could cause actual results to differ
materially include economic conditions, the Companys failure to consummate the
transaction presently under discussion, Certron not being able to find another
buyer for the Company and the Company running out of cash prior to consummating
a sale of the Company.




Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.




Item 8. Financial Statements and Supplementary Data.

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(Letterhead of Hurley & Company)

INDEPENDENT AUDITORS REPORT

Board of Directors
Certron Corporation
Los Angeles, California

We have audited the accompanying consolidated balance sheet of Certron
Corporation (the Company) as of October 31, 2003, and the related statements
of operations, stockholders deficit, and cash flows the year then ended. In
connection with our audit of the consolidated financial statements, we have
also audited the accompanying schedule of valuation and qualifying accounts.
These consolidated financial statements and financial schedule are the
responsibility of the Companys management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Certron Corporation
as of October 31, 2003, and the results of its operations and its cash flows
for the year then ended, in conformity with accounting principles generally
accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 12 to
the consolidated financial statements, the Company disposed of its assembly
operations and has suffered recurring losses from operations at October 31,
2003 that raise substantial doubt about its ability to continue as a going
concern. The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

Hurley & Company
Granada Hills, California
February 12, 2004

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(Letterhead of Beckman Kirkland & Whitney)

Independent Auditors Report

Board of Directors and Shareholders
Certron Corporation
Los Angeles, California

We have audited the accompanying balance sheet of Certron Corporation as of
October 31, 2002, and the related statements of operations and comprehensive
income, stockholders equity, and cash flows for the years ended October 31,
2002 and 2001. In connection with our audit of the financial statements, we
have also audited the accompanying financial statement schedule. These
financial statements and financial schedule are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Certron Corporation as of
October 31, 2002, and the results of its operations and its cash flows for the
years ended October 31, 2002 and 2001 in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

BECKMAN KIRKLAND & WHITNEY

Agoura Hills, California
January 3, 2003

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CERTRON CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

|                                               |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |             |         |            |           |           |           | 
|---------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ------------------------------------------ | -------------------- | -------- | ----------- | ------- | ---------- | --------- | --------- | --------- | 
|                                               |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          | October 31,
|                                               |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |            
|                                               |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          | 2003        |         | 2002      
|                                               |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |             |         |           
|                                               | ASSETS                                                                                                                                                                                                                                      |                                                                                           |                                            |                      |          |             |         |            |          
|CURRENT ASSETS:                                |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |             |         |           
|                                               | Cash and cash equivalents, Note 1                                                                                                                                                                                                           |                                                                                           | $                                          | 432,000              |          |             | $       | 642,000    |          
|                                               | Accounts receivable, less allowance
for doubtful accounts of
$15,000 in 2003 and $7,000 in 2002                                                                                                                                             |                                                                                           |                                            | 25,000               |          |             |         | 73,000     |          
|                                               | Inventories:                                                                                                                                                                                                                                |                                                                                           |                                            |                      |          |             |         |            |          
|                                               |                                                                                                                                                                                                                                             | Finished products, less allowance for
obsolescence of $177,000 in 2003 and
$8,000 in 2002 |                                            |                      |         |             |         |            | 252,000   |          
|                                               | Prepaid expenses                                                                                                                                                                                                                            |                                                                                           |                                            | 48,000               |          |             |         | 49,000     |          
|                                               | Other current assets                                                                                                                                                                                                                        |                                                                                           |                                            |                     |          |             |         | 33,000     |          
|                                               |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |             |         |            |          
|                                               |                                                                                                                                                                                                                                             |                                                                                           |                                            | Total current assets |          |             | 505,000 |            |           |           | 1,049,000 | 
|                                               |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |             |         |            |          
|EQUIPMENT AND LEASEHOLD IMPROVEMENTS, AT COST: |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |             |         |           
|                                               | Machinery and equipment                                                                                                                                                                                                                     |                                                                                           |                                            | 17,000               |          |             |         | 55,000     |          
|                                               | Dies and molds                                                                                                                                                                                                                              |                                                                                           |                                            |                     |          |             |         | 314,000    |          
|                                               | Furniture, fixtures and leasehold improvements                                                                                                                                                                                              |                                                                                           |                                            | 142,000              |          |             |         | 152,000    |          
|                                               |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |             |         |            |          
|                                               |                                                                                                                                                                                                                                             |                                                                                           | 159,000                                    |                      |          |             | 521,000 |           
|                                               |                                                                                                                                                                                                                                             | Less accumulated depreciation
and amortization                                            |                                            |                      | (159,000 | )           |         |            | (500,000  | )        
|                                               |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |             |         |            |          
|                                               |                                                                                                                                                                                                                                             |                                                                                           | Net Equipment and Leasehold Improvements   |                      |          |            |         |            |           | 21,000    |          
|                                               |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |             |         |            |          
|MARKETABLE SECURITIES                          |                                                                                                                                                                                                                                             |                                                                                           | 58,000                                     |                      |          |             | 119,000 |           
|OTHER ASSETS                                   |                                                                                                                                                                                                                                             |                                                                                           |                                           |                      |          |             | 14,000  |           
|                                               |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |             |         |            |          
|                                               |                                                                                                                                                                                                                                             | Total Assets                                                                              |                                            | $                    | 563,000  |             |         | $          | 1,203,000 |          
|                                               |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |             |         |            |          
|                                               | LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                                        |                                                                                           |                                            |                      |          |             |         |            |          
|CURRENT LIABILITIES:                           |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |             |         |           
|                                               | Accrued advertising                                                                                                                                                                                                                         |                                                                                           | $                                          |                     |          |             | $       | 13,000     |          
|                                               | Accrued professional fees                                                                                                                                                                                                                   |                                                                                           |                                            | 49,000               |          |             |         | 32,000     |          
|                                               | Accrued payroll and related items                                                                                                                                                                                                           |                                                                                           |                                            | 27,000               |          |             |         | 26,000     |          
|                                               | Other accrued expenses                                                                                                                                                                                                                      |                                                                                           |                                            | 72,000               |          |             |         | 67,000     |          
|                                               |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |             |         |           
|                                               |                                                                                                                                                                                                                                             | Total current liabilities                                                                 |                                            |                      | 148,000  |             |         |            | 138,000   |          
|                                               |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |             |         |           
|COMMITMENTS AND CONTINGENCIES                  |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |             |         |           
|STOCKHOLDERS EQUITY:                          |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |             |         |           
|                                               | Preferred Stock, $1.00 par value, authorized
500,000 shares, no shares issued and outstanding
Common stock, no par value; stated value $1 per
share; authorized 10,000,000 shares; issued and
outstanding, 3,128,000 shares (2002 and 2001) |                                                                                           |                                            | 3,128,000            |          |             |         | 3,128,000  |          
|                                               | Additional paid-in capital                                                                                                                                                                                                                  |                                                                                           |                                            | 1,824,000            |          |             |         | 1,824,000  |          
|                                               | Net unrealized loss on marketable
equity securities                                                                                                                                                                                         |                                                                                           |                                            | (77,000              | )        |             |         | (91,000    | )        
|                                               | Accumulated deficit                                                                                                                                                                                                                         |                                                                                           |                                            | (4,460,000           | )        |             |         | (3,796,000 | )        
|                                               |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |             |         |            |          
|                                               |                                                                                                                                                                                                                                             |                                                                                           | Total Stockholders Equity                 |                      |          | 415,000     |         |            |           | 1,065,000 |          
|                                               |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |             |         |            |          
|                                               |                                                                                                                                                                                                                                             |                                                                                           | Total Liabilities and Stockholders Equity |                      | $        | 563,000     |         |            | $         | 1,203,000 |          
|                                               |                                                                                                                                                                                                                                             |                                                                                           |                                            |                      |          |             |         |            |          

The accompanying notes are an integral part of these financial statement

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CERTRON CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

|                                            |                                                                |    |                        |          |      |    |           |          |   |    |           |          |  
|------------------------------------------- | -------------------------------------------------------------- | -- | ---------------------- | -------- | ---- | -- | --------- | -------- | - | -- | --------- | -------- | -
|                                            |                                                                |    | Year Ended October 31,
|                                            |                                                                |    |                       
|                                            |                                                                |    | 2003                   |          | 2002 |    | 2001     
|                                            |                                                                |    |                        |          |      |    |          
|NET SALES                                   |                                                                | $  | 300,000                |          |      | $  | 750,000   |          |   | $  | 1,475,000 |         
|COST OF PRODUCTS SOLD                       |                                                                |    | 353,000                |          |      |    | 672,000   |          |   |    | 1,131,000 |         
|                                            |                                                                |    |                        |          |      |    |           |          |   |    |           |         
|GROSS PROFIT                                |                                                                |    | (53,000                | )        |      |    | 78,000    |          |   |    | 344,000   |         
|                                            |                                                                |    |                        |          |      |    |           |          |   |    |           |         
|COSTS AND EXPENSES:                         |                                                                |    |                        |          |      |    |           |          |   |    |           |         
|                                            | Inventory holding loss(Note 4)                                 |    |                        | 170,000  |      |    |           | 258,000  |   |    |           | 29,000   |  
|                                            | Selling, general and
administrative                            |    |                        | 600,000  |      |    |           | 766,000  |   |    |           | 799,000  |  
|                                            | Depreciation and amortization                                  |    |                        | 21,000   |      |    |           | 17,000   |   |    |           | 44,000   |  
|                                            |                                                                |    |                        |          |      |    |           |          |   |    |           |         
|                                            |                                                                |    | 791,000                |          |      |    | 1,041,000 |          |   |    | 872,000   |         
|                                            |                                                                |    |                        |          |      |    |           |          |   |    |           |         
|OPERATING LOSS                              |                                                                |    | (844,000               | )        |      |    | (963,000  | )        |   |    | (528,000  | )       
|OTHER INCOME                                |                                                                |    |                        |          |      |    |           |          |   |    |           |         
|                                            | Realized gain on marketable
equity securities
and other assets |    |                        | 12,000   |      |    |           |         |   |    |           | 5,000    |  
|                                            | Interest Income (net)                                          |    |                        | 8,000    |      |    |           | 19,000   |   |    |           | 73,000   |  
|                                            | Other Income (Note 7)                                          |    |                        | 161,000  |      |    |           |         |   |    |           |         |  
|                                            |                                                                |    |                        |          |      |    |           |          |   |    |           |         
|LOSS FROM CONTINUING OPERATIONS,
BEFORE TAX |                                                                |    | (663,000               | )        |      |    | (944,000  | )        |   |    | (450,000  | )       
|PROVISIONS FOR TAXES                        |                                                                |    | 1,000                  |          |      |    | 1,000     |          |   |    | 1,000     |         
|                                            |                                                                |    |                        |          |      |    |           |          |   |    |           |         
|LOSS FROM CONTINUING OPERATIONS             |                                                                |    | (664,000               | )        |      |    | (945,000  | )        |   |    | (451,000  | )       
|DISCONTINUED OPERATIONS                     |                                                                |    |                        |          |      |    |           |          |   |    |           |         
|                                            | Loss from discontinued
operations, net of tax                  |    |                        |         |      |    |           |         |   |    |           | (10,000  | )
|                                            | Loss on disposal of discontinued
operations, net of tax        |    |                        |         |      |    |           |         |   |    |           | ( 20,000 | )
|                                            |                                                                |    |                        |          |      |    |           |          |   |    |           |         
|NET LOSS                                    |                                                                | ($ | 664,000                | )        |      | ($ | 945,000   | )        |   | ($ | 481,000   | )       
|                                            |                                                                |    |                        |          |      |    |           |          |   |    |           |         
|NET LOSS PER SHARE                          |                                                                |    |                        |          |      |    |           |          |   |    |           |         
|                                            | Continuing operations                                          |    | ($                     | 0.21     | )    |    | ($        | 0.30     | ) |    | ($        | 0.14     | )
|                                            | Discontinued operations, net of tax                            |    |                        |         |      |    |           |         |   |    |           | (0.01    | )
|                                            |                                                                |    |                        |          |      |    |           |          |   |    |           |         
|                                            | Net loss per share                                             |    | ($                     | 0.21     | )    |    | ($        | 0.30     | ) |    | ($        | 0.15     | )
|                                            |                                                                |    |                        |          |      |    |           |          |   |    |           |         
|Weighted average common shares
outstanding  |                                                                |    | 3,128,000              |          |      |    | 3,128,000 |          |   |    | 3,128,000 |         
|                                            |                                                                |    |                        |          |      |    |           |          |   |    |           |         
|COMPREHENSIVE LOSS                          |                                                                |    |                        |          |      |    |           |          |   |    |           |         
|                                            | Unrealized (loss)/gain on
marketable equity securities         |    | $                      | 14,000   |      |    | ($        | 4,000    | ) |    | ($        | 55,000   | )
|                                            | Net loss                                                       |    |                        | (664,000 | )    |    |           | (945,000 | ) |    |           | (481,000 | )
|                                            |                                                                |    |                        |          |      |    |           |          |   |    |           |         

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| |                    |  |                        |         |      |  |      |         |   |  |    |         |  
| | ------------------ |  | ---------------------- | ------- | ---- |  | ---- | ------- | - |  | -- | ------- | -
| |                    |  | Year Ended October 31,
| |                    |  |                       
| |                    |  | 2003                   |         | 2002 |  | 2001
| |                    |  |                        |         |      |  |     
| | Comprehensive loss |  | ($                     | 650,000 | )    |  | ($   | 949,000 | ) |  | ($ | 536,000 | )
| |                    |  |                        |         |      |  |      |         |   |  |    |        

The accompanying notes are an integral part of these financial statements.

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CERTRON CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

|         |                                          |  |              |           |            |  |            |           |             |  |         |           |       |  |            |          |   |  |          |           |   |  |           |           |  
|-------- | ---------------------------------------- |  | ------------ | --------- | ---------- |  | ---------- | --------- | ----------- |  | ------- | --------- | ----- |  | ---------- | -------- | - |  | -------- | --------- | - |  | --------- | --------- | -
|         |                                          |  |              |           |            |  |            |           |             |  |         |           |       |  | Net        |          |   |  |          |           |   |  |          
|         |                                          |  |              |           |            |  |            |           |             |  |         |           |       |  | Unrealized |          |   |  |          |           |   |  |          
|         |                                          |  |              |           |            |  |            |           |             |  |         |           |       |  | (Loss)     |          |   |  |          |           |   |  |          
|         |                                          |  |              |           |            |  |            |           |             |  |         |           |       |  | Gain on    |          |   |  |          |           |   |  |          
|         |                                          |  | Common Stock |           | Additional |  | Marketable |           |             |  |         |           |       |  |           
|         |                                          |  |              |           | paid-in    |  | Equity     |           | Accumulated |  |         |           |      
|         |                                          |  | Shares       |           | Amount     |  | capital    |           | Securities  |  | deficit |           | Total
|         |                                          |  |              |           |            |  |            |           |             |  |         |           |      
|BALANCE  |                                          |  |              |           |            |  |            |           |             |  |         |           |       |  |            |          |   |  |          |           |   |  |           |          
|         | October 31,
2000                         |  |              | 3,128,000 |            |  | $          | 3,128,000 |             |  | $       | 1,824,000 |       |  | ($         | 32,000   | ) |  | ($       | 2,370,000 | ) |  | $         | 2,550,000 |  
|         | Unrealized
Loss on
Marketable
Securities |  |              |           |            |  |            |           |             |  |         |           |       |  |            | ( 55,000 | ) |  |          |           |   |  |           | ( 55,000  | )
|         | Net Loss                                 |  |              |           |            |  |            |           |             |  |         |           |       |  |            |          |   |  |          | (481,000  | ) |  |           | ( 481,000 | )
|         |                                          |  |              |           |            |  |            |           |             |  |         |           |       |  |            |          |   |  |          |           |   |  |           |           |  
|BALANCE  |                                          |  |              |           |            |  |            |           |             |  |         |           |       |  |            |          |   |  |          |           |   |  |           |          
|         | October 31,
2001                         |  |              | 3,128,000 |            |  | $          | 3,128,000 |             |  | $       | 1,824,000 |       |  | ($         | 87,000   | ) |  | ($       | 2,851,000 | ) |  | $         | 2,014,000 |  
|         | Unrealized
Loss on
Marketable
Securities |  |              |           |            |  |            |           |             |  |         |           |       |  |            | (4,000   | ) |  |          |           |   |  |           | (4,000    | )
|         | Net Loss                                 |  |              |           |            |  |            |           |             |  |         |           |       |  |            |          |   |  |          | (945,000  | ) |  |           | (945,000  | )
|         |                                          |  |              |           |            |  |            |           |             |  |         |           |       |  |            |          |   |  |          |           |   |  |           |           |  
|BALANCE  |                                          |  |              |           |            |  |            |           |             |  |         |           |       |  |            |          |   |  |          |           |   |  |           |          
|         | October 31,
2002                         |  |              | 3,128,000 |            |  | $          | 3,128,000 |             |  | $       | 1,824,000 |       |  | ($         | 91,000   | ) |  | ($       | 3,796,000 | ) |  | $         | 1,065,000 |  
|         | Unrealized
Loss on
Marketable
Securities |  |              |           |            |  |            |           |             |  |         |           |       |  | $          | 14,000   |   |  |          |           |   |  | ($        | 14,000    | )
|Net Loss |                                          |  |              |           |            |  |            |           |             |  |         |           |       |  |            |          |   |  | (664,000 | )         |   |  | ( 664,000 | )        
|         |                                          |  |              |           |            |  |            |           |             |  |         |           |       |  |            |          |   |  |          |           |   |  |           |           |  
|BALANCE  |                                          |  |              |           |            |  |            |           |             |  |         |           |       |  |            |          |   |  |          |           |   |  |           |          
|         | October 31,
2003                         |  |              | 3,128,000 |            |  | $          | 3,128,000 |             |  | $       | 1,824,000 |       |  | ($         | 77,000   | ) |  | ($       | 4,460,000 | ) |  | $         | 415,000   |  

The accompanying notes are an integral part of these financial statements.

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CERTRON CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                                   |                                                              |                                                     |                                       |                                |          |                        |           |        |         |        |           |         |          |         |       | 
|-------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | --------------------------------------------------- | ------------------------------------- | ------------------------------ | -------- | ---------------------- | --------- | ------ | ------- | ------ | --------- | ------- | -------- | ------- | ----- | 
|                                                                                                   |                                                              |                                                     |                                       |                                |          | YEAR ENDED OCTOBER 31,
|                                                                                                   |                                                              |                                                     |                                       |                                |          |                       
|                                                                                                   |                                                              |                                                     |                                       |                                |          | 2003                   |           | 2002   |         | 2001  
|                                                                                                   |                                                              |                                                     |                                       |                                |          |                        |           |        |         |       
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                              |                                                              |                                                     |                                       |                                |          |                        |           |        |         |        |           |        
|Net loss                                                                                           |                                                              | ($                                                  | 664,000                               | )                              |          | ($                     | 945,000   | )      |         | ($     | 481,000   | )      
|Adjustments to reconcile net (loss)
income to net cash (used in)
provided by operating activities: |                                                              |                                                     |                                       |                                |          |                        |           |        |         |        |           |        
|                                                                                                   | Depreciation and amortization                                |                                                     |                                       | 22,000                         |          |                        |           | 17,000 |         |        |           | 64,000  |         
|                                                                                                   | Loss from discontinued
operations, net                       |                                                     |                                       |                               |          |                        |           |       |         |        |           | 10,000  |         
|                                                                                                   | Loss on disposal of discontinued
operations, net             |                                                     |                                       |                               |          |                        |           |       |         |        |           | 20,000  |         
|                                                                                                   | Decrease (Increase) in net assets
of discontinued operations |                                                     |                                       |                               |          |                        |           | 12,000 |         |        |           | (17,000 | )       
|                                                                                                   | Changes in operating assets and
liabilities:                 |                                                     |                                       |                                |          |                        |           |        |         |        |           |         |         
|                                                                                                   |                                                              |                                                     | Decrease(Increase)in
notes receivable |                                |          |                       |           |        |         | 99,000 |           |         |          | (99,000 | )    
|                                                                                                   |                                                              | Decrease(Increase) in trade
accounts receivable     |                                       |                                | 48,000   |                        |           |        | 56,000  |        |           |         | 175,000  |        
|                                                                                                   |                                                              | Decrease in inventories                             |                                       |                                | 252,000  |                        |           |        | 401,000 |        |           |         | 138,000  |        
|                                                                                                   |                                                              | Decrease (Increase) in
prepaid expenses             |                                       |                                | 1,000    |                        |           |        | 16,000  |        |           |         | (30,000  | )      
|                                                                                                   |                                                              | Decrease (Increase) in
other assets                 |                                       |                                | 47,000   |                        |           |        | (11,000 | )      |           |         | 45,000   |        
|                                                                                                   |                                                              | (Decrease) Increase
in current liabilities          |                                       |                                | 10,000   |                        |           |        | (68,000 | )      |           |         | (328,000 | )      
|                                                                                                   |                                                              |                                                     |                                       |                                |          |                        |           |        |         |        |           |        
|Net cash used in continuing
operations                                                             |                                                              |                                                     | (284,000                              | )                              |          |                        | (423,000  | )      |         |        | (503,000  | )      
|Net cash used in
discontinued operations                                                           |                                                              |                                                     |                                      |                                |          |                        |          |        |         |        | (13,000   | )      
|                                                                                                   |                                                              |                                                     |                                       |                                |          |                        |           |        |         |        |           |        
|Net cash used in
operating activities                                                              |                                                              |                                                     | (284,000                              | )                              |          |                        | (423,000  | )      |         |        | (516,000  | )      
|                                                                                                   |                                                              |                                                     |                                       |                                |          |                        |           |        |         |        |           |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                              |                                                              |                                                     |                                       |                                |          |                        |           |        |         |        |           |        
|Proceeds from sale of marketable
securities                                                        |                                                              |                                                     | 275,000                               |                                |          |                        | 85,000    |        |         |        | 224,000   |        
|                                                                                                   |                                                              | Purchase of marketable securities                   |                                       |                                | (201,000 | )                      |           |        | (95,000 | )      |           |         | (192,000 | )      
|                                                                                                   |                                                              |                                                     |                                       |                                |          |                        |           |        |         |        |           |        
|                                                                                                   |                                                              | Net cash (used in) provided by
investing activities |                                       |                                | 74,000   |                        |           |        | (10,000 | )      |           |         | 32,000   |        
|                                                                                                   |                                                              |                                                     |                                       |                                |          |                        |           |        |         |        |           |        
|NET DECREASE IN CASH
AND CASH EQUIVALENTS                                                          |                                                              |                                                     | (210,000                              | )                              |          |                        | (433,000  | )      |         |        | (484,000  | )      
|CASH AND CASH EQUIVALENTS,
beginning of year                                                       |                                                              |                                                     | 642,000                               |                                |          |                        | 1,075,000 |        |         |        | 1,559,000 |        
|                                                                                                   |                                                              |                                                     |                                       |                                |          |                        |           |        |         |        |           |        
|CASH AND CASH EQUIVALENTS,
end of year                                                             |                                                              | $                                                   | 432,000                               |                                |          | $                      | 642,000   |        |         | $      | 1,075,000 |        
|                                                                                                   |                                                              |                                                     |                                       |                                |          |                        |           |        |         |        |           |        
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                                  |                                                              |                                                     |                                       |                                |          |                        |           |        |         |        |           |        
|                                                                                                   |                                                              |                                                     |                                       | Cash paid during the year for: |          |                        |           |        |         |        |           |         |          |         |       | 
|                                                                                                   |                                                              |                                                     |                                       | Interest                       |          | $                      |          |        |         | $      |          |         |          | $       |      | 
|                                                                                                   |                                                              |                                                     |                                       | Income Taxes                   |          | $                      | 1,000     |        |         | $      | 1,000     |         |          | $       | 1,000 | 

The accompanying notes are an integral part of these financial statements.

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##### Table of Contents



CERTRON CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 2003, 2002 AND 2001

Note 1 - Summary of Significant Accounting Policies



| |  | Nature of Operations                                                                                                                                                                                                                                                                                                       
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Companys business consists primarily of the distribution of magnetic
media products.                                                                                                                                                                                                                                  
|
| |  | Principles of Consolidation                                                                                                                                                                                                                                                                                                
|
| |  | The consolidated financial statements include the accounts of Certron
Corporation and its wholly owned subsidiary, Certron Audio, S.A.
(collectively the Company). Certron Audio ceased operating on September 7,
2001. All material intercompany profits, transactions and balances have been
eliminated.               
|
| |  | Translation of Foreign Currencies                                                                                                                                                                                                                                                                                          
|
| |  | All balance sheet accounts of foreign operations are translated into US
dollars at the year-end rate of exchange, and statement of operations items
are translated at the weighted average exchange rates for the year.
Significant foreign operations ceased in 2001.                                                     
|
| |  | Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                  
|
| |  | The Company considers all cash on hand and on deposit, and securities with
original purchased maturities of less than three months to be cash and cash
equivalents.                                                                                                                                                        
|
| |  | Accounts Receivable                                                                                                                                                                                                                                                                                                        
|
| |  | The Company has recorded an allowance for doubtful accounts to cover the
difference between recorded receivables and collections from customers. The
allowance for bad debts is adjusted periodically based upon the Companys
evaluation of historical collection experiences, industry trends and other
relevant factors.
|
| |  | Inventories                                                                                                                                                                                                                                                                                                                
|
| |  | Inventories are stated at the lower of cost (first-in, first-out method) or
market. At October 31, 2003 the inventory was fully reserved.                                                                                                                                                                                  
|
| |  | Equipment and Leasehold Improvements                                                                                                                                                                                                                                                                                       
|
| |  | Equipment and leasehold improvements are stated at cost and are depreciated
or amortized using the straight-line method over the lesser of the estimated
useful lives of the assets (generally five years) or the applicable lease
terms. At October 31, 2003 all equipment and leasehold improvements were
fully reserved.
|
| |  | Marketable Equity Securities                                                                                                                                                                                                                                                                                               
|
| |  | Management determines the appropriate classification of its investments in
debt and equity securities at the time of purchase and reevaluates such                                                                                                                                                                         

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| |  | determination at each balance sheet date. Securities available for sale are
carried at market value, with the unrealized gains and losses, net of tax,
reported in a separate component of stockholders equity. The Company does
not have investments that qualify as trading or held to maturity securities.
Marketable equity securities are valued based on quoted market prices. The
cost of securities sold is determined by the specific identification of cost
method.                                                                    
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | The Company recognizes revenue from product sales upon shipment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Advertising and Promotion Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Advertising and promotion costs, which totaled $0 in 2003 and 2002, are
expensed as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Taxes on Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | The Company files tax returns excluding its subsidiary for United States
federal tax purposes and combined returns with its subsidiary for state
purposes.                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the year in which those
temporary differences are expected to be recovered or settled. Reserves for
deferred tax assets are recorded when ultimate recovery of such assets is
deemed uncertain.
|
| |  | Income (Loss) Per Common Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | Income (loss) per common share is based on the weighted average number of
common shares outstanding during the year and the effect of common stock
equivalents, if dilutive.                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Stock Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | The Company has elected to follow Accounting Principles Board Opinion No. 23,
Accounting for Stock Issued to Employees related interpretations in
accounting for its employee stock options. Under APB 25, no compensation
expense is recorded when the exercise price of the option equals the market
price of the underlying stock on the date of the grant. The Company has
adopted the disclosure only provisions of Statement of Financial Accounting
Standards No. 148, Accounting for Stock Based Compensation.                        
|
| |  | Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | In preparing consolidated financial statements in conformity with generally
accepted accounting principles, management makes estimates and assumptions
that affect the amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the consolidated financial
statements, as well as the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.                                                                                       

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| |  | Comprehensive Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Company utilizes SFAS No. 130, Reporting Comprehensive Income. This
statement establishes standards for reporting comprehensive income and its
components in a financial statement. Comprehensive income as defined
includes all changes in equity (net assets) during a period from non-owner
sources. Examples of items to be included in comprehensive income, which are
excluded from net income, include foreign currency translation adjustments
and unrealized gains and losses on available-for-sale securities.                                                                                                                                                                                                                                                                                                                                     
|
| |  | Segment Reporting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | The Company accounts for segments in accordance with SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information which
requires that companies disclose operating segments based on the way
management desegregates the Company for internal operating decisions. See
Note 9 for further information about the Companys segments. The Companys
Mexicali operation and the contract assembly segment of its business was
closed September 2001.                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Recently Issued Accounting Pronouncement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | In April 2002, the Financial Standards Board (the FASB) issued SFAS No.
145, Rescission of SFAS No. 4, 44, and 64, Amendment of the FASB Statement
No. 13, and Technical Corrections, effective for financial statements issued
after May 25, 2002, which effectively amends SFAS No. 13, Accounting for
Leases, to eliminate an inconsistency involving sale-leaseback transactions
and also gives clarity to other existing authoritative pronouncements. The
adoption of SFAS 145 did not have a material impact on the Companys
financial statements.                                                                                                                                                                                                                                                                                                   
|
| |  | In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities, effective for exit or disposal activities
after December 15, 2002, which addresses financial accounting and reporting
for costs associated with exit or disposal activities and nullifies Emerging
Issues Task Force (EITF) Issues No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit and Activity (Including
Certain Costs Incurred in a Restructuring.) The adoption of the provisions
of this SFAS did not have a material impact on the Companys financial
statements.                                                                                                                                                                                                                       
|
| |  | In October 2002, the FASB issued SFAS No. 147, Acquisition of Certain
Financial Institutions  an amendment of FASB Statements No. 72 and 144 and
FASB Interpretation No. 9, application for acquisitions on or after October
1, 2002, which generally removes acquisitions of financial institutions from
the scope of both Statement 72 and Interpretation 9 and requires that those
transactions to be accounted for in accordance with FASB Statement No. 141,
Business Combinations, and No. 142, Goodwill and Other Intangible Assets,
and emends FASB Statement No. 144, Accounting for the Impairment or Disposal
of Long Lived Assets, to include in its scope certain long term
customer-relationship intangible assets of financial institutions. The
adoption of SFAS 147 did not have a material impact on the Companys
financial statements.
|
| |  | In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

20



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| |  | Compensation  Transition and Disclosure  an Amendment of FASB Statement No.
123, effective for fiscal years ending after December 15, 2002, which
provides alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-base employee compensation. The
adoption of SFAS No. 148 did not have a material effect on the Companys
financial statements, as the adoption of this standard did not require the
Company to change, and the Company did not change, to the fair value based
method of accounting for stock-based compensation.                                                                                                                                                                                                                                                                                                                            
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In January 2003, the FASB issued FASB Interpretation (FIN) No. 46,
Consolidation of Variable Interest Entities. FIN No. 46 clarifies the
application of Accounting Research Bulletin No. 51, Consolidated Financial
Statements, and applies immediately to any variable interest entities
created after January 31, 2003 and to variable interest entities in which an
interest is obtained after January 31, 2003. The Company holds no interest
in variable interest entities.                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS 149 clarifies the
accounting and reporting for derivative instruments, including certain
derivative instruments imbedded in other contracts and for hedging activities
under SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities. In particular, SFAS No. 149 clarifies under what circumstances
a contract with an initial net investment meets the characteristic of a
derivative as described in SFAS No. 133. SFAS No. 149 also clarifies when a
derivative contains a financing component. SFAS No. 149 is generally
effective for derivative instruments entered into or modified after June 30,
2003, and for hedging relationships designated after June 30, 2003. The
company holds no derivative instruments and does not engage in hedging
activities.
|
| |  | In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No.
150 requires certain financial instruments that have both equity and
liability characteristics to be classified as a liability on the balance
sheet. SFAS No. 150 is effective for the first interim period beginning
after June 15, 2003. The adoptions of SFAS 150 did not have a material
impact on the Companys financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Reclassifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Certain prior year amounts in the accompanying consolidated financial
statements have been reclassified to conform to the current years
presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

Note 2  Discontinued Operation

On September 7, 2001, the Company closed its Mexicali, Mexico plant and its
contract assembly operations that were conducted at that facility. This
closure was in response to a decline in market for micro cassettes which also
had a been assembled at the Mexicali, Mexico facility, the loss of an existing
customer and the negative outlook for the retention of its then sole remaining
contract assembly customer and additional contract assembly business. In the
opinion of management, all expenses associated with the closing of Mexico
operations were either paid or fully accrued in fiscal 2001. The assets in the
Mexicali, Mexico facility consists primarily of accounts receivable and fixed
assets.

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The estimated loss on the disposal of the discontinued operation of $30,000(net
of income tax benefit of $0), represents the estimated loss on the disposal of
the assets of the segment and a provision for expected operating losses during
the phase-out period from September 7, 2001 through October 31, 2001.

Disposition of the Mexicali facility, represents the disposal of a business
segment under Accounting Principles Board (APB) Opinion No.30. Accordingly,
results of this operation have been classified as discontinued, and prior
periods have been restated. Operating results of the Mexicali facility for the
period of November 1, 1999 through September 7, 2001 are shown separately in
the accompanying statement of operations.

Net sales and income from the discontinued operation are as follows:

|                                           |  |      |   |      |  |      |   |  |  |   |         | 
|------------------------------------------ |  | ---- | - | ---- |  | ---- | - |  |  | - | ------- | 
|                                           |  | 2003 |   | 2002 |  | 2001
|                                           |  |      |   |      |  |     
|Net Sales                                  |  |      |  |      |  |      |  |  |  | $ | 603,000 | 
|Loss from discontinued operation           |  |      |  |      |  |      |  |  |  |   | 10,000  | 
|Loss on disposal of
discontinued operation |  |      |  |      |  |      |  |  |  |   | 20,000  | 
|Income tax benefit (expense)               |  |      |  |      |  |      |  |  |  |   |        | 
|Net loss from
discontinued operation       |  |      |  |      |  |      |  |  |  |   | 30,000  | 

Note 3 - Marketable Securities

The Company has investments in marketable equity securities, which have been
classified as non-current, available-for-sale, at October 31, 2003 and 2002.
The market value of these securities is shown as a non-current asset while the
change in market value since the acquisition of these securities is shown as an
unrealized holding loss in the shareholders equity section of the balance
sheet. The investments in equity securities at October 31, 2003 have an
original cost of $134,000 and a fair value of $58,000, resulting from gross
unrealized losses of $81,000 and gross unrealized gains of $5,000,
respectively. The investments in equity securities at October 31, 2002 had an
original cost of $210,000 and a fair value of $119,000, resulting from gross
unrealized losses of $110,000 and gross unrealized gains of $17,000
respectively.

Realized gains from the sale of marketable securities were $11,000, $0, and
$5,000 for the years ended October 31, 2003, 2002 and 2001, respectively.
Gross proceeds from the sale of securities were $275,000, $85,000 and $224,000
for the years ended October 31, 2003, 2002 and 2001, respectively.

Note 4 - Inventory

Due to the apparent loss of three of the Companys largest customers, as
described in Item 1, declining sales, and excess inventory, the Company has
established a reserve to reduce the value of its inventory to net realizable
value taking into account the cost of handling and sales.

Note 5 - Options

The Companys Executive Stock Option Plan (the Executive Plan) was approved
by shareholders in March 1989. In January 1995, the Board of Directors adopted
an amendment to the Executive Plan changing its name to the Executive Stock
Option Plan, increasing the number of shares of Common Stock covered thereby
from

22



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##### Table of Contents



150,000 to 300,000 and extending the expiration date of the Executive Plan
from January 1999 to January 2005. The increase in the number of shares and
the extension of the expiration date of the plan were approved by shareholders
in March 1995. In January 2001, the Board of Directors adopted a further
amendment to the Executive Plan increasing the number of shares of Common Stock
covered thereby to 600,000 shares and extending the expiration date of the
Executive Plan to January 24, 2011. This amendment was approved by
shareholders in March 2001. Options under the plan have been reserved for
issuance to officers, directors and key employees.

Options under the Plan may be exercised in various installments, may not be
exercised beyond ten years and the option price may not be less than the market
value of the common stock on the date the option is granted.

|                          |  |           |         |             |  |             |         |   |  |   |       | 
|------------------------- |  | --------- | ------- | ----------- |  | ----------- | ------- | - |  | - | ----- | 
|                          |  | Options   |         |             |  |             |         |   |  |  
|                          |  | available |         | Options     |  |             |         |  
|Executive Stock           |  | for       |         | granted and |  |             |         |  
|Option Plan               |  | grant     |         | outstanding |  | Price Range
|                          |  |           |         |             |  |            
|Balance, October 31, 1999 |  |           | 181,500 |             |  |             | 118,500 |   |  | $ | 1.000 | 
|Granted                   |  |           | (62,000 | )           |  |             | 62,000  |   |  | $ | 1.000 | 
|                          |  |           |         |             |  |             |         |   |  |   |       | 
|Balance, October 31, 2000 |  |           | 119,500 |             |  |             | 180,500 |   |  | $ | 1.000 | 
|Increase                  |  |           | 300,000 |             |  |             |         |   |  | $ | 1.000 | 
|Canceled                  |  |           | 75,500  |             |  |             | (75,500 | ) |  | $ | 1.000 | 
|                          |  |           |         |             |  |             |         |   |  |   |       | 
|Balance October 31, 2001  |  |           | 495,000 |             |  |             | 105,000 |   |  | $ | 1.000 | 
|Canceled                  |  |           | 67,000  |             |  |             | (67,000 | ) |  | $ | 1.000 | 
|                          |  |           |         |             |  |             |         |   |  |   |       | 
|Balance October 31, 2002  |  |           | 562,000 |             |  |             | 38,000  |   |  | $ | 1.000 | 
|Canceled                  |  |           | 3,000   |             |  |             | ( 3,000 | ) |  | $ | 1.000 | 
|                          |  |           |         |             |  |             |         |   |  |   |       | 
|Balance October 31, 2003  |  |           | 565,000 |             |  |             | 35,000  |   |  | $ | 1.000 | 
|                          |  |           |         |             |  |             |         |   |  |   |       | 

The Company has adopted only the disclosure provisions of SFAS No. 123,
Accounting for Stock-Based Compensation. It applies Accounting Principles
Bulletin (APB) Opinion No. 25, Accounting for Stock Issued to Employees,
and related interpretations in accounting for its plans and does not recognize
compensation expense for its stock-based compensation plans other than for
restricted stock and options/warrants issued to outside third parties. If the
Company had elected to recognize compensation expense based upon the fair value
at the grant date for awards under these plans consistent with the methodology
prescribed by SFAS 123, the Companys net income and earnings per share
prescribed by SFAS 123, the Companys net income and earnings per share would
be reduced to the pro forma amounts indicated below:

|                           |  |             |          |  
|-------------------------- |  | ----------- | -------- | -
|                           |  | October 31,
|                           |  | 2003       
|                           |  |            
|Net Loss as reported       |  | ($          | 664,000  | )
|Loss, pro forma            |  |             | (664,000 | )
|Loss per share as reported |  |             | (.21     | )
|Loss per share, pro forma  |  |             | (.21     | )

These pro forma amounts may not be representative of future disclosures
because they do not take into effect pro forma compensation expense related
to grants made before 1997.

23



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##### Table of Contents



The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following weighted
average assumptions used for grants in:

|                        |  |      |      |  
|----------------------- |  | ---- | ---- | -
|                        |  | 1997
|                        |  |     
|Risk free interest rate |  |      | 5.8  | %
|Expected lives (years)  |  |      | 5    |  
|Expected volatility     |  |      | 26.0 | %
|Expected dividends      |  | $    | 0    |  

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input
of highly subjective assumptions including the expected stock price
volatility. Because the Companys employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in managements opinion, the existing models do not
necessarily provide a single measure of the fair value of its employee stock
options.

At October 31, 2003, there were 35,000 options granted and outstanding, of
which 35,000 were exercisable. These options had a weighted average remaining
contractual life of three years. The weighted average exercise price of the
options outstanding and exercisable was $1.00.

Incremental common shares (not included in the denominator of
diluted earnings per share because of their anti-dilutive nature):

|                             |  |      |        |      |  |  |        | 
|---------------------------- |  | ---- | ------ | ---- |  |  | ------ | 
|                             |  | 2003 |        | 2002
|                             |  |      |        |     
|Employee
options             |  |      | 35,000 |      |  |  | 38,000
|Warrants                     |  |      | 0      |      |  |  | 0     
|                             |  |      |        |     
|Potential
common equivalents |  |      | 35,000 |      |  |  | 38,000
|                             |  |      |        |     

If all currently outstanding potential
common equivalents are exercised, the Company would receive proceeds
of approximately $35,000.

Note 6 - Taxes on Income

The provision for taxes on income is comprised of the minimum state income
taxes of $1,000.

A reconciliation of the federal statutory rates to the effective rates is
summarized as follows:

|                                             |  |                        |     |      |  |      |       |    |  |  |       |   
|-------------------------------------------- |  | ---------------------- | --- | ---- |  | ---- | ----- | -- |  |  | ----- | --
|                                             |  | Year Ended October 31,
|                                             |  |                       
|                                             |  | 2003                   |     | 2002 |  | 2001
|                                             |  |                        |     |      |  |     
|Statutory rate                               |  |                        | 34  | %    |  |      | 34.0  | %  |  |  | 34.0  | % 
|State taxes, net of federal
benefit          |  |                        | 0   | %    |  |      | 0     | %  |  |  | 0.2   | % 
|Unrecognized benefit of
net operating losses |  |                        | (34 | %)   |  |      | (34.0 | %) |  |  | (34.0 | %)
|                                             |  |                        |     |      |  |      |       |    |  |  |       |   
|Effective tax rate                           |  |                        | 0   | %    |  |      | 0     | %  |  |  | 0.2   | % 
|                                             |  |                        |     |      |  |      |       |    |  |  |       |   

For federal income tax return purposes, net operating losses of approximately
$5,136,000 expire beginning October 31, 2005. For state income tax purposes,
net operating losses of approximately $2,400,000 expire beginning October 31,
2003.

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Significant components of the Companys deferred tax asset consist of the
following:

|                                            |  |             |            |             |  |   |            |  
|------------------------------------------- |  | ----------- | ---------- | ----------- |  | - | ---------- | -
|                                            |  | October 31, |            | October 31,
|                                            |  | 2003        |            | 2002       
|                                            |  |             |            |            
|Net operating loss carry forward            |  | $           | 2,129,000  |             |  | $ | 1,913,900  |  
|State Taxes                                 |  |             | 90,000     |             |  |   | 71,900     |  
|Vacation and severance accruals             |  |             | 12,000     |             |  |   | 8,600      |  
|Allowance for bad debts                     |  |             | 7,000      |             |  |   | 6,500      |  
|Inventory                                   |  |             | 76,000     |             |  |   | 3,400      |  
|Depreciation                                |  |             | (2,000     | )           |  |   | 25,700     |  
|Close Out Reserves                          |  |             | 22,000     |             |  |   | 21,500     |  
|Loss on marketable equity
Securities        |  |             | 146,000    |             |  |   | 146,300    |  
|                                            |  |             |            |             |  |   |            |  
|General business credit                     |  |             |           |             |  |   |           |  
|                                            |  |             |            |             |  |   |            |  
|Total deferred tax assets                   |  |             | 2,480,000  |             |  |   | 2,197,800  |  
|Valuation allowance for deferred
tax assets |  |             | (2,480,000 | )           |  |   | (2,197,800 | )
|                                            |  |             |            |             |  |   |            |  
|                                            |  | $           |           |             |  | $ |           |  
|                                            |  |             |            |             |  |   |            |  

The deferred tax assets have been offset in their entirety by a valuation
allowance due to the uncertainty of their realization.

Note 7  Other Income

During the year ended October 31, 2003, the Company received $162,000 from
the surrendering of a life insurance policy held on a director of the
Company. The income from this transaction is reported as other income in the
statement of operations.

Note 8  Commitments and Contingencies

Operating Leases -

The Company leases office and warehouse facilities under long-term operating
leases. The minimum net lease payments under non-cancelable operating leases
are as follows:

|                            |            |   |        |   | 
|--------------------------- | ---------- | - | ------ | - | 
|Year Ending October 31
2004 |            | $ | 28,636 |  
|                            | Thereafter |   |        | 0 | 

Total rental expense charged to operations amounted to $113,000, $129,000,
and $197,000, for the years ended October 31, 2003, 2002, and 2001
respectively.

Some leases contain renewal options, inflation escalation clauses and under
some leasing arrangements, the Company pays maintenance, insurance, taxes and
other expenses in addition to the above minimum annual rentals.

The Company as of December 2, 2003 moved out of the Corona property. The
Company now leases a storage area at a facility owned by Louart Corporation
on a month to month basis.

Employment Contract -

On November 1, 1993, the Company entered into an employment agreement with
its Chairman/Chief Executive Officer under which the Company is committed to
annual salary payments to the officer in the amount of $200,000 through
fiscal

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1998.     During the fiscal year ended October 31, 1999, the Chairman and
CEO voluntarily reduced his compensation to $153,000, in fiscal year ended
October 31, 2000 to $139,000, in fiscal year ended October 31, 2001 to
$117,000, in fiscal year ended October 31, 2002 to $113,000 and in fiscal
year 2003 to $104,000. In 1998 the Employment Agreement was amended to extend
the term thereof through October 31, 2001 and in November 2001 the Agreement
was amended to extend the term thereof through October 31, 2004.

Contingencies 

The Company was notified by a letter dated June 2, 2000 received June 6, 2000
that the Company may have a potential liability from waste disposal in the
Casmalia Disposal Site at Santa Barbara County, California. The Company was
given a choice of either signing an agreement that would toll the statute of
limitations for eighteen (18) months in order to allow the Company to resolve
any liability with the government without incurring costs associated with
being named a defendant in a lawsuit, or becoming an immediate defendant in a
lawsuit. The Company signed the tolling agreement. On November 20, 2001, the
tolling agreement was extended for an additional 18 months and on May 20,
2003, the tolling agreement was again extended for an additional 18 months.
While the amount which will be required to settle this matter is not expected
to be material, Certron is unable to estimate the amount that may be required
to settle this matter. The company is waiting for communication from the
government concerning settlement of this claim.

Note 9 - Industry Segment Information

In fiscal 2003 and 2002, the Company operated solely in the segment of
distributing magnetic media products.

In fiscal 2001, the Company operated principally in two segments: magnetic
media products and contract assembly. Operations in magnetic media products
primarily involve the sale of blank magnetic media and related products. On
September 7, 2001, the contract assembly segment was closed and as set forth
in the financial information by industry segment as discontinued operations.
See Note 2 for further information on this discontinued operation.

Identifiable assets by industry segment are those that are used in the
Companys operation in each industry. Corporate assets are principally cash
and other assets.

Financial information for 2003, 2002 and 2001 by industry segment, is
summarized as follows:

| |                                      |                                               |        |    |          |   |        |   |            |   |         |   |           |   | 
| | ------------------------------------ | --------------------------------------------- | ------ | -- | -------- | - | ------ | - | ---------- | - | ------- | - | --------- | - | 
| |                                      |                                               |        |    | 2003     |   | 2002   |   | 2001      
| |                                      |                                               |        |    |          |   |        |   |           
| | Net sales to unaffiliated customers: |                                               |        |    |          |   |        |   |            |   |         |   |          
| |                                      | Magnetic media products                       |        | $  | 300,000  |   |        | $ | 750,000    |   |         | $ | 1,475,000 |  
| |                                      | Discontinued operations                       |        |    |         |   |        |   |           |   |         |   | 603,000   |  
| |                                      |                                               |        |    |          |   |        |   |            |   |         |   |           |  
| |                                      | Combined                                      |        | $  | 300,000  |   |        | $ | 750,000    |   |         | $ | 2,078,000 |  
| |                                      |                                               |        |    |          |   |        |   |            |   |         |   |           |  
| | Gross profit/(loss):                 |                                               |        |    |          |   |        |   |            |   |         |   |          
| |                                      | Magnetic media products                       |        | ($ | 53,000   | ) |        | $ | 78,000     |   |         | $ | 131,000   |  
| |                                      | Discontinued operations                       |        |    |          |   |        |   |           |   |         |   | 158,000   |  
| |                                      |                                               |        |    |          |   |        |   |            |   |         |   |           |  
| |                                      | ($                                            | 53,000 | )  |          |   | 78,000 |   |            |   | 289,000 |  
| |                                      | General corporate expenses                    |        |    | (790,000 | ) |        |   | (1,041,000 | ) |         |   | (847,000  | )
| |                                      | Realized gain & loss on
marketable securities |        |    | 11,000   |   |        |   |           |   |         |   | 5,000     |  

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|                     |                                               |                         |                                     |         |        |         |      |         |         |           |    |           |         |           | 
|-------------------- | --------------------------------------------- | ----------------------- | ----------------------------------- | ------- | ------ | ------- | ---- | ------- | ------- | --------- | -- | --------- | ------- | --------- | 
|                     |                                               |                         |                                     |         | 2003   |         | 2002 |         | 2001   
|                     |                                               |                         |                                     |         |        |         |      |         |        
|                     | Interest income                               |                         |                                     | 8,000   |        |         |      | 19,000  |         |           |    | 73,000    |        
|                     | Other income                                  |                         |                                     | 161,000 |        |         |      |        |         |           |    |          |        
|                     |                                               |                         |                                     |         |        |         |      |         |         |           |    |           |         |          
|                     | Loss from continuing
operations, before tax   |                         | ($                                  | 663,000 | )      |         | ($   | 944,000 | )       |           | ($ | 450,000   | )      
|                     |                                               |                         |                                     |         |        |         |      |         |         |           |    |           |         |          
|                     | Loss from continuing operations               |                         | ($                                  | 664,000 | )      |         | ($   | 945,000 | )       |           | ($ | 451,000   | )      
|                     |                                               |                         |                                     |         |        |         |      |         |         |           |    |           |         |          
|                     | Loss from discontinued
operations, net of tax |                         |                                     |        |        |         |      |        |         |           | ($ | 30,000    | )      
|                     | Net Loss                                      |                         | ($                                  | 664,000 | )      |         | ($   | 945,000 | )       |           | ($ | 481,000   | )      
|                     | Basic and diluted net loss
per share          |                         | ($                                  | 0.21    | )      |         | ($   | 0.30    | )       |           | ($ | 0.15      | )      
|Identifiable assets: |                                               |                         |                                     |         |        |         |      |         |         |           |    |          
|                     |                                               | Magnetic media products |                                     | $       | 73,000 |         |      | $       | 428,000 |           |    | $         | 918,000 |          
|                     |                                               | Discontinued operations |                                     |         |        |         |      |         |        |           |    |           | 11,000  |          
|                     |                                               |                         |                                     |         |        |         |      |         |         |           |    |           |         |          
|                     |                                               |                         | Total identifiable asset            |         |        | 73,000  |      |         |         | 428,000   |    |           |         | 929,000   | 
|                     | General corporate assets                      |                         |                                     | 490,000 |        |         |      | 775,000 |         |           |    | 1,291,000 |        
|                     |                                               |                         |                                     |         |        |         |      |         |         |           |    |           |         |          
|                     |                                               |                         | Total assets                        |         | $      | 563,000 |      |         | $       | 1,203,000 |    |           | $       | 2,220,000 | 
|                     |                                               |                         |                                     |         |        |         |      |         |         |           |    |           |         |          
|                     | Depreciation and amortization:                |                         |                                     |         |        |         |      |         |         |           |    |           |        
|                     |                                               | Magnetic media products |                                     | $       | 21,000 |         |      | $       | 17,000  |           |    | $         | 64,000  |          
|                     |                                               | Discontinued operations |                                     |         |       |         |      |         |        |           |    |           |        |          
|                     |                                               |                         |                                     |         |        |         |      |         |         |           |    |           |         |          
|                     |                                               |                         | Total depreciation and
amortization |         | $      | 21,000  |      |         | $       | 17,000    |    |           | $       | 64,000    | 
|                     |                                               |                         |                                     |         |        |         |      |         |         |           |    |           |         |          
|                     | Capital expenditures:                         |                         |                                     |         |        |         |      |         |         |           |    |           |        
|                     |                                               | Magnetic media products |                                     | $       |       |         |      |         |        |           |    |           |        |          
|                     |                                               | Discontinued operations |                                     |         |       |         |      |         |        |           |    |           |        |          
|                     |                                               |                         |                                     |         |        |         |      |         |         |           |    |           |         |          
|                     |                                               |                         | Total capital expenditures          |         | $      |        |      |         | $       |          |    |           | $       |          | 
|                     |                                               |                         |                                     |         |        |         |      |         |         |           |    |           |         |          

Note 10 - Related Party Transactions

The Company made payments to Louart, a stockholder of the Company, for rent of
warehouse and office space, secretarial and administrative services, consulting
services, and an automobile. These fees are included in selling, general and
administrative expenses.

The payments made to Louart for these items for the years ended October 31 are
as follows:

|     |  |   |         | 
|---- |  | - | ------- | 
|2003 |  | $ | 190,000 | 
|2002 |  | $ | 190,000 | 
|2001 |  | $ | 192,000 | 

Note 11 - Concentrations

For fiscal year ended October 31, 2003, the Companys ten largest customers of
magnetic media products accounted in the aggregate for approximately 93% of
the Companys total net sales of magnetic media products. During fiscal 2003,
the two largest single magnetic media customers accounted for $ 67,000 or 22%
and $33,000 or 11% of the Companys total magnetic media sales, respectively.
The Companys

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largest customer has informed the Company of their intent to
cease ordering from the Company, despite their continued placement of orders.
The loss of the Companys three largest customers has had a material negative
effect on the Companys earnings and sales.

The Company maintains cash deposits at several banks located in California.
Deposits at each bank are insured by the Federal Deposit Insurance Corporation
up to $100,000. As of October 31, 2003, uninsured portions of balances held at
those banks aggregated to $312,000.

Accounts receivable from the Companys largest customer accounted for $17,600
or 63% of accounts receivable as of October 31, 2003.

Note 12.    Basis
of Presentation

During the three years ended
October 31, 2003, 2002 and 2001, the Company had recurring losses
due to continuing intense price competition and technological
changes in the marketplace for its products. The Company concluded
that its audio and videotape businesses were no longer viable and
that raises substantial doubt as to the ability of the Company to
continue as a going concern.

Managements plans for the
Company include finding a buyer for the Company.

It is not possible to predict the
success of managements efforts. If management is unable to
achieve its goals, the Company may find it necessary to undertake
other actions as may be appropriate to meet its commitments.

The accompanying financial statements
do not include any adjustments relating to the recoverability and
classification of the recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the
Company be unable to continue in existence.




Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

During the year ended October 31,
2003, the Company changed independent auditors from Beckman Kirkland & Whitney to Hurley & Company. There were no disagreements with
Beckman Kirkland & Whitney.




Item 9A. Controls and Procedures

An evaluation was carried out by the Companys Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of
the Companys disclosure controls and procedures (as defined in Rule 13a-15(e)
or 15d-15(e) under the Securities and Exchange Act of 1934 as of October 31,
2003. Based upon the evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the design and operation of these disclosure
controls and procedures were effective. During the period covered by this
report, there have been no changes in the Companys internal control over
financial reporting that have materially affected or are reasonably likely to
materially affect the Companys internal control over financial reporting.

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Part III




Item 10. Directors and Executive Officers of the Registrant.

Set forth below is certain information about each of the Directors and
Executive Officer of the Company as of January 31, 2004.

|                                                                                                                                                                                                                                      |  |     |    |             |  |               |      | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --- | -- | ----------- |  | ------------- | ---- | 
|                                                                                                                                                                                                                                      |  |     |    |             |  | First Elected
|Name and Present
Position with Company or Principal Occupation                                                                                                                                                                        |  | Age |    | As Director
|                                                                                                                                                                                                                                      |  |     |    |            
|Marshall I Kass
Chairman of the Board,
Chief Executive Officer and
Chief Operating Officer of
the Company and Chairman
of the Board, Chief
Executive Officer and Chief
Operating Officer of Louart
Corporation, an investment
company |  |     | 75 |             |  |               | 1988 | 
|Michael S. Kass
Executive Vice President of
the Company and President
and Director of Louart
Corporation, an investment
company                                                                                                       |  |     | 50 |             |  |               | 1988 | 
|Susan E. Kass
Secretary and Treasurer of
the Company and Vice
President, Secretary and
Director of Louart
Corporation, an investment
Company                                                                                          |  |     | 47 |             |  |               | 1988 | 
|Ivalee E. Francia
Director of the Company and
Accounting Manager of
Louart Corporation, an
investment Company                                                                                                                         |  |     | 39 |             |  |               | 2003 | 

In March 1996, Mr. Michael S. Kass was elected Executive Vice President of the
Company. For the five years prior thereto, he served as Vice
President of the Company.
In December 1988, Mr. Marshall I. Kass was elected Chairman of the Board of
Directors and Chief Executive Officer, and in June 1990 he was elected as the
Chief Operating Officer of the Company. For more than the past five years and
until February 1996, Mr. Kass served as President of Louart Corporation, a
privately held investment company. In February 1996, he was elected Chairman of
the Board, Chief Executive Officer and Chief Operating Officer of Louart
Corporation. He is, and for more than the past five years has been, a Director
thereof. The Company and Marshall I. Kass are parties to an Employment
Agreement, dated as of November 1, 1993, pursuant to which Mr. Kass is employed
as the Chairman of the Board and Chief Executive Officer of the Company.
Although his Employment Agreement provides for an annual salary of $200,000 per
year (subject to adjustment at the discretion of the Board of Directors of the
Company), Mr. Kass has voluntarily taken less than that amount each of the last
three years as noted in the Summary Compensation Table contained in Item 11.
The

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Employment Agreement has been amended to extend the end of the term thereof
to October 31, 2004. The Employment Agreement may be earlier terminated in the
event of the death or disability of Mr. Kass or for good cause, defined to
mean conviction of a crime directly related to his employment or a felony,
gross mismanagement of the business and affairs of the Company or breach of any
material provision of the Employment Agreement.

In February 1996, Mr. Michael S. Kass was elected President of Louart
Corporation. For the five years prior thereto, he served as Senior Vice
President and Director of Louart Corporation. For more than the past five
years, Ms. Susan E. Kass has served as the Secretary, Vice President and
Director of Louart Corporation. In 1990, she was elected Secretary and
Treasurer of the Company. For more than the past five years, Ms. Ivalee E.
Francia has been Accounting Manager of Louart Corporation. Mr. Marshall I.
Kass is the father of Mr. Michael S. Kass and Ms. Susan E. Kass, both of whom
are siblings of one another.

Except for Marshall I. Kass, all of the executive officers of the Company serve
at the pleasure of the Board of Directors.

The Company has adopted a Code of Ethics that applies to its principal
executive officer, principal financial officer, principal accounting officer or
controller or persons performing similar functions. The Company will provide
without charge upon written request sent to Certron Corporation, 11845 W.
Olympic Boulevard, Suite 1080, Los Angeles, California, Attention Secretary, a
copy of such Code of Ethics.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Companys
executive officers and directors, as well as persons holding more than 10% of
the Companys outstanding shares of Common Stock, to file initial reports of
ownership and reports of changes of ownership of the Companys Common Stock
with the Securities and Exchange Commission. Executive officers and directors
are required to furnish the Company with copies of all Section 16(a) forms that
they file. Based solely upon a review of these filings, to the Companys
knowledge, during the fiscal year ended October 31, 2003, Ivalee E. Francia, a
director of the Company, failed to file on a timely basis a Form 3 upon her
election as a Director.

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Item 11. Executive Compensation.

The following table sets forth the compensation paid, during the fiscal year
ended October 31, 2003, to (i) the Chief Executive Officer and (ii) any other
executive officer whose total compensation for such fiscal year exceeded
$100,000, for services rendered by such persons in all capacities to the
Company:

SUMMARY COMPENSATION TABLE

|                            |                       |                         |      |            |  |              |         |                     |  |            |   |              |  |   |       |        |  | 
|--------------------------- | --------------------- | ----------------------- | ---- | ---------- |  | ------------ | ------- | ------------------- |  | ---------- | - | ------------ |  | - | ----- | ------ |  | 
|                            |                       |                         |      |            |  |              |         |                     |  |            |   | Long Term    |  |   |       |       
|                            |                       |                         |      |            |  |              |         |                     |  |            |   | Compensation |  |   |       |       
|                            |                       |                         |      |            |  |              |         |                     |  |            |   | Awards       |  |   |       |       
|                            |                       |                         |      |            |  |              |         | Annual              |  | Securities |   |              |  |  
|                            |                       |                         |      | Fiscal     |  | Compensation |         | Underlying          |  | All Other 
|Name and Principal Position |                       | Year                    |      | Salary ($) |  | Options (#)  |         | Compensation ($)(1)
|                            |                       |                         |      |            |  |              |         |                    
|Marshall I. Kass, Chairman  |                       |                         | 2003 |            |  | $            | 104,000 |                     |  |            |  |              |  | $ | 5,621 |       
|                            | of the Board, Chief   |                         |      | 2002       |  |              | $       | 113,000             |  |            |   |             |  |   | $     | 15,852 | 
|                            | Executive Officer and |                         |      | 2001       |  |              | $       | 117,000             |  |            |   |             |  |   | $     | 15,852 | 
|                            |                       | Chief Operating Officer |      |            |  |              |         |                     |  |            |   |              |  |   |       |        |  | 

Stock Options

In January 1989, the Board of Directors adopted the Executive Plan (then known
as the 1989 Stock Option Plan) covering 150,000 shares of Common Stock which
was approved by shareholders in March 1989. In January 1995, the Board of
Directors adopted an amendment to the Executive Plan changing its name to the
Executive Stock Option Plan, increasing the number of shares of Common Stock
covered thereby from 150,000 to 300,000 and extending the expiration date of
the Executive Plan from January 1999 to January 27, 2005. In January 2001, the
Board of Directors adopted an additional amendment to the Executive Plan
increasing the number of shares of Common Stock covered thereby from 300,000 to
600,000 and extending the expiration date of the Executive Plan to January 24,
2011, which amendments were approved by the Companys shareholders in March
2001.

During the fiscal year ended October 31, 2003, no options were granted or
exercised under the Executive Plan.



---

(1)  Represents premiums paid during the fiscal year on life insurance policies
maintained by the Company having as of January 1, 2004 an aggregate estimated
net surrender proceeds of $66,543 on the life and for the benefit of Mr.
Marshall I. Kass. In August 29, 2003, the Company surrendered one of the two
policies listed in fiscal 2002 and received in exchange therefore approximately
$162,000.


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The following table sets forth as of January 31, 2004 information as to the
number of unexercised options (none of which are in-the-money options) held by
the Chief Executive Officer of the Company.

AGGREGATED FISCAL YEAR-END OPTION VALUES

|                 |  |                            
|---------------- |  | ---------------------------
|                 |  | Number of Securities       
|                 |  | Underlying Unexercised     
|                 |  | Options at January 31, 2004
|                 |  | (#)                        
|Name             |  | Exercisable/Unexercisable  
|                 |  |                            
|Marshall I. Kass |  | 10,000/0                   

Under the Executive Plan both incentive stock options (as defined in Section
422 of the Internal Revenue Code of 1986, as amended) and non-incentive
options can be granted to selected executives, key employees and directors
(whether or not employees) of the Company. However, incentive stock options
may be granted only to employees (including officers and directors who are
employees). Under the Executive Plan, all options are required to be granted
at exercise prices of not less than 100% of the fair market value of the Common
Stock at the date the options are granted. If an incentive stock option is
granted to a more than 10% shareholder, it must be at 110% of the fair market
value of the Common Stock at the date of grant. The number of shares of Common
Stock covered by the Executive Plan is subject to adjustment in the case of
stock splits, reverse stock splits, stock dividends, recapitalization and
similar changes in the capitalization of the Company.

Stock appreciation rights may be granted with all or part of any option granted
under the Executive Plan. Directors who are not employees of the Company are
not eligible to receive these rights. Stock appreciation rights entitle the
holder thereof, upon exercise of such rights, to surrender the related option,
or any portion thereof, and to receive, without payment to the Company (except
for applicable withholding taxes), an amount equal to the excess of the fair
market value, on the date of such exercise, of the Common Stock covered by such
option or portion thereof over the option price of the Common Stock as provided
in the option. The Board of Directors or a committee thereof has sole
discretion to determine the form in which payment may be made to the employee
upon the exercise of any stock appreciation right (i.e., Common Stock, cash, or
any combination thereof). No stock appreciation rights have been granted under
the Executive Plan.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder matters.

The following table sets forth, as of January 31, 2004, the beneficial
ownership of equity securities of the Company by each person known by the
Company to own more than 5% of any class of the Companys voting securities,
each Director and Executive Officer and all Directors and Executive Officers as
a group:

|                                                                                    |  |                                           |           |                  |  |  |       |       
|----------------------------------------------------------------------------------- |  | ----------------------------------------- | --------- | ---------------- |  |  | ----- | ------
|                                                                                    |  | Beneficial Ownership of Equity Securities
|                                                                                    |  | of Company on January 31, 2003 (1)       
|                                                                                    |  |                                          
|Name                                                                                |  | Common Stock Held                         |           | Percent of Class
|                                                                                    |  |                                           |           |                 
|Louart Corporation
11845 W. Olympic Blvd., Suite 1080
Los Angeles, California 90064 |  |                                           | 1,535,840 | (2)              |  |  | 48.6  | %     
|Marshall I. Kass                                                                    |  |                                           | 1,491,315 | (3)(4)           |  |  | 47.5% | (3)(4)
|Michael S. Kass                                                                     |  |                                           | 1,238,725 | (3)(4)           |  |  | 39.5% | (3)(4)
|Susan E. Kass                                                                       |  |                                           | 1,216,200 | (3)(4)           |  |  | 38.8% | (3)(4)
|Ivalee E. Francia                                                                   |  |                                           | 0         |                  |  |  | 0     | %     
|Directors and Officers as a
Group (4 persons)                                       |  |                                           | 1,535,840 | (3)(4)           |  |  | 48.6% | (3)(4)

(1)  Except as otherwise indicated, nature of beneficial ownership is possession
of sole voting and investment power.

(2)  Includes 1,205,200 shares owned directly by Louart Corporation, as reported
in its Schedule 13D, dated January 1994 and filed with the Securities and
Exchange Commission. Such Schedule 13D indicates that Louart Corporation has
sole voting and dispositive power of such shares. Also includes 330,640 shares
beneficially owned (including shares issuable under options which are currently
exercisable or exercisable within 60 days) by officers and directors of Louart
Corporation.

(3)  Includes 1,205,200 shares owned by Louart Corporation. Messrs. Marshall
and Michael Kass and Ms. Susan Kass, directors and executive officers of the
Company, own shares of the capital stock of Louart Corporation representing a
majority of the voting power of the outstanding capital stock thereof.
Includes for Marshall I. Kass 276,115 shares owned by him, for Michael S. Kass
1,000 shares owned by him and 22,525 shares owned by his SEP/IRA, and for Susan
E. Kass 1,000 shares owned by her. Excludes for Marshall I. Kass 81,500 shares
owned by his wife, of which shares Marshall I. Kass disclaims beneficial
ownership.

(4)  Includes for each of Marshall I. Kass, Michael S. Kass and Susan E. Kass
10,000 shares issuable upon the exercise of presently exercisable options or
options exercisable within 60 days held by such persons.

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The following table sets forth certain information regarding the Executive
Plan, the only equity compensation plan of Certron:

EQUITY COMPENSATION PLAN INFORMATION

|                                                            |  |              |        |                  |  |                  |      |                 |  |            |         | 
|----------------------------------------------------------- |  | ------------ | ------ | ---------------- |  | ---------------- | ---- | --------------- |  | ---------- | ------- | 
|                                                            |  |              |        |                  |  |                  |      |                 |  | Number of 
|                                                            |  |              |        |                  |  |                  |      |                 |  | securities
|                                                            |  | Number of    |        |                  |  |                  |      | remaining      
|                                                            |  | securities   |        |                  |  |                  |      | available for  
|                                                            |  | to be        |        |                  |  |                  |      | future issuance
|                                                            |  | issued upon  |        | Weighted-average |  | under equity    
|                                                            |  | exercise of  |        | exercise price   |  | compensation    
|                                                            |  | outstanding  |        | of outstanding   |  | plans (excluding
|                                                            |  | options,     |        | options,         |  | securities      
|                                                            |  | warrants and |        | warrants and     |  | reflected in    
|Plan Category                                               |  | rights       |        | rights           |  | column (a)      
|                                                            |  |              |        |                  |  |                 
|                                                            |  | (a)          |        | (b)              |  | (c)             
|                                                            |  |              |        |                  |  |                 
|Equity compensation
plans approved by
security holders:     |  |              | 35,000 |                  |  | $                | 1.00 |                 |  |            | 565,000 | 
|Equity compensation
Plans not approved
by security
holders: |  |              | 0      |                  |  |                  | 0    |                 |  |            | 0       | 
|                                                            |  |              |        |                  |  |                  |      |                 |  |            |         | 
|Total                                                       |  |              | 35,000 |                  |  |                  |     |                 |  |            | 565,000 | 
|                                                            |  |              |        |                  |  |                  |      |                 |  |            |         | 
|                                                            |  |              |        |                  |  |                  |      |                 |  |            |         | 




Item 13. Certain Relationships and Related Transactions.

Louart Corporation, the beneficial owner of 48.6% of the Common Stock of
the Company and in which Messrs. Marshall and Michael Kass and Ms. Susan Kass,
directors and executive officers of the Company, own a majority of the voting
power and are executive officers and directors, leases to the Company a
warehouse and packaging facility in Corona, California. The facility in
Corona, California is leased on a triple-net basis pursuant to a lease that
expires November 30, 2003 at a monthly rental rate of approximately $7,400. On
December 2, 2003, the Company moved out of the Corona property. The Company
has leased a storage area at a facility owned by Louart Corporation on a
month-to-month as is at the rate of $450 per month.

During the fiscal year ended October 31, 2003, the Company paid to Louart
Corporation approximately $190,000 for the provision of certain services,
including rent, secretarial and administrative services, consulting services
and use of an automobile, and will continue to pay Louart for such services
during the Companys current fiscal year.




Item 14. Principal Accountant Fees and Services.

Not Applicable.

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PART IV




Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a) 
1. FINANCIAL STATEMENTS



| |  | The following consolidated financial statements of Certron Corporation
and its subsidiary are included in Part II, Item 8:
| |  | --------------------------------------------------------------------------------------------------------------------------

|                                                                                                             |  |  |    | 
|------------------------------------------------------------------------------------------------------------ |  |  | -- | 
|Report of Independent Public Accountants -
Hurley & Company                                                  |  |  | 11 | 
|Report of Independent Certified Public Accountants -
Beckman Kirkland & Whitney                              |  |  | 12 | 
|Consolidated balance sheets - October 31, 2003 and 2002                                                      |  |  | 13 | 
|Consolidated statements of operations and comprehensive
income - years ended October 31, 2003, 2002 and 2001 |  |  | 14 | 
|Consolidated statements of stockholders equity - years
ended October 31, 2003, 2002 and 2001                |  |  | 16 | 
|Consolidated statements of cash flows - years ended
October 31, 2003, 2002 and 2001                          |  |  | 17 | 
|Notes to consolidated financial statements                                                                   |  |  | 18 | 



|2. |  | FINANCIAL STATEMENT SCHEDULES
|-- |  | -----------------------------

|                                                |  |  |    | 
|----------------------------------------------- |  |  | -- | 
|Schedule II - Valuation and qualifying accounts |  |  | 37 | 



|   |  | All other schedules are omitted because they are not applicable or not
required, or because the required information is included in the
consolidated financial statements or notes thereto.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|3. |  | EXHIBITS                                                                                                                                                                                   

3.1 Articles of Incorporation of Registrant, as amended (incorporated by
reference to Exhibit 3.1 to Registrants Annual Report of from 10-K for the
year ended October 31, 1981 and Exhibit A and Exhibit B to Registrants
Proxy Statement dated February 17, 1988).

3.2 By-Laws of Registrant, as amended (incorporated by reference to
Exhibit 3.2 to Registrants Quarterly Report on form 10-Q for the quarter ended
April 30, 1989).

*10.1 Registrants Executive Stock Option Plan (incorporated by reference
to Exhibit B to Registrants Proxy Statement dated February 21, 1989).

*10.2 Amendment to Registrants 1989 Stock Option Plan (incorporated by
reference to Exhibit 10.5 to Registrants Annual Report on Form 10-K for the
year ended October 31, 1995).

*10.3 Amendment to Registrants Executive Stock Option Plan (incorporated
by reference to Exhibit 10.1 to Registrants Quarterly Report on Form 10Q for
the quarter ended April 30, 2001).

*10.4 Form of Indemnification Agreement between Registrant and its
Directors and selected officers and agents (incorporated by reference to
Exhibit C to Registrants Proxy Statement dated February 17, 1988).

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*10.5 Employment Agreement effective as of November 1, 1993 between
Registrant and Marshall I. Kass (incorporated by reference to Exhibit 10.1 to
Registrants Quarterly Report on Form 10-Q for quarter ended January 31, 1994).

*10.6 Amendment to Employment Agreement between Registrant and Marshall I.
Kass dated November 1, 1998 (incorporated by reference to Exhibit 10.8 to
Registrants Annual Report on Form 10-K for the year ended October 31, 1998).

21.     Subsidiaries of Registrant (incorporated by reference to Exhibit 22 to
Registrants Annual report on form 10-K for the year ended October 31, 1981).

23.1 Beckman Kirkland & Whitney consent.

23.2
Hurley & Company consent.

31.     Rule 13a-14(a)/15d-14(a) Certification

32.     Certification of Chief Executive Officer and Chief Financial Officer
under Section 906 of the Sarbanes-Oxley Act of 2002.

*     Indicates management contract or compensation plan or arrangement required to
be filed as an Exhibit to this Form 10-K

(b)  During the fourth quarter of Registrants fiscal year ended October 31,
2003 no reports on Form 8K were filed.

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CERTRON CORPORATION AND SUBSIDIARY

SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS

|                            |                                    |           |            |         |               |             |            |         |            |  |    |        |   |  |   |         | 
|--------------------------- | ---------------------------------- | --------- | ---------- | ------- | ------------- | ----------- | ---------- | ------- | ---------- |  | -- | ------ | - |  | - | ------- | 
|                            |                                    |           |            |         |               |             | Additions  |         |            |  |    |        |   |  |  
|                            |                                    |           |            |         |               |             | charged to |         |            |  |    |        |   |  |  
|                            |                                    |           |            |         |               |             | expense/   |         |            |  |    |        |   |  |  
|                            |                                    |           | Balance at |         | (subtractions |             | Balance of |         | Balance at
|                            |                                    |           | beginning  |         | charged to    |             | accounts   |         | end of    
|Classifications             |                                    | of period |            | income) |               | written off |            | period 
|                            |                                    |           |            |         |               |             |            |        
|YEAR ENDED OCTOBER 31, 2003 |                                    |           |            |         |               |             |            |         |            |  |    |        |   |  |   |        
|                            | Allowance for doubtful
Accounts    |           | $          | 7,000   |               |             | ($         | 0       | )          |  | $  | 0      |   |  | $ | 7,000   | 
|                            |                                    |           |            |         |               |             |            |         |            |  |    |        |   |  |   |        
|                            | Inventory
reserve for obsolescence |           | $          | 8,000   |               |             | $          | 169,000 |            |  | $  | 0      |   |  | $ | 177,000 | 
|                            |                                    |           |            |         |               |             |            |         |            |  |    |        |   |  |   |        
|YEAR ENDED OCTOBER 31, 2002 |                                    |           |            |         |               |             |            |         |            |  |    |        |   |  |   |        
|                            | Allowance for doubtful
accounts    |           | $          | 25,000  |               |             | $          | 0       |            |  | $  | 0      |   |  | $ | 7,000   | 
|                            |                                    |           |            |         |               |             |            |         |            |  |    |        |   |  |   |        
|                            | Inventory
reserve for obsolescence |           | $          | 0       |               |             | $          | 8,000   |            |  | $  | 0      |   |  | $ | 8,000   | 
|                            |                                    |           |            |         |               |             |            |         |            |  |    |        |   |  |   |        
|YEAR ENDED OCTOBER 31, 2001 |                                    |           |            |         |               |             |            |         |            |  |    |        |   |  |   |        
|                            | Allowance for doubtful
accounts    |           | $          | 44,000  |               |             | $          | 0       |            |  | ($ | 19,000 | ) |  | $ | 25,000  | 
|                            |                                    |           |            |         |               |             |            |         |            |  |    |        |   |  |   |        

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SIGNATURES

Pursuant to 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.

Date: February 13, 2004

| |  |                           |  |                     
| |  | ------------------------- |  | --------------------
| |  | CERTRON CORPORATION      
| |  |                           |  |                     
| |  | By                        |  | /s/ MARSHALL I. KASS
| |  |                           |  |                     
| |  | Marshall I. Kass         
| |  | Chairman of the Board and
| |  | Chief Executive and      
| |  | Operating Officer        

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

|                                         |  |                                                                                                                                                  |  |                  
|---------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------ |  | -----------------
|Signature                                |  | Title                                                                                                                                            |  | Date             
|                                         |  |                                                                                                                                                  |  |                  
|/s/ MARSHALL I. KASS

Marshall I. Kass   |  | Chairman of the Board
Chief Executive Officer
Chief Financial Officer and Director
(Principal Executive Officer and
Principal Financial Officer) |  | February 13, 2004
|                                         |  |                                                                                                                                                  |  |                  
|/s/ MICHAEL S. KASS

Michael S. Kass     |  | Executive Vice President and
Director                                                                                                            |  | February 13, 2004
|                                         |  |                                                                                                                                                  |  |                  
|/s/ SUSAN E. KASS

Susan E. Kass         |  | Secretary-Treasurer and
Director                                                                                                                 |  | February 13, 2004
|                                         |  |                                                                                                                                                  |  |                  
|/s/ IVALEE E. FRANCIA

Ivalee E. Francia |  | Director                                                                                                                                         |  | February 13, 2004

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EXHIBIT INDEX



|3. |  | EXHIBITS
|-- |  | --------

3.1 Articles of Incorporation of Registrant, as amended (incorporated by
reference to Exhibit 3.1 to Registrants Annual Report of from 10-K for the
year ended October 31, 1981 and Exhibit A and Exhibit B to Registrants
Proxy Statement dated February 17, 1988).

3.2 By-Laws of Registrant, as amended (incorporated by reference to
Exhibit 3.2 to Registrants Quarterly Report on form 10-Q for the quarter ended
April 30, 1989).

10.1 Registrants Executive Stock Option Plan (incorporated by reference
to Exhibit B to Registrants Proxy Statement dated February 21, 1989).

10.2 Amendment to Registrants 1989 Stock Option Plan (incorporated by
reference to Exhibit 10.5 to Registrants Annual Report on Form 10-K for the
year ended October 31, 1995).

10.3 Amendment to Registrants Executive Stock Option Plan (incorporated
by reference to Exhibit 10.1 to Registrants Quarterly Report on Form 10Q for
the quarter ended April 30, 2001).

10.4 Form of Indemnification Agreement between Registrant and its
Directors and selected officers and agents (incorporated by reference to
Exhibit C to Registrants Proxy Statement dated February 17, 1988).

10.5 Employment Agreement effective as of November 1, 1993 between
Registrant and Marshall I. Kass (incorporated by reference to Exhibit 10.1 to
Registrants Quarterly Report on Form 10-Q for quarter ended January 31, 1994).

10.6 Amendment to Employment Agreement between Registrant and Marshall I.
Kass dated November 1, 1998 (incorporated by reference to Exhibit 10.8 to
Registrants Annual Report on Form 10-K for the year ended October 31, 1998).

21.     Subsidiaries of Registrant (incorporated by reference to Exhibit 22 to
Registrants Annual report on form 10-K for the year ended October 31, 1981).

23.1 Beckman Kirkland & Whitney consent.

23.2 Hurley & Company consent

31.     Rule 13a-14(a)/15d-14(a) Certification.

32.     Certification of Chief Executive Officer and Chief Financial Officer
under Section 906 of the Sarbanes-Oxley Act of 2002.

42