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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB



|[X] | QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934for the quarterly period ended June 30, 2002
|--- | -----------------------------------------------------------------------------------------------------------------------------

OR



|[   ] | TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the Transition Period from                to
|----- | -----------------------------------------------------------------------------------------------------------------------------------

Commission file number: 001-16781

MICROHELIX, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)

|                                                                      |  |                                                
|--------------------------------------------------------------------- |  | -----------------------------------------------
|Oregon
(State or Other Jurisdiction of Incorporation or Organization) |  | 91-1758621
(I.R.S. Employer Identification No.)

|                                                                              |  |                 
|----------------------------------------------------------------------------- |  | ----------------
|16125 SW 72ND Ave.; Portland, Oregon
(Address of Principal Executive Offices) |  | 97224
(Zip Code)

(Issuers Telephone Number, Including Area Code): 503/968-1600

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports, and (2) has been
subject to such filing requirements for the past 90 days. Yes [X]; No [   ]

The number of shares outstanding of each of the issuers classes of common
equity, as of June 30, 2002 was 4,659,886 shares of Common Stock, 3,136,498
Class A Warrants, and 3,136,498 Class B Warrants.

Transitional Small Business Disclosure Format (Check One): Yes [   ]; No [X]





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TABLE OF CONTENTS



|                               |                                                                                                |                                            |  |  |  |  |  | 
|------------------------------ | ---------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | ITEM 1. FINANCIAL STATEMENTS                                                                  
|                               |                                                                                                | CONSOLIDATED BALANCE SHEET                
|                               |                                                                                                | CONSOLIDATED STATEMENTS OF OPERATIONS     
|                               |                                                                                                | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                               |                                                                                                | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                               | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|PART II  OTHER INFORMATION   
|                               | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   
|                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                      
|SIGNATURES                    
|EXHIBIT 99.1                  
|EXHIBIT 99.2                  



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##### Table of Contents



TABLE OF CONTENTS

|                               |                                                                                               |                                                                                                        |   |      |   | 
|------------------------------ | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | - | ---- | - | 
|                               |                                                                                               |                                                                                                        |   | Page
|                               |                                                                                               |                                                                                                        |   |     
|PART I  FINANCIAL INFORMATION |                                                                                               |                                                                                                        | 1 |     
|                              
|                               | ITEM 1. FINANCIAL STATEMENTS  UNAUDITED                                                      |                                                                                                        |   |      |  
|                               |                                                                                               | Consolidated balance sheets as of June 30, 2002 and December 31, 2001                                  |   |      | 2 | 
|                               |                                                                                               | Consolidated statements of operations for the three and six month
periods ended June 30, 2002 and 2001 |   |      | 3 | 
|                               |                                                                                               | Consolidated statements of cash flows for the three and six month
periods ended June 30, 2002 and 2001 |   |      | 4 | 
|                               |                                                                                               | Notes to consolidated financial statements                                                             |   |      | 5 | 
|                              
|                               | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS |                                                                                                        |   | 8    |  
|                              
|PART II  OTHER INFORMATION    |                                                                                               |                                                                                                        |   |     
|                              
|                               | ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   |                                                                                                        |   | 12   |  
|                              
|                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                      |                                                                                                        |   | 12   |  
|                              
|                               | SIGNATURES                                                                                    |                                                                                                        |   | 13   |  





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PART I  FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS

The accompanying unaudited consolidated financial statements of microHelix,
Inc. (the Company) include all adjustments (consisting only of normal
recurring accruals) which management considers necessary for fair presentation
of operating results, financial position and cash flows as of June 30, 2002 and
for the three and six month periods ended June 30, 2002 and 2001.

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MICROHELIX, INC.

CONSOLIDATED BALANCE SHEETS

|                                                           |                                                                                           |                             |           |                   |            |               |           |             |            | 
|---------------------------------------------------------- | ----------------------------------------------------------------------------------------- | --------------------------- | --------- | ----------------- | ---------- | ------------- | --------- | ----------- | ---------- | 
|                                                           |                                                                                           |                             |           | December 31, 2001 |            | June 30, 2002
|                                                           |                                                                                           |                             |           |                   |            |              
|Assets                                                     |                                                                                           |                             |           |                   |            |               |           |            
|Current Assets:                                            |                                                                                           |                             |           |                   |            |               |           |            
|                                                           | Cash                                                                                      |                             | $         | 7,353,316         |            |               | $         | 3,250,656   |           
|                                                           | Restricted short-term investment                                                          |                             |           |                  |            |               |           | 1,344,425   |           
|                                                           | Accounts receivable, net of allowance of $19,517 and
$12,099                              |                             |           | 1,048,573         |            |               |           | 570,103     |           
|                                                           | Inventories (Note 2)                                                                      |                             |           | 880,277           |            |               |           | 936,949     |           
|                                                           | Prepaid expenses                                                                          |                             |           | 170,566           |            |               |           | 94,999      |           
|                                                           |                                                                                           |                             |           |                   |            |               |           |            
|                                                           |                                                                                           | Total current assets        |           |                   | 9,452,732  |               |           |             | 6,197,132  | 
|Property and equipment  net                               |                                                                                           |                             | 1,867,830 |                   |            |               | 1,750,044 |            
|Intangible and other assets  net                          |                                                                                           |                             | 4,926,036 |                   |            |               | 4,923,397 |            
|                                                           |                                                                                           |                             |           |                   |            |               |           |            
|                                                           |                                                                                           | Total                       |           | $                 | 16,246,598 |               |           | $           | 12,870,573 | 
|                                                           |                                                                                           |                             |           |                   |            |               |           |            
|Liabilities and Shareholders Equity                       |                                                                                           |                             |           |                   |            |               |           |            
|Current Liabilities:                                       |                                                                                           |                             |           |                   |            |               |           |            
|                                                           | Accounts payable                                                                          |                             | $         | 841,771           |            |               | $         | 376,630     |           
|                                                           | Accrued interest to shareholder                                                           |                             |           | 530,546           |            |               |           |            |           
|                                                           | Accrued liabilities                                                                       |                             |           | 377,848           |            |               |           | 432,670     |           
|                                                           | Line
of credit (Note 3)                                                                   |                             |           | 711,000           |            |               |           | 711,000     |           
|                                                           | Current
portion of notes payable (Note 3)                                                 |                             |           | 250,000           |            |               |           | 250,000     |           
|                                                           | Current
portion of notes payable to shareholder (Note 3)                                  |                             |           | 325,830           |            |               |           | 535,000     |           
|                                                           | Deferred shareholder compensation                                                         |                             |           | 200,000           |            |               |           |            |           
|                                                           |                                                                                           |                             |           |                   |            |               |           |            
|                                                           |                                                                                           | Total current liabilities   |           |                   | 3,236,995  |               |           |             | 2,305,300  | 
|                                                           |                                                                                           |                             |           |                   |            |               |           |            
|Long-Term Liabilities:                                     |                                                                                           |                             |           |                   |            |               |           |            
|Long-term
portion of notes payable (Note 3)                |                                                                                           |                             | 500,000   |                   |            |               | 383,425   |            
|Long-term
portion of notes payable to shareholder (Note 3) |                                                                                           |                             | 1,000,000 |                   |            |               | 600,000   |            
|                                                           |                                                                                           |                             |           |                   |            |               |           |            
|                                                           |                                                                                           | Total long-term liabilities |           |                   | 1,500,000  |               |           |             | 983,425    | 
|                                                           |                                                                                           |                             |           |                   |            |               |           |            
|                                                           |                                                                                           | Total liabilities           |           |                   | 4,736,995  |               |           |             | 3,288,725  | 
|                                                           |                                                                                           |                             |           |                   |            |               |           |            
|Shareholders Equity:                                      |                                                                                           |                             |           |                   |            |               |           |            
|                                                           | Common stock, no par value, 5,519,495 shares authorized,
4,659,886 issued and outstanding |                             |           | 14,179,467        |            |               |           | 14,179,467  |           
|                                                           | Additional paid-in capital                                                                |                             |           | 6,485,312         |            |               |           | 6,485,313   |           
|                                                           | Notes receivable from shareholders for common stock                                       |                             |           | (57,940           | )          |               |           | (57,940     | )         
|                                                           | Deferred compensation expense                                                             |                             |           | (84,822           | )          |               |           | (66,539     | )         
|                                                           | Accumulated deficit                                                                       |                             |           | (9,012,414        | )          |               |           | (10,958,453 | )         
|                                                           |                                                                                           |                             |           |                   |            |               |           |            
|                                                           |                                                                                           | Total shareholders equity  |           |                   | 11,509,603 |               |           |             | 9,581,848  | 
|                                                           |                                                                                           |                             |           |                   |            |               |           |            
|                                                           |                                                                                           | Total                       |           | $                 | 16,246,598 |               |           | $           | 12,870,573 | 
|                                                           |                                                                                           |                             |           |                   |            |               |           |            

See notes to consolidated financial statements.

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MICROHELIX, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                         |                                 |                          |           |                             |           |                           |            |           |           |      |           |           |           |   |            |           |           |  
|-------------------------------------------------------- | ------------------------------- | ------------------------ | --------- | --------------------------- | --------- | ------------------------- | ---------- | --------- | --------- | ---- | --------- | --------- | --------- | - | ---------- | --------- | --------- | -
|                                                         |                                 |                          |           | Three Months Ended June 30, |           | Six Months Ended June 30,
|                                                         |                                 |                          |           |                             |           |                          
|                                                         |                                 |                          |           | 2001                        |           | 2002                      |            | 2001      |           | 2002
|                                                         |                                 |                          |           |                             |           |                           |            |           |           |     
|Sales:                                                   |                                 |                          |           |                             |           |                           |            |           |           |      |           |           |           |   |            |          
|                                                         | Wire and cable                  |                          | $         | 1,425,071                   |           |                           | $          | 873,170   |           |      | $         | 2,780,632 |           |   | $          | 2,102,734 |          
|                                                         | Government contracts            |                          |           | 329,940                     |           |                           |            | 137,388   |           |      |           | 574,215   |           |   |            | 199,791   |          
|                                                         |                                 |                          |           |                             |           |                           |            |           |           |      |           |           |           |   |            |          
|                                                         |                                 | Total sales              |           |                             | 1,755,011 |                           |            |           | 1,010,558 |      |           |           | 3,354,847 |   |            |           | 2,302,525 |  
|Cost of Sales:                                           |                                 |                          |           |                             |           |                           |            |           |           |      |           |           |           |   |            |          
|                                                         | Wire and cable                  |                          |           | 1,237,880                   |           |                           |            | 1,175,740 |           |      |           | 2,169,938 |           |   |            | 2,217,291 |          
|                                                         | Government contracts            |                          |           | 184,914                     |           |                           |            | 130,893   |           |      |           | 313,353   |           |   |            | 191,320   |          
|                                                         |                                 |                          |           |                             |           |                           |            |           |           |      |           |           |           |   |            |          
|                                                         |                                 | Total cost of sales      |           |                             | 1,422,794 |                           |            |           | 1,306,633 |      |           |           | 2,483,291 |   |            |           | 2,408,611 |  
|                                                         |                                 |                          |           |                             |           |                           |            |           |           |      |           |           |           |   |            |          
|                                                         |                                 | Gross
profit (loss)      |           |                             | 332,217   |                           |            |           | (296,075  | )    |           |           | 871,556   |   |            |           | (106,086  | )
|                                                         |                                 |                          |           |                             |           |                           |            |           |           |      |           |           |           |   |            |          
|Operating Expenses:                                      |                                 |                          |           |                             |           |                           |            |           |           |      |           |           |           |   |            |          
|                                                         | Research and development        |                          |           | 25,661                      |           |                           |            | 123,943   |           |      |           | 69,971    |           |   |            | 253,582   |          
|                                                         | Sales and marketing             |                          |           | 105,370                     |           |                           |            | 220,496   |           |      |           | 202,281   |           |   |            | 414,459   |          
|                                                         | General and administrative      |                          |           | 331,086                     |           |                           |            | 580,045   |           |      |           | 634,895   |           |   |            | 1,128,223 |          
|                                                         |                                 |                          |           |                             |           |                           |            |           |           |      |           |           |           |   |            |          
|                                                         |                                 | Total operating expenses |           |                             | 462,117   |                           |            |           | 924,484   |      |           |           | 907,147   |   |            |           | 1,796,264 |  
|                                                         |                                 |                          |           |                             |           |                           |            |           |           |      |           |           |           |   |            |          
|Loss from operations                                     |                                 |                          | (129,900  | )                           |           |                           | (1,220,559 | )         |           |      | (35,591   | )         |           |   | (1,902,350 | )        
|                                                         |                                 |                          |           |                             |           |                           |            |           |           |      |           |           |           |   |            |          
|Other Income (Expense):                                  |                                 |                          |           |                             |           |                           |            |           |           |      |           |           |           |   |            |          
|                                                         | Interest income                 |                          |           |                            |           |                           |            | 20,921    |           |      |           |          |           |   |            | 47,460    |          
|                                                         | Interest expense                |                          |           | (97,302                     | )         |                           |            | (24,056   | )         |      |           | (195,471  | )         |   |            | (41,840   | )        
|                                                         | Interest expense to shareholder |                          |           | (41,424                     | )         |                           |            | (21,223   | )         |      |           | (82,392   | )         |   |            | (49,369   | )        
|                                                         |                                 |                          |           |                             |           |                           |            |           |           |      |           |           |           |   |            |          
|                                                         |                                 | Other expense  net      |           |                             | (138,726  | )                         |            |           | (24,358   | )    |           |           | (277,863  | ) |            |           | (43,749   | )
|                                                         |                                 |                          |           |                             |           |                           |            |           |           |      |           |           |           |   |            |          
|Net loss                                                 |                                 | $                        | (268,626  | )                           |           | $                         | (1,244,917 | )         |           | $    | (313,454  | )         |           | $ | (1,946,099 | )        
|                                                         |                                 |                          |           |                             |           |                           |            |           |           |      |           |           |           |   |            |          
|Net loss per common share 
basic and diluted            |                                 | $                        | (.20      | )                           |           | $                         | (.27       | )         |           | $    | (.24      | )         |           | $ | (.41       | )        
|                                                         |                                 |                          |           |                             |           |                           |            |           |           |      |           |           |           |   |            |          
|Shares used in per share
calculation  basic and diluted |                                 |                          | 1,331,854 |                             |           |                           | 4,659,886  |           |           |      | 1,331,854 |           |           |   | 4,659,886  |          
|                                                         |                                 |                          |           |                             |           |                           |            |           |           |      |           |           |           |   |            |          

See notes to consolidated financial statements.

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MICROHELIX, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                   |                                                                         |                                            |                                               |                                                 |         |                             |            |                           |         |          |            |           |         |          |            |            |         |          |            |  
|-------------------------------------------------- | ----------------------------------------------------------------------- | ------------------------------------------ | --------------------------------------------- | ----------------------------------------------- | ------- | --------------------------- | ---------- | ------------------------- | ------- | -------- | ---------- | --------- | ------- | -------- | ---------- | ---------- | ------- | -------- | ---------- | -
|                                                   |                                                                         |                                            |                                               |                                                 |         | Three Months Ended June 30, |            | Six Months Ended June 30,
|                                                   |                                                                         |                                            |                                               |                                                 |         |                             |            |                          
|                                                   |                                                                         |                                            |                                               |                                                 |         | 2001                        |            | 2002                      |         | 2001     |            | 2002     
|                                                   |                                                                         |                                            |                                               |                                                 |         |                             |            |                           |         |          |            |          
|Cash Flows from Operating Activities:              |                                                                         |                                            |                                               |                                                 |         |                             |            |                           |         |          |            |           |         |          |            |           
|                                                   | Net loss                                                                |                                            | $                                             | (268,626                                        | )       |                             | $          | (1,244,917                | )       |          | $          | (313,454  | )       |          | $          | (1,946,099 | )      
|                                                   | Adjustments to reconcile net loss to cash used in
operating activities: |                                            |                                               |                                                 |         |                             |            |                           |         |          |            |           |         |          |            |            |        
|                                                   |                                                                         | Depreciation and amortization              |                                               |                                                 | 107,738 |                             |            |                           | 133,163 |          |            |           | 215,475 |          |            |            | 265,435 |         
|                                                   |                                                                         | Stock compensation expense                 |                                               |                                                 | 14,671  |                             |            |                           | 9,142   |          |            |           | 27,889  |          |            |            | 18,283  |         
|                                                   |                                                                         | Amortization of deferred inventory charges |                                               |                                                 | 3,610   |                             |            |                           | 1,540   |          |            |           | 3,610   |          |            |            | 3,080   |         
|                                                   |                                                                         | Change in:                                 |                                               |                                                 |         |                             |            |                           |         |          |            |           |         |          |            |            |         |         
|                                                   |                                                                         |                                            | Accounts receivable, net                      |                                                 |         | 65,589                      |            |                           |         | 323,001  |            |           |         | (144,553 | )          |            |         | 478,470  |           
|                                                   |                                                                         |                                            | Inventories                                   |                                                 |         | 137,772                     |            |                           |         | (70,596  | )          |           |         | (264,376 | )          |            |         | (59,752  | )         
|                                                   |                                                                         |                                            | Due from affiliates                           |                                                 |         | (25,456                     | )          |                           |         |         |            |           |         | (40,330  | )          |            |         |         |           
|                                                   |                                                                         |                                            | Prepaid expenses                              |                                                 |         | (36,725                     | )          |                           |         | 117,511  |            |           |         | (60,679  | )          |            |         | 75,568   |           
|                                                   |                                                                         |                                            | Intangible
and other assets, net              |                                                 |         | (85,532                     | )          |                           |         | 1        |            |           |         | (125,820 | )          |            |         | (9,144   | )         
|                                                   |                                                                         |                                            | Accounts payable                              |                                                 |         | (368,693                    | )          |                           |         | (100,850 | )          |           |         | (15,460  | )          |            |         | (465,141 | )         
|                                                   |                                                                         |                                            | Accrued interest                              |                                                 |         | (6,540                      | )          |                           |         |         |            |           |         | (39,746  | )          |            |         |         |           
|                                                   |                                                                         |                                            | Accrued interest to shareholder               |                                                 |         | 34,769                      |            |                           |         |         |            |           |         | 77,028   |            |            |         | (530,546 | )         
|                                                   |                                                                         |                                            | Accrued
liabilities and deferred compensation |                                                 |         | 141,032                     |            |                           |         | 66,921   |            |           |         | 203,008  |            |            |         | (145,178 | )         
|                                                   |                                                                         |                                            | Due to affiliates                             |                                                 |         | 35,297                      |            |                           |         |         |            |           |         | 82,041   |            |            |         |         |           
|                                                   |                                                                         |                                            |                                               |                                                 |         |                             |            |                           |         |          |            |           |         |          |            |           
|                                                   |                                                                         |                                            |                                               | Cash used in operating activities               |         |                             | (251,094   | )                         |         |          | (765,084   | )         |         |          | (395,367   | )          |         |          | (2,315,024 | )
|                                                   |                                                                         |                                            |                                               |                                                 |         |                             |            |                           |         |          |            |           |         |          |            |           
|Cash Flows from Investing Activities:              |                                                                         |                                            |                                               |                                                 |         |                             |            |                           |         |          |            |           |         |          |            |           
|                                                   | Capital expenditures                                                    |                                            |                                               | (55,025                                         | )       |                             |            | (33,562                   | )       |          |            | (70,663   | )       |          |            | (135,806   | )      
|                                                   |                                                                         |                                            |                                               |                                                 |         |                             |            |                           |         |          |            |           |         |          |            |           
|                                                   |                                                                         |                                            |                                               | Cash used in investing activities               |         |                             | (55,025    | )                         |         |          | (33,562    | )         |         |          | (70,663    | )          |         |          | (135,806   | )
|                                                   |                                                                         |                                            |                                               |                                                 |         |                             |            |                           |         |          |            |           |         |          |            |           
|Cash Flows from Financing Activities:              |                                                                         |                                            |                                               |                                                 |         |                             |            |                           |         |          |            |           |         |          |            |           
|                                                   | Proceeds from borrowings against notes payable and
line of credit       |                                            |                                               | 627,034                                         |         |                             |            |                          |         |          |            | 1,593,750 |         |          |            |           |        
|                                                   | Principal payments on notes payable and line of
credit                  |                                            |                                               | (67,590                                         | )       |                             |            | (57,971                   | )       |          |            | (875,090  | )       |          |            | (307,405   | )      
|                                                   | Restricted short-term investment                                        |                                            |                                               |                                                |         |                             |            | (1,344,425                | )       |          |            |          |         |          |            | (1,344,425 | )      
|                                                   | Payments of financing costs                                             |                                            |                                               | (179,031                                        | )       |                             |            |                          |         |          |            | (179,031  | )       |          |            |           |        
|                                                   |                                                                         |                                            |                                               |                                                 |         |                             |            |                           |         |          |            |           |         |          |            |           
|                                                   |                                                                         |                                            |                                               | Cash provided by (used in) financing activities |         |                             | 380,413    |                           |         |          | (1,402,396 | )         |         |          | 539,629    |            |         |          | (1,651,830 | )
|                                                   |                                                                         |                                            |                                               |                                                 |         |                             |            |                           |         |          |            |           |         |          |            |           
|Change in cash                                     |                                                                         |                                            | 74,294                                        |                                                 |         |                             | (2,201,042 | )                         |         |          | 73,599     |           |         |          | (4,102,660 | )         
|Cash, beginning of period                          |                                                                         |                                            | 2,859                                         |                                                 |         |                             | 5,451,698  |                           |         |          | 3,554      |           |         |          | 7,353,316  |           
|                                                   |                                                                         |                                            |                                               |                                                 |         |                             |            |                           |         |          |            |           |         |          |            |           
|Cash, end of period                                |                                                                         | $                                          | 77,153                                        |                                                 |         | $                           | 3,250,656  |                           |         | $        | 77,153     |           |         | $        | 3,250,656  |           
|                                                   |                                                                         |                                            |                                               |                                                 |         |                             |            |                           |         |          |            |           |         |          |            |           
|Supplemental disclosure of cash flow information  |                                                                         |                                            |                                               |                                                 |         |                             |            |                           |         |          |            |           |         |          |            |           
|Cash paid for interest                             |                                                                         | $                                          | 110,497                                       |                                                 |         | $                           | 45,279     |                           |         | $        | 240,581    |           |         | $        | 621,755    |           
|                                                   |                                                                         |                                            |                                               |                                                 |         |                             |            |                           |         |          |            |           |         |          |            |           

See notes to consolidated financial statements.

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MICROHELIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. General

The accompanying quarterly consolidated financial statements of
microHelix, Inc. and its wholly owned subsidiary, BioElectric Corporation
(collectively, the Company) are unaudited and include all adjustments
(consisting only of normal recurring accruals) considered necessary by
management to present a fair statement of the results of operations, financial
position and cash flows. They have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB of Regulation S-B. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.

The results of operations for the three and six month periods ended June
30, 2002 are not necessarily indicative of the results to be expected for the
year ending December 31, 2002. For further information, refer to the financial statements and
footnotes thereto included in the Companys Form 10-KSB for the fiscal year
ended December 31, 2001.

This report on Form
10-QSB for the quarter ended June 30, 2002, should be read in
conjunction with the Companys Annual Report on Form 10-KSB for
the year ended December 31, 2001 filed on April 1, 2002, as
subsequently amended. Portions of the accompanying financial
statements are derived from the audited year-end financial statements
of the Company for the year ended December 31, 2001.

Use of Estimates The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes. This
includes, among other things, evaluation of the remaining life and
recoverability of long-lived assets. Actual results could differ from those
estimates.

Recent
Accounting Pronouncements In July 2001, the Financial
Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 141, Business Combinations.The
statement discontinues the use of the pooling of interests method of accounting
for business combinations. The statement is effective for all business
combinations after June 30, 2001. The effects of this statement did not have a
material impact on the Companys consolidated financial statements.

In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets.The statement requires discontinuing the amortization of goodwill
and other intangible assets with indefinite useful lives. Instead, these assets
are to be tested periodically for impairment and written down to their fair
market values as necessary. This statement is effective for fiscal years
beginning after December 15, 2001. The Company adopted this statement on
January 1, 2002 and such adoption did not have a material impact on the
Companys consolidated financial statements.

In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No.144 addresses accounting
and reporting of long-lived assets, except goodwill, that are either held and
used or disposed of through sale or other means. The Company adopted this statement on January 1, 2002 and such adoption did not have a
material impact on the Companys consolidated financial statements.

In July 2002, the
FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. The standard requires
companies to recognize costs associated with exit or disposal
activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. Costs covered by the standard
include lease termination costs and certain employee severance costs
that are associated with a restructuring, discontinued operation,
plant closing, or other exit or disposal activity. This statement is
to be applied prospectively to exit or disposal activities initiated
after December 31, 2002. The company is currently evaluating,
but has not yet determined the impact of adopting the provisions of
this statement on its financial statements.

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2. Inventories

Inventories are as follows:

|                |       |   |              |         |  |  |          |         |        
|--------------- | ----- | - | ------------ | ------- |  |  | -------- | ------- | -------
|                |       |   | December 31, |         |  |  | June 30,
|                |       |   | 2001         |         |  |  | 2002    
|                |       |   |              |         |  |  |         
|Raw materials   |       | $ | 779,970      |         |  |  | $        | 852,001 |        
|Work-in-process |       |   | 98,233       |         |  |  |          | 84,948  |        
|Finished
goods  |       |   | 2,074        |         |  |  |          |       
|                |       |   |              |         |  |  |          |        
|                | Total |   | $            | 880,277 |  |  |          | $       | 936,949
|                |       |   |              |         |  |  |          |        

3. Line of Credit and Notes Payable

In December 2001, the Company entered into a revolving line of credit and
equipment loan agreement with a bank. The line of credit bears interest at the
prime rate plus 1% (5.75% at December 31, 2001 and June 30, 2002) and allows the Company to borrow up
to $2,000,000. At June 30, 2002, $711,000 was outstanding on the line of
credit.

As of June 30,
2002, the Company fully collateralized the line of credit and
borrowing agreement with $1.3 million of cash, held in a
restricted short-term investment account.

Notes payable consisted of the following:

|                                                                                                                                                                                                         |                                    |   |              |           |  |  |          |          |          
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------- | - | ------------ | --------- |  |  | -------- | -------- | ---------
|                                                                                                                                                                                                         |                                    |   | December 31, |           |  |  | June 30,
|                                                                                                                                                                                                         |                                    |   | 2001         |           |  |  | 2002    
|                                                                                                                                                                                                         |                                    |   |              |           |  |  |         
|Note
payable, interest at prime plus 1.25%, 6% at December 31, 2001
and June 30, 2002, principal and interest
payable monthly, due in full on December 30, 2004, secured by
inventory and equipment      |                                    | $ | 750,000      |           |  |  | $        | 633,425  |          
|Note
payable to shareholder, interest at 12% at December 31, 2001 and 7.5% at June 30, 2002, interest payable monthly
and principal payments due March 2003 and December 2004, secured by certain assets |                                    |   | 546,945      |           |  |  |          | 456,115  |          
|Note
payable to shareholder, interest at 12% at December 31, 2001 and 7.5% at June 30, 2002, interest payable monthly
and principal payments due March 2003 and December 2004, secured by certain assets |                                    |   | 383,885      |           |  |  |          | 383,885  |          
|Note payable to shareholder, interest at 15% at December 31, 2001 and 7.5% at June 30, 2002, interest payable monthly
and principal payment due December 2002, secured by certain assets                 |                                    |   | 235,000      |           |  |  |          | 135,000  |          
|Note payable to shareholder, interest at 12% at December 31, 2001 and 7.5% at June 30, 2002, interest payable monthly
and principal payments due March 2003 and December 2004, secured by certain assets |                                    |   | 160,000      |           |  |  |          | 160,000  |          
|                                                                                                                                                                                                         |                                    |   |              |           |  |  |          |          |          
|                                                                                                                                                                                                         | Total notes payable                |   |              | 2,075,830 |  |  |          |          | 1,768,425
|Less current portion                                                                                                                                                                                     |                                    |   | (575,830     | )         |  |  |          | (785,000 | )        
|                                                                                                                                                                                                         |                                    |   |              |           |  |  |          |          |          
|                                                                                                                                                                                                         | Long-term portion of notes payable |   | $            | 1,500,000 |  |  |          | $        | 983,425  
|                                                                                                                                                                                                         |                                    |   |              |           |  |  |          |          |          

Long-term notes
payable consist of a $500,000 note payable to a bank and $1,000,000
of notes payable to shareholders as of December 31, 2001. As of
June 30, 2002, long-term notes payable consist of a $383,425 note payable to a bank and
$600,000 of notes payable to shareholder.

In February 2002, the Companys President and Chief Executive Officer (the
shareholder), along with the Board of Directors, agreed to reduce the
interest rates on notes payable to shareholder from 12% to 7.5% and extend the
terms for $400,000 of the balance from December 31, 2002 to
March 31, 2003 with
the remaining $600,000 of the balance due December 31, 2004. The
shareholder, who also serves as trustee of the Sass Living Trust, along with
the Board of Directors, also agreed to reduce the interest rate on the note
payable to the Sass Living Trust from 15% to 7.5%. In connection with the
revisions, the Company repaid $90,830 of principal in 2002 in order to reduce
the outstanding principal to $1,000,000. Additionally, in 2002 the Company
paid accrued interest in full for both the notes payable to the shareholder and
to the Sass Living Trust in the amounts of approximately $460,000 and $72,000,
respectively.

The weighted-average interest rate on short-term
borrowings outstanding at December 31, 2001 and June
30, 2002 was 5.75%.

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4. Related-Party Transactions

Significant transactions and balances with shareholders are summarized
below:

|                                                    |  |              |           |  |  |          |  |  
|--------------------------------------------------- |  | ------------ | --------- |  |  | -------- |  | -
|                                                    |  | December 30, |           |  |  | June 30,
|                                                    |  | 2001         |           |  |  | 2002    
|                                                    |  |              |           |  |  |         
|Notes receivable from shareholders for common stock |  | $            | 57,940    |  |  |          |  | $
|                                                    |  |              |           |  |  |          |  |  
|Accrued interest to shareholder                     |  |              | 530,546   |  |  |          |  |  
|                                                    |  |              |           |  |  |          |  |  
|Notes payable to shareholder                        |  | $            | 1,325,830 |  |  |          |  | $
|                                                    |  |              |           |  |  |          |  |  
|Deferred
shareholder compensation                   |  |              | 200,000   |  |  |          |  |  
|                                                    |  |              |           |  |  |          |  |  

|                                |  |                          |        |                        |  |      |        |      |  |   |        |  |  |   |        | 
|------------------------------- |  | ------------------------ | ------ | ---------------------- |  | ---- | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|                                |  | Three Month Period Ended |        | Six Month Period Ended
|                                |  | June 30,                 |        | June 30,              
|                                |  |                          |        |                       
|                                |  | 2001                     |        | 2002                   |  | 2001 |        | 2002
|                                |  |                          |        |                        |  |      |        |     
|Interest expense to shareholder |  | $                        | 41,424 |                        |  | $    | 21,223 |      |  | $ | 82,392 |  |  | $ | 49,369 | 
|                                |  |                          |        |                        |  |      |        |      |  |   |        |  |  |   |        | 

During 1999, the shareholder agreed to defer his annual compensation of
$200,000 to future periods in order to improve the Companys cash flow. In
February 2002, the Company agreed to pay $125,000 of the deferred compensation
and the shareholder agreed to forgive the remaining $75,000.

5. Segments

The Company operates in two segments. The wire and cable segment designs
and manufactures micro cables, connectors, and assemblies for use in medical
devices. The government contracts segment performs research funded by
governmental institutions, primarily the National Institutes of Health, for
development of custom electronic interconnect systems for the human body.

The following is a summary of various financial amounts for each of the
Companys business segments. There were no intersegment sales during any of
the periods presented.

|                     |                      |       |   |                             |           |                           |   |          |           |      |   |           |           |  |   |           |           |  
|-------------------- | -------------------- | ----- | - | --------------------------- | --------- | ------------------------- | - | -------- | --------- | ---- | - | --------- | --------- |  | - | --------- | --------- | -
|                     |                      |       |   | Three Months Ended June 30, |           | Six Months Ended June 30,
|                     |                      |       |   |                             |           |                          
|                     |                      |       |   | 2001                        |           | 2002                      |   | 2001     |           | 2002
|                     |                      |       |   |                             |           |                           |   |          |           |     
|Sales:               |                      |       |   |                             |           |                           |   |          |           |      |   |           |           |  |   |          
|                     | Wire and cable       |       | $ | 1,425,071                   |           |                           | $ | 873,170  |           |      | $ | 2,780,632 |           |  | $ | 2,102,734 |          
|                     | Government contracts |       |   | 329,940                     |           |                           |   | 137,388  |           |      |   | 574,215   |           |  |   | 199,791   |          
|                     |                      |       |   |                             |           |                           |   |          |           |      |   |           |           |  |   |          
|                     |                      | Total |   | $                           | 1,755,011 |                           |   | $        | 1,010,558 |      |   | $         | 3,354,847 |  |   | $         | 2,302,525 |  
|                     |                      |       |   |                             |           |                           |   |          |           |      |   |           |           |  |   |          
|Gross
profit (loss): |                      |       |   |                             |           |                           |   |          |           |      |   |           |           |  |   |          
|                     | Wire and cable       |       | $ | 187,191                     |           |                           | $ | (302,570 | )         |      | $ | 610,694   |           |  | $ | (114,557  | )        
|                     | Government contracts |       |   | 145,026                     |           |                           |   | 6,495    |           |      |   | 260,862   |           |  |   | 8,471     |          
|                     |                      |       |   |                             |           |                           |   |          |           |      |   |           |           |  |   |          
|                     |                      | Total |   | $                           | 332,217   |                           |   | $        | (296,075  | )    |   | $         | 871,556   |  |   | $         | (106,086  | )
|                     |                      |       |   |                             |           |                           |   |          |           |      |   |           |           |  |   |          

6. Loss Per Share

Basic net loss per share has been computed by dividing net loss by the
weighted average number of shares outstanding during each period. Diluted loss
per share has been computed by dividing net loss adjusted for any interest on
convertible notes payable by the weighted average common stock and common stock
equivalent shares outstanding during each period using the treasury stock
method for employee stock option plans and warrants, and the if-converted
method for redeemable preferred stock and convertible notes payable, if the
common equivalent shares were not anti-dilutive. Common stock equivalents were
anti-dilutive for all periods presented.

* * * * * *

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion provides information which management believes is
relevant to an assessment and understanding of the Companys operations and
financial condition. This discussion should be read in conjunction with the
unaudited consolidated financial statements and accompanying notes.

Forward-Looking Statements

Statements in this
Form 10-QSB, which are not historical facts, are
forward-looking statements under the provisions of the Private Securities
Litigation Reform Act of 1995. Words such as expects,
anticipates, intends, plans,
believes, seeks, estimates, and
variations of such words or similar expressions are intended to
identify such forward-looking statements. All forward-looking statements involve risks
and uncertainties. These statements are based on numerous assumptions about
future conditions that could prove not to be accurate. Actual events,
transactions or results may materially differ from the anticipated events,
transactions or results described in such statements. The Companys ability to
consummate such transactions and achieve such events or results is subject to
certain risks and uncertainties. In addition to those specifically mentioned
above, factors that could adversely affect future events, transactions or
results include, but are not limited to, unfavorable economic conditions,
disruptions or other effects related to terrorism and acts of war, the
existence of demand for, and acceptance of, the Companys products and
services, regulatory approvals and developments, economic conditions, the
impact of competition and pricing, new product offerings by competitors,
successful completion of special engineering projects, successful completion of
long-term production contracts, and other risks and factors as are described
from time to time in the Companys Securities and Exchange Commission filings,
including but not limited to, the risks detailed in the Risk Factors section
of the Companys Annual Report on Form 10-KSB for the year ended December 31,
2001. The forward-looking statements contained in this Form 10-QSB speak only
as of the date on which they are made, and the Company undertakes no obligation
and does not intend to update or revise these forward-looking statements to
reflect events or circumstances that occur after the date of this
filing. If the Company does update or correct one or more
forward-looking statements, investors and others should not conclude
that the Company will make additional updates or corrections with
respect thereto or with respect to other forward-looking statements.

Critical Accounting Policies and
Estimates

The discussion and
analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. We evaluate our
estimates on an on-going basis. We base our estimates on historical
experience and on various other assumptions that are believed to be
reasonable under the circumstances. Actual results may differ from
these estimated under different assumptions or conditions. We believe
the following critical accounting policies and related judgments and
estimates affect the preparation of our consolidated financial
statements.

Revenue
Recognition  The Company recognizes revenue from commercial
sales of micro cables, connectors, assemblies and related supplies
when title passes, which is upon shipment. Commercial sales are made
F.O.B. point of shipment. Returns are limited to nonconforming
products.

Development contracts
are structured on a cost or cost plus basis. Revenue from development
contracts for non-recurring engineering is recognized using the
percentage of completion method as time and materials costs are
incurred. Revenue from contracts for the production of prototypes is
recognized when the title passes, which is upon shipment. Prototypes
are tested at the Companys facility for customer specifications
prior to shipment.

Revenue on government
contracts and grants is recognized as time and materials costs are
incurred using the percentage of completion method. The government
generally provides grants to perform specific research and is not the
ultimate customer.

Intangible and
Other Assets primarily represent patent costs that are amortized
using the straight-line method over their estimated useful lives or
15 years, whichever is shorter, once the technology is completed and
in use. management periodically evaluates the recoverability of
intangibles based on current and anticipated income and undiscounted
future cash flows. The recoverability of our intangible asset costs
depends in part on the development of additional commercial products
from those technologies, the acceptance of such products in the
marketplace, and our ability to generate significant revenues and
cash flows from these products.

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RESULTS OF OPERATIONS

THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2002 AND JUNE 30, 2001

Total sales for the second quarter ending June 30, 2002 were $1,011,000
compared to total sales of $1,755,000 recorded a year ago in the second quarter
ending June 30, 2001. This decline in sales of $744,000 consisted of a
decrease of $552,000 in wire and cable sales and a decline of $192,000 in
government grants. The decline in wire and cable sales from the same period a
year ago can be entirely attributed to the continued reduction in ultrasound
demand. The decrease in government grants has been anticipated as the Company
planned to be less dependent on government grants as a source of funds.

Total sales for the six months ending June 30, 2002 were $2,303,000
compared to total sales of $3,355,000 recorded a year ago during the same
six-month period ending June 30, 2001. Of the total reduction in sales,
$678,000 relates to wire and cable sales and the balance of $374,000 is
associated with government grants. Again the reduction in the wire and cable
sales can be entirely attributed to the decreased demand in the
ultrasound market while
the decline in government grants as a source of sales was expected.

Gross profit margin for the second quarter ending June 30, 2002 was a negative
29% compared to a positive gross profit margin of 19% earned a year ago during
the quarter ending June 30, 2001. For the
quarter ending June 30, 2002 gross profit was negative $296,000
compared to $332,000 gross profit earned a year ago in the
same quarter ending June 30, 2001. There are a number of factors that
adversely impacted the gross profit in the second quarter of this year
compared to the gross profit earned during this same period last year.
First, our ultrasound business continues to decline. Secondly, one of our
major customers in our minimally invasive market initiated an inventory
balancing program in the second quarter, which resulted in an unexpected drop in
production at the Portland facility. Thirdly, the Company continued to ship,
under a

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development contract, cable products at a negative
margin. Lastly, gross
profit margin earned on government sales this year was only $6,000 compared to
$145,000 earned a year ago in the same quarter ending June 30, 2001.

Gross profit for the six months ending June 30, 2002 was a
negative 5% compared to a positive gross profit of 26% recorded in the
six month period ending June 30, 2001. For the six months ending
June 30, 2002, gross profit was negative $106,000 compared to $872,000 earned
last year during the first six months ending June 30, 2001. The reasons for
the decline in the gross profit can be attributed to those
factors mentioned in the previous paragraph. We have commented in the prior
10-QSB that we were working to obtain additional orders that could add to the
production at the Mexican plant during the second half of this year. Some of
these orders have been received and if this trend continues, however we can
offer no guarantees that it will, then the gross profit on products
shipped from the Mexican plant will improve in the second half of this year
compared to the first half of this year. In addition, we anticipate
that at some point during the second half of this year we will no
longer ship product under a development contract at a negative gross
profit margin. While we cannot guarantee, we anticipate that these
products then will be shipped under a production
agreement at positive gross margins. This will further improve the prospects of
gross profit margins improving in the second half of this year compared to
the first half of this year.

Research and development expenses were $124,000 in the second quarter of 2002,
compared to $26,000 in the second quarter of last year. For the six-month
period ending June 30, 2002, research and development expenses were $254,000
compared to $70,000 for the six-month period ending June 30, 2001. The
increases in these expenses in both referenced periods reflect the
Companys building up of its product development capabilities in order to be less dependent
on directed government grant sources. In addition, again covering both the
second quarter and the first six-month comparative time periods, improvements
have been made in the methods used to allocate cost between research and
development and cost of sales.

Sales and marketing expenses were $220,000 in the second quarter of 2002,
compared to $105,000 in the second quarter of last year. For the six-month
period ending June 30, 2002, sales and marketing expenses were $414,000 compared
to $202,000 for the six-month period ending June 30, 2001. These increases, in
both comparative time periods, are almost entirely due to adding an external
sales force along with increasing the number of inside sales representatives.

General and administrative expenses were $580,000 in the second quarter of
2002, compared to $331,000 in the second quarter of last year. For the
six-month period ending June 30, 2002, general and administrative expenses were
$1,128,000 compared to $635,000 for the six-month period ending June 30, 2001.
The major factor contributing to these increased expenses in both the
comparative second quarter and six month time periods are costs related to
transitioning from a privately held company to a publicly held company. Such
costs include additional legal and auditing fees, insurance premiums, investor
relations cost and printing expenses associated with required
financial reporting. In addition expenses have increased this
year compared to last year due to the hiring of a Chief
Financial Officer and other necessary administrative personnel.

Interest expense was $45,000 in the second quarter of 2002, compared to
$139,000 in the second quarter of last year. For the six month period ending
June 30, 2002, interest expense was $91,000 compared to $278,000 incurred in the
six-month period ending June 30, 2001. This reduction in interest expense is
due primarily to the retirement of approximately $3.2 million of debt from a
portion of the proceeds from the Companys initial public offering that was
completed in November 2001.

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LIQUIDITY AND CAPITAL RESOURCES

THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2002 AND JUNE 30, 2001

The Company completed its initial public offering on November 16, 2001 and
received net proceeds, after underwriting commissions and financing cost, of
approximately $11.4 million. The Company used approximately $3.2 million of
such net proceeds to reduce debt. The Companys cash position as of June 30,
2002 was approximately $4.6 million of which approximately $1.3 million is held
in a restricted short-term investment account.

During the quarter ended June 30, 2002, the Company used $765,000 of cash
for operations compared to $251,000 used for operations in the same quarter a
year ago. This increased use of cash for operations was primarily due to an
increased operating loss of $976,000 offset by increased accounts receivable
collections of $257,000 in the second quarter of this year compared to the
same quarter of last year.

For the six month period ended June 30, 2002, the Company used $2,315,000 of
cash for operations compared to $395,000 used for operations during the same
six month period a year ago, or a net increase in cash used for operations of
$1,920,000. The increased use of $1,920,000 cash for operations this year
compared to last year was primarily due to increased operating losses of
$1,633,000. The remaining cash difference of $287,000 is composed of
several offsetting factors. These factors consist of interest payments made to
shareholders of $608,000, reductions in accounts payable of $450,000 offset by
increased collections of accounts receivable of $623,000 and a reduction in
inventory purchases of $204,000.

During the period from December 31, 2001 to
June 30, 2002, total cash balance
decreased from $7,353,000 to $3,251,000, or a net decrease of $4,102,000 of which $1,344,000 is held in a
restricted cash account. As of June 30, 2002 the Company had a cash balance of
$3,251,000 compared to a cash balance of $77,000 as of June 30, 2001.

In December 2001, the Company entered into a revolving line of credit and
equipment loan agreement with a bank. The line of credit allows the Company to
borrow up to $2.0 million at prime plus 1%. At June 30, 2002, $711,000 was
outstanding on the line of credit and $633,000 on the equipment loan agreement.
As of June 30, 2002 the Company has agreed with the bank to set up a
restricted cash account in the amount of $1,344,000 so the bank has a full
collateral position against the outstanding loan balance. As a result of this
change there are no longer covenants in place, therefore the Company is not in
violation of any loan covenants as of June 30, 2002. The revolving line of
credit and equipment loan agreement remain in place but new terms must be
negotiated. The Company and the bank intend to renegotiate the agreement but
as of this filing an agreement has not been reached.

The following table discloses the Companys contractual cash obligations as of
June 30, 2002:

|                                         |  |                        |           |      |  |             |           |           |  |   |           |  |  |   |       | 
|---------------------------------------- |  | ---------------------- | --------- | ---- |  | ----------- | --------- | --------- |  | - | --------- |  |  | - | ----- | 
|                                         |  | Payments Due by Period
|                                         |  |                       
|                                         |  |                        |           |      |  | Less than 1 |           |           |  |   |           |  |  |  
|Contractual Obligations                  |  | Total                  |           | year |  | 1-3 years   |           | 4-5 years
|                                         |  |                        |           |      |  |             |           |          
|Operating leases, net of sublease income |  | $                      | 136,148   |      |  | $           | 101,556   |           |  | $ | 45,246    |  |  | $ | 2,633 | 
|Line of credit                           |  |                        | 711,000   |      |  |             | 711,000   |           |  |   |           |  |  |   |       | 
|Long-term debt                           |  |                        | 633,425   |      |  |             | 250,000   |           |  |   | 383,425   |  |  |   |       | 
|Long-term debt to shareholder            |  |                        | 1,135,000 |      |  |             | 535,000   |           |  |   | 600,000   |  |  |   |       | 
|                                         |  |                        |           |      |  |             |           |           |  |   |           |  |  |   |       | 
|Total contractual cash obligations       |  | $                      | 2,615,573 |      |  | $           | 1,597,556 |           |  | $ | 1,015,384 |  |  | $ | 2,633 | 
|                                         |  |                        |           |      |  |             |           |           |  |   |           |  |  |   |       | 

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PART II  OTHER INFORMATION




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Companys annual meeting of
shareholders was held on June 6, 2002. The following matters
were submitted to shareholders for their consideration:

The election of seven
directors: Richard G. Sass received 3,831,114 votes and 28,830 votes
were withheld; Terrence A. Rixford received 3,831,614 votes and 28,330
votes were withheld; Jane K. Conner received 3,794,633 votes and 65,311
votes were withheld; Tyram H. Pettit received 3,826,934 votes and
33,010 votes were withheld; John L. Crary received 3,855,314 votes
and 4,630 votes were withheld; James B. Stewart received 3,855,314
votes and 4,630 votes were withheld; and James M. Williams received
3,831,614 votes and 28,330 votes were withheld.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:



| | Exhibit 99.1 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
| | ------------ |  | ----------------------------------------------------------------------------------------------------------------------
|
| | Exhibit 99.2 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b)  Reports
on Form 8-K  During the quarter ended June 30, 2002,
the Company filed a Current Report on Form 8-K on May 1, 2002, reporting its
financial results for the quarter ended March 31, 2002. Subsequent to the
quarter ended June 30, 2002, the Company filed a Current Report on Form 8-K on
July 26, 2002, reporting its financial results for the quarter ended June 30,
2002.

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|                    |  |                                                |  |                
|------------------- |  | ---------------------------------------------- |  | ---------------
|Signature           |  | Title                                          |  | Date           
|                    |  |                                                |  |                
|/s/                 |  | Chairman, President andChief Executive Officer |  | August 14, 2002
|Richard G. Sass     |  |                                                |  |                
|                   
|/s/                 |  | Chief Financial Officer andDirector            |  | August 14, 2002
|Terrence A. Rixford |  |                                                |  |                

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