===========================================================================

                                UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549
                     __________________________________

                                  FORM 10-K

           [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the Fiscal Year Ended June 30, 2002

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

                 For the Transition Period from ____ to ____
                       ______________________________

                         Commission File No. 0-12942

                             PARLEX CORPORATION

                      Massachusetts               04-2464749
                (State of incorporation)          (I.R.S. ID)

               One Parlex Place, Methuen, Massachusetts 01844

                                978-685-4341

         Securities registered pursuant to Section 12(b) of the Act:

     Title of each class               Name of Exchange on which registered
     -------------------               ------------------------------------
Common Stock ($.10 par value)                 NASDAQ National Market

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

                                    None

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

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

The aggregate market value of common stock held by non-affiliates of the
registrant as of September 19, 2002 was $74,377,949.

The number of shares outstanding of the registrant's common stock as of
September 19, 2002 was 6,303,216 shares.

                     DOCUMENTS INCORPORATED BY REFERENCE

The information required in response to Part III of Form 10-K is hereby
incorporated by reference to the specified portions of the definitive proxy
statement to be filed with the Commission within 120 days after the close
of the fiscal year.

===========================================================================


<PAGE>


                         FORWARD-LOOKING STATEMENTS

This document includes and incorporates forward-looking statements that are
subject to a number of risks and uncertainties. All statements, other than
statements of historical facts included or incorporated in this document,
regarding our strategy, future operations, financial position and estimated
revenues, projected costs, prospects, plans and objectives of management are
forward-looking statements. When used in this document, the words "will,"
"believe," "anticipate," "intend," "estimate," "expect," "project" and
similar expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain these identifying words.
We cannot guarantee future results, levels of activity, performance or
achievements and you should not place undue reliance on our forward-looking
statements. Our forward-looking statements do not reflect the potential
impact of any future acquisitions, mergers, dispositions, joint ventures or
strategic investments. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various
factors, including the risks described in the section of this report entitled
"Factors that May Affect Future Results" and elsewhere in this document.

                                   PART I

Item 1. Business
----------------

                                  Overview

We are a leading provider of flexible interconnect solutions to the
automotive, telecommunications and networking, diversified electronics,
aerospace, home appliance, computer markets, radio frequency identification
(RFID) and smart cards. Our product offerings, which we believe are the
broadest of any company in the flexible interconnect industry, include
flexible circuits, laminated cable, flexible interconnect hybrid circuits,
and flexible interconnect assemblies.

Our objective is to be the supplier of choice for key customers in markets
where cost-effective flexible interconnects provide added value to our
customers' products. We believe that our creative engineering expertise, our
ability to advance the technology of manufacturing processes and materials
and our broad product portfolio allow us to provide the lowest cost solution
that meets the performance requirements of our customers.

We have a long history of providing flexible interconnect solutions to some
of the leading original equipment manufacturers, or OEMs, in our target
markets, including Hewlett-Packard, Raytheon, Motorola, Dell Computer,
Siemens, and Whirlpool. We have a global presence and operate seven
manufacturing facilities, which are located in China, Mexico, the United
Kingdom and the United States. Certain information related to revenues
derived by geographic location, major customers and product lines is included
in Note 14 of our financial statements and is incorporated herewith by
reference.

Industry Background

Over the past two decades, electronic systems have become smaller, lighter
and more complex, while demands for increased performance at lower costs have
increased dramatically. The demand for more portable electronic packaging has
also increased. As two-dimensional rigid printed circuit boards, a
conventional form of electronic interconnect packaging, limit the options
available to design engineers, the demand for three-dimensional, flexible
interconnect solutions has increased. In addition to their improved packaging
and performance characteristics, they offer superior heat dissipation
characteristics compared to conventional circuits, making flexible
interconnects attractive for use in advanced, high-speed electronics. The IPC
- Association Connecting Electronics Industries, an international trade
organization, estimates that worldwide sales of flexible circuits alone in
2000 were approximately $3.9 billion.

Flexible interconnects provide electrical connection between components in
electronic systems and are increasingly used as a platform to support the
attachment of electronic devices. Flexible interconnects offer


<PAGE>  2


several advantages over rigid printed circuit boards and ceramic hybrid
circuits, particularly for small, complex electronic systems:

*   Their ability to physically bend or flex and their three-dimensional
    shape permit them to accommodate packaging contours and motion in a
    manner that traditional two-dimensional rigid printed circuit boards
    cannot;

*   They provide improved heat dissipation and signal integrity as compared
    to printed circuit boards; and

*   They permit the use of substrates for component attachment, as well as
    connectors, cables and other interconnection devices, with reduced size,
    weight and expense.

We consider the following trends important in understanding the flexible
interconnect industry:

Miniaturization, Portability and Complexity of Electronic Products

High-performance electronic products, such as cellular phones, laptop
computers and personal digital assistants, continue to become more compact,
portable and contain greater functionality. The complexity of these new
products requires flexible interconnects with smaller size, lighter weight,
greater circuit and component density, better heat dissipation properties,
higher frequencies and increased reliability. As electronic products become
increasingly sophisticated, electronic interconnect suppliers will require
greater engineering expertise and investment in manufacturing and process
technology to produce high-quality electronic interconnect products on time,
in volume and at acceptable cost.

Shorter Product Life Cycles and Time-to-Market Pressure

Rapid technological advances have significantly shortened the life cycle of
complex electronic products and increased pressure to develop and introduce
new products quickly. These time-to-market challenges have in turn increased
OEMs' emphasis on the development, design, engineering, prototype development
and ramp-to-volume capabilities of their suppliers.

Globalization and Reduction of Manufacturing Costs

Customers continue to demand increased electronic performance at lower
prices. Leading OEMs who often manufacture products in multiple geographic
regions are relying more on suppliers with global sourcing capabilities.
Local sourcing can help to shorten the manufacturer's supply chain and
provide regionally competitive pricing. OEMs also increasingly demand that
their suppliers provide infrastructure for local delivery of engineering,
manufacturing and sales support.

Increased Outsourcing

To avoid delays in new product introductions, reduce manufacturing costs and
avoid logistical complexities, OEMs are increasingly turning to suppliers
capable of producing electronic interconnect products from development,
design, quick-turn prototype and pre-production through volume production and
assembly. The accelerated time-to-market and ramp-to-volume needs of
manufacturers have resulted in increased collaboration with qualified
suppliers capable of providing a broad and integrated offering. Many OEMs now
seek to use a small number of technically qualified, strategically located
suppliers capable of providing both quick-turn prototype and pre-production
quantities as well as cost-competitive volume production quantities.

Our Solution

We combine creative engineering design capabilities with innovative
manufacturing processes and materials to provide our customers with a
complete and cost-effective flexible interconnect solution. We believe that


<PAGE>  3


our processes and technologies allow us to produce superior flexible
interconnect solutions at a competitive cost. In addition, because we are
able to produce a broad range of flexible interconnects ranging from low-cost
laminated cable to more expensive high-performance multilayer and rigid-
flexible interconnects, we are able to provide our customers with a product
that most efficiently meets their demands for functionality.

Our solution begins with the product design phase, in which our engineers
typically work closely with customers to develop a technically advanced
flexible interconnect design. Although our customers generally provide the
initial engineering guidelines for a particular interconnect, our design
engineers are often called upon to work in tandem with a customer's design
team to develop a solution. An important part of the Parlex solution is
ensuring at an early stage, before time and money are spent on manufacturing,
that the design can be produced efficiently and cost-effectively.

Once the design is completed, we apply our experience with materials and
manufacturing processes to produce a flexible interconnect solution that
meets our customer's objectives. We have developed materials and processes
that provide customers improved performance at a competitive production cost.
In addition, we provide a dedicated quick-turn capability for producing
prototype flexible interconnects and supporting our customers' needs for
limited quantities of flexible interconnects on short notice. We believe that
we are one of the few volume manufacturers of flexible interconnects to offer
this valuable service in a dedicated facility. When customers come to us for
prototype development of a flexible interconnect, we believe that we enjoy a
competitive advantage in pursuing the subsequent volume production of that
flexible interconnect. Over the past several years we have gained substantial
experience in producing products in high volume, and we believe this
expertise is a key factor in our ability to provide customers with cost-
effective, flexible interconnect solutions.

We believe that our capability to supply worldwide a broad range of products
with a diverse mix of performance characteristics will enable us to capture
additional market share in the flexible interconnect industry. We are one of
a limited number of independent manufacturers that offers a range of flexible
interconnect solutions from design concept through high-volume production. By
offering a variety of products and services, we can provide design and
manufacturing solutions for our customers while reducing their time-to-market
and product development costs.

Our Strategy

Our objective is to be the flexible interconnect supplier of choice for
customers in our target markets. Our strategy to achieve this objective
includes the following key elements:

Develop Innovative Processes and Materials

We believe that our ability to develop innovative processes and materials
enhances our opportunity for growth within our target markets. We intend to
continue to focus our development efforts on proprietary flexible materials
and processes that have a broad range of applications. These materials and
processes enable us to produce, at reduced cycle times, cost-effective
flexible interconnects that are reliable and improve product performance. Our
PALFlex(R), PALCoat(R), U-Flex(R), PALCore(R) HP, Polysolder(R) and
AutoNet(R) technologies are examples of some of our innovative materials and
manufacturing processes.

Offer the Broadest Range of Products and Services in the Flexible
Interconnect Industry

We offer product lines that service virtually all of our customers' flexible
interconnect needs. We are not aware of another company in the flexible
interconnect industry that provides a broader range of products and services.
Our product line includes flexible and rigid-flexible circuits from 1 to 24
layers, laminated cable, flexible interconnect hybrid circuits, flexible
interconnect assemblies and, surface mount assembly capabilities. We offer
products using a variety of materials, including adhesiveless and adhesive-
based


<PAGE>  4


polyimide, polyester, and polymer thick film technologies. This wide product
range enables us to remain the flexible interconnect supplier of choice to
customers even when their functional requirements change.

Develop Strategic Relationships with Key Customers

We seek to develop strategic relationships with key customers in targeted
industries. As a value-added strategic partner with our customers, we work
with a customer's technology roadmap to design and develop cost-effective
flexible interconnect solutions. We believe that these relationships are most
effective when we provide a significant portion of a customer's flexible
interconnect needs. Through these strategic relationships, we achieve greater
visibility into our customers' entire range of flexible interconnect
requirements. As a result of our relationships with key customers, we
developed PALFlex(R), PALCore(R), PALCore(R) HP, PALCoat(R), and HIS+(C) with
the knowledge that successful development would result in immediate market
acceptance.

Diversify Customer Base across Specific Markets

We seek to serve a variety of markets to help mitigate the effects of
economic cycles in any one industry. We believe our diversification among the
major segments provides greater insight into emerging technological
requirements. For example, we applied our proprietary knowledge of shielding
and impedance control which was developed for the laptop computer market to
gain a competitive advantage in the telecommunications and networking market.

Expand Global Presence

We believe that our customers will increasingly require service and support
on a global basis. To address these requirements, we have continued to expand
our global presence in emerging markets and throughout the world. We now have
facilities in Asia, Europe, and the east and west coasts of North America. In
1995 we established a joint venture in China, Parlex (Shanghai) Circuit Co.,
Ltd. ("Parlex Shanghai") , to serve the emerging flexible circuit market
throughout Asia and to produce specific products more cost-effectively for
North America's customers. In May 1998, we leased a facility in Mexico that
performs the finishing and, in some instances, assembly operations for
flexible interconnects manufactured at our other facilities. In April 1999,
we purchased a facility in San Jose, California to produce low to medium
volumes of flexible circuits and provide our customers with quick-turn and
prototyping services. This facility also supports several customers who use
Parlex Shanghai for high volume production. In addition, we have developed,
and plan to continue to develop, strategic relationships and alliances that
we believe are necessary for the success of our international business. In
March 2000, we acquired Poly-Flex which has manufacturing facilities in Rhode
Island and the United Kingdom. This acquisition positions us to further
expand our sales presence in Europe. We will continue to explore appropriate
expansion opportunities as demand for our solutions increases.

Our Markets

Flexible interconnects are used in most segments of the electronics industry.
The primary market segments that place high value on superior, cost-effective
flexible interconnect solutions include:

Automotive

Automobile manufacturers increasingly use electronics to enhance vehicle
performance and functionality, while at the same time reducing electronic
component size, weight and manufacturing and assembly costs. Flexible
circuits and laminated cable can provide cost-effective interconnect
solutions for such applications as dashboard instrumentation, automotive
entertainment systems, electronic engine control units, steering wheel
controls, power distribution, sensors and anti-lock brakes. Providers of
flexible interconnects typically work closely with the companies that supply
these electronic systems to the vehicle manufacturers. Because automotive
production cycles generally last three to five years and designs are unlikely
to change


<PAGE>  5


during that period, a flexible interconnect that is designed into an
automobile model or platform provides a relatively predictable source of
demand over an extended time period.

Telecommunications and Networking

The telecommunications and networking market includes infrastructure
equipment and subscriber equipment submarkets. Infrastructure equipment
consists of support electronics for the distribution of voice and data
transmission. Infrastructure equipment employs sophisticated electronics
which usually require the use of complex flexible interconnects. Subscriber
equipment consists of cellular devices such as handsets and battery
assemblies. Tight packaging and the need to reduce weight have driven the
demand for flexible interconnects in this submarket. Laminated cable and
single and double-sided flexible circuits are generally used in subscriber
equipment.

Diversified Electronics

The diversified electronics market, which we define to include medical
electronics, encompasses many applications. Virtually any electronic device
which requires tight packaging, lightweight or high reliability is a product
that could incorporate flexible interconnects. Typical applications include
electronic scales, industrial controls, metering devices, scanners, sensors
and medical monitoring and testing equipment.

Aerospace

Aerospace electronics were at one time the primary applications for flexible
circuitry. Because of product complexity and space restrictions, aerospace
applications often require multilayer rigid-flexible circuits. Typical
applications are navigation systems, flight controls, displays,
communications equipment and munitions. We believe that procurement of
flexible interconnects will experience modest growth. We believe that the
trend toward "smart" military systems will continue to drive demand for
flexible interconnects in this segment.

Home Appliance

The home appliance market is beginning to make the transition from electro-
mechanical controls to electronic controls containing intelligence and
display. Over time, appliances are expected to become more technologically
advanced. The utility and ease of use and repair associated with flexible
interconnects make them especially suitable for these applications. Our
primary application today is the dishwasher market but we have targeted the
laundry market for growth.

Computer

Demand for flexible circuits and laminated cable in the computer market is
driven by short product life cycles as consumers demand increasingly
powerful, less expensive, smaller, faster and lighter equipment. Disk drives
represent the largest application for flexible circuits in this market. Other
applications include personal computers, notebook displays, personal digital
assistants, mass storage devices and peripheral equipment such as scanners,
printers and docking stations.

Radio Frequency Identification (RFID) and Smart Cards

The emerging identification and tracking market is based upon next generation
identification tags generating radio frequency signals which in some cases
are attached to an antenna. Advancing technology at lower prices, increasing
cooperation among industry participants and high volume applications such as
automated fuel payment, ATM and credit cards, electronic ticketing, baggage
handling and parcel tracking are expected to be the growth drivers for this
market. The size, cost and performance requirements demanded by this market
are expected to drive the use of flexible circuits and assemblies in these
applications. We have recently entered into a multiyear agreement to provide
substrates for a major producer of smartcards.


<PAGE>  6


Our Products

Our current flexible interconnect products include flexible circuits,
laminated cable, flexible interconnect hybrid circuits and flexible
interconnect assemblies. We manufacture our products, which are designed by
us, our customers or jointly, to our customers' application-specific
requirements. Lead times for the design and manufacture of our products
generally range from one week for some products to three months for more
sophisticated products.

Flexible Circuits

Flexible circuits, which consist of conductive patterns that are etched or
printed onto flexible substrate materials such as polyimide or polyester, are
used to provide connections between electronic components and as a substrate
to support these electronic devices. The circuits are manufactured by passing
base materials through multiple processes such as drilling, screening, photo
imaging, etching, plating and finishing. Flexible circuits can be produced in
single or multiple layers. We produce a wide range of flexible circuits
including:

*   Single-Sided Flexible Circuits, which have a conductive pattern only on
    one side. Single-sided flexible circuits are usually less costly and more
    flexible than double-sided flexible circuits. Through our proprietary
    high-speed interconnect screening technology, HSI+(c), which eliminates the
    need for a separate shield layer, we can produce single-sided flexible
    circuits that provide the same functionality as double-sided flexible
    circuits at a lower cost. We manufacture single-sided circuitry in both
    the United States and at Parlex Shanghai, where substantially all of our
    production to date has been single-sided.

*   Double-Sided Flexible Circuits, which have conductive patterns or
    materials on both sides that are interconnected by a drilled and copper-
    plated hole. Double-sided flexible circuits can provide either more
    functionality than a single-sided flexible circuit by containing
    conductive patterns on both sides, or can provide greater shielding than
    a single-sided flexible circuit by having a conductive pattern on one
    side and a layer of shielding material on the other.

*   Multilayer and Rigid-Flexible Circuits, which consist of layers of
    circuitry that are stacked and then laminated. These circuits are used
    where the complexity of the electronic design demands multiple layers of
    flexible circuitry. If some of the layers are rigid printed circuit board
    material, the product becomes a rigid-flexible circuit. We have
    manufactured these circuits with up to 40 layers in prototype programs
    and 24 layers in production.

*   Polymer Thick Film Flexible Circuits, which are flexible circuits
    manufactured using a technology that uses a low-cost thick film polyester
    dielectric substrate and a silver screen-printed conductive pattern.
    These circuits are made with an additive process involving the high-speed
    screen printing of conductive traces utilizing internally developed ink
    systems. We are able to produce multilayer circuits using proprietary
    dielectric materials and double-sided circuits using proprietary printed
    through-hole technologies. Polymer thick film flexible circuits are used
    in low-cost, low-temperature, low-power interconnect applications.

Laminated Cable

Laminated cable, which consist of flat or round wire laminated to a flexible
substrate material, provide connections between electronic sub-systems and
replace conventional wire harnesses. We manufacture laminated cable in an
efficient, proprietary roll process. Substantially all of the laminated cable
that we produce uses flat wire. Approximately 95% of the laminated cable that
we produce is insulated with polyester material, allowing for maximum
flexibility, while the remainder is insulated with polyimide material for its
enhanced performance at elevated temperatures. Our laminated cable is capable
of handling both power (high current) and signal (low current).


<PAGE>  7


Improving the process by which laminated cable is manufactured can increase
functionality and lower the cost of production. To this end, we have
developed U-Flex(R), a proprietary technique that forms flat wire into a u-
shape, followed by an injection molding process that enables the u-shaped end
to function as a connector. This technique improves electrical performance
and eliminates the need for a separate costly connector. We have also
developed Pemacs(R) shielding, which adds a specially designed silver ink to
laminated cable to meet stringent electronic shielding requirements without
compromising flexibility.

Flexible Interconnect Hybrid Circuits

In many cases, although a laminated cable is capable of carrying the
necessary signals, etched circuitry is required for termination. For these
applications we manufacture flexible interconnect hybrid circuits, which take
advantage of the lower cost of laminated cable and the technology of flexible
circuits by combining them into a single interconnect. On some products, we
apply our HSI+(C) process to the flexible interconnect hybrid circuit in
order to provide signal clarity and shielding.

Flexible Interconnect Assemblies

Both flexible circuits and laminated cable can be converted into an
electronic assembly by adding electronic components. This process can be as
simple as adding a connector or as complex as attaching components such as
capacitors, resistors or integrated circuits onto a flexible circuit using
surface mount assembly. We attach surface mount components to both copper and
polymer thick film circuits with either solder paste or our patented
Polysolder(R) conductive adhesive. We can place a full range of electronic
devices, from passive components to computing devices, on our flexible
interconnects.

The following table sets forth representative applications in which our
products are used:

<TABLE>
<CAPTION>

      Flexible Circuits
      -----------------

      
                                      <c>
      Single-Sided                             Automotive Displays
                                               Batteries for Cell Phones
                                               Printers
                                               Personal Digital Assistants
                                               Data Storage

      Double-Sided                             Engine Control Units
                                               Laptop Computers
                                               Cellular Phones (Including
Batteries)
                                               Engine Sensors
                                               Smart Cards

      Multilayer and Rigid-Flexible            Engine Control Units
                                               Computer Networks
                                               Network Switching Systems
                                               Aircraft Displays
                                               Automotive Transmission
Systems

      Polymer Thick Film                       Business Phones
                                               Disposable Medical Devices
                                               Appliances
                                               Radio Frequency Identification

      Laminated Cable                          Postage Meters
      ---------------                          Automotive Sound Systems
                                               Notebook Computers
                                               Industrial Controls


<PAGE>  8


                                               Electronic Scales

      Flexible Interconnect Hybrid Circuits    Total Vehicle Interconnection
      -------------------------------------    Printers
                                               Sensors
                                               Scanning Devices
                                               Night Vision Systems

      Flexible Interconnect Assemblies         Aircraft Identification
Systems
      --------------------------------         Sensors
                                               Scanning Devices
                                               Batteries for Portable
Products
                                               Disk Drives
                                               Night Vision Systems
                                               Personal Computers
</TABLE>

New Process and Material Technologies

An important part of our strategy is development of new processes and
materials for use in our products. Our proprietary processes and materials
include:

PALFlex(R) - PALFlex(R) is both an adhesiveless polyimide-based material and
a manufacturing process that we believe provides superior performance at a
lower cost than traditional copper-clad materials. PALFlex(R) provides
additional cost benefits by allowing us to combine several material
manufacturing steps with circuit manufacturing and eliminating several major
process steps. We developed PALFlex(R) for high volume automotive
applications and are now adapting it for use across a number of other product
lines. Because PALFlex(R) is produced in roll form and the copper thickness
can be controlled to tight tolerances, we believe that it may serve as the
foundation for products in the emerging high density substrate market. We
shipped our first product incorporating the current version of PALFlex(R) in
fiscal 1998.

PALCoat(R) - Working closely with a materials manufacturer and an equipment
manufacturer we developed PALCoat(R), a new material for coating the outside
of flexible circuits. PALCoat(R) has been designed to provide the electrical
and physical characteristics required for a new generation of products but at
a substantially lower cost than what is now commercially available.
PALCoat(R) entered volume production in fiscal 1999.

PALCore(R) HP - PALCore(R) HP is a low-cost multilayer flexible material that
is designed to minimize the difference between the cost of materials used in
flexible circuits and those used in conventional rigid circuits. We have
received patents on our latest, more flexible version of PALCore(R)HP, which
entered production in January 2000.

Polysolder(R) - Polysolder(R) is both a patented lead-free, conductive
adhesive used to attach electronic components onto flexible interconnects and
a patented manufacturing process that enables the attachment of electronic
devices onto substrates at low temperatures. Polysolder(R) has been used in
the production of polymer thick film flexible circuit assemblies for several
years. We plan to apply the Polysolder(R) process to etched flexible circuits
and laminated cable. This technology will enable us to use polyester, instead
of the more expensive polyimide, as a substrate in the production of these
flexible interconnect assemblies.

RFID Flip Chip Attachment Process - We have developed a low-cost process that
we believe will be an enabling technology in the RFID market. Our high-speed
flip chip attachment process is up to ten times faster at placing
semiconductors on low-cost materials than conventional process alternatives.
This process allows us to meet our customer's goals for cost and reliability.
This process entered production in September 1999.


<PAGE>  9


AutoNet(TM) - AutoNet(TM) is a proprietary flexible interconnect designed
specifically to meet the emerging needs of the automotive industry. As each
generation of vehicles incorporates greater electronic content,
interconnection becomes both more important and more difficult. AutoNet(TM)
draws upon our flexible interconnect process and materials technology to
provide a cost-effective interconnect for placement in the headliners, trunks
and doors of automobiles. AutoNet(TM) is designed to replace traditional wire
harnesses and is lighter, smaller, more reliable and provides shielding
necessary to control the emission of electronic signals. We believe that the
potential market for AutoNet(TM) is substantial and will develop over the
next few years.

Our Customers

Our customers are a diverse group of OEMs that serve a variety of industries.
Our largest 20 customers based on sales accounted for approximately 60% of
total revenues in fiscal 2000, 55% in fiscal 2001, and 44% in fiscal 2002.
Our major end-customers include: BAE, Dell Computer, Delphi, Hewlett-Packard,
Hitachi, Infineon, Johnson Controls, Maytag, Motorola, Pitney Bowes,
Raytheon, Samsung, Siemens, Visteon, and Whirlpool. To support these end
customers, we work closely with major electronics manufacturing services
(EMS) companies such as Flextronics, Solectron, and Celestica.

Sales and Customer Service

In fiscal 2002, we realigned our sales and marketing organization to support
a very dispersed customer base. We established a corporate sales organization
that is regionally focused and provides local support to the various customer
engineering, procurement, and operations teams. The transition to a
regionally based sales organization improves program support throughout the
entire product life cycle. The regional sales teams are responsible for
marketing and selling the entire Parlex product offering to existing and
potential customers within their territories. These regional organizations
include direct sales engineers and independent manufacturers'
representatives. To support the sales effort, we have established field
applications engineering offices in Arizona, Michigan, and New York.

Complementing the restructured sales force are robust product line
organizations within each of the manufacturing organizations. Led by a
product line manager, this group provides technical marketing, research and
development input, and sustaining customer support for our customer base.

Manufacturing

We believe that our manufacturing expertise in a number of specialized areas,
together with our investment in process research and development and
equipment, have contributed to our position as an industry leader. A
significant amount of our production equipment is proprietary, including
cable laminators, precision cable slitters and roll plating, roll etching and
automatic punching equipment.

Our computer-aided manufacturing system takes the customer's design and
programs the various steps that will be required to manufacture the
particular product. The manufacturing process varies a great deal from
product to product. Although there is no standard process, significant
elements of production are highlighted below:

<TABLE>
<CAPTION>

                                  Polymer Thick Film
Etched Flexible Circuit            Flexible Circuit            Laminated
Cable
-----------------------           ------------------           -------

   
                     <c>                                 <c>
   Drilling                Convert/Condition Substrate         Lamination
   Plating                 Screen Print                        Slitting
   Photoimaging            Diecut                              Conductor
Forming
   Etching                 Conductive Adhesive                 Injection
Molding
   Lamination              Surface Mount/Flip Chip Assembly    Shielding
   Electrical Testing      Electrical Testing                  Laser Skiving
   Assembly                                                    Assembly
</TABLE>


<PAGE>  10


In fiscal 1999, we added 60,000 square feet to our Methuen, Massachusetts
facility, 12,000 square feet to our Salem, New Hampshire facility and 10,000
square feet to our Shanghai, China facility. Additionally, we purchased over
$6.7 million of new equipment in fiscal 2002. Our acquisitions of Dynaflex in
fiscal 1999 and Poly-Flex in fiscal 2000 gave us a full complement of
flexible circuit manufacturing equipment and an additional 19,000 and 95,500
square feet of facility capacity, respectively. In fiscal 2001, we added
capacity in Shanghai of 52,000 square feet and relocated our Dynaflex
operations to a more efficient 16,800 square foot facility.

During fiscal 2002, we continued to focus on cost reduction initiatives. Core
to this strategy is relocation of high volume low cost manufacturing from the
U.S. to China and Mexico. In June 2002, we agreed to close our Salem, New
Hampshire facility and transfer our laminated cable business to Methuen,
better utilizing our excess capacity. We believe that we now have sufficient
capacity to meet forecast demand in the U.S. operations for the next several
years.

Six of our manufacturing facilities are certified to the international
standard ISO 9001 or ISO 9002 and to the automotive standard QS 9000.

Materials and Materials Management

We aggressively attempt to control our cost of purchased materials and our
level of inventories through long-term relationships with our suppliers. Our
goal is to attain a competitive price from suppliers and foster a shared
vision towards advancing technology.

We purchase raw materials, process chemicals and various components from
multiple outside sources. We often make long-term purchasing commitments with
key suppliers for specific customer programs. These suppliers commit to
provide cooperative engineering as required and in some cases to maintain a
local inventory to provide shorter lead times and reduced inventory levels.
In many cases our customers approve, and often specify, sources of supply.

We qualify our suppliers through a vendor rating system that limits the
number of suppliers to those that can provide the best total value and
quality. We monitor each supplier's quality, delivery, service and technology
so that the materials we receive meet our objectives.

Competition

Our business is highly competitive. We compete against other manufacturers of
flexible interconnects as well as against manufacturers of rigid-printed
circuits. In addition to competing with industry peers who produce flexible
circuitry (etched), laminated cable, and polymer think film products, we also
compete with alternative technology leaders in the rigid printed circuit,
wire harness and cable, and connector industries. Competitive factors among
flexible circuit and laminated cable suppliers are price, product quality,
technological capability and service. We believe that we compete favorably on
all of these competitive factors, but believe that our competitive strength
is in our ability to apply technology to reduce cost. We compete against
rigid board products on the basis of product versatility, although price can
also be a competitive factor if the difference between the cost of a rigid
circuit and a flexible circuit becomes too great.

Intellectual Property

We have acquired patents and we seek patents on new products and processes
where we believe patents would be appropriate to protect our interests.
Although patents are an important part of our competitive position, we do not
believe that any single patent or group of patents is critical to our
success. We believe that, due to the rapid technological change in the
flexible interconnect business, our success depends more on design creativity
and manufacturing expertise than on patents and other intellectual property.
We own 22 patents issued, and have 21 patent applications pending, in the
United States and have several corresponding foreign patent applications
pending. We have obtained federal trademark registrations for PALFlex(R),


<PAGE>  11


PALCore(R), U-Flex(R), PALCoat(R), Polysolder(R), and HSI and have one
trademark application pending. We also rely on internal security measures and
on confidentiality agreements for protection of trade secrets and proprietary
know-how. We cannot be sure that our efforts to protect our intellectual
property will be effective to prevent misappropriation or that others may not
independently develop similar technology.

In January 2000, we sold two U.S. patents for PALCore(R), a low-cost
multilayer material, to Polyclad Laminates, Inc., a subsidiary of Cookson
Electronics, for approximately $1.3 million. We had previously licensed
PALCore(R) to Isola Laminate Systems Corp. (f/k/a Allied Signal Laminate
Systems) and will transfer royalties received in connection with the license
to Polyclad Laminates, Inc. as part of the sale. We have retained a
perpetual, royalty-free, non-exclusive license to use the PALCore(R) material
in our products. We also hold a patent, which we have not licensed to anyone,
which covers the process of using PALCore(R) in the production of flexible
interconnects.

Environmental Regulations

Flexible interconnect manufacturing requires the use of metals and chemicals.
Water used in the manufacturing process must be treated to remove metal
particles and other contaminants before it can be discharged into the
municipal sanitary sewer system. We operate and maintain water effluent
treatment systems and use approved laboratory testing procedures to monitor
the effectiveness of these systems at our San Jose, California and Methuen,
Massachusetts facilities. We operate these treatment systems under an
effluent discharge permit issued by the local governmental authority. Air
emissions resulting from our manufacturing processes are regulated by permits
issued by government authorities. These permits must be renewed periodically
and are subject to revocation in the event of violations of environmental
laws. We believe that the waste treatment equipment at our facilities is
currently in compliance with the requirements of environmental laws in all
material respects and that our air emissions are within the limits
established in the relevant permit. However, violations may occur in the
future. We are also subject to other environmental laws including those
relating to the storage, use and disposal of chemicals, solid waste and other
hazardous materials, as well as to work place health and safety and indoor
air quality emissions. Furthermore, environmental laws could become more
stringent or might apply to additional aspects of our operations over time,
and the costs of complying with such laws could be substantial. Compliance
with local, state and federal laws did not have a material impact on our
capital expenditures, earnings or competitive position in fiscal 2002. We
estimate that the total capital expenditures in fiscal 2002 and 2003
associated with environmental compliance will be $100,000.

Employees

As of June 30, 2002, we employed approximately 601 people in the United
States. Of these employees, 562 were direct employees of Parlex and 39 worked
for interim staffing agencies. In addition, we employed approximately 241
people in Mexico, approximately 117 people in the United Kingdom and
approximately 1,033 people in China. We are not party to any collective
bargaining agreement and we believe our relations with our employees are
good.


<PAGE>  12


Item 2. Properties
------------------

                                 Facilities

Our facilities at June 30, 2002 are:

<TABLE>
<CAPTION>

                            Approximate
Location                    Square Feet        Leased/Owned                    Description
--------                    -----------        ------------                    -----------


                           <c>          <c>                       <c>
Methuen, Massachusetts        185,000      Owned                     Corporate headquarters, product
                                                                     and process development and
                                                                     flexible circuit manufacturing

Cranston, Rhode Island         55,500      Owned                     Polymer thick film and surface
                                                                     mount assembly operations

Salem, New Hampshire           46,000      Leased (lease expires     Laminated cable manufacturing
                                           in June 2007)

Newport, Isle of Wight,        40,000      Leased (lease expires     Polymer thick film and surface
United Kingdom                             in November 2009)         mount assembly operations

Shanghai, China                55,000      Leased (lease expires     Single- and double-sided
                                           in August 2004)           flexible circuit manufacturing

Shanghai, China                34,000      Leased (month-to-month)   Single- and double-sided
                                                                     flexible circuit manufacturing

Empalme, Sonora, Mexico        38,000      Leased (lease expires     Finishing and assembly operations
                                           in January 2005)

San Jose, California           16,800      Leased (lease expires     Prototype and quick-turn operations
                                           in December 2008)
</TABLE>

In December 2001, Parlex (Shanghai) Interconnect Products Co., Ltd. ("Parlex
Interconnect"), our second tier subsidiary, purchased land use rights for a
parcel of land located in the People's Republic of China. The purchase of the
land use rights will allow Parlex Interconnect to expand its operations
within China. The purchase price of the land use rights was approximately
$1.1 million.

Item 3. Legal Proceedings
-------------------------

From time to time we are involved in litigation relating to claims arising
out of our operations in the normal course of business. We are not currently
involved in any material legal proceedings.

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

No matter was submitted to a vote of our stockholders during the fourth
quarter of the fiscal year covered by this report.


<PAGE>  13


                                   PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
-----------------------------------------------------------------------------

(a)   PRICE RANGE OF COMMON STOCK

Our common stock is quoted on the Nasdaq National Market under the symbol
"PRLX." The following table sets forth, for the periods indicated, the high
and low closing prices for our common stock as reported on the Nasdaq
National Market.

<TABLE>
<CAPTION>

                                           High         Low
                                           ----         ---


                                       <c>         <c>
Fiscal Year Ended June 30, 2002
First Quarter                             $13.47      $ 8.90
Second Quarter                            $15.80      $ 8.70
Third Quarter                             $15.80      $12.00
Fourth Quarter                            $13.11      $11.50
Fiscal Year Ended June 30, 2001
First Quarter                             $44.75      $15.00
Second Quarter                            $17.19      $11.75
Third Quarter                             $13.38      $ 9.50
Fourth Quarter                            $13.61      $ 8.91
</TABLE>

On June 30, 2002, the closing sale price of our common stock as reported on
the Nasdaq National Market was $12.10 per share and there were 98 holders of
record of our common stock.

(b)   DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We
presently intend to retain future earnings, if any, to finance the expansion
of our business and do not expect to pay any cash dividends. Future cash
dividends, if any, will be determined by our Board of Directors and will be
based on our earnings, capital, financial condition and other factors that
the Board deems relevant. Our credit agreement permits us to pay cash
dividends to the extent such payment would not cause us to violate financial
covenants contained in the credit agreement.


<PAGE>  14


Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
--------------------------------------------

<TABLE>
<CAPTION>

                                                                 Fiscal Year Ended June 30,
                                                2002          2001         2000(a)       1999(b)        1998
                                                ----          ----         -------       -------        ----
                                                            (in thousands, except per share data)


                                           <c>           <c>           <c>           <c>           <c>
Consolidated Statements of Operations
 Data:
Total revenues                                $ 87,056      $103,620      $101,839      $ 67,047      $ 60,275
Cost of products sold                           90,294        97,460        76,614        52,785        47,304
                                              --------      --------      --------      --------      --------
Gross (loss) profit                             (3,238)        6,160        25,225        14,262        12,971
Selling, general and administrative
 expenses                                       14,049        17,706        14,097         9,715         8,272
                                              --------      --------      --------      --------      --------

Operating (loss) income                        (17,287)      (11,546)       11,128         4,547         4,699
(Loss) income from operations before
 income taxes and minority interest            (17,724)      (11,517)       10,473         4,681         5,130
Net (loss) income                             $(10,388)     $ (6,199)     $  6,335      $  3,020      $  3,157
                                              ========      ========      ========      ========      ========

Net (loss) income per share:
Basic                                         $  (1.65)     $  (0.99)     $   1.31      $   0.65      $   0.73
                                              ========      ========      ========      ========      ========
Diluted                                       $  (1.65)     $  (0.99)     $   1.28      $   0.63      $   0.71
                                              ========      ========      ========      ========      ========

Weighted average shares outstanding:
Basic                                            6,303         6,289         4,842         4,662         4,296
Diluted                                          6,303         6,289         4,940         4,771         4,466

<CAPTION>

                                                                 Fiscal Year Ended June 30,
                                                2002          2001         2000(a)       1999(b)        1998
                                                ----          ----         -------       -------        ----
                                                                       (in thousands)


                                           <c>           <c>           <c>           <c>           <c>
Consolidated Balance Sheet Data:
Working capital                               $ 22,320      $ 31,016      $ 38,752      $ 18,762      $ 26,286
Total assets                                   106,054       110,864       115,341        63,521        56,181
Current portion of long-term debt                3,561        10,710         1,483           619           432
Long-term debt, less current portion            12,000           119           360         1,632         1,166
Stockholders' equity                            70,141        81,351        87,790        45,333        41,591

<FN>
(a)   Includes Poly-Flex beginning March 1, 2000.
(b)   Includes Dynaflex beginning April 30, 1999.
</FN>
</TABLE>


<PAGE>  15


Item 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------------
        RESULTS OF OPERATIONS
        ---------------------

The Management's Discussion and Analysis of Financial Condition and Results
of Operations should be read in conjunction with the financial information
included in this Annual Report on Form 10-K and with "Factors That May Affect
Future Results" set forth on page 22. The following discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from the results contemplated by these
forward-looking statements as a result of many factors, including those
discussed below and elsewhere in this Annual Report on Form 10-K. Our
significant accounting policies are more fully described in Note 2 to our
consolidated financial statements included in this Annual Report on Form 10-
K, and in Part IV, Item 14 "Exhibits, Financial Statement Schedule and
reports on Form 8-K". However, certain of our accounting policies are
particularly important to the portrayal of our financial position and results
of operations and require the application of significant judgement by our
management which subjects them to an inherent degree of uncertainty. In
applying our accounting policies, our management uses its best judgement to
determine the appropriate assumptions to be used in the determination of
certain estimates. Those estimates are based on our historical experience,
terms of existing contracts, our observance of trends in the industry,
information provided by our customers, information available from other
outside sources, and on various other factors that we believe to be
appropriate under the circumstances. We believe that the critical accounting
policies discussed below involve more complex management judgement due to the
sensitivity of the methods, assumptions and estimates necessary in
determining the related asset, liability, revenue and expense amounts.

Critical Accounting Policies
----------------------------

The preparation of consolidated financial statements requires that we make
estimates and judgements that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosures. On an ongoing
basis, we evaluate our estimates, including those related to bad debts,
inventories, property, plant and equipment, intangible assets, income taxes,
and other accrued expenses. We base our estimates on historical experience
and on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results will differ from these estimates under
different assumptions or conditions.

Revenue recognition and accounts receivable. We recognize revenue when
persuasive evidence of an agreement exists, the price is fixed and
determinable, delivery has occurred and there is reasonable assurance of
collection of the sales proceeds. We generally obtain written purchase
authorizations from our customers for a specified amount of product, at a
specified price and consider delivery to have occurred at the time of
shipment. License fees and royalty income are recognized when earned. We have
demonstrated the ability to make reasonable and reliable estimates of product
returns in accordance with SFAS No. 48 and of allowances for doubtful
accounts based on significant historical experience. We maintain allowances
for doubtful accounts for estimated losses resulting from the inability of
our customers to make required payments. If the financial condition of our
customers were to deteriorate, resulting in an impairment of their ability
to make payments, additional allowances may be required.

Inventories. We value our inventory at the lower of the actual cost to
purchase and/or manufacture the inventory or the current estimated market
value of the inventory. We regularly review our inventory and record a
provision for excess or obsolete inventory based primarily on our estimate of
expected and future product demand. Our estimates of future product demand
will differ from actual demand and, as such our estimate of the provision
required for excess and obsolete inventory will change, which we will record
in the period such determination was made.

Income Taxes. We determine if our deferred tax assets and liabilities are
realizable on an ongoing basis by assessing our valuation allowance and by
adjusting the amount of such allowance, as necessary. In the determination of
the valuation allowance, we have considered future taxable income and the
feasibility of tax planning initiatives. Should we determine that it is more
likely than not that we will realize certain of our deferred tax assets for
which we previously provided a valuation allowance, an adjustment would be
required to reduce the existing valuation allowance. Conversely, if we
determine that we would not be able to realize our recorded net deferred tax
asset, an adjustment to increase the valuation allowance would be charged to
our results of operations in the period such conclusion was reached. In
addition, we operate within multiple taxing jurisdictions and are subject to
audit in these jurisdictions. These audits can involve complex issues, which
may require an extended period of time for resolution. Although we believe
that adequate consideration has been made for such issues, there is the
possibility that the ultimate resolution of such issues could have an adverse
effect on the results of our operations.


<PAGE>  16


Overview

We are a leading supplier of flexible interconnects principally for sale to
the automotive, telecommunications and networking, diversified electronics,
aerospace and computer markets. We believe that our development of innovative
materials and processes provides us with a competitive advantage in the
markets in which we compete. During the past three fiscal years, we have
invested approximately $24.8 million in property and equipment and
approximately $17.3 million in research and development to develop materials
and enhance our manufacturing processes. We believe that these expenditures
will help us to meet customer demand for our products, and enable us to
continue to be a technological leader in the flexible interconnect industry.
Our research and development expenses are included in our cost of products
sold.

We formed a Chinese joint venture, Parlex Shanghai, in 1995 to better serve
our customers that have production facilities in Asia and to more cost
effectively manufacture products for worldwide distribution. Effective
October 22, 2001, we purchased the 40% share of Parlex Shanghai held by one
of our joint venture partners, Shanghai Jinling Co., Ltd's ("Jinling"),
increasing our equity interest in Parlex Shanghai to 90.1%. Parlex Shanghai's
results of operations, cash flows and financial position are included in our
consolidated financial statements. We are in the process of transferring the
production of our automotive related products utilizing our PalFlex(R)
technology from our Methuen, Massachusetts facility to Parlex Interconnect, a
wholly owned subsidiary of Parlex Asia Pacific Limited, which is located in
China.

Recent Acquisitions

On March 1, 2000, we acquired the businesses of Poly-Flex Circuits, Inc. and
Poly-Flex Circuits Limited (collectively "Poly-Flex"), wholly owned
subsidiaries of Cookson Group plc, for a purchase price, including
acquisition costs, of approximately $19.7 million. This acquisition further
diversified our product offerings by providing us with polymer thick film and
surface mount assembly capabilities. Poly-Flex has manufacturing facilities
in Cranston, Rhode Island and the United Kingdom.

Results of Operations

The following table sets forth, for the periods indicated, selected items in
our statements of income as a percentage of total revenue. You should read
the table and the discussion below in conjunction with our Consolidated
Financial Statements and the Notes thereto.

<TABLE>
<CAPTION>

                                            Fiscal Year Ended June 30,
                                          ------------------------------
                                           2002        2001        2000
                                           ----        ----        ----


                                       <c>         <c>         <c>
Total revenues                            100.0%      100.0%      100.0%
Cost of products sold                     103.7%       94.1%       75.2%
Gross (loss) profit                        (3.7%)       5.9%       24.8%
Selling, general and administrative
 expenses                                  16.1%       17.1%       13.8%
Operating (loss) income                   (19.9%)     (11.1%)      10.9%
(Loss) income from operations before
 income taxes and minority interest       (20.4%)     (11.1%)      10.3%
Net (loss) income                         (11.9%)      (6.0%)       6.2%
</TABLE>

Comparison of years ended June 30, 2002, 2001, and 2000

Total Revenues. Total revenues for fiscal 2002 were $87.1 million, a
decrease of 16% from $103.6 million reported in fiscal 2001. Revenues were
generated primarily from product sales with decreases in each of our
principal product lines, flexible circuits (14%) and laminated cable (23%).

Reductions in revenues are attributable to the general decline in customer
demand within the global electronics industry and a general downturn of the
U.S. economy. This downturn has had a significant


<PAGE>  17


impact on Parlex's customers and their end markets. We experienced
significant reductions in revenues from our customers in the
telecommunications and networking, and computer peripheral markets, which
affected all of our manufacturing operations. While sales are expected to
increase, we are not able to predict the time frame within which there will
be renewed sales due to the economic uncertainty in these markets, and
there is no assurance that sales will not fluctuate significantly in the
future. Revenue decline was partially offset by improved performance in the
military, automotive, and home appliance markets.

In fiscal 2001, total revenues were $103.6 million, an increase of 2% from
$101.8 million reported in fiscal 2000. Our flex circuit operation in
Methuen experienced a reduction in product sales of $16.8 million or 31%
for fiscal 2001 compared to the same period in fiscal 2000. The decrease in
product sales at the Methuen facility was due primarily to a decrease in
purchases from customers in the telecommunications industry as a result of
excess inventory held by these customers. The decline in product sales from
our Methuen operation was offset by the inclusion of additional revenues of
$15.6 million from our Poly-Flex operation, acquired in March 2000, and
increased sales from our other operations of $4.7 million.

Total revenues included licensing and royalty fees of approximately $50,000
for fiscal 2002, $194,000 for fiscal 2001 and $1,887,000 in fiscal 2000.
Licensing and royalty fees for fiscal 2000 included amounts related to our
$1.3 million patent assignment agreement with Polyclad Laminates, Inc. The
final installment of the Polyclad agreement was recognized in fiscal 2001.
Although we intend to continue developing materials and processes that we
can license to third parties, we do not expect that licensing and royalty
revenues will represent a significant portion of total revenues in the near
term.

Cost of Products Sold. Cost of products sold was $90.3 million, or 104% of
total revenues, for fiscal 2002, versus $97.5 million, or 94% of total
revenues for fiscal 2001. The increase includes $1.5 million for the
elimination of excess facilities, $209,000 for severance costs associated
with reductions in workforce, and $3.4 million for increases in inventory
reserves and inventory write-downs. In addition, the Methuen operation
continued to experience low capacity utilization and correspondingly,
significant unfavorable manufacturing variances. In fiscal 2002 these
variances totaled approximately $11 million and have been charged to cost
of products sold. To improve utilization in fiscal 2003, we will relocate
our Salem, New Hampshire laminated cable business to Methuen. In fiscal
2002, a reduction in force eliminated approximately 82 employees, primarily
in the United States, through proactive cost controls, improved operational
efficiency and reduced manufacturing volume. Inventory reserves were
recorded to reflect increased risk from sustained economic downturn in the
electronics industry and in particular the telecommunications market.

During the past year, we have made a significant investment to improve our
margins through the transfer of labor intensive manufacturing operations to
more cost-effective locations. A large portion of the final assembly,
inspection, and test procedures previously performed in our Methuen and
Salem, New Hampshire facilities are now performed in Mexico. During fiscal
2002 we continued to transfer a significant share of our PalFlex operations
to China. The transfer of manufacturing capabilities is costly, however
this investment is core to our long-term strategy for cost effective
manufacturing. Although these cost reduction measures are expected to
improve our gross margins, a return to profitability is predicated upon
operational performance, a favorable product mix and increased sales.

In fiscal 2001, cost of products sold was $97.5 million, or 94% of total
revenues versus $76.6 million, or 75% of total revenues in fiscal 2000. The
increase includes a $2.7 million charge for severance and inventory
reserves associated with the slowdown in the technology markets. In
addition, the Methuen operation experienced unfavorable manufacturing
variances of approximately $12 million or 32% of its total revenues. The
manufacturing variances are due to excess manufacturing capacity associated
with a 31% decrease in product sales for fiscal 2001. The increase in the
cost of products sold in 2001 also includes costs associated with our Poly-
Flex operation, which was acquired in March 2000.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $14.0 million in fiscal 2002, or 16% of total
revenues, and $17.7 million or 17% of total revenues for the


<PAGE>  18


comparable period in the prior year. The decreases were primarily the
result of continued cost controls mandated by current economic conditions.
Decreases were partially offset by investment in a regionally focused
corporate sales organization. These sales teams are responsible for
marketing and selling the entire Parlex product offering to existing and
potential customers within their territories.

In fiscal 2001, selling, general and administrative expenses were $17.7
million, or 17% of total revenues and $14.1 million or 14% of total
revenues for the comparable period in the prior year. The increase in
selling, general and administrative expenses was primarily due to the
inclusion of the Poly-Flex operation, which was $3.3 million for fiscal
2001 versus $1.9 million in fiscal 2000. In addition, selling, general and
administrative expenses included a charge of $1.4 million for severance and
bad debt allowance associated with the slowdown in our technology markets.

Other Income and Interest Expense and Provision for Income Taxes. Other
income of $207,000 was primarily comprised of interest income on short-term
investments. In fiscal 2001, other income of $501,000 was comprised of
interest income from short-term investments and $110,000 received relative
to the settlement of legal claims associated with our Methuen building
addition.

Interest expense was $644,000 for fiscal 2002, $472,000 for fiscal 2001 and
$892,000 for fiscal 2000. The interest expense represents interest incurred
on our short and long-term borrowings for working capital needs and
interest expense associated with deferred compensation. The increase in
fiscal 2000 represents the interest on our borrowings required to finance
our Poly-Flex acquisition.

Our loss before income taxes and the minority interest in our Chinese joint
venture, Parlex Shanghai, was $17.7 million and $11.5 million for fiscal
years 2002 and 2001 respectfully. We earned income of $10.5 million for
fiscal 2000. We own 90.1% of the equity interest in Parlex Shanghai and,
accordingly, include Parlex Shanghai's results of operations, cash flows
and financial position in our consolidated financial statements.

Our effective tax rate was approximately (39%) for fiscal 2002, (47%) for
fiscal 2001 and 28% for fiscal 2000. The decrease in the effective tax rate
resulted from net operating losses generated in lower tax jurisdictions and
a decreased amount of available tax credits.

Liquidity and Capital Resources

As of June 30, 2002, we had approximately $1.8 million in cash and short-
term investments.

Net cash used in operations during fiscal 2002 was $2.5 million. Operating
losses of $10.4 million adjusted for minority interest, depreciation and
amortization, used $4.4 million of operating cash. This was offset by $1.9
million generated from a reduction in our working capital requirements. Net
cash used by investing activities was $3.7 million in fiscal 2002. These
funds were used to purchase $5.2 million of capital equipment and other
assets, and to acquire our joint venture partner's 40% minority interest in
Parlex Shanghai for $4.5 million. Cash generated from investing activities
included the sale of higher-yielding investment grade corporate and United
States Government debt securities of $5.5 million and $525,000 received
from Cookson Group plc as a final settlement related to our fiscal 2000
acquisition of the Poly-Flex business. Cash provided by financing
activities was $4.7 million during fiscal 2002, and represented the net
borrowings and repayments on our bank debt.

Net cash used in operations during fiscal 2001 was $5.5 million. The
decrease in operating cash resulted from an increase in working capital
including $4.2 million in payments to our suppliers. Cash used in investing
activities was $12.3 million for fiscal 2001. These funds were used to
purchase $5.5 million of higher-yielding investment grade corporate and
United States Government debt securities and $7.3 million of capital
equipment expenditures net of $525,000 received from Cookson Group plc as
partial settlement of certain purchase price adjustments related to the
Poly-Flex acquisition. Cash provided by financing activities was $9.1
million for fiscal 2001 and represented the net borrowings and repayments
of our bank debt and cash received through the exercise of stock options.


<PAGE>  19


In June 2002, our subsidiary, Parlex Interconnect, executed a $5,000,000 Loan
Agreement (the "Loan Agreement") with CITIC Ka Wah Bank Limited, a Hong Kong
bank. Proceeds received under the Loan Agreement are to be used exclusively
for financing land, building, plant and machinery and other working capital
requirements and to prepay Parlex Interconnect's two current short-term bank
notes with combined outstanding balances of $1.2 million as of June 30, 2002.
As of June 30, 2002, no amounts were outstanding under the Loan Agreement.
Borrowings under the Loan Agreement accrue interest at a fixed rate equal to
LIBOR plus a margin of 2.2%. Interest is payable at the end of each interest
period which varies from one to six months. As a condition of the approval of
this Loan Agreement, our subsidiary, Parlex Asia Pacific Ltd., and we have
provided a guarantee of the payment of this loan. The Loan Agreement contains
a cross default provision that would permit the lender to accelerate the
repayment of our obligation under the Loan Agreement in the event of our
default on other financing arrangements. As of August 31, 2002, total
borrowings were $3.1 million. These borrowings were used to repay local
short-term bank notes of $1.2 million and fund future equipment and working
capital requirements.

On April 16, 2002, we executed the Second Amendment to our Loan Agreement
(the "Credit Agreement") (originally dated March 1, 2000). The Credit
Agreement provided our bank with a secured interest in all of our assets with
the exception of our real estate. We may borrow up to a total of $15,000,000,
based on a borrowing base of eligible accounts receivable and marketable
securities. No further advances of principal will be made under this Credit
Agreement after December 30, 2003. At our discretion, borrowings under the
Credit Agreement accrue interest at either a variable rate equal to the
bank's prime rate (4.75% at June 30, 2002) or a fixed rate equal to LIBOR
plus a margin that varies from 1.5% to 2.25%. As of June 30, 2002 we have, as
provided for under our Credit Agreement, converted $9 million of our Credit
Agreement borrowings into 4 LIBOR contracts with maturities of three months.
The LIBOR plus margin for these contracts varies between 4.12% and 4.17875%.
Interest on the LIBOR contracts is payable at the end of each LIBOR term. The
Credit Agreement carries an annual commitment fee of 1/4% to 1/2% on the
average daily-unused portion of the bank's commitment. Interest is payable
monthly. The Credit Agreement allows us to issue letters of credit, which
reduce our availability for borrowings under the Credit Agreement, and which
a $100,000 letter of credit is outstanding at June 30, 2002. The Credit
Agreement permits us to pay cash dividends to the extent that such payment
would not cause us to violate the aforementioned covenants. The Credit
Agreement has certain restrictive covenants related to current ratio, tangible
net worth, total liabilities to tangible net worth, interest coverage ratio,
debt service coverage ratio and income and capital expenditure targets. As of
June 30, 2002, we were not in compliance with the restrictive covenants
related to income targets and tangible net worth coverage and our outstanding
advances under the Credit Agreement exceeded the allowable borrowing base. We
received a waiver of all covenant violations at June 30, 2002. We have
executed a third amendment to the Credit Agreement as of September 27, 2002
and are now in compliance with all covenants and our advances are within the
borrowing base.

On September 27, 2002, we executed the Third Amendment to our Loan Agreement
(the "Third Amendment"). The Third Amendment increases our bank's security
interest to include a first mortgage on our Methuen, Massachusetts facility.
In addition, our total availability for borrowings under the Credit Agreement
was reduced to $14,000,000 at September 30, 2002 and will be reduced to
$12,000,000 by March 31, 2003. The borrowing base was amended so as to be
calculated as 80% of eligible accounts receivable plus 70% of the appraised
value of the Methuen facility, less amounts outstanding under letters of
credit. The Third Amendment also amends the restrictive covenants for periods
subsequent to June 30, 2002 to remove the interest coverage ratio, amend the
definition of minimum tangible net worth, and amend the future income targets.
At June 30, 2002 we are in compliance with the restrictive covenants, as
amended, and anticipate being in compliance with the terms of the amended
agreement for the foreseeable future.

Throughout fiscal 2002 and into fiscal 2003, we took a series of steps to
reduce operating expenses and to restructure operations, which consisted
primarily of reductions in workforce and consolidating manufacturing
operations. We continue to implement plans to control operating expenses,
inventory levels, and capital expenditures as well as plans to manage accounts
payable and accounts receivable to enhance cash flows and maintain compliance
with the restrictive covenants under the Credit Agreement. Our plan includes
the following actions: 1) consolidation of some of our manufacturing
facilities, including the closing of the Salem, New Hampshire facility during
fiscal 2003; 2) the transfer of certain manufacturing processes from our
domestic operations to our lower cost international manufacturing
operations, particularly those in the People's Republic of China; 3) expand
our products in the home appliance, laptop computer, and radio identification
frequency and smart card markets; and 4) the continued monitoring and
reduction of selling, general and administrative expenses. Furthermore, we are
exploring alternative financing arrangements to partially replace or supplement
our financing arrangements to provide us with longer-term financing to support
our current working capital needs.


<PAGE>  20


We believe that our cash on hand and cash expected to be generated during
fiscal 2003 will be sufficient to enable us to meet our financing and operating
obligations for the foreseeable future. If we require alternative external
financing to repay or refinance our existing financing obligations or fund our
working capital requirements, we believe that we will be able to obtain new
external financing. However, there can be no assurance that we will be
successful in obtaining such new financing.

Recent Accounting Pronouncements

Effective July 1, 2001, we adopted the provisions of Statement on Financial
Accounting Standards No.142, "Goodwill and Other Intangible Assets"("SFAS
142"). Under the provisions of SFAS 142, if an intangible asset is
determined to have an indefinite useful life, it shall not be amortized
until its useful life is determined to be no longer indefinite. An
intangible asset that is not subject to amortization shall be tested for
impairment annually, or more frequently if events or changes in
circumstances indicate that the asset might be impaired. Goodwill is not
amortized but is tested for impairment, for each reporting unit, on an
annual basis and between annual tests in certain circumstances. In
accordance with the guidelines in SFAS 142, we determined we have
one reporting unit. Upon adoption of SFAS 142, we performed an
impairment review and concluded that there are no necessary adjustments.

Future Adoption of Accounting Pronouncements

In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"). SFAS No. 144
supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, " and the accounting
and reporting provisions of APB Opinion No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." SFAS No. 144 specifies accounting for long-lived assets to
be disposed of by sale, and broadens the presentation of discontinued
operations to include more disposal transactions than were included under
the previous standards. We will adopt SFAS No. 144 as of July 1, 2002.

In April 2002, the FASB issued SFAS No. 145 "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections" ("SFAS No. 145"). This statement amends, among others, the
classification on the statement of operations for gains and losses from the
extinguishment of debt. Currently such gains and losses are reported as
extraordinary items, however the adoption of SFAS No. 145 may require the
classification of the gains and losses from the extinguishment of debt
within income or loss from continuing operations unless the transactions
meet the criteria for extraordinary treatment as infrequent and unusual as
described in Accounting Principles Board Opinion No. 30 Reporting the
Results of Operations, Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions. We will adopt SFAS No. 145 on July 1, 2002.

In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated
with Exit or Disposal Activities". This statement supersedes Emerging
Issues Task Force ("EITF") No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity ("SFAS
No. 146"). Under this statement, a liability for a cost associated with a
disposal or exit activity is recognized at fair value when the liability is
incurred rather than at the date of an entity's commitment to an exit plan
as required under EITF 94-3. The provisions of this statement are effective
for exit or disposal activities that are initiated after December 31, 2002,
with early adoption permitted.

We are currently evaluating the impact, but do not expect a material
impact, resulting from the adoption of SFAS Nos. 144, 145, and 146 on our
consolidated financial position, results of operations, and cash flows.


<PAGE>  21


                   FACTORS THAT MAY AFFECT FUTURE RESULTS

Our prospects are subject to certain uncertainties and risks. This Annual
Report on Form 10-K also contains certain forward-looking statements within
the meaning of the Federal Securities Laws. Our future results may differ
materially from the current results and actual results could differ
materially from those projected in the forward-looking statements as a result
of certain risk factors, including but not limited to those set forth below,
other one-time events and other important factors disclosed previously and
from time to time in our other filings with the Securities and Exchange
Commission.

Our business could continue to be materially adversely affected as a result
of general economic and market conditions.

We are subject to the effects of general global economic and market
conditions. Our operating results have been materially adversely affected as
a result of recent unfavorable economic conditions and reduced electronics
industry spending. If economic and market conditions do not improve, our
business, results of operations or financial condition could continue to be
materially adversely affected.

If we cannot obtain additional financing when needed, we may not be able to
expand our operations and invest adequately in research and development,
which could cause us to lose customers and market share.

The development and manufacturing of flexible interconnects is capital
intensive. To remain competitive, we must continue to make significant
expenditures for capital equipment, expansion of operations and research and
development. We expect that substantial capital will be required to expand
our manufacturing capacity and fund working capital for anticipated growth.
We may need to raise additional funds either through borrowings or further
equity financings. We may not be able to raise additional capital on
reasonable terms, or at all. If we cannot raise the required funds when
needed, we may not be able to satisfy the demands of existing and prospective
customers and may lose revenue and market share.

Our operating results fluctuate and may fail to satisfy the expectations of
public market analysts and investors, causing our stock price to decline.

Our operating results have fluctuated significantly in the past and we expect
our results to continue to fluctuate in the future. Our results may fluctuate
due to a variety of factors, including the timing and volume of orders from
customers, the timing of introductions of and market acceptance of new
products, changes in prices of raw materials, variations in production yields
and general economic trends. It is possible that in some future periods our
results of operations may not meet or exceed the expectations of public
market analysts and investors. If this occurs, the price of our common stock
is likely to decline.

Our quarterly results depend upon a small number of large orders received in
each quarter, so the loss of any single large order could harm quarterly
results and cause our stock price to drop.

A substantial portion of our sales in any given quarter depends on obtaining
a small number of large orders for products to be manufactured and shipped in
the same quarter in which the orders are received. Although we attempt to
monitor our customers' needs, we often have limited knowledge of the
magnitude or timing of future orders. It is difficult for us to reduce
spending on short notice on operating expenses such as fixed manufacturing
costs, development costs and ongoing customer service. As a result, a
reduction in orders, or even the loss of a single large order, for products
to be shipped in any given quarter could have a material adverse effect on
our quarterly operating results. This, in turn, could cause our stock price
to decline.

Because we sell a substantial portion of our products to a limited number of
customers, the loss of a significant customer or a substantial reduction in
orders by any significant customer would harm our operating results.


<PAGE>  22


Historically we have sold a substantial portion of our products to a limited
number of customers. Our 20 largest customers based on sales accounted for
approximately 60% of our total revenue in fiscal 2000, 55% in fiscal 2001,
and 44% in fiscal 2002.

We expect that a limited number of customers will continue to account for a
high percentage of our total revenues in the foreseeable future. As a result,
the loss of a significant customer or a substantial reduction in orders by
any significant customer would cause our revenues to decline and have an
adverse effect on our operating results.

If we are unable to respond effectively to the evolving technological
requirements of customers, our products may not be able to satisfy the
demands of existing and prospective customers and we may lose revenues and
market share.

The market for our products is characterized by rapidly changing technology
and continuing process development. The future success of our business will
depend in large part upon our ability to maintain and enhance our
technological capabilities. We will need to develop and market products that
meet changing customer needs, and successfully anticipate or respond to
technological changes on a cost-effective and timely basis. There can be no
assurance that the materials and processes that we are currently developing
will result in commercially viable technological processes, or that there
will be commercial applications for these technologies. In addition, we may
not be able to make the capital investments required to develop, acquire or
implement new technologies and equipment that are necessary to remain
competitive. It is also possible that the flexible interconnect industry
could encounter competition from new technologies in the future that render
flexible interconnect technology less competitive or obsolete. If we fail to
keep pace with technological change, our products may become less competitive
or obsolete and we may lose customers and revenues.

A significant downturn in any of the sectors in which we sell products could
result in a revenue shortfall.

We sell our flexible interconnect products principally to the automotive,
telecommunications and networking, diversified electronics, aerospace, home
appliance and computer markets. Although we serve a variety of markets to
avoid a dependency on any one sector, a significant downturn in any of these
market sectors could cause a material reduction in our revenues, which could
be difficult to replace.

We rely on a limited number of suppliers, and any interruption in our primary
sources of supply, or any significant increase in the prices of materials,
chemicals or components, would have an adverse effect on our short-term
operating results.

We purchase the bulk of our raw materials, process chemicals and components
from a limited number of outside sources. In fiscal 2002, we purchased
approximately 23% of our materials from DuPont and Northfield Acquisition Co.
doing business as Sheldahl, our two largest suppliers. We operate under tight
manufacturing cycles with a limited inventory of raw materials. As a result,
although there are alternative sources of the materials that we purchase from
our existing suppliers, any unanticipated interruption in supply from DuPont
or Sheldahl, or any significant increase in the prices of materials,
chemicals or components, would have an adverse effect on our short-term
operating results.

If we acquire additional businesses, these acquisitions will involve
financial uncertainties as well as personnel contingencies, and may be risky
and difficult to integrate.

We have completed two acquisitions in the past four years and we may acquire
additional businesses that could complement or expand our business. Acquired
businesses may not generate the revenues or profits that we expect and we may
find that they have unknown or undisclosed liabilities. In addition, if we do
make acquisitions, we will face a number of other risks and challenges,
including: the difficulty of integrating dissimilar operations or assets;
potential loss of key employees of the acquired business;


<PAGE>  23


assimilation of new employees who may not contribute or perform at the levels
we expect; diversion of management time and resources; and additional costs
associated with obtaining any necessary financing.

These factors could hamper our ability to receive the anticipated benefits
from any acquisitions we may pursue, and could adversely affect our financial
condition and our stock price.

The additional expenses and risks related to our existing international
operations, as well as any expansion of our global operations, could
adversely affect our business.

We own a 90.1% equity interest in our joint venture in China, Parlex
Shanghai, which manufactures and sells flexible circuits. We also operate a
facility in Mexico for use in the finishing, assembly and testing of flexible
circuit and laminated cable products. We have a facility in the United
Kingdom where we manufacture polymer thick film flexible circuits and polymer
thick film flexible circuits with surface mounted components and intend to
introduce production of laminated cable within the next year. We will
continue to explore appropriate expansion opportunities as demand for our
products increases.

Manufacturing and sales operations outside the United States carry a number
of risks inherent in international operations, including: imposition of
governmental controls, regulatory standards and compulsory licensure
requirements; compliance with a wide variety of foreign and U.S. import and
export laws; currency fluctuations; unexpected changes in trade restrictions,
tariffs and barriers; political and economic instability; longer payment
cycles typically associated with foreign sales; difficulties in administering
business overseas; labor union issues; and potentially adverse tax
consequences.

International expansion may require significant management attention, which
could negatively affect our business. We may also incur significant costs to
expand our existing international operations or enter new international
markets, which could increase operating costs and reduce our profitability.

We face significant competition, which could make it difficult for us to
acquire and retain customers.

We face competition worldwide in the flexible interconnect market from a
number of foreign and domestic providers, as well as from alternative
technologies such as rigid printed circuits. Many of our competitors are
larger than we are and have greater financial resources. New competitors
could also enter our markets. Our competitors may be able to duplicate our
strategies, or they may develop enhancements to, or future generations of,
products that could offer price or performance features that are superior to
our products. Competitive pressures could also necessitate price reductions,
which could adversely affect our operating results. In addition, some of our
competitors are based in foreign countries and have cost structures and
prices based on foreign currencies. Accordingly, currency fluctuations could
cause our dollar-priced products to be less competitive than our competitors'
products priced in other currencies.

We will need to make a continued high level of investment in product research
and development and research, sales and marketing and ongoing customer
service and support in order to remain competitive. We may not have
sufficient resources to be able to make these investments. Moreover, we may
not be able to make the technological advances necessary to maintain our
competitive position in the flexible interconnect market.

If we are unable to attract, retain and motivate key personnel, we may not be
able to develop, sell and support our products and our business may lack
strategic direction.

We are dependent upon key members of our management team. In addition, our
future success will depend in large part upon our continuing ability to
attract, retain and motivate highly qualified managerial, technical and sales
personnel. Competition for such personnel is intense, and there can be no
assurance that we will be successful in hiring or retaining such personnel.
We currently maintain a key person life insurance policy in the amount of
$1.0 million on each of Herbert W. Pollack and Peter J. Murphy. If we lose
the service of Messrs. Pollack or Murphy or one or more other key
individuals, or are unable to attract additional qualified members of the
management team, our ability to implement our business strategy may be
impaired. If we


<PAGE>  24


are unable to attract, retain and motivate qualified technical and sales
personnel, we may not be able to develop, sell and support our products.

If we are unable to protect our intellectual property, our competitive
position could be harmed and our revenues could be adversely affected.

We rely on a combination of patent and trade secret laws and non-disclosure
and other contractual agreements to protect our proprietary rights. We own 22
patents issued and have 21 patent applications pending in the United States
and have several corresponding foreign patent applications pending. Our
existing patents may not effectively protect our intellectual property and
could be challenged by third parties, and our future patent applications, if
any, may not be approved. In addition, other parties may independently
develop similar or competing technologies. Competitors may attempt to copy
aspects of our products or to obtain and use information that we regard as
proprietary. If we fail to adequately protect our proprietary rights, our
competitors could offer similar products using materials, processes or
technologies developed by us, potentially harming our competitive position
and our revenues.

If we become involved in a protracted intellectual property dispute, or one
with a significant damages award or which requires us to cease selling some
of our products, we could be subject to significant liability and the time
and attention of our management could be diverted.

Although no claims have been asserted against us for infringement of the
proprietary rights of others, we may be subject to a claim of infringement in
the future. An intellectual property lawsuit against us, if successful, could
subject us to significant liability for damages and could invalidate our
proprietary rights. A successful lawsuit against us could also force us to
cease selling, or redesign, products that incorporate the infringed
intellectual property. We could also be required to obtain a license from the
holder of the intellectual property to use the infringed technology. We might
not be able to obtain a license on reasonable terms, or at all. If we fail to
develop a non-infringing technology on a timely basis or to license the
infringed technology on acceptable terms, our revenues could decline and our
expenses could increase.

We may in the future be required to initiate claims or litigation against
third parties for infringement of our proprietary rights or to determine the
scope and validity of our proprietary rights or the proprietary rights of
competitors. Litigation with respect to patents and other intellectual
property matters could result in substantial costs and divert our
management's attention from other aspects of our business.

Market prices of technology companies have been highly volatile, and our
stock price may be volatile as well.

From time to time the U.S. stock market has experienced significant price and
trading volume fluctuations, and the market prices for the common stock of
technology companies in particular have been extremely volatile. In the past,
broad market fluctuations that have affected the stock price of technology
companies have at times been unrelated or disproportionate to the operating
performance of these companies. Any significant fluctuations in the future
might result in a material decline in the market price of our common stock.

Following periods of volatility in the market price of a particular company's
securities, securities class action litigation has often been brought against
that company. If we were to become involved in this type of litigation, we
could incur substantial costs and diversion of management's attention, which
could harm our business, financial condition and operating results.

The costs of complying with existing or future environmental regulations, and
of curing any violations of these regulations, could increase our operating
expenses and reduce our profitability.

We are subject to a variety of environmental laws relating to the storage,
discharge, handling, emission, generation, manufacture, use and disposal of
chemicals, solid and hazardous waste and other toxic and hazardous materials
used to manufacture, or resulting from the process of manufacturing, our
products. We


<PAGE>  25


cannot predict the nature, scope or effect of future regulatory requirements
to which our operations might be subject or the manner in which existing or
future laws will be administered or interpreted. Future regulations could be
applied to materials, product or activities that have not been subject to
regulation previously. The costs of complying with new or more stringent
regulations, or with more vigorous enforcement of these regulations, could be
significant.

Environmental laws require us to maintain and comply with a number of
permits, authorizations and approvals and to maintain and update training
programs and safety data regarding materials used in our processes.
Violations of these requirements could result in financial penalties and
other enforcement actions. We could also be required to halt one or more
portions of our operations until a violation is cured. Although we attempt to
operate in compliance with these environmental laws, we may not succeed in
this effort at all times. The costs of curing violations or resolving
enforcement actions that might be initiated by government authorities could
be substantial.

Our business could be materially adversely affected by the recent terrorist
attacks.

Since we sell our flexible interconnect products principally to the
automotive, telecommunications and networking, diversified electronics, home
appliances, aerospace and computer markets, our future success depends upon
the viability of both the United States and global economy. As a result of
the recent terrorist attacks and the economic uncertainty created by these
events, there exist a significant number of risks which may cause a downturn
in any of our market sectors thereby creating a material reduction in our
revenues which could be difficult to replace. There can be no assurance that
a continuation of the terrorist attacks will not have a material adverse
effect upon our business, results of operations or financial
condition.

Undetected problems in our products could directly impair our financial
results.

If flaws in design, production, assembly or testing of our products were to
occur by us or our suppliers, we could experience a rate of failure in our
products that would result in substantial repair or replacement costs and
potential damage to our reputation. Continued improvement in manufacturing
capabilities, control of material and manufacturing quality and costs and
product testing, are critical factors in our future growth. There can be no
assurance that our efforts to monitor, develop, modify and implement
appropriate test and manufacturing processes for our products will be
sufficient to permit us to avoid a rate of failure in our products that
results in substantial delays in shipment, significant repair or replacement
costs or potential damage to our reputation, any of which could have a
material adverse effect on our business, results of operations or financial
condition.

We may have exposure to additional income tax liabilities.

As a multinational corporation, we are subject to income taxes in both the
United States and various foreign jurisdictions. Our domestic and
international tax liabilities are subject to the allocation of revenues and
expenses in different jurisdictions and the timing of recognizing revenues
and expenses. Additionally, the amount of income taxes paid is subject to our
interpretation of applicable tax laws in the jurisdictions in which we file.
From time to time, we are subject to income tax audits. While we believe we
have complied with all applicable income tax laws, there can be no assurance
that a governing tax authority will not have a different interpretation of
the law and assess us with additional taxes. Should we be assessed with
additional taxes, there could be a material adverse affect on our results of
operations or financial condition.

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

The following discussion about our market risk disclosures involves forward-
looking statements. Actual results could differ materially from those
projected in the forward-looking statements. We are exposed to market risk
related to changes in U.S. and foreign interest rates and fluctuations in
exchange rates. We do not use derivative financial instruments for
speculative or trading purposes.


<PAGE>  26


We also have a $15,000,000 revolving credit line that bears interest, at our
choice, at our lender's prime rate or LIBOR plus a margin that varies from
1.5% to 2.25%. Both the prime and LIBOR rates are affected by changes in
market interest rates. As of June 30, 2002, we have an outstanding balance
under our Credit Agreement of $12,160,000. We have the option to repay
borrowings at anytime without penalty, other than breakage fees in the case
of prepayment of LIBOR rate borrowings, and therefore believe that our market
risk is not material. A 10% change in interest rates would impact interest
expense by approximately $40,000. We do not consider this to be material or
significant.

The remainder of our long-term debt bears interest at fixed rates and is
therefore not subject to market risk.

Sales of Parlex Shanghai, Poly-Flex Circuits Limited and Parlex Europe are
typically denominated in the local currency, which is also each company's
functional currency. This creates exposure to changes in exchange rates. The
changes in the Chinese/U.S. and U.K./U.S. exchange rates may positively or
negatively impact our sales, gross margins and retained earnings. Based upon
the current volume of transactions in China and the United Kingdom and the
stable nature of the exchange rate between China and the U.S. and the United
Kingdom and the U.S., we do not believe the market risk is material. We do
not engage in regular hedging activities to minimize the impact of foreign
currency fluctuations. Parlex Shanghai and Parlex Interconnect had combined
net assets as of June 30, 2002, of approximately $12.5 million. Poly-Flex
Circuits Limited and Parlex Europe had combined net assets as of June 30,
2002 of approximately $5.1 million. We believe that a 10% change in exchange
rates may have a significant impact upon Parlex Shanghai's or Poly-Flex
Circuits Limited's financial position, results of operation or outstanding
debt. As of June 30, 2002, Parlex Shanghai and Parlex Interconnect had
combined outstanding debt of $3.3 million. As of June 30, 2002, Poly-Flex
Circuits Limited had no outstanding debt.

Item 8. Financial Statements and Supplementary Data
---------------------------------------------------


<PAGE>  27


INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders
 of Parlex Corporation
Methuen, Massachusetts

We have audited the accompanying consolidated balance sheets of Parlex
Corporation and subsidiaries (the "Company") as of June 30, 2002 and 2001,
and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended June
30, 2002. Our audits also included the financial statement schedule listed in
the index at Item 14(a)(2). These financial statements are the responsibility
of the Company's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Parlex Corporation and
subsidiaries at June 30, 2002 and 2001, and the results of their operations
and their cash flows for each of the three years in the period ended June
30, 2002, in conformity with accounting principles generally accepted in
the United States of America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.

As discussed in Note 2 to the consolidated financial statements, in 2002 the
Company changed its method of accounting for goodwill and other intangible
assets.


/s/ Deloitte & Touche LLP
Boston, Massachusetts
September 20, 2002 (September 27, 2002 as to paragraph 6 of Note 8)


<PAGE>  F-1


PARLEX CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
JUNE 30, 2002 AND 2001
---------------------------------------------------------------------------

<TABLE>
<CAPTION>

ASSETS                                            2002              2001


                                          <c>               <c>
CURRENT ASSETS:
  Cash and cash equivalents                  $  1,785,025      $  3,203,990
  Short-term investments                                -         5,533,703
  Accounts receivable - less allowance
   for doubtful accounts of $1,215,200
   in 2002 and $1,896,100 in 2001              17,665,808        17,434,115
  Inventories - net                            17,588,589        19,318,522
  Refundable income taxes                       1,810,102         2,921,145
  Deferred income taxes                         3,595,659         2,901,201
  Other current assets                          2,030,210         2,634,085
                                             ------------      ------------

      Total current assets                     44,475,393        53,946,761
                                             ------------      ------------

PROPERTY, PLANT AND EQUIPMENT:
  Land and land improvements                    1,018,822         1,018,822
  Buildings                                    22,209,273        22,109,721
  Machinery and equipment                      58,267,902        56,174,718
  Leasehold improvements and other              7,499,054         6,806,493
  Construction in progress                      6,467,541         3,843,792
                                             ------------      ------------

      Total                                    95,462,592        89,953,546

  Less accumulated depreciation and
   amortization                               (39,480,757)      (34,379,848)
                                             ------------      ------------

      Property, plant and equipment - net      55,981,835        55,573,698
                                             ------------      ------------

INTANGIBLE ASSETS - NET                         1,155,827            41,530

GOODWILL - NET                                  1,157,510           906,708

DEFERRED INCOME TAXES                           2,850,876                 -

OTHER ASSETS                                      432,488           395,255
                                             ------------      ------------

TOTAL                                        $106,053,929      $110,863,952
                                             ============      ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of long-term debt          $  3,560,855      $ 10,710,299
  Accounts payable                             13,729,201         8,330,461
  Accrued liabilities                           4,865,058         3,889,540
                                             ------------      ------------

      Total current liabilities                22,155,114        22,930,300
                                             ------------      ------------

LONG-TERM DEBT                                 12,000,000           118,762
                                             ------------      ------------

OTHER NONCURRENT LIABILITIES                    1,327,490         2,442,274
                                             ------------      ------------

MINORITY INTEREST IN PARLEX SHANGHAI              430,204         4,021,485
                                             ------------      ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Preferred stock, $1.00 par value -
   authorized, 1,000,000 shares; none
   issued                                               -                 -
  Common stock, $.10 par value -
   authorized, 30,000,000 shares in
   2002 and 2001; issued 6,513,216
   shares in 2002 and 2001                        651,321           651,321
  Additional paid-in capital                   60,897,275        60,897,275
  Retained earnings                             9,911,794        21,467,585
  Accumulated other comprehensive (loss)
   income                                        (281,644)         (627,425)
  Less treasury stock, at cost - 210,000
   shares in 2002 and 2001                     (1,037,625)       (1,037,625)
                                             ------------      ------------

      Total stockholders' equity               70,141,121        81,351,131
                                             ------------      ------------

TOTAL                                        $106,053,929      $110,863,952
                                             ============      ============
</TABLE>

See notes to consolidated financial statements.


<PAGE>  F-2


PARLEX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 2002, 2001 AND 2000
---------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                         2002              2001              2000


                                                  <c>               <c>               <c>
REVENUES:
  Product sales                                      $ 87,005,253      $103,426,642      $ 99,952,142
  License fees and royalty income                          50,311           193,547         1,886,602
                                                     ------------      ------------      ------------

      Total revenues                                   87,055,564       103,620,189       101,838,744
                                                     ------------      ------------      ------------

COSTS AND EXPENSES:
  Cost of products sold                                90,293,843        97,460,179        76,613,787
  Selling, general and administrative expenses         14,049,040        17,706,049        14,096,704
                                                     ------------      ------------      ------------

      Total costs and expenses                        104,342,883       115,166,228        90,710,491
                                                     ------------      ------------      ------------

OPERATING (LOSS) INCOME                               (17,287,319)      (11,546,039)       11,128,253

OTHER INCOME, Net                                         206,995           501,036           236,812

INTEREST EXPENSE                                         (643,722)         (471,882)         (891,805)
                                                     ------------      ------------      ------------

(LOSS) INCOME FROM OPERATIONS BEFORE
  INCOME TAXES AND MINORITY INTEREST                  (17,724,046)      (11,516,885)       10,473,260

BENEFIT (PROVISION) FOR INCOME TAXES                    6,855,127         5,453,245        (2,906,219)

(LOSS) INCOME BEFORE MINORITY INTEREST                (10,868,919)       (6,063,640)        7,567,041

MINORITY INTEREST                                         481,091          (135,845)       (1,231,705)
                                                     ------------      ------------      ------------

NET (LOSS) INCOME                                    $(10,387,828)     $( 6,199,485)     $  6,335,336
                                                     ============      ============      ============

BASIC (LOSS) INCOME PER SHARE                        $      (1.65)     $      (0.99)     $       1.31
                                                     ============      ============      ============

DILUTED (LOSS) INCOME PER SHARE                      $      (1.65)     $      (0.99)     $       1.28
                                                     ============      ============      ============
</TABLE>

See notes to consolidated financial statements.


<PAGE>  F-3


PARLEX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 2002, 2001 AND 2000
---------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                          Accumulated     Compre-
                                                   Additional                               Other         hensive
                                Common Stock        Paid-in      Retained     Treasury   Comprehensive     Income
                              Shares     Amount     Capital      Earnings       Stock    Income (Loss)     (Loss)         Total


                          <c>        <c>       <c>          <c>           <c>           <c>          <c>            <c>
BALANCE, JULY 1, 1999        4,991,149  $499,115  $24,568,566  $ 21,288,296  $(1,037,625)  $  14,878                   $45,333,230

Comprehensive income
 (loss):
  Net income                         -         -            -     6,335,336            -           -    $  6,335,336     6,335,336
                                                                                                        ------------
  Other comprehensive
   income (loss), net of
   tax:
    Foreign currency
     translation adjustment          -         -            -             -            -           -        (136,020)     (136,020)
    Unrealized loss on
     short-term investments          -         -            -             -            -           -          (1,886)       (1,886)
                                                                                                        ------------
  Other comprehensive
   income (loss)                     -         -            -             -            -    (137,906)       (137,906)
                                                                                                        ------------
  Comprehensive income
   (loss)                                                                                               $  6,197,430
                                                                                                        ============
  Exercise of stock
   options                      42,235     4,223      256,921             -            -           -                       261,144
  Tax benefit arising
   from the exercise of
   stock options                     -         -      132,735             -            -           -                       132,735
  Stock offering, net of
   expenses                  1,452,500   145,250   35,719,787             -            -           -                    35,865,037
                             ---------  --------  -----------   -----------  -----------   ---------                   -----------

BALANCE, JUNE 30, 2000       6,485,884   648,588   60,678,009    27,623,632   (1,037,625)   (123,028)                   87,789,576

Comprehensive income
 (loss):
  Net loss                           -         -            -    (6,199,485)           -           -    $ (6,199,485)   (6,199,485)
                                                                                                        ------------
  Other comprehensive
   income (loss), net of
   tax:
    Foreign currency
     translation adjustment          -         -            -             -            -           -        (539,149)     (539,149)
    Unrealized gain on
     short-term investments          -         -            -             -            -           -          34,752        34,752
                                                                                                        ------------
  Other comprehensive
   income (loss)                     -         -            -             -            -    (504,397)       (504,397)
                                                                                                        ------------
  Comprehensive income
   (loss)                                                                                               $ (6,703,882)
                                                                                                        ============
  Effect of subsidiary
   accounting period change          -         -            -        43,438            -           -                        43,438
  Tax benefit arising
   from the exercise of
   stock options                     -         -       71,773             -            -           -                        71,773
  Exercise of stock
   options and other            27,332     2,733      147,493             -            -           -                       150,226
                             ---------  --------  -----------   -----------  -----------   ---------                   -----------

BALANCE, JUNE 30, 2001       6,513,216   651,321   60,897,275    21,467,585   (1,037,625)   (627,425)                   81,351,131

Comprehensive income
 (loss):
  Net loss                           -         -            -   (10,387,828)           -           -    $(10,387,828)  (10,387,828)
                                                                                                        ------------
  Other comprehensive
   income (loss), net of
   tax:
    Foreign currency
     translation adjustment          -         -            -             -            -           -         380,533       380,533
    Unrealized loss on
     short-term investments          -         -            -             -            -           -         (34,752)      (34,752)
                                                                                                        ------------
  Other comprehensive
   income (loss)                     -         -            -             -            -     345,781         345,781
                                                                                                        ------------
  Comprehensive income
   (loss)                                                                                               $(10,042,047)
                                                                                                        ============
  Distribution of earnings
   in consideration for              -         -            -             -            -           -
  40% interest in Parlex
   Shanghai Circuits Corp.           -         -            -    (1,167,963)           -           -                    (1,167,963)
                             ---------  --------  -----------   -----------  -----------   ---------                   -----------

BALANCE, JUNE 30, 2002       6,513,216  $651,321  $60,897,275   $ 9,911,794  $(1,037,625)  $(281,644)                  $70,141,121
                             =========  ========  ===========   ===========  ===========   =========                   ===========
</TABLE>

See notes to consolidated financial statements.


<PAGE>  F-4


PARLEX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2002, 2001 AND 2000
---------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                   2002               2001               2000


                                                          <c>                 <c>                <c>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net (loss) income                                          $ (10,387,828)      $ (6,199,485)      $  6,335,336
  Adjustments to reconcile net (loss) income
   to net cash provided by (used for)
   operating activities:
    Depreciation and amortization of property,
     plant and equipment and other assets                        6,422,514          6,260,344          4,757,235
    Facility exit costs                                          1,480,000                  -                  -
    Loss on property, plant and equipment                          173,828             74,369                  -
    Tax benefit arising from the exercise of stock options               -             71,773            132,735
    Minority interest                                             (481,091)           135,845          1,231,705
    Changes in current assets and liabilities:
      Accounts receivable - net                                   (115,019)         1,664,805         (1,905,970)
      Inventories                                                1,771,999          1,729,045         (7,758,203)
      Refundable income taxes                                    1,111,043         (2,921,145)                 -
      Other assets and deferred taxes                           (5,701,113)        (2,132,200)          (681,175)
      Accounts payable and accrued liabilities                   3,195,360         (4,215,370)         2,593,122
                                                             -------------       ------------       ------------
        Net cash (used in) provided by operating activities     (2,530,307)        (5,532,019)         4,704,785
                                                             -------------       ------------       ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of Poly-Flex subsidiary                              525,000            525,000        (20,682,061)
  Acquisition of minority interest in Parlex Shanghai           (4,485,095)                 -                  -
  Maturities (purchases) of investments available for
   sale, net                                                     5,498,951         (5,498,951)         1,605,067
  Additions to property, plant, equipment and other assets      (5,243,605)        (7,311,625)       (10,386,405)
                                                             -------------       ------------       ------------
        Net cash used for investing activities                  (3,704,749)       (12,285,576)       (29,463,399)
                                                             -------------       ------------       ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from the issuance of common shares - net                      -                  -         35,865,037
  Proceeds from bank loans                                      28,975,378         23,580,184         30,584,673
  Payment of bank loans                                        (24,243,584)       (14,594,033)       (31,042,251)
  Exercise of stock options and other                                    -            150,226            261,144
                                                             -------------       ------------       ------------
        Net cash provided by financing activities                4,731,794          9,136,377         35,668,603
                                                             -------------       ------------       ------------

EFFECT OF EXCHANGE RATE CHANGES ON CASH                             84,297            (64,650)          (136,020)
                                                             -------------       ------------       ------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS            (1,418,965)        (8,745,868)        10,773,969

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                     3,203,990         11,949,858          1,175,889
                                                             -------------       ------------       ------------

CASH AND CASH EQUIVALENTS, END OF YEAR                       $   1,785,025       $  3,203,990       $ 11,949,858
                                                             =============       ============       ============

SUPPLEMENTARY DISCLOSURE OF NONCASH FINANCING AND
 INVESTING ACTIVITIES:
Liabilities assumed in acquisition                           $           -       $          -       $  5,506,000
                                                             =============       ============       ============

Property, plant, equipment and other asset purchases
 financed under capital lease obligations, long-term
 debt, and accounts payable                                  $   1,474,311       $    293,530       $     49,500
                                                             =============       ============       ============
</TABLE>

See notes to consolidated financial statements.


<PAGE>  F-5


PARLEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2002, 2001 AND 2000
---------------------------------------------------------------------------

1.    BUSINESS AND BASIS OF PRESENTATION

Business  - Parlex Corporation ("Parlex" or the "Company") is a world
leader in the design and manufacture of flexible interconnect products.
Parlex produces custom flexible circuits and laminated cables utilizing
proprietary processes and patented technologies which are designed to
satisfy the unique requirements of a wide range of customers.  Parlex
provides its products and engineering services to a variety of markets
including automotive, telecommunications and networking, diversified
electronics, aerospace and computer.

Basis of Presentation  - As shown in the consolidated financial statements,
the Company incurred net losses of $10,387,828 and $6,199,485 and used
$2,530,307 and $5,532,019 of cash in operations for the fiscal years ended
June 30, 2002 and 2001, respectively, and at June 30, 2002, was out of
compliance with certain financial covenants of its principal external
financing agreement, and its outstanding advances under such arrangement
exceeded the allowable borrowing base. These results are primarily
attributable to the worldwide downturn in the electronics industry.

The Company has received a waiver of all covenant violations at June 30, 2002
and on September 27, 2002, executed an amendment to its principal external
financing arrangement. As a result of this amendment, the Company is now in
compliance with all financial covenants and its advances are within the amended
borrowing base at June 30, 2002. The Company anticipates being in compliance
with the terms of the amended Agreement for the forseeable future (see Note 8).

Throughout fiscal 2002 and into fiscal 2003, management has taken a series of
actions to reduce operating expenses and to restructure operations, which
consisted primarily of reductions in workforce and consolidating manufacturing
operations. Moreover, management continues to implement plans to control
operating expenses, inventory levels, and capital expenditures as well as
manage accounts payable and accounts receivable to enhance cash flow and return
the Company to profitability. Management's plans include the following actions:
1) continuing to consolidate manufacturing facilities, including the closing
of the Salem, New Hampshire facility during fiscal 2003; 2) continuing to
transfer certain manufacturing processes from its domestic operations to lower
cost international manufacturing locations, primarily those in the People's
Republic of China; 3) expanding its products in the home appliance, laptop
computer, and radio frequency identification and smart card markets; and 4)
continuing to monitor and reduce selling, general and administrative expenses.

Furthermore, management is exploring alternative financing arrangements to
partially replace or supplement those currently in place in order to provide
the Company with long-term financing to support its current working capital
needs.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation - The consolidated financial statements include the
accounts of Parlex, its wholly owned subsidiaries and its 90.1% investment
in Parlex (Shanghai) Circuit Co., Ltd. ("Parlex Shanghai") (see Note 4).
Prior to October 2, 2000, the Company consolidated Parlex Shanghai and its
wholly owned subsidiary, Parlex Asia Pacific Limited ("PAPL") on a three-
month time lag.  Beginning with the quarter ended December 31, 2000, the
Company conformed the reporting of Parlex Shanghai and PAPL with its
December quarter financial results. Accordingly, the Parlex Shanghai and
PAPL net income for the quarter ended September 26, 2000 is reported as an
adjustment to retained earnings in the amount of $43,000.  Intercompany
transactions have been eliminated.

Use of Estimates - The preparation of the Company's consolidated financial
statements in conformity with accounting principles generally accepted in
the United States of America necessarily requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
balance sheet dates.  Estimates include reserves for accounts receivables,
inventory and deferred taxes, useful lives of property, plant, and
equipment, certain accrued liabilities including health insurance claims,
and the Company's effective tax rate.  Actual results could differ from
those estimates.

Foreign Currency Translation - The functional currency of foreign
operations is deemed to be the local country's currency.  Assets and
liabilities of operations outside the United States are translated into
United States dollars using current exchange rates at the balance sheet
date.  Results of operations are translated at average exchange rates
prevailing during each period.  Gains or losses on translation are
accumulated as a component of other comprehensive income or loss.

Cash and Cash Equivalents - Cash and cash equivalents include short-term
highly liquid investments purchased with remaining maturities of three
months or less.


<PAGE>  F-6


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Short-Term Investments - The Company follows Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments
in Debt and Equity Securities."  At June 30, 2001, the Company had
categorized all securities as "available-for-sale", since the Company could
liquidate these investments currently.  In calculating realized gains and
losses, cost is determined using the specific-identification method.  SFAS
No. 115 requires that unrealized gains and losses on available-for-sale
securities be excluded from earnings and reported in a separate component
of stockholders' equity.

Inventories - Inventories of raw materials are stated at the lower of cost,
first-in, first-out or market.  Work in process and finished goods are
valued as a percentage of completed cost, not in excess of net realizable
value.  At June 30, inventories consisted of:

<TABLE>
<CAPTION>

                            2002             2001


                     <c>              <c>
Raw materials           $ 7,240,945      $ 6,766,359
Work in process           7,382,378        8,861,718
Finished goods            2,965,266        3,690,445
                        -----------      -----------
Total                   $17,588,589      $19,318,522
                        ===========      ===========
</TABLE>

Property, Plant and Equipment - Property, plant and equipment are stated at
cost and are depreciated using the straight-line method over their
estimated useful lives: buildings - 30-40 years; machinery and equipment -
2-15 years; and leasehold improvements over the terms of the lease.  The
Company evaluates its long-lived assets for impairment whenever events or
changes in circumstances indicate that carrying amount of such assets may
not be recoverable.  Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to the future
undiscounted net cash flows expected to be generated by the asset.  If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the asset exceeds
the fair value of the asset.  Assets to be disposed of are reported at the
lower of the carrying amount or fair value, less cost to sell.  The Company
has not recorded any impairment losses during 2002, 2001, or 2000.

Revenue Recognition - Revenue on product sales is recognized when
persuasive evidence of an agreement exists, the price is fixed or
determinable, delivery has occurred and there is reasonable assurance of
collection of the sales proceeds.  The Company generally obtains written
purchase authorizations from its customers for a specified amount of
product, at a specified price and considers delivery to have occurred at
the time of shipment. License fees and royalty income are recognized when
earned.

Research and Development - Research and development costs are expensed as
incurred and amounted to $6,145,000, $6,906,000 and $4,237,000 for the
years ended June 30, 2002, 2001 and 2000, respectively.  These amounts are
reflected in the Company's cost of products sold.

Income Taxes - The Company accounts for income taxes in accordance with
SFAS No. 109, "Accounting for Income Taxes."  This statement requires an
asset and liability approach to accounting for income taxes based upon the
future expected values of the related assets and liabilities.  Deferred
income taxes are provided for basis differences between assets and
liabilities for financial reporting and tax purposes.

(Loss) Income Per Share - Basic (loss) income per share is calculated on
the weighted-average number of common shares outstanding during the year.
Diluted income per share is calculated on the weighted-average number of
common shares and common share equivalents resulting from options
outstanding except where such items would be antidilutive.


<PAGE>  F-7


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(Loss) Income Per Share (Continued)

A reconciliation between shares used for computation of basic and dilutive
income per share is as follows:

<TABLE>
<CAPTION>

                                       2002           2001           2000


                                 <c>            <c>            <c>
Shares for basic computation        6,303,216      6,289,117      4,842,055
Effect of dilutive stock options            -              -         98,429
                                    ---------      ---------      ---------

Shares for dilutive computation     6,303,216      6,289,117      4,940,484
                                    =========      =========      =========
</TABLE>

Antidilutive potential shares not included in per-share calculations for
2002 and 2001 were approximately 471,00 and 320,000 due to the net losses
recorded in these years.  Antidilutive potential shares not included in the
per-share calculation for 2000 were approximately 65,000 as the exercise
price of these options exceeded the average market price of the Company's
stock for that year.

Fair Value of Financial Instruments - SFAS No. 107, "Disclosures About Fair
Value of Financial Instruments," requires disclosure of the fair value of
certain financial instruments.  The carrying amounts of cash, short-term
investments, accounts receivable, accounts payable and accrued expenses
approximate fair value because of their short-term nature.  The carrying
amounts of the Company's debt instruments approximate fair value since the
majority of long-term debt bears interest at a rate similar to the
prevailing market rate.

Goodwill - Under the provisions of SFAS No.142, "Goodwill and Other
Intangible Assets"("SFAS 142"), if an intangible asset is determined to
have an indefinite useful life, it shall not be amortized until its useful
life is determined to be no longer indefinite.  An intangible asset that is
not subject to amortization shall be tested for impairment annually.
Goodwill associated with the acquisition of a 40% interest in Parlex
Shanghai (see Note 4), and the acquisitions of the Poly-Flex and Parlex-
Dynaflex businesses was determined to have an indefinite useful life and is
therefore not amortized.  The Company tests for impairment on an annual
basis and between annual tests in certain circumstances.  In accordance
with the guidelines in SFAS 142, the Company determined it has one
reporting unit and concluded that there are no necessary adjustments for
impairment at June 30, 2002.  The accumulated amortization of goodwill
totaled $234,477, $234,477 and $220,100 at June 30, 2002, 2001 and 2000,
respectively.

Stock-Based Compensation - The Company accounts for stock-based
compensation in accordance with Accounting Principles Board ("APB") Opinion
No. 25 using the intrinsic-value method as permitted by SFAS No. 123,
"Accounting for Stock-Based Compensation."  SFAS No. 123 encourages, but
does not require, the recognition of compensation expense for the fair
value of stock options and other equity instruments issued to employees and
nonemployee directors.  The difference between accounting for stock-based
compensation under APB Opinion No. 25 and SFAS No. 123 is disclosed in Note
11.

Reclassifications - Certain prior period amounts have been reclassified to
conform to the current year presentation.

Recent Accounting Pronouncements -Effective July 1, 2001, the Company
adopted the provisions of SFAS No.142. Under the provisions of SFAS 142, if
an intangible asset is determined to have an indefinite useful life, it
shall not be amortized until its useful life is determined to be no longer
indefinite. An intangible asset that is not subject to amortization shall
be tested for impairment annually, or more frequently if events or changes
in circumstances indicate that the asset might be impaired. Goodwill is not
amortized but is tested for impairment, for each reporting unit, on an
annual basis and between


<PAGE>  F-8


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements (Continued)

annual tests in certain circumstances.  In accordance with the guidelines
in SFAS 142, the Company determined it has one reporting unit.  Upon
adoption of SFAS 142 the Company performed an impairment review and
concluded that there are no necessary adjustments.

Intangible assets as of June 30, 2002, are as follows:

<TABLE>
<CAPTION>

                                  Land Use
                                   Rights         Patents         Total


                              <c>             <c>           <c>
Gross cost                       $1,145,784      $ 58,560      $1,204,344
Accumulated amortization            (28,559)      (19,958)        (48,517)
                                 ----------      --------      ----------

Intangible assets, net           $1,117,225      $ 38,602      $1,155,827
                                 ==========      ========      ==========
</TABLE>

The Company has reassessed the useful lives of other intangible assets and
determined the useful lives are appropriate in determining amortization
expense.  Amortization expense for the year ended June 30, 2002 was
$14,376.  The estimated amortization expense for each of the fiscal years
subsequent to June 30, 2002 is as follows:

<TABLE>
<CAPTION>

                                           Amortization Expense


                                            <c>
For year ended June 30, 2003                   $   30,403
For year ended June 30, 2004                       30,403
For year ended June 30, 2005                       30,403
For year ended June 30, 2006                       30,403
For year ended June 30, 2007                       30,403
Thereafter                                      1,003,812
                                               ----------

                                               $1,155,827
                                               ==========
</TABLE>


<PAGE>  F-9


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements (Continued)

If SFAS 142 had been adopted on July 1, 1999, the adjusted net income (loss)
and adjusted net income (loss) per share would be as follows:

<TABLE>
<CAPTION>

                                                           Year Ended June 30,
                                           ------------------------------------------------
                                                2002               2001             2000
                                                ----               ----             ----


                                        <c>                <c>               <c>
Reported net income (loss)                 $(10,387,828)      $ (6,199,485)     $ 6,335,336
Add back: Goodwill amortization                       -            250,284          219,162
                                           ------------       ------------      -----------
Adjusted net income (loss)                 $(10,387,828)      $ (5,949,201)     $ 6,554,498
                                           ============       ============      ===========

Basic net income (loss) per share:
Reported net income (loss)                 $      (1.65)      $      (0.99)     $      1.31
Goodwill amortization                                 -               0.04             0.04
                                           ------------       ------------      -----------
Adjusted net income (loss)                 $      (1.65)      $      (0.95)     $      1.35
                                           ============       ============      ===========

Diluted net income (loss) per share:
Reported net income (loss)                 $      (1.65)      $      (0.99)     $      1.28
Goodwill amortization                                 -               0.04             0.05
                                           ------------       ------------      -----------
Adjusted net income (loss)                 $      (1.65)      $      (0.95)     $      1.33
                                           ============       ============      ===========
</TABLE>

Future Adoption of Accounting Pronouncements - In August 2001, the FASB
issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-
Lived Assets" ("SFAS No. 144").  SFAS No. 144 supercedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, " and the accounting and reporting provisions of
APB Opinion No. 30, "Reporting the Results of Operations-Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions." SFAS No. 144 specifies
accounting for long-lived assets to be disposed of by sale, and broadens
the presentation of discontinued operations to include more disposal
transactions than were included under the previous standards.  The Company
will adopt SFAS No. 144 on July 1, 2002.

In April 2002, the FASB issued SFAS No. 145 "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections" ("SFAS No. 145").  This statement amends, among others, the
classification on the statement of operations for gains and losses from the
extinguishment of debt.  Currently such gains and losses are reported as
extraordinary items, however, the adoption of SFAS No. 145 may require the
classification of the gains and losses from the extinguishment of debt
within income or loss from continuing operations unless the transactions
meet the criteria for extraordinary treatment as infrequent and unusual as
described in APB Opinion No. 30, "Reporting the Results of Operations,
Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions". The
Company will adopt SFAS No. 145 on July 1, 2002.


<PAGE>  F-10


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Future Adoption of Accounting Pronouncements (Continued)

In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated
with Exit or Disposal Activities" ("SFAS No. 146"). This statement supersedes
Emerging Issues Task Force ("EITF") No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity.  Under this
statement, a liability for a cost associated with a disposal or exit activity
is recognized at fair value when the liability is incurred rather than at the
date of an entity's commitment to an exit plan as required under EITF 94-3.
The provisions of this statement are effective for exit or disposal activities
that are initiated after December 31, 2002, with early adoption permitted.

The Company is currently evaluating the impact resulting from the adoption
of SFAS Nos. 144, 145, and 146 on the Company's consolidated financial
position and results of operations, but does not expect a material impact.

3.    POLY-FLEX ACQUISITION

On March 1, 2000, pursuant to a Stock Purchase Agreement (the "Agreement")
dated as of January 21, 2000, by and among the Company and Cookson Group
plc and Cookson Investment, Inc. (together, "Cookson"), the Company
completed its acquisition of the stock of two Cookson wholly-owned
subsidiaries, Poly-Flex Circuits Limited and Poly-Flex Circuits, Inc.
(collectively, "Poly-Flex"), for $19,650,000 in cash.  Costs associated
with the transaction approximated $1,000,000. The acquisition was recorded
under the purchase method of accounting. On December 15, 2000, the Company
jointly filed with Cookson a tax election with the Internal Revenue Service
to account for the transaction as an asset acquisition for tax purposes
whereby the assets acquired would be recorded, for tax purposes, at fair
value versus their carryover tax basis. Accordingly, the Company adjusted
purchase price related to deferred tax liabilities and goodwill in the
amount of $2,495,000.  In addition, on June 28, 2001, the Company entered
into a settlement agreement with Cookson resolving any purchase price or
contingent purchase price adjustment between the two companies.  The terms
of the settlement agreement provided that Cookson pay Parlex $1,050,000 in
full settlement of all outstanding claims by both companies relative to any
purchase price adjustment.  The Company received $525,000 in cash prior to
June 30, 2001 and recorded a receivable for an additional $525,000 within
other current assets in the consolidated balance sheet at June 30, 2001,
which was subsequently received.  The final purchase price after this
settlement and the tax election is approximately $19,765,000 including
acquisition costs of approximately $1,165,000.  Accordingly the Company
reallocated the purchase price as follows:

<TABLE>


                                             <c>
Accounts receivable                             $ 3,208,000
Inventories                                       2,447,000
Other current assets                                436,623
Property, plant and equipment                    16,533,681
Accounts payable and accrued liabilities         (2,551,000)
Deferred tax liabilities                           (309,000)
                                                -----------

Net assets of Poly-Flex                         $19,765,304
                                                ===========
</TABLE>

The results of operations of Poly-Flex are included in the consolidated
results of the Company from the acquisition date.


<PAGE>  F-11


3.    POLY-FLEX ACQUISITION (CONTINUED)

The following unaudited pro forma summary presents information as if Poly-
Flex had been acquired as of the beginning of the Company's fiscal year
2000. The pro forma amounts include certain adjustments, primarily to
recognize depreciation and amortization based on the preliminary allocation
of the purchase price of Poly-Flex's net assets, interest expense
associated with the debt used to acquire Poly-Flex and adjustments for
various allocated charges from Poly-Flex's previous parent.  The
adjustments do not reflect any benefits from economies which might be
achieved from combining operations. The pro forma information does not
necessarily reflect the actual results that would have occurred nor is it
necessarily indicative of future results of operations of the combined
companies:

<TABLE>
<CAPTION>

                                                    Unaudited
                                                      2000


                                               <c>
Revenue                                           $116,908,000
Income from operations                              10,525,000
Net income                                           5,680,000

Net income per share:
  Basic                                           $       1.17
  Diluted                                                 1.15

Shares used to compute net income per share
  Basic                                              4,842,000
  Diluted                                            4,940,000
</TABLE>

4.    JOINT VENTURE

In 1995, the Company formed a joint venture, Parlex Shanghai.  At its
formation, the Company had a 50.1% controlling interest and as such has
been consolidating Parlex Shanghai's financial results within its
financial statements with minority interest recorded to reflect its
partners' 49.9% interest.  On October 22, 2001, the Company executed an
agreement (the "Agreement") to purchase Shanghai Jinling Co., Ltd's
("Jinling") 40% joint venture interest in Parlex Shanghai , bringing the
Company's interest to 90.1%.  The Agreement required the Company to pay
Jinling the sum of $2.2 million. The purchase price has been allocated to
acquired accounts receivable, inventory, property, plant and equipment,
accounts payable, accrued liabilities and debt, and resulted in goodwill of
approximately $251,000. Prior to the acquisition, a distribution of retained
earnings was declared based upon each joint venture partners' proportional
share of Parlex Shanghai's registered capital as of December 30, 2000.
Jinling's distribution approximated $2.3 million and was payable in cash.  As
of June 30, 2002, all amounts due Jinling have been paid. Minority interest in
the consolidated statements of operations represents the minority shareholder's
share of the income or loss of Parlex Shanghai. The minority interest in the
consolidated balance sheets reflect the original investment, net of any
distributions, by these minority shareholders in Parlex Shanghai, along with
their proportional share of the earnings or losses of Parlex Shanghai.

5.    OTHER INTANGIBLE ASSETS - LAND USE RIGHTS

In December 2001, Parlex (Shanghai) Interconnect Products Co., Ltd., the
Company's second tier subsidiary, purchased land use rights for a parcel of
land located in the People's Republic of China.  The purchase of the land
use rights will allow the Company to expand its operations within China.
The purchase price of the land use rights was approximately $1.1 million.
The rights have been reported within intangible assets on the consolidated
balance sheets and are being amortized over their 50-year life.


<PAGE>  F-12


6.    CASH AND SHORT-TERM INVESTMENTS

A summary of the Company's investments available for sale by major security
type at June 30, 2001 was as follows:

<TABLE>
<CAPTION>

                                               Gross        Gross
                              Amortized     Unrealized    Unrealized      Fair
Security Type                    Cost          Gains        Losses        Value


                           <c>             <c>            <c>        <c>
Cash management fund          $  204,596      $     -        $ -        $  204,596
Corporate debt securities      5,294,355       34,752          -         5,329,107
                              ----------      -------        ---        ----------

Total                         $5,498,951      $34,752        $ -        $5,533,703
                              ==========      =======        ===        ==========
</TABLE>

All corporate debt securities at June 30, 2001 had contractual maturities
of less than one year. The Company had no short-term investments at June
30, 2002.

7.    ACCRUED LIABILITIES

Accrued liabilities at June 30 consisted of:

<TABLE>
<CAPTION>

                                         2002            2001


                                   <c>             <c>
Payroll and related expenses          $1,650,825      $1,369,057
Accrued health insurance                 375,819         350,008
Commissions                              400,411         983,181
Facility exit costs                    1,480,000               -
Other                                    958,003       1,187,294
                                      ----------      ----------

Total                                 $4,865,058      $3,889,540
                                      ==========      ==========
</TABLE>

In June 2002, management committed to a plan to consolidate and relocate
certain of its manufacturing operations.  The Company accrued $755,000 for
lease costs, $625,000 for the abandonment of leasehold improvements, and
$100,000 for a lease termination penalty, all of which are reported (as
cost of sales) in the consolidated statements of operations.  No amounts
have been paid as of June 30, 2002.  The Company's lease agreement, for
which certain costs have accrued under this plan, expires in 2004.


<PAGE>  F-13


8.    INDEBTEDNESS

Long-term debt at June 30 consisted of:

<TABLE>
<CAPTION>

                                         2002             2001


                                   <c>              <c>
Term notes                            $ 3,310,378      $ 1,495,717
Capital lease obligations                  90,477          358,344
Revolving credit agreement             12,160,000        8,975,000
                                      -----------      -----------

Total long-term debt                   15,560,855       10,829,061

Less current portion                    3,560,855       10,710,299
                                      -----------      -----------

Long-term debt - net                  $12,000,000      $   118,762
                                      ===========      ===========
</TABLE>

The scheduled maturities for long-term debt, excluding capital lease
obligations (see Note 13), at June 30, 2002 are $3,560,855 in fiscal year
2003 and $12,000,000 in fiscal 2004.

Interest paid during the years ended June 30, 2002, 2001 and 2000 was
approximately $625,000, $454,000 and $887,000, respectively.

Approximately $1,114,500 of equipment is recorded under capital leases at
June 30, 2002 and 2001.  Accumulated amortization on the capital lease
equipment approximated $1,024,000 and $749,000 at June 30, 2002 and 2001,
respectively.

Revolving Credit Agreement - On April 16, 2002, the Company executed the
Second Amendment to its Loan Agreement (the "Credit Agreement") (originally
dated March 1, 2000).  The Credit Agreement provided the Company's bank
with a secured interest in all of its assets with the exception of its real
estate.  The Company may borrow up to a total of $15,000,000, based on a
borrowing base of eligible accounts receivable and marketable securities.
No further advances of principal will be made under this Credit Agreement
after December 30, 2003.  At the Company's discretion, borrowings under the
Credit Agreement accrue interest at either a variable rate equal to the
bank's prime rate (4.75% at June 30, 2002) or a fixed rate equal to LIBOR
plus a margin that varies from 1.5% to 2.25%.  As of June 30, 2002 the
Company has, as provided for under its Credit Agreement, converted $9
million of its Credit Agreement borrowings into 4 LIBOR contracts with
maturities of three months. The LIBOR plus margin for these contracts
varies between 4.12% and 4.17875%. Interest on the LIBOR contracts is
payable at the end of each LIBOR term.  The Credit Agreement carries an
annual commitment fee of 0.25% to 0.5% on the average daily-unused portion
of the bank's commitment.  Interest is payable monthly. The Credit
Agreement allows the Company to issue letters of credit, which reduces its
availability for borrowings under the Credit Agreement, and which a
$100,000 letter of credit is outstanding at June 30, 2002.  The Credit
Agreement permits the Company to pay cash dividends to the extent that such
payment would not cause the Company to violate the aforementioned
covenants. The Credit Agreement has certain restrictive covenants related
to current ratio, tangible net worth, total liabilities to tangible net
worth, interest coverage ratio, debt service coverage ratio and income and
capital expenditure targets.

As of June 30, 2002, the Company was not in compliance with the restrictive
covenants related to income targets and tangible net worth coverage and its
outstanding advances under the Credit Agreement exceeded its borrowing
base.  The Company received a waiver of certain restrictive covenants at
June 30, 2002 and renegotiated the terms of its existing external financing
arrangement.


<PAGE>  F-14


8.    INDEBTEDNESS (CONTINUED)

On September 27, 2002, the Company executed the Third Amendment to the Credit
Agreement (the "Third Amendment"). The Third Amendment increases the bank's
security interest in the Company's assets to include a first mortgage on the
Company's Methuen, Massachusetts facility. In addition, the total availability
for borrowings under the Credit Agreement was reduced to $14,000,000 at
September 30, 2002 and will be reduced to $12,000,000 by March 31, 2003. The
borrowing base was amended so as to be calculated as 80% of eligible accounts
receivable plus 70% of the appraised value of the Methuen, Massachusetts
facility, less amounts outstanding through letters of credit. The Third
Amendment also amends the restrictive covenants for periods subsequent to
June 30, 2002 to remove the interest coverage ratio, amend the definition of
minimum tangible net worth, and amend the future income targets. The Company
was in compliance with the restrictive covenants at June 30, 2002, as amended.
The Company has classified as a current liability on the consolidated balance
sheets, $160,000 of the amounts owed under the Credit Agreement due to the
reduction in the total availability for borrowings as amended by the Third
Amendment.

Parlex Shanghai Term Note - On February 26, 2002, Parlex Shanghai entered
into a short-term bank note bearing interest at 5.841%.  Jinling, a former
minority interest partner in Parlex Shanghai, guarantees the short-term
note.  Amounts outstanding under this short-term note total $2.1 million
and are included within the current portion of long-term debt on the
consolidated balance sheet for the year ended June 30, 2002.  The Company
provides a cross guarantee to Jinling for 100% of the term note.

Parlex Interconnect Term Notes - In December 2001 and May 2002, Parlex
Interconnect entered into two short-term bank notes bearing interest at
7.02%.  Parlex Shanghai guarantees the short-term notes.  Amounts
outstanding under these two short-term notes total $1.2 million and is
included within the current portion of long-term debt on the consolidated
balance sheet for the year ended June 30, 2002.

In June 2002, the Company's subsidiary, Parlex Interconnect, executed a
$5,000,000 Loan Agreement (the "Loan Agreement") with CITIC Ka Wah Bank
Limited, a Hong Kong bank.  Proceeds received under the Loan Agreement are to
be used exclusively for financing land, building, plant and machinery and
other working capital requirements and to prepay Parlex Interconnect's two
current short-term bank notes with combined outstanding balances of $1.2
million as of June 30, 2002.  As of June 30, 2002, no amounts were
outstanding under the Loan Agreement.  Borrowings under the Loan Agreement
accrue interest at a fixed rate equal to LIBOR plus a margin of 2.2%.
Interest is payable at the end of each interest period which varies from one
to six months.  As a condition of the approval of this Loan Agreement, the
Company's  subsidiary, Parlex Asia Pacific Ltd., and the Company has provided
a guarantee of the payment of this loan.  The Loan Agreement contains a cross
default provision that would permit the lender to accelerate the repayment of
Parlex Interconnect's obligation under the Loan Agreement in the event of the
Company's default on other financing arrangements.  As of August 31, 2002,
total borrowings were $3.1 million.  These borrowings were used to repay
local short-term bank notes of $1.2 million and fund future equipment and
working capital requirements.

9.    OTHER NONCURRENT LIABILITIES

Other noncurrent liabilities at June 30 consisted of:

<TABLE>
<CAPTION>

                                         2002            2001


                                   <c>             <c>
Deferred income taxes (Note 10)       $  350,919      $1,390,390
Deferred compensation                    976,571       1,051,884
                                      ----------      ----------

                                      $1,327,490      $2,442,274
                                      ==========      ==========
</TABLE>

Deferred compensation of $182,000 is to be paid within one year and is
included within accrued liabilities in the consolidated balance sheet at
June 30, 2002.


<PAGE>  F-15


10.   INCOME TAXES

Income (loss) before income taxes consisted of:

<TABLE>
<CAPTION>

                     2002               2001              2000


             <c>                <c>                <c>
Domestic        $(16,345,891)      $(13,537,847)      $ 9,327,873
Foreign           (1,378,155)         2,020,962         1,145,387
                ------------       ------------       -----------

Total           $(17,724,046)      $(11,516,885)      $10,473,260
                ============       ============       ===========
</TABLE>

The benefit (provision) for income taxes consisted of:

<TABLE>
<CAPTION>

                                             2002            2001             2000


               <c>                     <c>             <c>             <c>
Current:
                                State     $        -      $ -             $  (201,720)
                              Federal      2,288,093       2,821,486       (2,102,868)
                              Foreign        (17,771)       (194,971)        (396,953)
                                          ----------      ----------      -----------
                                           2,270,322       2,626,515       (2,701,541)

Deferred Tax:
                                State         83,844           7,442          (28,452)
                              Federal        475,116         129,358         (445,741)
                              Foreign        (41,919)              -                -
                                          ----------      ----------      -----------
                                             517,041         136,800         (474,193)

Tax Credits:
                                State        451,712         141,841          235,560
                              Federal      1,408,981         616,303          166,690
                                          ----------      ----------      -----------
                                           1,860,693         758,144          402,250

Effect on Tax Benefit
 (Expense) from Exercise
 of Stock Options:
                                State              -           7,555          (13,972)
                              Federal              -          64,218         (118,763)
                                          ----------      ----------      -----------
                                                   -          71,773         (132,735)

Tax Benefit from Operating
 Losses Carryforwards:
                                State        327,262         733,865                -
                              Federal      2,066,700       1,326,148                -
                              Foreign        313,109               -                -
                  Valuation Allowance       (500,000)       (200,000)               -
                                          ----------      ----------      -----------
                                           2,207,071       1,860,013                -
                                          ----------      ----------      -----------

Total                                     $6,855,127      $5,453,245      $(2,906,219)
                                          ==========      ==========      ===========
</TABLE>


<PAGE>  F-16


10.   INCOME TAXES (CONTINUED)

A reconciliation of the statutory federal income tax rate to the effective
income tax rate is as follows:

<TABLE>
<CAPTION>

                                                      2002       2001       2000


                                                   <c>        <c>        <c>
Statutory federal income tax rate                     (34)%      (34)%      34 %
State income taxes, net of federal tax benefit         (3)        (4)        2
Foreign income - not subject to taxation                2          -        (7)
Foreign sales corporation                               -         (1)       (2)
Tax credits                                            (5)        (7)       (4)
Valuation allowance on net operating loss
 carryforwards                                          3          2         -
Other                                                  (2)        (3)        5
                                                      ---        ---        --

Effective income tax rate                             (39)%      (47)%      28 %
                                                      ===        ===        ==
</TABLE>

The Company's China joint venture, Parlex Shanghai, was exempt from income
taxes for the two years ended December 31, 1998.  For the next three years,
the China joint venture was eligible for a 50% reduction in the statutory
income tax rate of 15%.  Accordingly, income tax of 7.5% was recorded for
the two years ended June 30, 2001 and 15% for the year ended June 30, 2002.

No provision for U.S. income taxes has been recorded on undistributed
earnings of Poly-Flex Circuits Limited (approximately $98,000 at June 30,
2002) because such amounts are considered permanently invested.


<PAGE>  F-17


10.   INCOME TAXES (CONTINUED)

Deferred income tax assets and liabilities at June 30 are attributable to
the following:

<TABLE>
<CAPTION>

                                                    2002             2001


                                             <c>              <c>
Deferred tax assets:
  Inventories                                   $ 1,488,945      $ 1,284,907
  Allowance for doubtful accounts                   431,496          689,688
  Goodwill                                           29,099           59,470
  Accruals                                        1,316,151          475,777
  Self-insurance                                    146,384           69,020
  Deferred compensation                             451,271          512,574
  Net operating loss carryforwards                4,767,084        2,060,013
  Valuation allowance                              (700,000)        (200,000)
  Tax credit carryforwards                        3,021,087        1,160,394
                                                -----------      -----------

                                                 10,951,517        6,111,843
                                                -----------      -----------

Deferred tax liabilities:
  Depreciation                                    4,761,141        4,121,057
  Accruals                                                -          272,325
  Prepaid expenses                                   94,760          207,650
                                                -----------      -----------

                                                  4,855,901        4,601,032
                                                -----------      -----------

Net deferred tax asset                          $ 6,095,616      $ 1,510,811
                                                ===========      ===========
</TABLE>

Tax credit carryforwards consist of research and development, alternative
minimum, and investment tax credits available for state and federal
purposes.  To the extent the credits are not currently utilized on the
Company's tax returns, deferred tax assets, subject to the considerations
about the need for a valuation allowance, are recognized for the
carryforward amounts.  Research and development tax credits, if not
utilized, will expire in the years 2008 through 2022. The Company's
alternative minimum tax and investment credits do not expire and can be
carried forward indefinitely.

The Company has available at June 30, 2002, federal and state net operating
loss carryforwards of approximately $9,979,000 and $24,463,000,
respectively, expiring beginning in 2022 and 2006, respectively.  A
valuation allowance has been established to reduce the deferred tax asset
recorded for certain state net operating loss carryforwards that may expire
unutilized through 2007.  The Company has foreign net operating losses
carryforwards of $2,087,000, which do not expire.

Income tax payments of approximately $600,000 and $2,469,000 were made in
2001 and 2000, respectively.  Income tax refunds of approximately
$3,348,000 were received in 2002.

11.   STOCKHOLDERS' EQUITY

Preferred Stock - The Board of Directors is authorized to establish one or
more series of preferred stock and to fix and determine the number and
conditions of preferred shares, including dividend rates, redemption and/or
conversion provisions, if any, preference and voting rights.  At June 30,
2002, the Board of Directors has not authorized any series of preferred
stock.


<PAGE>  F-18


11.   STOCKHOLDERS' EQUITY (CONTINUED)

Common Stock - On August 30, 2000, a special meeting of the Company's
stockholders approved an amendment to the Company's Restated Articles of
Organization increasing the number of authorized shares of common stock,
par value $.10 per share, from 10,000,000 shares to 30,000,000 shares.

Common Stock Offering - In June 2000, the Company sold 1,452,500 shares of
its common stock in an underwritten public offering of which 202,500 shares
were sold pursuant to an underwriters' over-allotment provision.  Proceeds
to the Company approximated $35,865,000, net of expenses associated with
the offering.  A portion of the proceeds was used by the Company to repay
all the outstanding indebtedness under the Company's Revolving Credit
Agreement and $15.0 million Term Loan.  The Company used the
remaining balance of the net proceeds for general corporate purposes,
including working capital.

Stock Option Plans - The Company has incentive and nonqualified stock
option plans covering officers, key employees and non-employee directors.
The options are generally exercisable commencing one year from the date of
grant and typically expire in either five or ten years, depending on the
plan.  The option price for the incentive stock options and for the
directors' plan is fair market value at the date of grant.  Non-employee
directors receive an automatic grant of 1,500 options annually.
Additionally, grants of up to 2,250 options annually, per director, may
also be made at the discretion of the Board of Directors.  Nonqualified
stock options are granted at fair market value or at a price determined by
the Board of Directors, depending on the plan.

On December 4, 2001 the stockholders approved the adoption of the 2001
Employees' Stock Option Plan (the "2001 Plan").  A total of 600,000 shares
of common stock (subject to adjustment for capital charges) in the
aggregate may be issued under the 2001 Plan.

On November 28, 2000, the Board of Directors approved a proposal to offer
certain employees a choice to cancel approximately 45,000 stock options
granted to them in February and March 2000 in exchange for new options to
purchase 75% of the original number of shares of stock.  The new options
were granted six months and one day from the date the old options were
cancelled.  The exercise price of the new options was the market price on
the grant date. The exchange offer was not available to members of the
Board of Directors or executive officers.

At June 30, 2002, there were 846,443 shares reserved for future grants for
all of the above-mentioned plans.


<PAGE>  F-19


11.   STOCKHOLDERS' EQUITY (CONTINUED)

Stock Option Plans (Continued)

The following is a summary of activity for all of the Company's stock
option plans:

<TABLE>
<CAPTION>

                                      Weighted-
                                      Average
                         Shares       Exercise
                         Under        Price Per      Shares
                         Option         Share      Exercisable


                      <c>           <c>           <c>
July 1, 1999             243,630       $12.38        105,244
  Granted                167,000        23.79
  Surrendered             (5,438)       15.12
  Exercised              (42,235)        6.18
                         -------       ------

June 30, 2000            362,957        11.97        118,832
  Granted                 59,250        11.81
  Surrendered            (66,875)       29.71
  Exercised              (27,332)        6.81
                         -------        -----

June 30, 2001            328,000        15.76        154,562
  Granted                160,800        12.30
  Surrendered            (18,050)       14.53
                         -------       ------

June 30, 2002            470,750       $14.63        229,370
                         =======       ======        =======
</TABLE>

The following table sets forth information regarding options outstanding at
June 30, 2002:

<TABLE>
<CAPTION>

                                Options Outstanding              Options Exercisable
                     ----------------------------------------    -------------------
                                     Weighted-
                                      Average       Weighted-              Weighted-
                                     Remaining       Average                Average
Exercise               Number       Contractual     Exercise                Exercise
Prices               Outstanding    Life (Years)      Price      Number       Price


                    <c>              <c>          <c>         <c>          <c>
$5.67 - $6.67           21,000          2.7          $ 5.96       21,000      $ 5.96
10.00 - 10.45           25,500          8.3           10.28       10,000       10.11
12.05 - 13.25          243,500          8.2           12.45       65,620       12.57
15.50 - 16.25           81,250          7.0           16.17       44,250       16.11
18.75 - 19.13           77,500          5.4           18.79       77,500       18.79
22.00                    2,000          7.9           22.00        1,000       22.00
32.75                   20,000          7.7           32.75       10,000       32.75
                       -------          ---          ------      -------      ------
$5.67 - $32.75         470,750          7.2          $14.63      229,370      $15.56
                       =======          ===          ======      =======      ======
</TABLE>

As described in Note 2, the Company uses the intrinsic-value method in
accordance with APB Opinion No. 25 to measure compensation expense
associated with grants of stock options to employees.  Had the Company used
the fair-value method to measure compensation, the Company's net (loss)
income and diluted income per share would have been ($11,233,000) or
($1.78) per share in 2002, ($7,108,000) or ($1.13) per share in 2001 and
$5,439,000 or $1.10 per share in 2000.


<PAGE>  F-20


11.   STOCKHOLDERS' EQUITY (CONTINUED)

Stock Option Plans (Continued)

The fair value of each stock option is estimated on the date of grant using
the Black-Scholes option-pricing model.  Key assumptions used to apply this
option-pricing model are as follows:

<TABLE>
<CAPTION>

                                               2002           2001           2000


                                          <c>            <c>            <c>
Average risk-free interest rate                   4.1%           5.6%           5.6%
Expected life of option grants               3.5 years      2.5 years      2.5 years
Expected volatility of underlying stock            74%            88%            74%
Expected dividend rate                            None           None           None
</TABLE>

The weighted-average fair value of options granted in 2002, 2001 and 2000
was $6.72, $6.46, and $11.57, respectively.

The option-pricing model was designed to value readily tradable stock
options with relatively short lives.  The options granted to employees are
not tradable and have contractual lives of 10 years.  However, management
believes that the assumptions used and the model applied to value the
awards yield a reasonable estimate of the fair value of the grants made
under the circumstances.

Accumulated Other Comprehensive Income (Loss) - The Company reports
comprehensive income (loss) in accordance with the provisions of SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards
for reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general-purpose
financial statements.  The following components and changes in balances of
accumulated other comprehensive income (loss) are as follows:

<TABLE>
<CAPTION>

                              Foreign                          Accumulated
                             Currency         Unrealized          Other
                            Translation     Gains (Losses)    Comprehensive
                            Adjustments     on Investments    Income (Loss)


                          <c>               <c>       <c>
Balance, July 1, 1999        $  12,992         $  1,886         $  14,878

  Change in balance           (136,020)          (1,886)         (137,906)
                             ---------         --------         ---------

Balance, June 30, 2000        (123,028)               -          (123,028)

  Change in balance           (539,149)          34,752          (504,397)
                             ---------         --------         ---------

Balance, June 30, 2001        (662,177)          34,752          (627,425)

  Change in balance             380,533          (34,752)         345,781
                             ---------         --------         ---------

Balance, June 30, 2002       $(281,644)        $      -         $(281,644)
                             =========         ========         =========
</TABLE>


<PAGE>  F-21


11.   STOCKHOLDERS' EQUITY (CONTINUED)

Accumulated Other Comprehensive Income (Loss) (Continued)

A summary of the changes in unrealized gains (loss) in short-term
investments is as follows for the years ended June 30:

<TABLE>
<CAPTION>

                                                               2002           2001         2000


                                                          <c>            <c>          <c>
Unrealized gains on short-term investments:
 Unrealized holding gains arising during the year            $      -       $34,752      $     -

 Less reclassification adjustment for (loss)
 gains realized in net income                                 (34,752)            -       (1,886)
                                                             --------       -------      -------

Net unrealized gains (losses) on short-term investments      $(34,752)      $34,752      $(1,886)
                                                             ========       =======      =======
</TABLE>

12.   BENEFIT PLAN

The Company sponsors a 401(k) Savings Plan (the "Plan") covering all
domestic employees of the Company who have three consecutive months of
service and have attained the age of 21.  Matching employer contributions
equal 50% of the first 8% of employee contributions and vest 100% after
three complete years of service.  Effective September 1, 2001, the Company
suspended the employer matching contribution.  The Company contributed
approximately $70,000, $492,000 and $26,000 to the Plan for the years ended
June 30, 2002, 2001 and 2000, respectively.

13.   COMMITMENTS AND CONTINGENCIES

Leases - The Company leases certain property and equipment under agreements
generally with initial terms from three to five years with renewal options.
Rental expense for each of the years ended June 30, 2002, 2001 and 2000
approximated $1,458,000, $1,378,000 and $798,000, respectively.  Future
payments under noncancelable capital and operating leases, including
payments related to the Salem, NH facility which will be exited in fiscal
2003 are:

<TABLE>
<CAPTION>

                                                         Capital       Operating
                                                         Leases         Leases


                                                      <c>          <c>
2003                                                     $97,715      $1,458,926
2004                                                           -       1,328,469
2005                                                           -         462,042
2006                                                           -         405,422
2007                                                           -         412,622
Thereafter                                                     -         419,822
                                                         -------      ----------

Total minimum lease payments                              97,715       4,487,303
                                                                      ==========
Less amounts representing interest                        (7,238)
                                                         -------

Present value of net minimum lease payments               90,477
Current maturities of capitalized lease obligations       90,477
                                                         -------

Portion of capitalized lease obligations due
 after one year                                          $     -
                                                         =======
</TABLE>


<PAGE>  F-22


13.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

Litigation - From time to time, the Company is subject to various legal
proceedings and claims, either asserted or unasserted, which arise in the
ordinary course of business.  While the outcome of these claims cannot be
predicted with certainty, management is not aware of any current legal
matters that would have a material adverse effect on the Company's
consolidated financial position, results of operations, or cash flows.

14.   BUSINESS SEGMENT, MAJOR CUSTOMER AND INTERNATIONAL OPERATIONS

The Company operates within a single segment of the electronics industry as
a specialist in the interconnection and packaging of electronic equipment
with its product lines of flexible printed circuits, laminated cable, and
related assemblies.  The Company organizes itself as one segment reporting
to the chief operating decision maker, the Chief Executive Officer.
Revenue consists of product sales, license fees, and royalty income.

    The Company had two customers which individually accounted for 10% of
the Company's revenues in 2000.  No other revenues from a single customer
exceeded 10% of the Company's revenues in 2002, 2001, or 2000.

The Company had two customers which individually accounted for more than
10% of the Company's accounts receivables in 2002.  No other customers
accounted for more than 10% of accounts receivable in 2002, 2001, or 2000.

Summarized information relating to international operations is as follows:

<TABLE>
<CAPTION>

                                 2002              2001             2000


                          <c>              <c>               <c>
Revenues:
  United States              $56,138,749      $ 62,803,825      $ 59,001,502
  Canada                       1,972,938         5,888,696        17,262,614
  China                        3,614,000         6,576,148         5,434,875
  Europe                      15,871,637        19,585,733        13,186,932
  Other                        9,458,240         8,765,787         6,952,821
                             -----------      ------------      ------------

Total revenues               $87,055,564      $103,620,189      $101,838,744
                             ===========      ============      ============

The principal product
 group sales were:
  Flexible circuits          $70,046,402      $ 81,288,991      $ 80,047,383
  Laminated cables            16,958,851        22,137,651        19,904,759
                             -----------      ------------      ------------

Product sales                $87,005,253      $103,426,642      $ 99,952,142
                             ===========      ============      ============

Long-lived assets:
  United States              $47,600,687      $ 47,938,826      $ 51,652,326
                             ===========      ============      ============

  China                      $10,738,185      $  5,623,713      $  3,427,673
                             ===========      ============      ============

  United Kingdom             $ 3,275,430      $  3,354,652      $  4,134,371
                             ===========      ============      ============
</TABLE>


<PAGE>  F-23


15.   SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data are as follows (in thousands except per
share amounts):

<TABLE>
<CAPTION>
                              First       Second        Third      Fourth (A)


                          <c>          <c>          <c>          <c>
2002 Quarters

Revenues                     $21,636      $20,684      $21,278      $23,458
Gross profit (loss)              569         (140)          (7)      (3,660)
Net (loss)                    (1,161)      (2,682)      (1,667)      (4,878)
Net (loss) per share:
  Basic                        (0.18)       (0.43)       (0.26)       (0.77)
  Diluted                      (0.18)       (0.43)       (0.26)       (0.77)

2001 Quarters

Revenues                     $29,689      $27,001      $24,889      $22,041
Gross profit (loss)            5,555        1,615          (15)        (995)
Net income (loss)                872       (2,274)      (3,550)      (1,247)
Net income (loss) per share:
  Basic                          .14        (0.36)       (0.56)       (0.21)
  Diluted                        .14        (0.36)       (0.56)       (0.21)
</TABLE>

(A)   Fourth quarter 2001 net income includes a pretax charge of $2.2
      million related to severance, and increases in reserves for inventory
      and the allowance for bad debts.  In addition, the Company recorded a
      $4.7 million change in its income tax benefit reflecting net
      operating loss carryforwards and additional tax credits.

Fourth quarter 2002 net loss includes a pretax charge of $4.9 million
related to a reserve for relocating the Salem, New Hampshire operations to
Methuen, Massachusetts and increases in inventory reserves and inventory
write-downs.


<PAGE>  F-24


                                  Part III

Item 9. Changes In and Disagreements With Accountants on Accounting and
-----------------------------------------------------------------------
        Financial Disclosure
        --------------------

None

Item 10. Directors and Executive Officers of the Registrant
-----------------------------------------------------------

The information required by this Item is incorporated by reference from the
information under the captions "Election of Directors", "Board of Directors
Meetings and Committees of the Board", "Executive Officers" and "Security
Ownership of Certain Beneficial Owners and Management" in our definitive
proxy statement to be filed with the Commission within 120 days of June 30,
2002.

Item 11. Executive Compensation
-------------------------------

The information required by this Item is incorporated by reference from the
information under the captions "Compensation of Executive Officers" and
"Board of Directors Meetings and Committees of the Board" in our definitive
proxy statement to be filed with the Commission within 120 days of June 30,
2002.

Item 12. Security Ownership of Certain Beneficial Owners and Management
-----------------------------------------------------------------------

The information required by this Item is incorporated by reference from the
information under the caption "Security Ownership of Certain Beneficial
Owners and Management" in our definitive proxy statement to be filed with
the Commission within 120 days of June 30, 2002.

Item 13. Certain Relationships and Related Transactions
-------------------------------------------------------

We retain as our general counsel the law firm of Kutchin & Rufo, P.C. to
perform legal services on our behalf. Payments made by us to Kutchin &
Rufo, P.C. in fiscal 2002 were approximately $65,000. Edward D. Kutchin, a
shareholder in the professional corporation of Kutchin & Rufo, P.C., was
elected to the position of Clerk on August 27, 2002 and is the son-in-law
of Herbert W. Pollack, the Chairman of the Board of Directors.

                                   Part IV

Item 14. Exhibits, Financial Statement Schedule And Reports on Form 8-K
-----------------------------------------------------------------------

      (a)

      1. Consolidated Financial Statements

      The Consolidated Financial Statements are filed as part of this
report.

      2. Consolidated Financial Statement Schedules

      The schedule is filed as part of this report and is set forth below:


<PAGE>  28


                      VALUATION AND QUALIFYING ACCOUNTS
              For the Years Ended June 30, 2002, 2001 and 2000

<TABLE>
<CAPTION>

                                                          Additions
                                 Balance at      Charges to      Charges to                       Balance at
                                 Beginning        Cost and         Other                            End of
                                  of Year         Expenses        Accounts      Deductions           Year


                             <c>              <c>              <c>          <c>               <c>
Allowance for Bad Debts

June 30, 2002                   $ 1,896,615      $   355,490      $     -      $(1,036,927)      $ 1,215,178
June 30, 2001                       404,000        1,877,743          249         (385,377)        1,896,615
June 30, 2000                       255,000          649,000            -         (500,000)          404,000
------------------------------------------------------------------------------------------------------------
Accumulated Amortization of Goodwill

June 30, 2002                       234,477                -            -                -           234,477
June 30, 2001                       220,100          250,284            -         (235,907)          234,477
June 30, 2000                        16,800          219,162            -          (15,862)          220,100
------------------------------------------------------------------------------------------------------------
Accumulated Depreciation

June 30, 2002                    34,379,848        6,408,138            -       (1,307,229)       39,480,757
June 30, 2001                    28,114,968        5,919,839      345,041                -        34,379,848
June 30, 2000                    23,915,018        4,491,855            -         (291,905)       28,114,968
------------------------------------------------------------------------------------------------------------
Inventory Obsolescence

June 30, 2002                     3,494,094          643,942            -         (616,335)        3,521,701
June 30, 2001                       711,709        2,782,385            -                -         3,494,094
June 30, 2000                             -          711,709            -                -           711,709
------------------------------------------------------------------------------------------------------------
</TABLE>

      All other schedules are omitted because of the absence of conditions
      under which they are required or because the required information is
      included in the Consolidated Financial Statements or notes thereto.

      3. Exhibits

      See Index to Exhibits on page 32 of this report.

      The exhibits listed below are either filed herewith or incorporated
      by reference in this report.

      (b) Reports on Form 8-K

      We did not file any current report on Form 8-K during the quarter
      ended June 30, 2002.


<PAGE>  29


                                 SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on
September 27, 2002.

Parlex Corporation

By */s/ Peter J. Murphy
   ------------------------
   Peter J. Murphy, Chief Executive Officer

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

<TABLE>
<CAPTION>

         Signature                        Title                        Date
         ---------                        -----                        ----


                             <c>                               <c>
* /s/ Herbert W. Pollack        Chairman of the Board             September 27, 2002
---------------------------
Herbert W. Pollack

* /s/ Peter J. Murphy           Director and Chief Executive      September 27, 2002
---------------------------     Officer (Principal Executive
Peter J. Murphy                 Officer)

* /s/ Jonathan R. Kosheff       Treasurer and Chief Financial     September 27, 2002
---------------------------     Officer (Principal Financial
Jonathan R. Kosheff             and Accounting Officer)

* /s/ Sheldon A. Buckler        Director                          September 27, 2002
---------------------------
Sheldon A. Buckler

* /s/ Richard W. Hale           Director                          September 27, 2002
---------------------------
Richard W. Hale

* /s/ M. Joel Kosheff           Director                          September 27, 2002
---------------------------
M. Joel Kosheff

* /s/ Lester Pollack            Director                          September 27, 2002
----------------------------
Lester Pollack

* /s/ Benjamin M. Rabinovici    Director                          September 27, 2002
----------------------------
Benjamin M. Rabinovici

* /s/ Edward D. Kutchin         Attorney-in-Fact                  September 27, 2002
----------------------------
Edward D. Kutchin
</TABLE>


<PAGE>  30


                                CERTIFICATION

I, Peter J. Murphy, certify that:

1.    I have reviewed this annual report on Form 10-K of Parlex
      Corporation;

2.    Based on my knowledge, this annual report does not contain any untrue
      statement of a material fact or omit to state a material fact
      necessary to make the statements made, in light of circumstances
      under which such statements were made, not misleading with respect to
      the period covered by this annual report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this annual report, fairly present in all
      material respects the financial condition, results of operations and
      cash flows of the registrant as of, and for, the periods presented in
      this annual report;

4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
      and have:

a)    designed such disclosure controls and procedures to ensure that
      material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this annual report
      is being prepared;

b)    evaluated the effectiveness of the registrant's disclosure controls
      and procedures as of a date within 90 days prior to the filing date
      of this annual report (the "Evaluation Date"); and

c)    presented in this annual report our conclusions about the
      effectiveness of the disclosure controls and procedures based on our
      evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed,
      based on our most recent evaluation, to the registrant's auditors and
      the audit committee of registrant's board of directors (or persons
      performing the equivalent functions):

a.    all significant deficiencies in the design or operation of internal
      controls which could adversely affect the registrant's ability to
      record, process, summarize and report financial data and have
      identified for the registrant's auditors any material weaknesses in
      internal controls; and

b.    any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal
      controls; and

6.    The registrant's other certifying officers and I have indicated in
      this annual report whether there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation,
      including any corrective actions with regard to significant
      deficiencies and material weaknesses.

                          Date: September 27, 2002

                            * /s/ Peter J. Murphy
                            ---------------------
                  Peter J. Murphy, Chief Executive Officer
                        (Principal Executive Officer)


<PAGE>  31


                                CERTIFICATION

I, Jonathan R. Kosheff, certify that:

1.    I have reviewed this annual report on Form 10-K of Parlex
Corporation;

2.    Based on my knowledge, this annual report does not contain any untrue
      statement of a material fact or omit to state a material fact
      necessary to make the statements made, in light of circumstances
      under which such statements were made, not misleading with respect to
      the period covered by this annual report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this annual report, fairly present in all
      material respects the financial condition, results of operations and
      cash flows of the registrant as of, and for, the periods presented in
      this annual report;

4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
      and have:

a)    designed such disclosure controls and procedures to ensure that
      material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this annual report
      is being prepared;

b)    evaluated the effectiveness of the registrant's disclosure controls
      and procedures as of a date within 90 days prior to the filing date
      of this annual report (the "Evaluation Date"); and

c)    presented in this annual report our conclusions about the
      effectiveness of the disclosure controls and procedures based on our
      evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed,
      based on our most recent evaluation, to the registrant's auditors and
      the audit committee of registrant's board of directors (or persons
      performing the equivalent functions):

a.    all significant deficiencies in the design or operation of internal
      controls which could adversely affect the registrant's ability to
      record, process, summarize and report financial data and have
      identified for the registrant's auditors any material weaknesses in
      internal controls; and

b.    any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal
      controls; and

6.    The registrant's other certifying officers and I have indicated in
      this annual report whether there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation,
      including any corrective actions with regard to significant
      deficiencies and material weaknesses.

                          Date: September 27, 2002

                          * /s/ Jonathan R. Kosheff
                          -------------------------
                Jonathan R. Kosheff, Chief Financial Officer
                        (Principal Financial Officer)


<PAGE>  32


                                EXHIBIT INDEX

The exhibits listed below are filed with or incorporated by reference in
the Annual Report on Form 10-K.

Exhibit
  No.                    Description
-------                  -----------

3-A        Restated Articles of Organization as amended (dated August 2,
           1983); (filed as Exhibits 3-A and 3-B to the Company's
           Registration Statement on Form S-1, file No. 2-85588, and
           incorporated herein by reference).

3-B        Articles of Amendment to Restated Articles of Organization,
           dated December 1, 1987; (filed as Exhibit 10-Q to Form 10-K for
           the fiscal year ended June 30, 1988).

3-C        Bylaws; (filed as Exhibit 3-C to the Company's Registration
           Statement on Form S-1, file No. 2-85588, and incorporated herein
           by reference).

3-D        Articles of Amendment to Restated Articles of Organization,
           dated October 21, 1997; (filed as Exhibit 3-D to Form 10-Q for
           the quarter ended December 28, 1997).

10-A       1985 Employees' Nonqualified Stock Option Plan dated December 2,
           1985*; (filed as Exhibit 10-L to Form 10-K for the fiscal year
           ended June 30, 1986).

10-B       Employment Agreement between Parlex Corporation and Mr. Herbert
           W. Pollack, dated May 1, 1986;* (filed as Exhibit 10-M to Form
           10-K for the fiscal year ended June 30, 1986).

10-C       1989 Outside Directors' Stock Option Plan*; (filed as Exhibit
           10-Z to Form 10-K for the fiscal year ended June 30, 1991).

10-D       1989 Employees' Stock Option Plan*; (filed as Exhibit 10-AA to
           Form 10-K for the fiscal year ended June 30, 1991).

10-E       Chinese Joint Venture Contract, Articles of Association, and
           Agreement of Technology License and Technical Service dated May
           29, 1995; (filed as Exhibit 10-AH to Form 10-K for the fiscal
           year ended June 30, 1995). Confidential treatment has been
           granted for portions of this exhibit.

10-F       Manufacturing and Sales Agreement between Samsung Electro
           Mechanics Co., Ltd. and Parlex Corporation dated September 29,
           1994; (filed as Exhibit 10-AK to Form 10-K for the fiscal year
           ended June 30, 1995). Confidential treatment has been granted
           for portions of this exhibit.

10-H       License Agreement between Parlex Corporation and Polyclad
           Laminates, Inc., effective June 1, 1996; (filed as Exhibit 10-AN
           to Form 10-K for the fiscal year ended June 30, 1996).
           Confidential treatment has been granted for portions of this
           exhibit.

10-I       Agreement between Parlex Corporation and Allied Signal Laminate
           Systems, Inc., effective May 5, 1995; (filed as Exhibit 10-AO to
           Form 10-K for the fiscal year ended June 30, 1996). Confidential
           treatment has been granted for portions of this exhibit.

10-J       License Agreement between Parlex Corporation and Pucka
           Industrial Co., Ltd., effective July 1, 1996; (filed as Exhibit
           10-AP to Form 10-K for the fiscal year ended June 30, 1996).
           Confidential treatment has been granted for portions of this
           exhibit.


<PAGE>  33


10-K       Agreement of Lease between PVP-Salem Associates, L.P. and Parlex
           Corporation dated August 12, 1997; (filed as Exhibit 10-L to
           Form 10-K for the fiscal year ended June 30, 1997).

10-M       Patent Assignment Agreement between Parlex Corporation and
           Polyonics, Inc. dated June 16, 1997; (filed as Exhibit 10-N to
           Form 10-K for the fiscal year ended June 30, 1997).

10-N       1996 Outside Directors' Stock Option Plan*; (filed as Exhibit
           10-O to Form 10-K for the fiscal year ended June 30, 1997).

10-O       Shelter Service Agreement between Parlex Corporation and
           Offshore International Inc. dated March 6, 1998; (filed as
           Exhibit 10-O to Form 10-K for the fiscal year ended June 30,
           1998).

10-P       Commercial Loan Agreement dated November 12, 1997; (filed as
           Exhibit 10-P to Form 10-K for the fiscal year ended June 30,
           1998).

10-Q       Amendment to Agreement between Parlex Corporation and Allied
           Signal Laminate Systems, Inc., effective May 5, 1999;(filed as
           Exhibit 10-Q to Form 10-K for the fiscal year ended June 30,
           1999).

10-R       Employment Agreement between Parlex Corporation and Peter J.
           Murphy, dated September 1, 1999;(filed as Exhibit 10-R to Form
           10-K for the fiscal year ended June 30, 1999).

10-S       Loan Agreement dated as of March 1, 2000 between Parlex
           Corporation and Fleet National Bank (filed as Exhibit 10-S to
           Form 8-K dated March 15, 2000 and filed with the Securities and
           Exchange Commission on March 15, 2000).

10-T       Patent Assignment Agreement between Parlex Corporation and
           Polyclad Laminates, Inc., dated January 20, 2000; (filed as
           Exhibit 10-T to Form 10-K for the fiscal year ended June 30,
           2000).

10-U       First Amendment dated September 28, 2001 to Loan Agreement dated
           as of March 1, 2000 between Parlex Corporation and Fleet
           National Bank; (filed as Exhibit 10-U to Form 10-Q dated
           September 30, 2001 and filed with the Securities and Exchange
           Commission on November 9, 2001).

10-V       Parlex Corporation 2001 Employees' Stock Option Plan*; (filed as
           Exhibit 10-V to Form 10-Q dated December 30, 2001 and filed with
           the Securities and Exchange Commission on February 12, 2002).

10-W       Second Amendment dated April 16, 2002 to Loan Agreement dated as
           of March 1, 2000 between Parlex Corporation and Fleet National
           Bank; (filed as Exhibit 10-W to Form 10-Q dated March 31, 2002
           and filed with the Securities and Exchange Commission on May 14,
           2002).

10-X       Employment Agreement between Parlex Corporation and Herbert W.
           Pollack dated September 1, 2000*; (filed herewith).

21.1       Subsidiaries of the Registrant; filed herewith.

23.1       Consent of Independent Auditors; filed herewith.


<PAGE>  34


24.1       Powers of Attorney; filed herewith.

<FN>
*   Denotes management contract or compensatory plan or arrangement.
</FN>


<PAGE>  35