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

                                    FORM 10-K

              Annual Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

                         Commission File Number 0-12283

                    For the fiscal year ended March 31, 2000

                                ZONIC CORPORATION
             (Exact name of registrant as specified in its charter)

                         An Ohio Corporation 31-0791199
      (State or other jurisdiction of (I.R.S. Employer Identification No.)
                         incorporation or organization)

    Park 50 TechneCenter, 50 W. TechneCenter Drive, Milford, Ohio 45150-9777
               (Address of principal executive offices) (Zip Code)

        Registrant's telephone number, including area code (513)248-1911

        Securities registered pursuant to Section 12(b) of the Act: None

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

                        Common Shares, Without Par Value
                                 Title of Class

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 the voting stock held by  non-affiliates  of the
registrant as of June 12, 2000 was $316,263.

The number of shares  outstanding of the  registrant's  Common Shares as of June
12, 2000 was 3,044,136.


                       DOCUMENTS INCORPORATED BY REFERENCE
--------------------------------------------------------------------------------

Portions  of the  Registrant's  Proxy  Statement  for the August 9, 2000  Annual
Meeting of Shareholders are incorporated by reference in Part III.



         Special Cautionary Notice Regarding Forward-Looking Statements
--------------------------------------------------------------------------------
Certain  of the  matters  discussed  under the  captions  "Business,"  "Selected
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operation" may constitute forward-looking statements for purposes
of the  Securities  Act of 1933 and the  Securities  Exchange  Act of  1934,  as
amended,  and as such may involve  known and unknown  risks,  uncertainties  and
other factors which may cause the actual results, performance or achievements of
the Company to be  materially  different  from future  results,  performance  or
achievements expressed or implied by such forward-looking statements.  Important
factors that could cause the actual  results,  performance or achievement of the
Company to differ materially from the Company's  expectations  include,  without
limitation, the following: 1) the Company is unable to improve existing products
or develop new products  which satisfy needs in the  Company's  markets;  2) the
Company is unable to penetrate  new markets;  3) the Company is unable to retain
existing personnel or hire additional  personnel;  4) the industries the Company
serves experience less rapid growth than  anticipated;  5) the Company is unable
to obtain  supplies on a timely basis from its limited  number of suppliers;  6)
new  competitors  enter the markets the Company  serves or existing  competitors
increase  their  marketing  efforts;  and 7) the  Company  is  unable  to obtain
additional  debt or equity  financing on favorable  terms, if at all, to satisfy
its  cash  requirements.   All  written  or  oral   forward-looking   statements
attributable  to the Company are expressly  qualified in their  entirety by such
factors.

                                     PART I

Item 1.  Business.

General

Zonic Corporation  ("Zonic" or the "Company") designs,  manufactures and markets
integrated standard systems, which are used to measure and analyze the vibration
and noise  characteristics  of  mechanical  structures.  These  systems are used
worldwide in product design conformance  testing,  manufactured  product quality
verification,  and operating  machine  condition  monitoring.  Key  technologies
utilized by the  Company  include  personal  computers  and  related  peripheral
equipment, multi-channel data acquisition, digital signal processing, structural
analysis, noise analysis, and rotating machinery analysis.

In product design conformance  testing, the Company's systems are used by highly
skilled engineers to reduce product  development time and enhance the quality of
their  company's  products  during  the  design  phase.  In  manufacturing,  the
Company's  systems  are used both to measure  manufactured  product  quality and
provide evidence of conformance to quality standards.  The Company's  monitoring
systems allow  maintenance and reliability  engineers  responsible for turbines,
compressors, and other rotating equipment to monitor wear, schedule maintenance,
and optimize operating performance.

During the past year,  the  Company has  focused on  manufacturing  applications
primarily  in the areas of machine  condition  monitoring  and  quality  product
production  monitoring.  The  Company has been  developing  new  products  which
utilize certain existing products to satisfy needs which are currently not being
met in certain niche segments of these markets.

Industry-Applications and Technology

Product  Design  Conformance  Testing.  Increasing  global  competition  in  the
industries  served by the Company has made the development  and  introduction of
new  products  on a  timely,  cost  effective  basis  vital to a  manufacturer's
success.  As a result,  product design  engineers are  constantly  challenged to
shorten product design cycles and improve product  quality.  Computer based test
systems are a vital tool in helping engineers achieve these goals.

The absence of noise and vibration in mechanical  structures is a key measure of
product  quality.  Advances in mechanical  design  software have enabled  design
engineers to predict and estimate  noise and vibration  characteristics  through
simulation  algorithms.  Accordingly,  quality  standards have been increasingly
stringent and  verification  of a product's  conformance  to these  standards is
crucial to a manufacturer.

Manufacturing  Testing Systems.  World-class  manufacturing  requires consistent
quality.  At all levels of the  manufacturing  process,  manufacturers are being
forced by their customers to not only  incrementally  improve quality,  but also
provide  documentary  evidence of the improvement.  Interest is growing in using
100 percent parts inspection as a method of accomplishing  zero-defect  delivery
of parts.  Although  there are a variety of  techniques  available  to inspect a
manufactured  component,  vibration analysis techniques offer the advantage of a
non-invasive,  non-destructive  means to detect  cracks  and  internal  flaws of
components.  Further,  vibration  measurements  of  equipment  integral  to  the
manufacture  of components or the end product can be used as a means to document
the process under which that component or end product was produced.

When a vibration analysis system is used for non-destructive production testing,
the vibration  characteristics of an approved component are measured and used as
a baseline.  As each  component is  produced,  it is tested and compared to that
baseline. Components that do not match the baseline can be rejected or receive a
more  thorough  inspection  and  analysis.  A metal  casting  is an example of a
component for which this technique is applicable.  When  inspection on a unit is
not practical, such as coiled metals, the machinery producing the product can be
monitored  for  vibration  characteristics,  which  affect  the  quality  of the
product.  In both cases,  data specific to the manufactured item can be retained
as evidence of the  condition of the product at that point in the  manufacturing
process.

Machinery Monitoring Systems (MMS).  Turbines,  compressors,  industrial blowers
and other types of rotating machinery designed to operate  continuously for many
years are used extensively in the petrochemical and power generation industries.
Breakdown of the  machinery  can be extremely  expensive,  both in terms of lost
production and repair cost.

Machinery  Monitoring  Systems  utilize  high-speed  digital  signal  processing
technology  and  sophisticated   monitoring  software  to  continuously  monitor
vibration,  temperature,  pressure and flows in this type of machinery.  Current
operating  characteristics  can be  compared  to a  baseline  obtained  when the
machine  was new.  This  comparison  can be used to  monitor  wear in  bearings,
blades, and other parts, and to predict failures.  The analysis can be conducted
automatically  without the presence of a skilled engineer at the equipment site.
Predictions can be used to schedule  maintenance before catastrophic  breakdowns
occur.

Monitoring rotating machinery requires rapid collection  management and analysis
of vast amounts of data. Once this data is available,  it can be used to monitor
the performance and efficiency of the machinery.  Machinery  Monitoring  Systems
can be developed to adjust  operating  parameters  of the  equipment to maximize
output and minimize fuel cost.

Relationship

In 1988, the Company  entered into a relationship  with A&D Co. Ltd., a Japanese
instrument manufacturer,  ("A&D"). As part of this relationship,  A&D acquired a
28%  ownership  interest in the  Company.  The Company had entered  into various
joint product  development  arrangements,  marketing  arrangements  and a credit
agreement with A&D most of which have been terminated in the past few years.

Pursuant to the terms of a Subscription  Agreement  between the Company and A&D,
dated  January 30, 1998,  A&D  purchased  12,000  shares of Class A  Non-Voting,
Redeemable  Convertible  Preferred  Stock of the  Company  ("Class  A  Preferred
Stock") at a price of $100 per share.  The Class A Preferred  Stock is currently
convertible at the rate of one Class A Preferred  Share for 100 shares of common
stock.  Proceeds of $1,200,000  from this sale were used to repay a bank loan of
$1,078,000,  and related accrued  interest of $26,757 and to settle a portion of
the loans payable to A&D of $95,243. In addition,  A&D purchased 6,000 shares of
Class B Non-Convertible,  Redeemable,  Non-Voting Preferred Stock of the Company
at a price  of $200  per  share  with an  annual  dividend  equal  to 20% of the
Company's annual after-tax earnings excluding non-recurring earnings and charges
("Class B Preferred  Stock").  Proceeds of  $1,200,000  from the sale of Class B
Preferred  Stock were used to repay a short-term  bank loan of $600,000 that A&D
guaranteed,  the balance of loans  payable to A&D totaling  $538,203 and related
accrued  interest of $61,797.  In the event of  liquidation  or  dissolution  of
Zonic,  the Class A Preferred  Stock is entitled to receive $100 per share,  and
the Class B  Preferred  Stock $200 per  share,  before  holders of common  stock
receive any  amounts.  Both  classes of  Preferred  Stock may be redeemed by the
Company upon thirty days prior notice, the Class A shares at $100 per share, and
the Class B shares at $200 per share.  Pursuant to the  Subscription  Agreement,
the Credit  Agreement  between the Company and A&D dated December 7, 1992, under
which  A&D made  loans to the  Company,  was  terminated  and A&D  released  its
security interest in the Company's assets.

Products

Vibration  and  noise  analysis  systems  require  both  hardware  and  analysis
software. The Company provides both complete systems and components depending on
the specific customer's requirements.  In addition to product sales, the Company
offers  services  to its  customers  in the form of  training,  consulting,  and
extended warranty and equipment repairs.

Products offered by the Company include:

A&D 3527 Series - This is a line of single  channel,  hand-held,  FFT  analyzers
which the  Company  imports  from A&D in Japan for  distribution  in the Western
Hemisphere.  The  products are used both as  engineering  test  instruments  and
incorporated  in  production  testing  systems and range in price from $4,000 to
$8,000 depending on options and accessories.

Zonic  Medallion  Series - Originally  introduced  in February 1996 as a mobile,
eight  channel  FFT  analyzer,  the  Medallion  series has been  expanded by the
Company to two, four,  six and in the last fiscal year,  sixteen  channels.  The
Medallion  has also  served  as the basic  platform  for the  Company's  Machine
Condition  Monitoring  Systems  and Non  Destructive  test  Systems.  The  basic
analyzer consists of a signal conditioning module which interfaces to a personal
computer via a PCMCIA card which resides in the  customers'  personal  computer.
The software  controlling the analyzer and providing the user interface  depends
on the intended use of the analyzer.

For general structural analysis such as design conformance  testing, the Company
provides it's  Fundamental  Acquisition  Software,  or FAS, with every Medallion
system.  The  capabilities of the system can be extended through the purchase of
additional,  add-on packages.  In the case of general structural  analysis,  the
Company's RECORDER software turns the system into a multi-channel digital signal
recorder  with the  personal  computer  hard drive  serving as the data  storage
medium. For general rotating machinery analysis,  the Company's ROTATE software,
which was  originally  developed for the Company by another  local firm,  offers
extensive signal analysis and data reduction  capabilities for the data acquired
by the Medallion and RECORDER software.

In addition to Zonic authored software,  the Company is an authorized  re-seller
of various third party  packages  which are used for specific test purposes such
as Modal Analysis and Acoustic Intensity Analysis. Generally, these products are
sold to the end user at the third party list price with the  Company  buying the
packages at a re-seller  discount.  Warranty and support obligations remain with
the  original  provider  of the  software  packages  and the  Company  incurs no
additional liability.

For  manufacturing   product  conformance  testing,  the  Company  provides  its
proprietary  eZ-NDT software and accessories to facilitate  manufacturing  tests
such as impact hammers,  accelerometers and microphones.  These systems range in
complexity  from a simple two channel  analyzer  with a computer and software to
fully  integrated  systems  with  conveyors,,  programmable  logic  controllers,
pneumatic  devices,  industrial  grade  computers  with TFT touch  screens,  and
Medallion FFT analyzers.  In the latter case, the systems are generally built to
order, however, the software which forms the core of the application is standard
Zonic product.  In all cases,  the systems  utilize large amounts of third party
materials  and the  Company  has  developed  several  sources of supply for such
components.

For machinery  monitoring,  the Company  employs its own Medallion  analyzers as
well as personal  computers and signal  transducers  from others.  The Company's
TOMAS  software  is  bundled  with the  systems  and  forms  the  core  analysis
functions.  These systems are generally used to trouble shoot problem  machinery
either by direct  on-line  analysis  or post event  analysis  by highly  skilled
machinery diagnosticians.

Medallion based systems range in price from $6,000 to over $50,000  depending on
the  intended  application  as  described  above  and the  amount  of  ancillary
equipment supplied by the Company.

A&D WCA (World Class Analyzer) - The WCA was originally  developed under a joint
development  agreement between the Company and A&D, and was intended to be based
on the Apple Macintosh.  The Company sold its 40% interest in the product to A&D
in June of 1995. A&D has  subsequently  re-designed  the product to operate with
personal  computers  running the Microsoft  Windows NT operating  system and the
Company  imports  components  for  configuration  and sale to  customers  in the
Western  Hemisphere.  The product is  configurable  from two to 32 channels  and
provides   extensive   signal   analysis   capabilities   primarily  for  design
verification testing. Prices range from $30,000 to $90,000.

Zonic 7000 Series - This line of products was  originally  developed in the late
1980's and provided a cost effective solution to those customers requiring large
channel count systems in the range of 32 to more than 500 channels.  The line is
being phased out of the Company's product  offerings,  however,  it continues to
contribute  revenues  though system  upgrades and warranty  contracts.  Original
system  prices  ranged from  $35,000 to over  $1,000,000.  Current  upgrades and
warranty contracts are in the $10,000 to $25,000 range.

Marketing and Distribution

The Company markets its Design Test and Manufacturing  Test systems primarily to
original   equipment   manufacturers   and   suppliers  in  the   aerospace  and
transportation  industries,  while its Machinery Monitoring Systems are marketed
primarily  to  steel,   industrial  chemical  and  petrochemical   manufacturing
facilities, and power generation plants.

The Company sells its products worldwide,  but principally in the United States,
Canada, the Pacific Rim Countries (Korea,  Japan, China, etc.) and India. Export
sales  accounted for 9%, 10%, and 26% of the  Company's  net revenue  during the
fiscal years ended March 31, 2000,  1999 and 1998,  respectively.  See Note G of
Notes to  Financial  Statements.  In the United  States and Canada,  the Company
maintains a network of manufacturers  representatives who are trained on the use
of the Company's  product and who can help potential  customers in the selection
of the right equipment for their application. The Representatives solicit orders
on the Company's behalf. The Company sells its products and services directly to
the end customer and pays the representative a commission.

In addition to sales of its own system, the Company sells its Medallion analyzer
to third party  packaging  companies who employ the Medallion in their  systems.
Generally,  these third party  companies  add  significant  value in the form of
system integration and their own software with the Medallion  providing key high
speed data acquisition functions.

Outside  of  the  United   States  and  Canada,   the  Company   utilizes   both
representatives  and  distributors,  depending  on the  particular  country  and
strength of the representative in that country.  In the case of representatives,
the end  users  place  orders  directly  with  Zonic  and the  Company  pays the
representative a commission. Distributors purchase materials from the Company at
a discount from the Company's Export Price List and then re-sell the products to
the end user.  The level of discount  varies  from  distributor  to  distributor
depending on the individual capabilities of the distributor.

A&D sells Zonic  products in the Japanese  market.  The Company is the exclusive
distributor of the WCA Product owned by A&D in the Western Hemisphere. (See Note
J of Notes to  Financial  Statements.)  In  Japan,  A&D buys  products  from the
Company for re-sale to end  customers.  The Company  sells it products to A&D at
discounts which vary by product. These discounts are a vendor-to-agent  discount
and not a discount to the  end-user.  The Company  believes  that the terms made
available  to A&D as an  international  sales  agent  are  fair and are not more
favorable than the terms that would be made available to a non-affiliated  sales
agent in a similar market and with similar technical expertise.

Major Customers

There was one customer, which accounted for 10% or more of the Company's total
revenues in 2000. See Note H of Notes to Financial Statements.

Manufacturing and Supplies

In manufacturing its systems,  the Company utilizes  custom-designed  electronic
components,  custom-machined  parts and,  to the extent  feasible,  commercially
available devices such as integrated circuits, power supplies, and CRT monitors.
The Company also purchases engineering  workstations and personal computers that
are used in the assembly of its products.

The Company purchases  several component parts from single source suppliers.  If
these  single  source  suppliers  are unable to supply the  Company  with needed
parts, or to supply them on schedule, material production delays could occur.

Service, Maintenance and Warranty

The Company  provides a one-year  limited warranty from the date of shipment for
all its products.  The Company will repair, or at its option,  replace defective
products returned to its Milford,  Ohio,  location.  As an alternative,  service
technicians  employed  by  the  Company  will  provide  repair  service  at  the
customer's  location if the customer pays travel expenses.  Service for products
sold overseas are generally  provided by the Company's  appointed  agent in that
country.  (See Item 1 Business  -  Marketing  and  Distribution)  The  Company's
warranty  expense was 2.4%,  2.0%, and 3.0% of revenue for fiscal 2000, 1999 and
1998, respectively.

The  Company  also  sells  extended   warranty   service   contracts  for  Zonic
manufactured equipment and software.  These contracts are generally for one year
and extend the original warranty provisions.  The price for one year of extended
warranty coverage is 10% of the then current price for the covered equipment and
software. All products are on a return to factory basis and include software, in
which case,  software  updates are provided at no  additional  charge.  Software
updates for customers  under extended  warranty are available from the Company's
website.

Research and Development and Software Construction

Research  and product  development  and  software  construction  is an important
factor in the Company's  business.  The Company  maintains an internal  staff of
three full-time  employees for the development of new products and software,  as
well as the improvement and refinement of its present products and the expansion
of their uses and  applications.  There can be no assurance  the Company will be
successful in developing new products or software or improving existing products
or software.  Moreover,  there can be no assurance that the  introduction of new
products  or  technological  developments  by  others  will not  materially  and
adversely affect the Company's operations.

Software construction and product enhancement costs totaling $67,000 and $47,000
were capitalized during fiscal years 2000 and 1998, respectively.  There were no
software  construction and product  enhancement costs capitalized  during fiscal
year 1999. Software  construction and product enhancement  amortization expenses
for  fiscal  years  2000,  1999 and 1998 were  $4,000,  $44,000,  and  $139,000,
respectively. The Company expensed $148,000, $163,000, and $196,000 for research
and product development for fiscal 2000, 1999, and 1998, respectively.

Patents

The  Company's  primary  focus in the area of research  and  development  is the
development of data acquisition and digital signal processing equipment.  In the
opinion of management,  the Company's  present  position and its future progress
are a function of the level of excellence and creativity of its technical staff;
patent protection is useful, but of secondary importance.

Competition

The Company markets a full range of standard products for use in analyzing noise
and vibration from single channel instruments to systems that process over 1,000
channels  of data.  (See  Item 1  Business  -  Products).  There  are  different
competitors in each market segment.

Many of the Company's  competitors offer only hardware or software components of
a noise and vibration analysis system. Thus, a customer purchasing products from
those competitors must integrate components in order to have the complete system
necessary to conduct  noise and  vibration  analysis.  The Company  provides its
customers  with fully  integrated  systems  that  include  both the hardware and
software necessary for the customer to conduct noise and vibration analysis.

Competition in the market for noise and vibration  analysis systems is generally
based on product  features.  Customers  select a particular  system based on how
well they perceive it will meet their particular needs. Price can be a secondary
consideration,  however  the system  selected  must fit  within  the  customer's
equipment  budget.  The Company has designed  its products  with a wide range of
capabilities so that those products will meet a variety of customer needs.

Competitors   in  the  market  for  one  and  two  channel   analyzers   include
Hewlett-Packard  Corporation,  Ono Sokki (a Japanese company), Stanford Research
Systems, and Bruel & Kjaer (a Danish company).

Competitors with the Company for engineering  design test and production testing
include a division of Hewlett-Packard,  Bruel & Kjaer, Data Physics,  Ono Sokki,
Signal  Processing  Systems,  OROS (a French  company),  and Leuven  Measurement
Systems, N.V. (a Belgian company).

Bentley Nevada, Computational Systems, Inc. and ENTEK-IRD are the main
competitors with the Company in machine condition monitoring systems for smaller
scale machinery applications.

Several of the  Company's  competitors,  including  the above,  have  financial,
technical,  research,  distribution and personnel resources that exceed those of
the Company. There can be no assurance that the Company can compete against such
companies, or that other competitors will not emerge.  Competition is intense in
all product lines and, in many cases,  requires significant  discounts from list
prices being passed on to customers.

Product Backlog

The Company's  product and services  backlog of orders believed to be firm as of
March 31, 2000 and March 31, 1999 was $168,000 and $309,000,  respectively.  The
prior year backlog  included  orders  totaling  $150,000 for products  which the
Company no longer actively markets.

Generally,  orders can be  processed  and  shipped  on  products  not  requiring
modifications  from  stock  within 45 days.  Certain  orders are  processed  and
shipped  on a longer  cycle due to  customer  delivery  requests  or  because of
modifications  ordered by a customer.  Orders are subject to  cancellation  upon
certain conditions.

Employees

As of March 31,  2000,  the  Company  had 14  employees.  Many of the  Company's
employees are highly  skilled.  The Company's  continued  success will depend in
part on its ability to attract and retain such employees.  None of the Company's
employees are  represented  by a labor  organization.  The Company  believes its
relations with its employees are good.

Item 2.  Properties.
The Company's executive offices and manufacturing facilities are located at Park
50 TechneCenter,  50 West TechneCenter Drive, Milford, Ohio. The leased premises
consist of  approximately  6,500 square feet of which about  one-third is office
space. The lease expires August 31, 2001.

Item 3.  Legal Proceedings.
The Company  occasionally is involved in ordinary routine litigation  incidental
to its business.  The Company is not involved in any material pending litigation
not covered by insurance.

Item 4.  Submission of Matters to a Vote of Security Holders.
         Not Applicable.

                                     PART II

Item 5.  Market For Registrant's Common Equity and Related Stockholder Matters.
(a) The Company's  Common Shares are currently  listed  over-the-counter  on the
"OTC Bulletin Board" through the National Daily Quotation Bureau, Inc. under the
symbol "ZNIC"; therefore,  there is only limited trading in the Company's Common
Shares. Quarterly trading information is not available.

(b) As of March 31,  2000,  there were 554  holders  of record of the  Company's
Common Shares,  without par value, the Company's only class of common equity. On
June 12, 2000, there were 3,044,136 Common Shares of the Company outstanding.

(c)   The Company did not pay any dividends on its common shares during the
fiscal years ended March 31, 2000 and March 31, 1999.

Item 6.  Selected Financial Data.
The following  financial  data is provided for the Company and its  subsidiaries
for the five preceding fiscal years.
<TABLE>
<CAPTION>
                                           2000           1999           1998           1997          1996
                                      -----------    -----------    -----------    -----------   -----------

<S>                                   <C>            <C>            <C>            <C>           <C>
Net revenues ......................   $ 1,846,018    $ 2,114,183    $ 2,025,938    $ 3,734,706   $ 3,639,982

Gain (loss) .......................   $    (4,372)   $    (6,050)   $     4,090    $ 3,027,551   $ 1,417,027

Profit (loss) before extraordinary    $    42,875    $   164,207    $  (315,604)   $ 1,898,113   $    (9,969)

Net profit (loss) .................   $    42,875    $   164,207    $  (315,604)   $ 1,898,113   $   387,306

Basic earnings (loss) per share:

Profit (loss) before extraordinary    $      0.01    $      0.04    $     (0.10)   $      0.62   $      0.00

Extraordinary item - gain from debt   $      0.00    $      0.00    $      0.00    $      0.00   $      0.13

   Net profit (loss) ..............   $      0.01    $      0.04    $     (0.10)   $      0.62   $      0.13

Diluted earnings (loss) per share:

Profit (loss) before extraordinary    $      0.01    $      0.04    $     (0.10)   $      0.62   $      0.00

Extraordinary item - gain from debt   $      0.00    $      0.00    $      0.00    $      0.00   $      0.13

   Net profit (loss) ..............   $      0.01    $      0.04    $     (0.10)   $      0.62   $      0.13

Total assets ......................   $   500,524    $   568,827    $   699,597    $ 2,687,484   $ 3,242,766

Long-term obligations (including ..   $     5,029    $    10,160    $    30,186    $   987,425   $ 4,070,000

Cash dividends declared ...........   $      0.00    $      0.00    $      0.00    $      0.00   $      0.00
</TABLE>


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
of Operation.

The following Management's Discussion and Analysis should be read in conjunction
with the financial statements and notes thereto which follow.

Results of Operations

2000 versus 1999
Revenues. Total revenues decreased $268,000 or 13% in fiscal 2000 from the prior
year.  Sales  decreased  primarily in the Company's  7000 Series and WCA product
lines as the  Company  focused  its sales and  development  efforts  during  the
current year on its Medallion  product line.  There were also small  declines in
consulting and extended warranty revenues. These decreases were partially offset
by a 9% or $105,000  increase in Medallion  product  sales.  Except as discussed
below,  sales in both periods were  geographically  diverse and not dependent on
any one customer for recurring business,  nor specific region of the world. (See
Notes G and H of Notes to Financial  Statements.) Price increases did not have a
significant  impact  on  sales.  As a  percentage  of total  revenues,  sales to
domestic  customers  increased  in  2000 to 91%  compared  to 90% in  1999.  The
Company's largest customer in 2000, a U.S.  company,  accounted for 12% of total
sales. A different U.S. company accounted for 16% of total sales in 1999.

Cost of Products and  Services  Sold.  Cost of products  and services  sold as a
percentage  of revenues  increased  to 40% in 2000 from 37% the prior year.  The
reduced  profit  margin was due primarily to higher costs on the sale of certain
Medallion based custom designed systems during the current year.

Selling  and  Administrative  Expenses.   Selling  and  administrative  expenses
decreased  by  approximately  $62,000  or 7% in 2000  from  the  prior  year due
primarily  to less  sales  commission  expense as a result of more sales made by
Company employees versus outside sales  representatives  during the current year
and lower  professional  service and  advertising  expenses.  As a percentage of
total revenue,  however, these expenses increased to 48% in 2000 compared to 45%
in 1999 due to lower revenues during the current year.

Research and  Development  and  Software  Construction  and Product  Enhancement
Amortization.  Research and development  expense and software  construction  and
product  enhancement  amortization  decreased  by $56,000 or 27% in 2000  versus
1999. This decrease was due primarily to less  amortization  expense as a result
of a decrease in capitalized software construction and product enhancement costs
during recent years.  (See Liquidity and Capital Resources and Note A-3 of Notes
to Financial Statements.)

Interest Expense.  Interest expense increased by $2,500 in 2000 due to higher
bank borrowings and discounts given to customers forearly payment of invoices.

Foreign Currency Gains (Losses).  Foreign currency gains and (losses) of $(12)
and $875 in 2000 and 1999, respectively were due to increases and decreases in
value of the U.S. dollar against the Japanese yen.

Results of Operations

1999 versus 1998
Revenues.  Total revenues  increased $88,000 or 4% in fiscal 1999 from the prior
year.  Sales increased in the Company's 7000 Series,  WCA and Medallion  product
lines and  decreased in  consulting,  extended  warranty and MMS  products.  The
increases  in 7000  Series and WCA  revenues  were due to sales  resulting  from
orders received in fiscal 1998 which were completed during the current year. The
increase in  Medallion  revenues  was due  primarily  to sales made to a company
under an OEM  distribution  agreement.  The  decrease  in  consulting,  extended
warranty and MMS  revenues  were  attributable  to the  continuing  slow down of
orders  resulting  from the sale of its Zeta  technology  and software to A&D in
fiscal   1997.   Except  as  discussed   below,   sales  in  both  periods  were
geographically  diverse and not  dependent  on any one  customer  for  recurring
business,  nor  specific  region of the  world.  (See  Notes G and H of Notes to
Financial  Statements.)  Price  increases did not have a  significant  impact on
sales. As a percentage of total revenues,  sales to domestic customers increased
in 1999 to 90% compared to 74% in 1998. The Company's  largest customer in 1999,
a U.S. company,  accounted for 16% of total sales. A foreign  government was the
Company's largest customer in 1998 that accounted for 8% of total sales.

Cost of Products and  Services  Sold.  Cost of products  and services  sold as a
percentage  of revenues  decreased  to 37% in 1999 from 40% the prior year.  The
improved  profit margin was due primarily to higher profit  margins on Medallion
product sales resulting from add-on  software and equipment  options and reduced
production costs.

Selling  and  Administrative  Expenses.   Selling  and  administrative  expenses
decreased  by  approximately  $77,000  or 7% in 1999  from  the  prior  year due
primarily  to a  decrease  in rent  and  other  facility  related  costs,  lower
professional  services expense and sales commission expense resulting from fewer
sales commissionable to sales representatives. As a percentage of total revenue,
these expenses decreased to 45% in 1999 compared to 51% in 1998.

Research and  Development  and  Software  Construction  and Product  Enhancement
Amortization.  Research and development  expense and software  construction  and
product  enhancement  amortization  decreased  by $128,000 or 38% in 1999 versus
1998.  This  decrease  was due to less  amortization  expense  as a result  of a
decrease in capitalized  software  construction  and product  enhancement  costs
during recent years.  (See Liquidity and Capital Resources and Note A-3 of Notes
to Financial Statements.)

Interest  Expense.  Interest  expense  decreased  by  $158,000  in  1999  due to
significantly  less  borrowings  during  the  current  year  resulting  from the
retirement of  outstanding  current and long-term  debt using  proceeds from the
sale of preferred stock to A&D in fiscal 1998.

Foreign Currency Gains (Losses).  Foreign currency gains and (losses) of $875
and $(146) in 1999 and 1998, respectively were due to increases and decreases in
value of the U.S. dollar against the Japanese yen

Liquidity and Capital Resources.

Working  capital as of March 31, 2000 was a negative  $809,000 versus a negative
$748,000 as of March 31, 1999. The decrease in working capital was due primarily
to increases in short-term borrowings which was partially offset by a decline in
accounts payable, deferred income and accrued liabilities.

The Company's cash flow from  operations was a negative  $38,000 in fiscal 2000.
The Company borrowed $135,000,  made payments on long-term debt totaling $21,000
and purchased equipment totaling $7,000. Investment in software construction and
product enhancement activities used $67,000 of cash during fiscal 2000.

The Company has experienced some improvement in its cash flow resulting from its
operating  profits during fiscal 2000 and 1999, but continues to experience cash
flow  problems  as  current  liabilities  exceed  current  assets.  The  Company
continues  to  seek  additional   sources  of  working  capital  either  through
additional  debt or equity  financing to sustain  operations  and reduce current
liabilities.  There can be no assurance  that the Company will be able to obtain
additional financing on favorable terms, if at all, from any source. (See Note M
of Notes to the Financial Statements.)

Market Risk

The Company's  operations  and cash flow can be affected by, among other things,
interest  rate  changes and  foreign  currency  fluctuations.  The impact of any
reasonably  possible  change  in the  values  of  these  financial  items on the
Company's  financial  position,  its results of  operations,  and its cash flows
would be immaterial.

Item 8.  Financial Statements and Supplementary Data.
Financial Statements included as part of this Report:


                                                                        Page No.

Independent Auditors' Report.............................................. 12-13

Statements of Operations for the Years Ended March 31, 2000, 1999 and 1998 .. 14

Balance Sheets as of March 31, 2000 and 1999 ................................ 15

Statements of Cash Flows for the Years Ended March 31, 2000, 1999 and 1998 .. 16

Statements of Shareholders' Equity (Deficit) for the Years
     Ended March 31, 2000, 1999 and 1998 .................................... 17

Notes to Financial Statements ............................................... 18



Independent Auditors' Report

To the Board of Directors and Shareholders
Zonic Corporation
Cincinnati, Ohio

We have audited the accompanying balance sheets of Zonic Corporation as of March
31,  2000 and 1999  and the  related  statements  of  operations,  shareholders'
deficit, and cash flows for the years then ended. 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  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits 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  financial  statements  present  fairly,  in all material
respects,  the  financial  position of the Company as of March 31, 2000 and 1999
and the results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.

The  accompanying  financial  statements have been prepared  assuming that Zonic
Corporation  will  continue as a going  concern.  As  disclosed in Note M to the
Financial  Statements,  the Company is  experiencing  difficulty  in  generating
sufficient cash flow to meet its  obligations and sustain its operations,  which
raises  substantial  doubt about its  ability to  continue  as a going  concern.
Management's  plans in regard to these matters are also described in Note M. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.



by: / s / Clark, Schaefer, Hackett & Co.
Cincinnati, Ohio
April 28, 2000



Independent Auditors' Report



To the Board of Directors and Shareholders
Zonic Corporation
Cincinnati, Ohio

We have audited the balance sheet of Zonic  Corporation as of March 31, 1998 and
the related statements of operations,  shareholders' deficit, and cash flows for
the year ended March 31, 1998 (not presented separately herein). 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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
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 audit provides a reasonable basis for our opinion.

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects,  the  financial  position  of the Company as of March 31, 1998 and the
results of its  operations  and its cash flows for the year ended March 31, 1998
in conformity with generally accepted accounting principles.

The  accompanying  financial  statements have been prepared  assuming that Zonic
Corporation  will  continue as a going  concern.  As  disclosed in Note M to the
Financial  Statements,  the Company is  experiencing  difficulty  in  generating
sufficient cash flow to meet its  obligations and sustain its operations,  which
raises  substantial  doubt about its  ability to  continue  as a going  concern.
Management's  plans in regard to these matters are also described in Note M. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

by: / s / Deloitte and Touche LLP
Cincinnati, Ohio

June 22, 1998


<TABLE>
<CAPTION>

Statements of Operations for the Years Ended March 31, 2000, 1999, and 1998

                                                              2000           1999           1998
                                                          -----------    -----------    -----------

<S>                                                       <C>            <C>            <C>
Products and service revenue ..........................   $ 1,846,018    $ 2,114,183    $ 2,025,938
                                                          -----------    -----------    -----------

Cost of products and services sold ....................       745,185        775,638        813,600
Selling and administrative expenses ...................       892,368        954,629      1,031,718
Research and development expenses and software
  construction and product enhancement amortization ...       151,602        207,459        335,004
                                                          -----------    -----------    -----------

Total operating expenses ..............................     1,789,155      1,937,726      2,180,322
                                                          -----------    -----------    -----------

Operating income (loss) ...............................        56,863        176,457       (154,384)

Gain (loss) on sale and disposal of assets ............        (4,372)        (6,050)         4,090
Interest expense ......................................        (9,604)        (7,075)      (165,164)
Foreign currency gains (losses) .......................           (12)           875           (146)
                                                          -----------    -----------    -----------

Income (loss) before taxes ............................        42,875        164,207       (315,604)

Provision for income taxes ............................          --             --             --
                                                          -----------    -----------    -----------

Net income (loss) .....................................        42,875        164,207       (315,604)

Less: Dividend payable on preferrred shares ...........        (8,575)       (35,698)          --
                                                          -----------    -----------    -----------

Net income (loss) available to common shares ..........   $    34,300    $   128,509    ($  315,604)
                                                          ===========    ===========    ===========

Basic earnings (loss) per share: ......................   $      0.01    $      0.04    ($     0.10)
                                                          ===========    ===========    ===========

Diluted earnings (loss) per share: ....................   $      0.01    $      0.04    ($     0.10)
                                                          ===========    ===========    ===========
</TABLE>



The accompanying notes are an integral part of these statements.



<TABLE>
<CAPTION>

Balance Sheets as of March 31, 2000 and 1999

                                                                                         2000           1999
                                                                                     -----------    -----------
<S>                                                                                  <C>            <C>
Current Assets
  Cash ...........................................................................   $    34,578    $    32,848
  Receivables, net of allowance for doubtful accounts
      Trade ......................................................................       101,662        125,786
      Related parties ............................................................        27,751            200
      Unbilled contracts .........................................................          --          115,588
                                                                                     -----------    -----------
  Total receivables ..............................................................       129,413        241,574

  Inventories
      Finished products ..........................................................       137,628         96,164
      Work in process ............................................................        18,561         68,128
      Raw material ...............................................................        81,229         85,049
                                                                                     -----------    -----------
  Total inventory ................................................................       237,418        249,341
  Prepaid expenses ...............................................................         1,896          2,702
                                                                                     -----------    -----------
Total current assets .............................................................       403,305        526,465

Property and Equipment-at cost
  Furniture and office equipment .................................................       102,217        133,284
  Machinery and plant equipment ..................................................       219,381        264,164
  Software construction and product enhancements .................................     2,270,008      2,203,070
                                                                                     -----------    -----------
                                                                                       2,591,606      2,600,518
  Less accumulated depreciation and amortization .................................     2,494,387      2,558,156
                                                                                     -----------    -----------
                                                                                     -----------    -----------
Total net property and equipment .................................................        97,219         42,362
                                                                                     -----------    -----------

                                                                                     $   500,524    $   568,827
                                                                                     ===========    ===========
Liabilities and Shareholders' Deficit
Current Liabilities
  Note payable ...................................................................   $   135,000    $      --
  Current maturities of long term obligations ....................................         5,133         20,788
  Accounts payable - trade .......................................................       567,958        614,230
  Deferred income ................................................................       244,098        321,819
  Dividend payable ...............................................................         8,575         35,698
  Accrued liabilities
      Salaries and wages .........................................................        88,693        105,514
      Property and payroll taxes .................................................        33,777         41,317
      Other ......................................................................       128,917        135,468
                                                                                     -----------    -----------
                                                                                     -----------    -----------
  Total accrued liabilities ......................................................       251,387        282,299
                                                                                     -----------    -----------
Total current liabilities ........................................................     1,212,151      1,274,834

Long-term obligations, less current maturities ...................................         5,029         10,160
Deferred rent ....................................................................          --           34,789
Commitments and Contingencies

Shareholders' Deficit
  Preferred shares - authorized, 250,000 shares without par value;
      12,000 shares Class A  non-voting , redeemable, convertible, $100 per share      1,200,000      1,200,000
      6,000 shares Class B non-voting, redeemable, non-convertible, $200 per share     1,200,000      1,200,000
  Common shares - authorized, 9,750,000 shares without par value; issued and
    outstanding, 3,044,136 shares at March 31, 2000 and 1999 at stated issue price        61,674         61,674
Additional paid in capital .......................................................     5,727,881      5,727,881
                                                                                     -----------    -----------
                                                                                       8,189,555      8,189,555
Accumulated deficit ..............................................................    (8,906,211)    (8,940,511)
                                                                                     -----------    -----------
                                                                                     -----------    -----------
Total shareholders' deficit ......................................................      (716,656)      (750,956)
                                                                                     -----------    -----------

                                                                                     $   500,524    $   568,827
                                                                                     ===========    ===========

</TABLE>




The accompanying notes are an integral part of these statements.



<TABLE>
<CAPTION>

Statements of Cash Flows for the Years Ended March 31, 2000, 1999 and 1998

                                                                       2000         1999         1998
                                                                    ---------    ---------    ---------

<S>                                                                 <C>          <C>          <C>
Cash provided by (used in) operations
  Net income (loss) for year ....................................   $  42,875    $ 164,207    ($315,604)
  Adjustments to reconcile net income (loss) to net cash provided
           by (used in) operating activities:
 (Gain) loss from sale and disposal of assets ...................       4,372        6,050       (4,090)
  Depreciation and amortization .................................      11,277       17,704       21,052
  Amortization of software construction and product enhancements        3,819       44,383      139,179
  Amortization of deferred income and deferred rent .............    (138,538)    (200,770)    (220,601)
  Amortization of discount on notes receivable ..................        --           --        (30,000)
  Provision for obsolete inventories ............................      24,000       24,000       33,385
  Foreign currency (gain) loss and other ........................          12         (875)         235
  Increase (decrease) in cash due to changes in:
    Receivables .................................................     101,732        4,053       36,301
    Inventories .................................................     (12,077)      (7,746)     120,886
    Prepaid expenses ............................................         806        1,032          504
    Accounts payable and accrued liabilities ....................    (102,465)    (120,964)     (87,469)
    Accrued rent ................................................        --           --        (64,079)
    Deferred revenue and advanced billings to customers .........      26,028       73,835      183,581
                                                                    ---------    ---------    ---------
        Net cash provided by (used in) operations ...............     (38,159)       4,909     (186,720)

Cash used in investment activities
  Purchase of equipment and leasehold improvements ..............      (7,387)     (10,891)      (9,094)
  Proceeds from sale of fixed assets ............................        --          1,025       13,976
  Software construction and product enhancement expenditures ....     (66,938)        --        (47,198)
                                                                    ---------    ---------    ---------
        Net cash used in investment activities ..................     (74,325)      (9,866)     (42,316)

Cash provided by (used in) financing activities
  Proceeds from note payable ....................................     135,000         --         75,000
  Repayment of long-term obligations ............................     (20,786)     (41,603)     (26,050)
                                                                    ---------    ---------    ---------
        Net cash provided by (used in) financing activities .....     114,214      (41,603)      48,950

Increase (decrease) in cash .....................................       1,730      (46,560)    (180,086)
Cash - beginning of period ......................................      32,848       79,408      259,494
                                                                    ---------    ---------    ---------
                                                                    =========    =========    =========
Cash - end of period ............................................   $  34,578    $  32,848    $  79,408
                                                                    =========    =========    =========

Interest paid during the year ...................................   $   9,604    $   7,075    $ 171,722
                                                                    =========    =========    =========

</TABLE>


The accompanying notes are an integral part of these statements.



<TABLE>
<CAPTION>

Statements of Shareholders' Deficit for the Years Ended March 31, 2000, 1999 and 1998
                                               Common    Preferred      Paid in      Accumulated
                                               Shares     Shares        Capital       Deficit         Total
                                            ---------   -----------   -----------   -----------    -----------

<S>                                         <C>         <C>           <C>           <C>            <C>
Balance at March 31, 1997 ...............   $  61,674   $         0   $ 5,727,881   ($8,753,416)   ($2,963,861)

Preferred shares issued .................        --       2,400,000          --            --        2,400,000

Net loss for year .......................        --            --            --        (315,604)      (315,604)
                                            ---------   -----------   -----------   -----------    -----------

Balance at March 31, 1998 ...............   $  61,674   $ 2,400,000   $ 5,727,881   ($9,069,020)   ($  879,465)

Net income for year .....................        --            --            --         164,207        164,207

Dividends payable on preferred shares ...        --            --            --         (35,698)       (35,698)
                                            ---------   -----------   -----------   -----------    -----------

Balance at March 31, 1999 ...............   $  61,674   $ 2,400,000   $ 5,727,881   ($8,940,511)   ($  750,956)

Net income for year .....................        --            --            --          42,875         42,875

Dividends payable on preferred shares ...        --            --            --          (8,575)        (8,575)
                                            ---------   -----------   -----------   -----------    -----------

Balance at March 31, 2000 ...............   $  61,674   $ 2,400,000   $ 5,727,881   ($8,906,211)   ($  716,656)
                                            ==========  ===========   ===========   ============    ===========
</TABLE>



The accompanying notes are an integral part of these statements.



Notes to Financial Statements

Note A - Summary of Accounting Policies

The  Company's  principal  activity  consists  of the design,  manufacture,  and
marketing of data  acquisition  and analysis  systems.  A summary of significant
accounting  policies  applied in the preparation of the  accompanying  financial
statements follows.

1.   Inventories
     Inventories  are stated at the lower of cost or market.  Finished  products
and work in process costs are determined principally by the average cost method,
including material,  labor, and overhead  associated with inventory  production.
Raw  material  cost is  determined  by the  first-in  first-out  method  (FIFO).
Inventories  are reduced by allowances for  obsolescence  totaling  $134,500 and
$179,000 at March 31, 2000 and 1999, respectively.

2.   Depreciation
     Depreciation  is  provided  in  amounts  sufficient  to relate  the cost of
depreciable  assets to operations over their  estimated  service lives under the
straight-line  method.  Estimated  remaining useful lives range from one to five
years.

3.   Research and  Development  Expenses and Software  Construction  and Product
     Enhancement
     Certain   software   development   costs  are  capitalized  when  incurred.
Capitalization  of software  development  costs begins upon the establishment of
technological  feasibility.  The establishment of technological  feasibility and
the ongoing  assessment of  recoverability of capitalized  software  development
costs  requires  considerable  judgment by  management  with  respect to certain
external  factors,  including,  but not limited to,  technological  feasibility,
estimated  economic  life and changes in  software  and  hardware  technologies.
Research and development  expenses,  including development costs of new products
and processes, are expensed as incurred.

     At March 31,  2000,  there was $63,119 of  unamortized  costs for  software
construction  and  product  enhancement.  There  were no  unamortized  costs for
software construction and product enhancement at March 31, 1999.

Capitalized costs of software  construction and product  enhancement and related
information for fiscal years 2000, 1999, and 1998 follow:
<TABLE>
<CAPTION>
                                                     2000        1999       1998
                                                     ----        ----       ----
<S>                                                <C>       <C>        <C>
Capitalized costs
   Software construction and product enhancement   $ 66,938       --     $ 47,198

Amortization
   Software construction .......................   $  3,819   $ 44,383    139,179

Research and development expenses ..............   $147,783   $163,076   $195,825
</TABLE>

During 1998, the Company wrote-off fully amortized capitalized costs totaling
$2,646,650.  There was no effect on the profit and loss statement.

4.   Income Taxes
     The Company  provides for income taxes using the asset and liability method
required under Statement of Financial  Accounting  Standards No. 109 "Accounting
for Income Taxes." (See Note I of Notes to Financial Statements.)

5.   Use of Estimates
     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the reported  amounts of assets and  liabilities at the
date of the  financial  statements  and the  reported  amounts of  revenues  and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.

6.   Revenue Recognition
     The Company  recognizes  revenue  upon  shipment for  contracts,  which are
completed and shipped within one fiscal quarter.  The Company recognizes revenue
using  the  percentage  of  completion  method  for  those  contracts  for which
production  spans more than one fiscal quarter and are material to the financial
statements.

     Under the percentage of completion method, revenues are recognized based on
the ratio of total cost  incurred at the balance  sheet date to total  estimated
cost of the project through  completion.  There were no contracts in progress at
March 31, 2000. There were two contracts in progress at March 31, 1999. Unbilled
receivables relating to these contracts at March 31, 1999, were $115,588.

      Billings,  as specified  in the terms of a contract,  in excess of revenue
earned have been recorded as deferred income.

     The Company sells extended  warranty  contracts which provide for repair of
hardware and no-cost  upgrades of software.  These  contracts  normally  cover a
one-year period with revenue being  recognized on a straight line basis over the
contract period.

7.   Credit Risk
     The Company is  diversified  geographically  and has a broad customer base.
The Company grants credit to  substantially  all of its customers.  Export sales
are generally secured with a letter of credit in favor of the Company payable on
shipment.  At March 31, 2000 five customers  accounted for  approximately 82% of
total  accounts  receivable  and at March 31, 1999 two  customers  accounted for
approximately 64% of total accounts receivable. The Company's credit risk is not
concentrated  in any one  industry  and the  significant  receivables  were from
different  customers in 2000 and 1999.  (See Notes G and H of Notes to Financial
Statements). The Company had an allowance for doubtful accounts of approximately
$25,000 at March 31, 2000 and 1999, respectively.

8.   Stock Based Compensation
     The Company  adopted the  "disclosure-only"  provisions  of  Statements  of
Financial  Accounting  Standards  (SFAS) No. 123 -  Accounting  for  Stock-Based
Compensation  and measures  compensation  expense for  stock-based  compensation
using the  intrinsic-value-based  method under the  provisions  of the standard.
(See Note E of Notes to Financial Statements).

9.   Earnings Per Share
     The  Company  implemented  SFAS No. 128  during the third  quarter of 1998.
Basic  earnings  (loss) per share is based on net income (loss) and the weighted
average number of common shares outstanding during the period.  Diluted earnings
(loss) per share is based on net income (loss) and the weighted  average  number
of common shares plus all dilutive potential common shares.

Computation of basic and diluted earnings (loss) per share are as follows:

<TABLE>
<CAPTION>
                                                             2000           1999           1998
                                                         -----------    -----------    -----------

<S>                                                      <C>            <C>            <C>
Net income (loss) ....................................   $    42,875    $   164,207    ($  315,604)
Class B preferred stock dividend .....................        (8,575)       (35,698)          --
                                                         -----------    -----------    -----------
                                                         ===========    ===========    ===========
Net income (loss) available to common shareholders ...   $    34,300    $   128,509    ($  315,604)
                                                         ===========    ===========    ===========

Weighted average of common shares outstanding ........     3,044,136      3,044,136      3,044,136
Dilutive potential common shares:
              Class A convertible preferred stock ....     1,200,000        200,000           --
              Stock options ..........................        45,877         10,046           --
                                                         -----------    -----------    -----------
                                                         ===========    ===========    ===========
Adjusted weighted average of common shares outstanding     4,290,013      3,254,182      3,044,136
                                                         ===========    ===========    ===========

Basic earnings (loss) per share ......................   $      0.01    $      0.04    ($     0.10)
Diluted earnings (loss) per share ....................   $      0.01    $      0.04    ($     0.10)
</TABLE>

     At March 31, 2000 and 1999,  there were 1,252,500  additional stock options
for the  purchase  of common  shares.  At March 31,  1999,  there  were  450,000
warrants  outstanding for the purchase of common shares.  These potential common
shares were not included in the diluted earnings per share  calculation for 2000
and  1999  as  their  effect  was  anti-dilutive.  Stock  options  and  warrants
outstanding  at March 31, 1998 were not  included in the  diluted  earnings  per
share  calculation for 1998 as their effect was anti-  dilutive.  (See Note E of
Notes to the Financial Statements)

10.  New Standards
     In March  2000,  the  Financial  Accounting  Standards  Board  issued  FASB
Interpretation  No. 44,  "Accounting  for Certain  Transactions  involving Stock
Compensation  - an  interpretation  of APB Option No.  25." This  Interpretation
clarifies the application of Opinion 25 for only certain  issues,  including the
accounting  consequence  of various  modifications  to the terms of a previously
fixed stock option or award. This Interpretation is effective July 1, 2000, but
covers   specific   events  that  occurred   after   December  15,  1998.   This
Interpretation affects the Company as a result of the repricing of options which
occurred in February 1999 (See Footnote E). Commencing July1, 2000, the repriced
options  will be  accounted  for as  variable  until  the  date the  awards  are
exercised,  are  forfeited,  or expire  unexercised.  Compensation  cost will be
recognized  immediately  after July 1, 2000 to the extent  that the stock  price
exceeds the stock price on July 1, 2000.  Future  changes in the market value of
the Company's  stock will  directly  affect the amount of  compensation  expense
recorded by the Company.  The magnitude of the impact on the Company's financial
statements  will  depend on the market  value of the common  stock as of July 1,
2000 and thereafter.

Note B - Preferred Stock

Pursuant to the terms of a Subscription  Agreement  between the Company and A&D,
dated  January 30, 1998,  A&D  purchased  12,000  shares of Class A  Non-Voting,
Redeemable,  Convertible  Preferred  Stock of the Company at a price of $100 per
share which is convertible on or after January 30, 1999 at the rate of one Class
A Preferred  Share for 100 shares of common  stock.  In addition,  A&D purchased
6,000 shares of Class B Non-Voting, Redeemable,  Non-Convertible Preferred Stock
of the Company at a price of $200 per share with an annual dividend equal to 20%
of the Company's annual after-tax earnings excluding  non-recurring earnings and
charges  beginning  with  the  year  ended  March  31,  1999.  In the  event  of
liquidation or dissolution of Zonic,  the Class A Preferred Stock is entitled to
receive $100 per share,  and the Class B Preferred Stock $200 per share,  before
holders of common stock receive any amounts. Both classes of Preferred Stock may
be redeemed by the Company upon thirty days prior notice. Proceeds from the sale
of the stock  were used to  retire  debt and  related  accrued  interest.  These
transactions were considered non-cash transactions on the accompanying Statement
of Cash Flow.

The Company has recorded annual  dividend  amounts of $8,575 and $35,698 in 2000
and 1999, respectively, relating to the Class B Preferred Stock.

Note C - Note Payable

On August 29,1999,  the Company signed a revolving line of credit agreement with
its local bank.  The maximum amount is $150,000 and is secured by all the assets
of the Company. Interest is computed at the prime rate plus 2% (11% at March 31,
2000) and is payable  monthly.  The  agreement  expires  on August 1, 2000.  The
amount borrowed at March 31, 2000 is $135,000.

Note D - Long-Term Obligations

Long-term obligations consist of a promissory note for the purchase of a company
vehicle  with a balance  of  $10,162  and  $15,323  at March  31,  2000 and 1999
respectively.  Monthly  principal and interest payments are $473, with the final
payment due March 11, 2002. Also included in long-term  obligations at March 31,
1999 was a loan payable to the Company's local bank of $15,625 which matured and
was paid in full on August 31, 1999.

Long-term obligations as of March 31, 2000 mature as follows: 2001 - $5,133; and
2002 - $5,029.

Note E - Stock Options

The Company has certain incentive and non-qualified stock option plans available
to key  employees  to purchase  common stock of the Company at not less than the
market value on the date of grant. A summary of option transactions during 2000,
1999 and 1998 follows:
<TABLE>
<CAPTION>

                                          Number of      Weighted Average
                                           Options        Exercise Price
                                          ----------     --------------

<S>                  <C> <C>              <C>                <C>
Outstanding at March 31, 1997 ........    1,706,000          1.70

Granted in 1998 ......................         --              --
Exercised in 1998 ....................         --              --
Forfeited in 1998 ....................     (148,000)         0.61

Outstanding at March 31, 1998 ........    1,558,000          1.80

Granted in 1999 ......................       30,000          0.14
Exercised in 1999 ....................         --              --
Forfeited in 1999 ....................      (15,000)         0.30

Outstanding at March 31, 1999 ........    1,573,000          1.69

Granted in 2000 ......................         --              --
Exercised in 2000 ....................         --              --
Forfeited in 2000 ....................      (16,000)         0.14

Outstanding at March 31, 2000 ........    1,557,000          1.71

Exercisable at March 31, 1999 ........    1,550,500          1.72
Exercisable at March 31, 2000 ........    1,547,000          1.72
</TABLE>

The following table summarizes  information  about stock options  outstanding at
March 31, 2000.

<TABLE>
<CAPTION>
                         Options Outstanding                       Options Exercisable

Exercise  Outstanding at  Weighted Average  Weighted Average   Exercisable     Weighted Average
 Prices   March 31, 2000      Remaining     Exercise Price    March 31, 2000    Exercise Price
                          Contractual Life

<S>          <C>                <C>              <C>              <C>                     <C>
   .14       304,500            4.74             .14              294,500                 .14

  2.00     1,140,000            2.95            2.00            1,140,000                2.00

  2.50        62,500            2.33            2.50               62,500                2.50

  3.63        50,000            1.67            3.63               50,000                3.63
</TABLE>

On February 19, 1999, the Board of Directors  re-priced  290,500 incentive stock
options for common  shares  shares at $0.14 per share,  the fair market value of
the stock as of that date. Nothing else was changed about the options.

The Company adopted a new incentive stock option plan in fiscal 2000.  Under the
plan,  250,000  common  shares are available to key employees at the fair market
value at the date of the grant of the  option.  There  were no  options  granted
under this plan during 2000. The 1989 incentive stock option plan expired during
fiscal 2000,  except for options  previously  granted  thereunder.  At March 31,
2000, there were 304,500 incentive options and 1,252,500  non-qualified  options
outstanding  and 370,000  common shares were  available for granting  additional
options.

As consideration  for entering into the Credit Agreement between the company and
A&D dated December 7, 1992 which was terminated in 1998, the Company granted A&D
a stock option to purchase  1,000,000 shares of the company's stock at $2.00 per
share. The option expires on March 20, 2005.

Gerald Zobrist, the former President of the company, personally guaranteed loans
received under the Credit  Agreement.  This  guarantee was  terminated  upon his
resignation  in  December  of 1995.  As  consideration  for this  guarantee,  he
received an option to purchase  140,000  shares of the stock at $2.00 per share.
This option expires December 7, 2002.

During 1994, the Company issued warrants for 100,000 common shares in connection
with  the  renegotiation  of the  lease of its  facilities.  The  warrants  were
exercisable  at $2.00 per share and expired on March 31, 2000.  During 1995, the
Company  issued  warrants  for  350,000  common  shares in  connection  with the
extinguishment  of certain  long-term  debt  obligations.  These  warrants  were
exercisable at $2.00 per share and expired on March 31, 2000.

At March 31, 2000,  the Company has reserved  common shares  sufficient to cover
the exercise of outstanding stock options.

The  Company  has  adopted the  "disclosure  only"  provisions  of SFAS No. 123,
therefore no  compensation  expense has been recognized for stock option grants.
Had compensation  expense been determined based upon the fair value  (determined
using the Black-Sholes option pricing model) at the grant date,  consistent with
the provisions of SFAS No. 123, the Company's  income (loss) would have been the
pro forma amounts as follows:
<TABLE>
<CAPTION>

                                                              2000        1999        1998
                                                              ----        ----        ----
<S>                                                        <C>         <C>         <C>
Pro forma income (loss) ................................   $  42,225   $ 152,001   $(333,078)
Pro forma income (loss) available to common stockholders   $  33,650   $ 116,303   $(333,078)
Pro forma income (loss) per share of common stock ......   $     .01   $     .04   $    (.11)
</TABLE>

The weighted  average per option fair value of options granted in 1999 was $.14.
There  were no  options  granted  during  2000 and 1998.  The fair value of each
option grant was estimated on the date of the grant and using the  Black-Scholes
option-pricing model with the following  assumptions used for grants in 1999: no
expected  dividend  yield  and  expected  option  lives of ten  years;  expected
volatility of 112%; and risk-free interest rate of 5.0%.

Note F - Operating Lease Commitments

On June 29,  1999,  the  Company  extended  the lease for its  current  premises
through August 31, 2001. Effective September 1, 1999, the monthly rent increased
to $4,685.  The previous monthly rent was $4,604. All other terms and conditions
of the lease remained the same. The minimum future rental  commitment  under the
lease agreement is $56,220 and $23,425 in fiscal 2000 and 2001, respectively.

Deferred  rent arising from  incentives  and  concessions  from the landlord was
$34,789 at March 31,  1999.  There was no  deferred  rent as of March 31,  2000.
Deferred rent was  amortized as a reduction of rent payments  charged to expense
through August, 1999. Rent expense for 2000, 1999 and 1998 was $56,043, $55,506,
and $91,866,  respectively.  Amortization of deferred rent for 2000 and 1999 was
$34,789 and $83,896, respectively.

The Company also has computer  equipment  under an operating  lease at March 31,
2000.  Leased equipment  expense under this lease was $6,303 and $1,576 for 2000
and 1999,  respectively.  Minimum future rental commitments under this lease are
2001 - $6,303, and 2002 - $4,727.

Note G - Foreign Sales

The Company had foreign sales as follows:
<TABLE>
<CAPTION>

                       Percent of
              Amount   Total Sales
            --------   -----------
     <S>    <C>             <C>
     2000   $172,000          9%
     1999   $215,000         10%
     1998   $519,000         26%
</TABLE>

Note H - Sales to Major Customers

Sales to major customers  (customers with sales in excess of 10% of total annual
sales)  include  products and services  sold to end-user  customers  through the
Company's exclusive selling agents for their respective geographic  territories.
These selling agents  include  related  parties  described in Note J of Notes to
Financial  Statements.  Sales of large systems to end-users represent relatively
high  percentages  of sales.  However,  the Company is not  dependent on any one
customer for future sales.

One U.S.  company  accounted for about 12% of the Company's total sales in 2000,
while two U.S.  companies  accounted  for more than 29% of the  Company's  total
sales in 1999. There were no major customers in 1998.

Note I - Federal Income Taxes

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amount used for income tax  purposes.  Deferred tax assets have
been  reduced by a valuation  allowance,  as it is  uncertain  if and when these
benefits  will be realized.  Although the Company  realized  profits in 2000 and
1999,  there was no  provision  for  income  taxes as the  result of  changes in
deferred tax assets and the related valuation allowance during the year.

Deferred taxes at March 31 consist of the following:
<TABLE>
<CAPTION>

                                          2000         1999
                                       ---------    ---------
Current deferred tax asset:
<S>                                    <C>          <C>
   Reserves not currently deductible   $  59,257    $  74,275
   Deferred revenue ................      82,993      109,418
   Accruals not currently deductible      56,541       58,851
                                       ---------    ---------
 Subtotal ..........................     198,791      242,544
Less valuation allowance ...........    (198,791)    (242,544)
                                       ---------    ---------
      Net ..........................   $    --      $    --
                                       =========    =========
</TABLE>
<TABLE>
<CAPTION>

Non-current deferred tax asset:
<S>                                    <C>           <C>
  Net operating loss carryforward ..   2,318,423     2,279,920
  Tax credits ......................     662,625       666,205
  Deferred income ..................         457        12,150
                                      ----------    ----------
  Subtotal .........................   2,981,505     2,958,275

Non-current deferred tax liability -
     Capital leases and accelerated
     depreciation ..................     (2,149)       (2,867)
                                      -----------   -----------
                                      -----------   -----------
Net non-current deferred tax asset..   2,979,356      2,955,408
Less valuation allowance ...........  (2,979,356)    (2,955,408)
                                      ===========    ===========
                                      ===========    ===========
    Net ...........................   $      --      $      --
                                      ===========    ===========
</TABLE>
<TABLE>
<CAPTION>

The provision for income taxes for the years ended consist of the following:

                                         2000         1999         1998
                                      ---------    ---------    ---------
<S>                                      <C>        <C>           <C>
Deferred (income) expense .........      19,805     (121,409)     (47,190)
Increase (Reduction) in the
     valuation allowance ..........    (19,805)     121,409       47,190
                                      ---------    ---------    ---------
                                      =========    =========    =========
Provision for income taxes ........   $    --      $    --      $    --
                                      =========    =========    =========
</TABLE>

At  March  31,  2000  the  Company  had  net  operating  loss  carryforwards  of
approximately   $6.8  million  for  U.S.   Federal  tax   purposes.   Such  loss
carryforwards,  if unused as  offsets  to future  taxable  income,  will  expire
beginning in 2002 and continuing through 2014.

Tax credits are  accounted for under the  flow-through  method as a reduction of
the provisions for income taxes in the year utilized.

The Company has  $663,000 of tax credits  primarily  comprised  of research  and
development  available  for U.S.  income tax purposes.  These credits  expire at
various dates beginning in 2001 and continuing through 2008.

Note J - Related Party Transactions

A&D, a 28.6%  shareholder,  sells the company's products in the Japanese market.
The Company  sells its  products to A&D at  discounts  which vary by product for
re-sale to end  customers.  Revenues from sales to A&D were $38,000,  $2,800 and
$84,000 during 2000, 1999, and 1998 respectively.

The Company is also the exclusive distributor of the WCA Product owned by A&D in
the Western Hemisphere and purchases components from A&D used principally in the
production of its WCA product line.  Such  purchases  totaled $536,  $48,085 and
$32,110 during 2000, 1999 and 1998,  respectively.  The Company had a receivable
balances from A&D of $27,751 and $200 at March 31, 2000 and 1999,  respectively.
There was no amounts payable to A&D at March 31, 2000 and 1999, respectively.

During  1997,  A&D paid the Company  $300,000 to promote its WCA  products.  The
amount was recorded as deferred income and is recorded as a reduction of selling
and  administrative  expenses as expenses  are  incurred.  The Company  recorded
$21,000 and $35,000 of this amount during fiscal 2000 and 1998,  respectively as
a reduction of selling and administrative expenses.

Note K - Retirement Plan

The Company has an employee  savings and  investment  retirement  plan qualified
under sections 401 (a) and 401 (k) of the Internal Revenue Code. The plan covers
all  employees of the Company age 18 and over who have  completed  six months of
service and are scheduled to work 1,000 hours or more during the plan year.

Under the Plan  agreement,  the Company is required to  contribute 30 percent of
the voluntary 401 (k)  contribution of all participants up to a maximum of 5% of
each employee's  salary.  One half of this  contribution  may be made in Company
stock at the discretion of the Company's Board of Directors.

In any plan year, a supplemental  contribution  may be made if the Company has a
net after tax profit of more than 5% of sales.

The Company made  contributions  of $10,683,  $16,757 and $10,777 for 2000, 1999
and 1998,  respectively.  None of the contributions  were made in Company stock.
The 1999 contribution included a supplemental contribution of $7,315.

Note L - Statement of Cash Flows

In addition to those shown in the accompanying  Statement of Cash Flows and Note
B of Notes to the Financial Statements,  the following non-monetary  transaction
occurred:  the Company  offset amounts  payable to A&D with accounts  receivable
from A&D in 2000,  1999 and 1998.  This offset  reduced both current  assets and
current  liabilities  by  $10,417,  $4,600 and  $33,868 in 2000,  1999 and 1998,
respectively, resulting in no gain or loss.

Note M - Basis of Financial Statement Presentation

The  Company  has  made   significant   progress  in  returning  to   consistent
profitability  during 1999 and 2000 and expects  improved  results during fiscal
year 2001.  Revenue is  expected  to increase  slightly  with gross  margins and
operating expenses to remain at constant levels.

The Company has experienced some improvement in its cash flow resulting from its
operating  profits during fiscal 2000 and 1999, but continues to experience cash
flow problems as current  liabilities  exceed current assets.  The  accompanying
financial  statements have been prepared assuming that the Company will continue
as a going  concern,  which  contemplates  the  realization  of  assets  and the
satisfaction  of  liabilities  in the normal  course of business.  The financial
statements  do not include any  adjustment  relating to the  recoverability  and
classification  of recorded  asset amounts or the amount and  classification  of
liabilities  that might be  necessary  should the  Company be unable to generate
sufficient cash to meet its obligations and sustain operations.


Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure.
Effective  December  17,  1998,  the  Board of  Directors  of Zonic  Corporation
dismissed  its former  auditor  and  selected  Clark,  Schaefer,  Hackett & Co.,
located in  Cincinnati,  Ohio as the sole auditor for the Company for the fiscal
year ending  March 31,  1999.  Since  November  11,  1991  Deloitte & Touche LLP
("Deloitte"),  also located in Cincinnati,  Ohio acted as the Company's auditor.
The decision to change  auditors was recommended by the Board of Directors based
on  management's  belief  that  the  Company  could  substantially   reduce  its
accounting fees by selecting a regional rather than a national accounting firm.

Deloitte's  report on the financial  statements of the Company has not contained
an adverse opinion or a disclaimor of opinion, and was not qualified or modified
as  to  uncertainity,   audit  scope,  or  accounting  principles,  except  that
Deloitte's  reports for the last six fiscal years  expressed  uncertainity as to
the  Company's  ability to  continue  as a going  concern.  The  Company  had no
disagreements with Deloitte on any matter of accounting principles or practices,
financial disclosure,  or auditing scope or procedures which, if not resolved to
Deloitte's satisfaction, would have caused it to make a reference to the subject
matter of the disagreement in connection with its audit report.

                                    PART III

Items 10, 11, 12 and 13 of Part III hereof are  incorporated by reference to the
Company's  Definitive  Proxy  Statement for the Annual  Meeting of  Shareholders
involving  the  election of  directors  which will be filed on or about June 20,
2000. The  information  being  incorporated  by reference is set forth under the
captions: "Outstanding Voting Securities";  "Election of Directors";  "Executive
Officers of the Company"; and "Executive Compensation."

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)  The following  documents are filed as a part of this Report or incorporated
     by reference:
    (1) All financial statements required to be filed by Item 8 of this Form and
included in this Report have been listed previously.

   (2) Financial Statements and Financial Statement Schedules Required: none

   (3) Exhibits Required by Item 601 of Regulations S-K:

          Exhibit No.    Description

           (3)    (i)   Amended and Restated Articles of Incorporation
                        (incorporated by reference).

           (3)   (ii)   Code of Regulations (incorporated by reference).

           (3)  (iii)   Amendment to Article II Section 1 of the Company's Code
                        of Regulations (incorporated by reference).

           (4)    (i)   Specimen Common Share Certificate (incorporated by
                        reference).

           (4)   (ii)   1989 Stock Option Plan (incorporated by reference).

           (4)  (iii)   1991 Executive Stock Option Plan (incorporated by
                        reference).

           (4)   (iv)   1999 Stock Option Plan (incorporated by reference).

          (10)    (v)   Lease Termination Agreement dated August 29, 1997,
                        between the Company and Duke Realty Limited Partnership.

          (10)   (vi)   Lease  Agreement  dated  August  29, 1997,  between the
                        Company and Duke Realty Limited   Partnership
                        (incorporated by reference).

          (10)  (vii)   Subscription Agreement, dated January 30, 1998, between
                        Zonic Corporation and A&D Company. (incorporated by
                        reference)

           (10) (viii)  Contribution Agreement among the Company and A&D
                        Engineering and Zonic A&D Company, effective as
                        of December 30, 1997. (incorporated by reference)

           (10)   (ix)  Notice of Abandonment of Partnership Interest by A&D
                        Engineering, effective March 29, 1998. (incorporated by
                        reference)

           (10)    (x)  Termination Agreement between the Company and A&D
                        Engineering, effective May 15, 1998.
                        (incorporated by reference)

           (10)   (xi)  First Lease Amendment dated June 29, 1999.

           (10)  (xii)  Promissory Note dated August 29, 1999 between the
                        Company and The Provident Bank.

           (10) (xiii)  Security Agreement dated August 29, 1999 between the
                        Company and The Provident Bank.

           (11)         Computation of earnings per common share --
                        See Note A-9 of Notes to Financial Statements.

           (16)         Letter of Deloitte & Touche agreeing to changes in
                        Certifying Accountant (incorporated by reference)

           (23)         Independent Auditor's Consent

           (27)         Financial Data Schedule.

   (b)   Reports on Form 8-K.
         None.

   (c)   Exhibits. See subparagraph (a) above.

   (d)   Financial Statement Schedules.
         None.


                                   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.



ZONIC  CORPORATION

By:  /s/ James B. Webb
     James B. Webb, President

Date:  June 20,  2000


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.

Signature                  Title                             Date



/s/ James B. Webb          President, Treasurer,            June 20, 2000
------------------
    James B. Webb          Principal Executive Officer,
                           and Director

/s/ John H. Reifschneider  Controller and                   June 20, 2000
-------------------------  Principal Financial and
    John H. Reifschneider  Accounting Officer

/s/ Shoichi Sekine         Director                         June 20, 2000
    --------------
    Shoichi Sekine


/s/ Gerald J. Zobrist      Director                         June 20, 2000
---------------------
    Gerald J. Zobrist


                                    EXHIBITS

                                 Exhibit 10 (xi)
                              FIRST LEASE AMENDMENT

THIS FIRST LEASE  AMENDMENT (the  "Amendment")  is executed this 29 day of June,
1999,  by and  between  DUKE  REALTY  LIMITED  PARTNERSHIP,  an Indiana  limited
partnership   ("Landlord"),   and  ZONIC   CORPORATION,   and  Ohio  corporation
("Tenant").

                              W I T N E S S E T H :

WHEREAS,  Landlord and Tenant entered into a certain Lease dated August 29, 1997
(the  "Lease"),  whereby  Tenant leased from rentable  square feet of space (the
"Leased  Premises")  in a  building  commonly  known  as Park  50  TechneCenter,
Building No. 20, located at 50 West TechneCenter  Drive, Suite K, Milford,  Ohio
45150, and

WHEREAS, Landlord and Tenant desire to extend the Lease Term; and

WHEREAS,  Landlord and Tenant desire to amend certain provisions of the Lease to
reflect such extension, changes and additions;

NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants
herein contained and each act performed  hereunder by the parties,  Landlord and
Tenant hereby agree that the Lease is amended as follows:

     1.  Incorporation  of Recitals.  The above recitals are herby  incorporated
into this Amendment as if fully set forth herein.

     2.  Extension  of Lease  Term.  The Lease Term is hereby  extended  through
August 31, 2001.

     3.  Amendment of Paragraph 2.  Term.  Paragraph 2 of the Lease is hereby
         ------------------------   ----   -----------
deleted in its entirely and the following is substituted in lieu thereof:

          "2.  TERM.  The term of this Lease commenced on September 1, 1997
               (The Commencement Date") and shall expire on August 31, 2001
               (the "Lease Term")."

     4.  Amendment of Paragraph 4. Minimum Rent.  Commencing  September 1, 1999,
Paragraph 4 of the Lease is hereby  deleted in its entirety and the following is
substituted in lieu thereof:

         "4.  MINIMUM  RENT.  Tenant  hereby  agrees to pay as minimum  rent for
the Leased Premises the sum of Four Thousand Six Hundred Eighty-five Dollars and
Forty-two Cents  ($4,685.42) per month from September 1, 1999 through August 31,
2001 in advance  without sett off or deduction on the first day of each calendar
month (the "Minimum  Rent").  The Minimum Rent shall be prorated for any partial
month."

     5. Tenant's Representations and Warranties.  The undersigned represents and
warrants to Landlord that (i) Tenant is duly organized,  validly existing and in
good  standing  in  accordance  with the laws of the  state  under  which it was
organized; (ii) all action necessary to authorize the execution of the Amendment
has been taken by Tenant; and (iii) the individual executing and delivering this
Amendment on behalf of Tenant has been  authorized to do so, such  execution and
delivery  shall bind  Tenant.  Tenant,  at  Landlord's  request,  shall  provide
Landlord with evidence of such authority.

     6. Examination of Amendment.  Submission of this instrument for examination
or signature to Tenant does not  constitute a reservation  or option,  and it is
not effective until execution by and delivery to both Landlord and Tenant.

     7. Definitions.  Except as otherwise provided herein, the capitalized terms
used in this Amendment shall have the definitions set forth in the Lease.

     8. Incorporation. This Amendment shall be incorporated into and made a part
of the Lease, and all provisions of the Lease not expressly  modified or amended
hereby shall remain in full force and effect.

IN WITNESS WHEREOF, the parties have caused this Amendment to be executed on the
day and year first written above.
                               LANDLORD:

WITNESSES:                     DUKE REALTY LIMITED PARTNERSHIP,
/s/ Joan Wolpin                an Indiana limited partnership

/s/ Naomi Gump                 By:  Duke Investments, Inc., its general partner

                               By: /s/ Kenneth A. Schuermann,
                               Vice President and General Manager

                               TENANT:

WITNESSES:                     ZONIC CORPORATION,
/s/ Sharman Tenpenny           an Ohio corporation
/s/ John H Reifschneider       By:  /s/ James B. Webb
                               President & CEO


                               Exhibit (10) (xii)

                               The Provident Bank

                                 PROMISSORY NOTE
                                 COMMERCIAL LOAN

                     150,000.00 CINCINNATI, OHIO AUGUST 1999

The  undersigned,  for  value  received,  promises  to pay to the  order  of The
Provident Bank, at any of its offices, the sum of ONE HUNDRED FIFTY THOUSAND AND
00/100 Dollars  ($150,000) the "Maximum Credit") or so much thereof as is loaned
by the holder  pursuant to the provisions  hereof,  together with interest until
demand or maturity at the rate of TO VARY WITH PROVIDENT  BANK'S PRIME RATE PLUS
2% per year  computed  on basis of a year of 360 days for the  actual  number of
days elapsed, and after default hereunder, demand or maturity, whether at stated
maturity or by acceleration,  at a rate four (4) percentage  points greater than
the stated rate (the "Default Rate").  Interest shall be due and payable MONTHLY
BEGINNING SEPTEMBER 1, 1999, and at maturity. Principal shall be due and payable
AT MATURITY, AUGUST 1, 2000. The undersigned hereby state(s) that the purpose of
the loan evidenced by this Note is WORKING CAPITAL.

XX  Revolving  Credit:  If this box is check,  this Note is a  revolving  credit
subject to the terms of this paragraph.  Subject to the conditions hereof and of
any other agreements  between the parties  relating hereto and until demand,  if
the  principal  is payable on demand,  or  maturity  (whether  at  scheduled  or
accelerated  maturity),  if the principal is payable  other than on demand,  the
undersigned  may borrow and reborrow  from the holder and the holder may, in its
sole  discretion,  lend and relend to the undersigned such amounts not to exceed
the  Maximum  Credit  as the  undersigned  may at any time and from time to time
request upon satisfactory notice to the holder.

Notwithstanding  anything  to the  contrary  contained  herein  or in any  other
agreement  between the undersigned  and the holder,  if this Notes provides that
the principal  hereof is payable on demand,  then this Note is a demand Note due
and owing  immediately,  without prior demand of the holder and immediate action
to enforce  its  payment  may be taken at any time,  without  notice and without
reason.  If any payment of principal or interest is not paid when due, or if the
holder deems itself  insecure for any reason,  including but not limited to, the
insolvency, bankruptcy, business failure, death, default in the payment of other
obligations or  receivership  of or concerning any maker,  guarantor or indorser
hereof,  this Note shall, if payable other than on demand,  at the option of its
holder,  become  immediately  due and  payable,  without  demand or notice.  The
undersigned  shall  promptly  provide such  financial  information as the holder
shall reasonably request from time to time.

As  collateral  security  for the payment of the amounts from time to time owing
hereunder,  the  undersigned  and all  indorsers  hereby  grant to the  holder a
security interest in (i) all property in which the holder now or hereafter holds
a security  interest  pursuant to any and all assignments,  pledges and security
agreements  between  the  undersigned  and the  holder  and (ii)  all  accounts,
securities  and properties now and hereafter in the possession of the holder and
in which the  undersigned  or any indorsers  haver any interest.  Upon this Note
becoming due under any of its terms and provisions, and not being fully paid and
satisfied,  the total sum then due  hereunder  may, at any time and from time to
time,  be charged  against any account or  accounts  maintained  with the holder
hereof by any of the  undersigned or any indorser,  without notice to or further
consent from any of them, and the  undersigned and all indorsers agree to be and
remain jointly and severally liable for all remaining  indebtedness  represented
by this Note in excess of the amount or amounts so applied.  The undersigned and
the  holder  intend  that  this  indebtedness  shall be  secured  by any and all
mortgages  heretofore or hereafter  granted by the  undersigned  in favor of the
holder.

There will be a minimum finance charge of $50.00 for each billing period.  Prime
rate is that annual  percentage  rate of interest  which is  established  by The
Provident Bank from time to time as its prime rate,  whether or not such rate is
publicly  announced,  and  which  provides  a base to which  loan  rates  may be
referenced.  Prime  rate  is not  necessarily  the  lowest  lending  rate of The
Provident  Bank.  A rate based on the prime rate will change each time and as of
the date that the prime rate changes. If any payment of principal or interest is
not  paid  when  due  or if  the  undersigned  shall  otherwise  default  in the
performance  of it  obligations  hereunder  or under any other note or agreement
with the holder, the holder at its option, may charge and collect, or add to the
unpaid  balance  hereof,  a late  charge up to the greater of $250 or .1% of the
unpaid  balance  of this  Note at the time of such  delinquency  for  each  such
delinquency to cover the extra expense incident to handling delinquent accounts,
and/or increase the interest rate on the unpaid balance to the Default Rate. The
holder may charge interest at the rate provided herein on all interest and other
amounts owing hereunder which are not paid when due.

The undersigned, all indorsers hereof, any other party hereto, and any guarantor
hereof (collectively "Obligors") each (i) wave(s) presentment, demand, notice of
demand, protest, notice of dishonor and any other notice required to be given by
law in  connection  with  the  delivery,  acceptance,  performance,  default  or
enforcement of this Note, of any  indorsement or guaranty of this Note or of any
document or  instrument  evidencing  any security for payment of this Note;  and
(ii)  consent(s)  to  any  and  all  delays,   extensions,   renewals  or  other
modifications of this Note or waivers of any term hereof or release or discharge
by the holder of any of  Obligors or  release,  substitution  or exchange of any
security for the payment  hereof or the failure to act on the part of the holder
or any  indulgence  shown by the  holder,  from  time to time and in one or more
instances,  (without  notice to or  further  assent  from any of  Obligors)  and
agree(s) that no such action, failure to act or failure to exercise any right or
remedy,  on the  part of the  holder  shall  in any way  affect  or  impair  the
obligations  of any  Obligors or be  construed  as a waiver by the holder of, or
otherwise  affect,  any of the  holder's  rights  under  this  Note,  under  any
indorsement  or  guaranty  of this  Note or under  any  document  or  instrument
evidencing  any  security  for  payment of this Note.  The  undersigned  and all
indorsers further agree to reimburse the holder for all advances, charges, costs
and  expenses,  including  reasonable  attorneys'  fees,  incurred  or  paid  in
exercising  any  right,  power  or  remedy  conferred  by this  Note,  or in the
enforcement thereof. If the undersigned are more than one (1) , the liability of
the undersigned heron is joint and several, and the term "undersigned",  as used
herein, means any one or more of them.

The  undersigned and all indorsers  authorize any attorney at law,  including an
attorney engaged by the holder, to appear in any court of record in the State of
Ohio  or  any  other  State  or  Territory  of  the  United  States,  after  the
indebtedness  evidenced hereby,  or any part thereof,  becomes due and waive the
issuance  and service of process and  confess  judgment  against any one or more
than one of the  undersigned  and all indorsers in favor of the holder,  for the
amount  then  appearing  due,  together  with costs of suit and,  thereupon,  to
release all errors and waive all rights of appeal and stay of execution,  but no
such judgment or judgments  against any one of the undersigned shall be a bar to
a  subsequent  judgment  or  judgments  against any one or more than one of such
persons  against whom  judgment has not been  obtained  hereon.  This warrant of
attorney to confess  judgment is a joint and several  warrant of  attorney.  The
foregoing  warrant of attorney shall survive any judgment;  and if any judgement
be vacated for any reason, the holder hereof  nevertheless may hereafter use the
foregoing  warrant of attorney  to obtain an  additional  judgment or  judgments
against  the  undersigned  and all  indorsers  or any one or more of  them.  The
undersigned  and all indorsers  hereby  expressly waive any conflict of interest
that the holder's  attorney may have in confessing  such  judgment  against such
parties and expressly consent to the confessing  attorney  receiving a legal fee
from the holder for confessing such judgment against such parties.

If the  undersigned or any indorser or guarantor  hereof would have the right to
rescind the loan  evidenced by this Note  pursuant to a right so to do under the
Truth-in-Lending  Act  because one or more  mortgages  now exist in favor of the
holder hereof  covering the principal  home or homes of the  undersigned  or any
indorser  or  guarantor  hereof,  the  holder's  acceptance  of this Note  shall
constitute a waiver of its right under any such mortgage to treat such principal
home or homes as security for the  repayment or guaranty of this Note except for
the principal home or homes descried in the Mortgage dated ________________. THE
PROVISIONS OF THIS NOTE SHALL BE GOVERNED BY AND  INTERPREED IN ACCORDANCE  WITH
THE LAWS OF OHIO.  AS A  SPECIFICALLY  BARGAINED  INDUCEMENT  FOR THE  HOLDER TO
EXTEND CREDIT TO BORROWER,  AND AFTER HAVING THE OPPORTUNITY TO CONSULT COUNSEL,
THE UNDERSIGNED AND ALL INDORSERS  HEREBY  EXPRESSLY WAIVE THE RIGHT TO TRIAL BY
JURY IN ANY  LAWSUIT  OR  PROCEEDING  RELATED TO THIS NOTE OR ARISING IN ANY WAY
FROM ANY  INDEBTEDNESS  OR  OTHER  TRANSACTIONS  INVOLVING  THE  HOLDER  AND THE
UNDERSIGNED. THE UNDERSIGNED HEREBY DESIGNATE(S) ALL COURTS OF RECORD SITTING IN
CINCINNATI,  OHIO AND HAVING  JURISDICTION  OVER THE SUBJECT  MATTER,  STATE AND
FEDERAL, AS FORUMS WHERE ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING
FROM OR OUT OF THIS NOTE, ITS MAKING, VALIDITY OR PERFORMANCE, MAY BE PROSECUTED
AS  TO  ALL  PARTIES,  THEIR  SUCCESSORS  AND  ASSIGNS,  AND  BY  THE  FOREGOING
DESIGNATION THE  UNDERSIGNED  CONSENT(S) TO THE  JURISDICTION  AND VENUE OF SUCH
COURTS.

WARNING- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR  KNOWLEDGE  AND THE  POWERS  OF A COURT  CAN BE USED TO  COLLECT  FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR  WHETHER FOR RETURNED
GOODS,  FAULTY GOODS,  FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,  OR ANY
OTHER CAUSE.

ZONIC CORPORATION
BY: /s/ James B. Webb, President
50 West TechneCenter Drive
Cincinnati, OH 45150




                               Exhibit (10) (xiii)
                               SECURITY AGREEMENT
This  SECURITY   AGREEMENT  by  PROVIDENT  BANK  ("Secured   Party")  and  ZONIC
CORPORATION ("Debtor").

1. Security Interest.

   Debtor  hereby  assigns,  pledges and  transfers to Secured  Party and grants
Secured Party a continuing security interest in all of the property described in
this section 1, all of which properties are hereafter called "Collateral".  Each
of the types of  Collateral  described in Sections  1.1,  1.2,  1.3, 1.4 and 1.5
hereof are  included  unless the phrase "not  included" is inserted in the place
provided.

1.1 _____ All of  Debtor's  accounts  (as that term is  defined  in the  Uniform
Commercial Code), accounts receivable, chattel paper, contract rights, documents
and  instruments;  all other  obligations  or  indebtedness  owed to Debtor from
whatever source arising; all guarantees of any of the foregoing and all security
therefor;  all of the right, title and interest of Debtor in and with respect to
the goods,  services or other property which gave rise to or which secure any of
the foregoing and all insurance  policies and proceeds relating thereto;  all of
the foregoing whether now owned by Debtor or hereafter acquired or in existence.

1.2 _____ All of  Debtor's  inventory  (as that term is defined  in the  Uniform
Commercial Code),  including,  without  limitation,  all goods,  merchandise and
other personal property which are held for sale or lease, or are furnished or to
be  furnished  under any  contract of service by Debtor,  or are raw  materials,
work-in-progress,  supplies or materials  used or consumed in Debtor's  business
and all products thereof,  and all  substitutions,  replacements,  additions and
accessories  thereto, all whether now owned or hereafter acquired by Debtor; and
all of  Debtors  right,  title  and  interest  in and to any  leases  or  rental
agreements for such inventory.

1.3 _____ All of  Debtor's  equipment  (as that term is defined  in the  Uniform
Commercial  Code),  including,  without  limitation,  all  furniture,  fixtures,
machinery and other equipment of any kind and all substitutions and replacements
thereof and accessories  and parts therefor,  all whether now owned or hereafter
acquired by Debtor.

1.4 _____ All of Debtor's  general  intangibles  (as that term is defined in the
Uniform Commercial Code), including,  without limitation, all goodwill, patents,
formulas, blueprints, proprietary manufacturing processes, trademarks, licenses,
franchises, beneficial interests in trusts, joint venture interests, partnership
interests, rights to tax refunds, pension plan overfundings, literary rights and
other contractual  rights of Debtor, all whether now owned or hereafter acquired
by Debtor

1.5 _____ All of Debtor's  investment  property  (as that term is defined in the
Uniform Commercial Code) including, without limitation, all securities,  whether
certificated  or  uncertificated,  all  security  entitlements,  all  securities
accounts,  all commodity contracts and all commodity accounts owned by Debtor or
in which Debtor has an interest,  all whether now owned or hereafter acquired by
Debtor.

1.6  _________________________________________________________________________

1.7  _____,  together  with all  dividends,  distributions,  income,  interest ,
premiums,  monies,  claims for monies,  stock dividends and stock splits, now or
hereafter due and payable  thereon,  and all proceeds  thereof,  all  securities
issued in replacement  thereof,  and all other securities  substituted  therefor
(all of which are  hereinafter  sometimes  collectively  referred to as "Pledged
Stock").  Debtor  covenants  that the Pledged Stock shall have a market value at
all times of not less than ___% of the indebtedness.

1.8 All instruments,  documents,  securities,  cash, property, deposit accounts,
certificates  of deposit  and the  proceeds  of any of the  foregoing,  owned by
Debtor or in which  Debtor has an interest,  which now or  hereafter  are at any
time in the  possession  or control  of  Secured  Party or in transit by mail or
carrier to or from Secured Party,  or in possession of any third party acting on
behalf of Secured Party,  without regard to whether  Secured Party received same
in pledge, for safekeeping, as agent for collection or transmission or otherwise
or whether  Secured Party had  conditionally  released the same.  1.9 All ledger
sheets,  files,  records,  documents,   blueprints,   drawings  and  instruments
(including without limitation,  computer programs,  tapes and related electronic
data  processing  software)  evidencing  an  interest  in  or  relating  to  the
Collateral described in this Section 1.

1.10 All proceeds and products of the Collateral described above in this Section
1, including, without limitation, all claims against third parties for damage to
or loss or destruction of any of the foregoing,  including  insurance  proceeds,
and accounts,  contracts rights,  chattel paper and general  intangibles arising
out of any sale, lease or other disposition of any of the foregoing.

2.  Indebtedness.

    The security  interests granted hereby are granted to secure all of debtor's
debts, obligations,  or liabilities of every kind, nature, class and description
to Secured  Party,  now due or to become due,  direct or  indirect,  absolute or
contingent,  presently existing or hereafter arising, joint or several,  secured
or unsecured,  consumer or  commercial,  purchase money or  non-purchase  money,
related or unrelated, similar or dissimilar, whether for payment or performance,
regardless  of how the  same  arise  or by what  instrument,  agreement  or book
account they may be evidenced, or whether evidenced by any instrument, agreement
or book account, including, without limitation, all loans (including any loan by
renewal or extension),  all overdrafts, all guarantees, all bankers acceptances,
all agreements, all letters of credit issued by Secured Party for Debtor and the
applications  relating thereto, all indebtedness of Debtor to Secured Party, all
undertakings  to take or refrain from taking any action,  and all  indebtedness,
liabilities and obligations  owing from Debtor to others which Secured Party may
obtain by purchase,  negotiation,  discount,  assignment or  otherwise,  further
including,   without  limitation,   the  following  obligations  (all  of  which
obligations are collectively  referred to herein as the  "Indebtedness"):  2.1 A
loan to Debtor by Secured Party of  $150,000.00  evidenced by a promissory  note
dated AUGUST, 1999 and all renewals, extensions and modifications thereof;

2.2 All costs incurred by Secured Party to obtain, preserve,  and/or enforce the
security interests granted by this Agreement; to collect the obligations secured
hereby, and to maintain and preserve the Collateral,  with such costs including,
but not limited to,  expenditures made by Secured Party for taxes,  assessments,
insurance  premiums,   repairs,  reasonable  attorney's  fees  and  other  legal
expenses,  storage costs, rents, and expenses of sale, together with interest on
the  above  amounts  at the  highest  rate  being  paid by  Debtor on any of its
obligations  to  Secured  Party,  all of which  Debtor  agrees to pay to Secured
Party; and

2.3  ________________________________________________________________________

      Notwithstanding the foregoing, Secured Party waives any rights arising out
of this Security Agreement to the Collateral as security for any indebtedness of
an  individual  Debtor  to  which  the  Truth-In-Lending  Act and  Regulation  Z
promulgated thereunder apply.

3.  Debtor's Warranties

3.1 Except for the security  interests  granted  herein,  Debtor  represents and
warrants  that it is, and as to the  Collateral  to be  acquired  after the date
hereof,  shall be,  the  owner of the  Collateral  free from any lien,  security
interest or encumbrance, and Debtor shall defend the Collateral and its proceeds
and products  against all claims and demands of all persons at any time claiming
the same of any interest  therein adverse to Security Party,  and shall preserve
the  Collateral  free  from  any  subsequent  liens,  encumbrances  or  security
interests.

3.2 Debtor  represents and warrants that at the time any account becomes subject
to a security  interest in favor of Secured Party,  said account shall be a good
and valid account  representing  a bona fide outright sale of goods by Debtor or
services  performed  by Debtor  and such goods  shall  have been  shipped to the
respective  account  debtors  or  the  services  have  been  performed  for  the
respective  account debtors.  Each account shall not be subject to any claim for
credit,  allowance or  adjustment  by account  debtor or any setoff,  defense or
counterclaim.  Debtor shall immediately notify Secured Party in the event of the
refusal  of any goods  which are the  subject  of any such  account,  and of the
bankruptcy,  insolvency or financial  embarrassment of any account debtor and of
any claim asserted for credit, allowance, adjustment, setoff or counterclaim.

4. Debtor's Obligations.

4.1 Debtor shall keep  accurate and complete  records and accounts in accordance
with  sound  accounting  practices  of all of its  Collateral,  and shall at all
reasonable  times allow  Secured  Party to inspect the  Collateral,  to examine,
audit or make  extracts  from  Debtor's  books and  records,  and to arrange for
verification of the Collateral under reasonable procedures directly with account
debtors and other persons or by other procedures. Debtor will furnish to Secured
Party on request additional statements of any account together with all notes or
other documents and information relating thereto.

4.2 Debtor shall keep the Collateral  insured against such  causalities,  and in
such  amount an on such terms as Secured  Party shall  require and the  policies
shall  provide for at least 30 days written  notice of  cancellation  to Secured
Party.  Debtor shall furnish  Secured Party with  satisfactory  evidence of such
Insurance and Secured Party shall be added to any such  insurance as loss payee.
Debtor shall promptly pay when due all taxes and assessments imposed on, or with
respect to the  Collateral,  and shall maintain the Collateral in good condition
and repair.  If Debtor fails to pay the  premiums on any such  insurance or such
taxes when due, or to maintain the Collateral in good condition and repair,  the
Secured  Party  may do so  for  Debtor's  account  and  add  the  amount  of its
expenditures  with respect thereto to Debtor's  outstanding  obligations,  which
amount  shall be payable on demand with  interest at the highest rate being paid
by Debtor on any of its  obligations to Secured Party.  Secured Party shall have
the right to settle and compromise any and all claims under any of the insurance
policies  required  to be  maintained  by Debtor  hereunder  and  Debtor  hereby
irrevocably  appoints  Secured  Party  as its  attorney-in-fact,  with  power to
demand, receive and receipt for all monies payable thereunder, to execute in the
name of the Debtor any proof of loss,  notice,  draft, and other  instruments in
connection  with such  policies  or loss  thereunder,  and  generally  to do and
perform  any and all acts as  Debtor  could  perform  in  connection  with  such
policies.

4.3 Debtor shall execute such financing  statements and other  documentation  as
shall  reasonably be requested by Secured Party in order to perfect the security
interests  granted  Secured  Party  hereunder and to carry out the terms of this
Agreement.  A photocopy of this  Security  Agreement  shall be  sufficient  as a
financing statement and may be filed in any appropriate office in lieu thereof.

4.4  Upon request of Secured Party, Debtor shall furnish Secured Party:

a.   Within  90  days  after  the  end of  Debtor's  fiscal  year,  a  financial
     statement,  including a balance sheet,  and statements of income,  retained
     earnings and changes in financial  position,  each  prepared in  accordance
     with  generally  accepted  accounting   principles   consistently  applied,
     certified by Debtor's chief financial officer or certified public account;

b.   Within  45 days  after  the  close of each  quarter,  financial  statements
     similar to those in (a) above and  certified  by Debtor's  chief  financial
     officer,

c.   Promptly,  such other  information as Secured Party may reasonably  request
     from time to time, including, without limitation, at the end of each month,
     financial statements similar to those in (a) above; and

d.   Promptly,  in the  case of a  Debtor  who is a  natural  person,  financial
     statements in a form acceptable to Secured Party.

5. Debtor's Rights with Respect to Collateral.

5.1  With  respect  to the  Collateral  specified  in  Section  1.1,  Debtor  is
authorized  to collect the proceeds of such  Collateral  and utilize them in the
ordinary course of business, provided that Secured Party shall have the right at
any time, before or after default, to notify account debtors, and to notify such
account debtors to make payments of such accounts  directly to Secured Party. At
the request of Secured  Party,  Debtor shall so notify such account  debtors and
indicate on all  billings  that the  accounts  are  payable  directly to Secured
Party.  In addition,  Debtor shall,  at the request of Secured  Party,  hold all
proceeds  from  collection  of  accounts  in trust  for  Secured  Party  without
commingling the same with other funds,  and shall promptly turn over the same to
Secured  Party in the  identical  form  received,  endorsed by Debtor to Secured
Party.  The proceeds of such Collateral  shall be applied to the indebtedness in
such order as Secured Party determines in its sole discretion.

5.2 Debtor shall also have the right to utilize the  Collateral  as specified in
Section 1.2 in the ordinary  course of business,  and to sell such Collateral in
the ordinary course of business,  provided that such Collateral is replaced with
Collateral  of like kind and  quality,  with a fair market  value equal to or in
excess of that sold,  provided,  however,  the  Secured  Party may, by notice to
Debtor, require that no such sales be made without the prior written approval of
Secured Party.

5.3 Until  default,  Debtor  shall have the right to use,  consume,  or sell any
items of the  collateral  described  in  Section  1.3 in the  regular  course of
business but not to otherwise dispose of such Collateral.

5.4 In the event Debtor  receives any  certificates,  proceeds or other property
constituting Pledged Stock after the date hereof, Debtor shall hold such Pledged
Stock in trust for Secured Party and shall promptly  deliver the same to Secured
Party; provided,  however, that the Debtor may retain any cash dividends,  other
than  liquidating  dividends or distributions of return of capital and interest,
so long as no event of default has occurred hereunder.

6.  Default.

If the  indebtedness is due other than on demand,  upon the happening of any one
or more of the following events or conditions, Secured Party may, at its option,
declare the entire amount of Indebtedness  of Debtor to it then  outstanding due
and payable  immediately without notice to Debtor, and Secured Party may proceed
to enforce  payment of the same,  and to exercise all of the rights and remedies
of a Secured  Party under the Ohio  Uniform  Commercial  Code in addition to the
rights and remedies  provided  herein.  The events of default  hereunder  are as
follows:

6.1 The failure of Debtor to pay any of the Indebtedness when due.

6.2 The  failure of Debtor to observe or perform any of the  provisions  of this
Agreement or any other agreement between the Debtor and the Secured Party.

6.3 If any warranty, representation,  certificate, schedule, financial statement
or other  information  given to Secured Party hereunder shall prove to be untrue
or materially misleading.

6.4 The  death of any  person  signing  as Debtor  to this  Agreement  or of any
guarantor.

6.5 If any  proceedings are instituted by or against Debtor under any insolvency
laws,  or if Debtor shall become  insolvent or otherwise  suffer such changes in
his  condition or affairs as in the sole  discretion  of Secured  Party  impairs
Secured  Party's  security  interests  hereunder,  or  increases  its risk as to
repayment of any item of the  indebtedness,  or if Secured Party shall otherwise
deem itself insecure with respect to the Indebtedness.

If the  indebtedness is due on demand,  the Secured Party may proceed to enforce
payment of same and exercise all of the  remedies  provided  herein at any time,
without notice and without reason.

Secured  Party's  remedies  include,  but are not  limited to, the right to take
possession  of the  collateral  or any part  thereof,  and Debtor  hereby grants
Secured  Party  authority to enter upon any premises on which the  Collateral or
any part thereof may be situated,  and remove the Collateral  from such premises
or use such premises,  together with the materials,  supplies, books and records
of Debtor, to maintain  possession and/or the condition of the Collateral and to
prepare the  Collateral  for sale.  Debtor shall,  upon demand by Secured Party,
assemble the Collateral  specified in Section 1.2 hereof,  and make it available
at a place  designated  by Secured Party and  convenient  to both  parties.  All
rights  and  remedies  of  Secured  Party  hereunder  shall be  cumulative,  not
exclusive, and shall be enforceable alternatively,  successively or concurrently
with any other remedy  available  hereunder or otherwise  available at law or in
equity.

7.  Power of Attorney

Debtor  hereby  irrevocably  appoints  Secured Party as Debtor's true and lawful
attorney-in-fact,  with full power of substitution,  for Debtor, and in Debtor's
name, place and stead, upon the occurrence of any event of default as defined in
Section 6 above,  and in the event that  Secured  Party  elects to exercise  any
rights granted to it hereunder.  As attorney-in-fact,  Secured Party may act for
Debtor  with  respect  to the  Collateral  as if Secured  Party  where the owner
thereof,   and  may  endorse  and  cash  promissory  notes,   checks  and  other
instruments,  institute legal proceedings,  make, adjust, and settle claims, and
do all other  acts  necessary  and  incidental  to the  exercise  of its  rights
provided  hereunder,  or  otherwise  available  to it in the  event of  default.
Neither Secured Party nor its agents shall be liable for any act or omissions or
for any error of  judgement  or mistake of fact or law in its  capacity  as such
attorney-in-fact.

8.  Miscellaneous

Any  required  notices  to  Debtor,  including  notice of the sale of any of the
Collateral,  shall be deemed to be reasonable if mailed to Debtor at the address
shown below, or such other address furnished Secured Party in writing,  at least
five (5)  business  days prior to the action which is the subject of the notice.
The term  "Debtor" as used  herein  shall  include  the  singular as well as the
plural,  and other words in the singular  shall  include the plural and words of
one gender  shall  include the other  gender when the sense  requires.  The term
"Uniform  Commercial Code" as used herein shall mean the Uniform Commercial Code
as adopted by the State of Ohio.  No  waivers  by Secured  Party of any  default
shall be effective unless given in writing, and shall not operate as a waiver of
any other default. The rights of Secured Party shall inure to the benefit of its
successors and assigns,  and the obligation of Debtor shall bind Debtor's heirs,
executors,  administrators,  successors  and assigns.  If there is more than one
Debtor, their obligations hereunder shall be joint and several.

This Agreement contains the entire understanding between the parties hereto with
respect to the transactions contemplated herein and such understanding shall not
be modified  except in a writing  signed by or on behalf of the parties  hereto.
This Agreement  shall be deemed to be a contract  entered into and made pursuant
to the  laws of the  State  of Ohio  and  shall  in all  respects  be  governed,
construed, applied and enforced in accordance with the laws of said state.

As a  specifically  bargained  inducement  for Secured Party to extend credit to
Debtor: (i) THE DEBTOR HEREBY EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY
LAWSUIT OR PROCEEDING  RELATED TO THIS SECURITY  AGREEMENT OR ARISING IN ANY WAY
FROM THE INDEBTEDNESS OR TRANSACTIONS INVOLVING SECURED PARTY AND THE DEBTOR AND
(ii) THE DEBTOR HEREBY  DESIGNATE(S) ALL COURTS OF RECORD SITTING IN CINCINNATI,
OHIO AND HAVING  JURISDICTION  OVER THE SUBJECT  MATTER,  STATE AND FEDERAL.  AS
FORUMS WHERE ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING FROM OR OUT
OF  THIS  SECURITY  AGREEMENT,  ITS  MAKING,  VALIDITY  OR  PERFORMANCE,  MAY BE
PROSECUTED  AS TO  ALL  PARTIES.  THEIR  SUCCESSORS  AND  ASSIGNS,  AND  BY  THE
FOREGOINGD ESIGNATION THE DEBOR CONSENT(S) TO THE JURISDICTION AND VENUE OF SUCH
COURTS.

Executed at CINCINNATI, __ on the 29 day of AUGUST, 1999

ALL TERMS AND  CONDITIONS ON THE REVERSE SIDE OF THIS AGREEMET ARE A PART HEREOF
AND ARE BINDING UPON THE PARTIES HERETO.

THE PROVIDENT BANK ("Secured Party")
BY: /s/  Richard E. Wirthlin, Vice President
ADDRESS:  One East Fourth Street
Cincinnati, Hamilton County, Ohio 45202

DEBTOR:  ZONIC CORPORATION
BY: /s/ James B. Webb, President
ADDRESS:  50 West TechneCenter Drive
Cincinnati, OH 45150

                                  Exhibit (23)

INDEPENDENT AUDITORS' CONSENT

We consent to the  incorporation  by reference  in  Registration  Statement  No.
333-85109 and Registration  Statement No. 33-45686 of Zonic  Corporation on Form
S-8 of our report dated June 22, 1998,  appearing in this Annual  Report on Form
10-K of Zonic Corporation for the year ended March 31, 2000.


Deloitte & Touche

Cincinnati, Ohio
June 15, 2000