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

                                    FORM 10-K

(Mark One)

(X)  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES  EXCHANGE
     ACT OF 1934 - FOR THE FISCAL YEAR ENDED APRIL 30, 2004

( )  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15 (d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934 - For the  transition  period from _______ to ________

                         Commission file number: 0-8006

                             COX TECHNOLOGIES, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


            NORTH CAROLINA                                       86-0220617
    (State or other jurisdiction of                           (I.R.S. Employer
     incorporation or organization)                          Identification No.)

          77 McADENVILLE ROAD
        BELMONT, NORTH CAROLINA                                  28012-2434
(Address of principal executive offices)                         (Zip code)

       Registrant's telephone number, including area code: (704) 825-8146

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

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

                         COMMON STOCK, 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  the  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)

Estimated  aggregate market value of the voting stock held by  non-affiliates of
the registrant:

                        $6,106,732 as of August 17, 2004
--------------------------------------------------------------------------------
Number of shares of Common  Stock,  no par value,  as of the latest  practicable
date:

                     38,167,077 shares as of August 17, 2004
--------------------------------------------------------------------------------
Documents incorporated by reference:  None


<PAGE>


                             COX TECHNOLOGIES, INC.

                                    FORM 10-K

                                ANNUAL REPORT TO
                     THE SECURITIES AND EXCHANGE COMMISSION
                    FOR THE FISCAL YEAR ENDED APRIL 30, 2004

                                 --------------

                                TABLE OF CONTENTS

Item                                                                        Page
                                     PART I

1.     Business.............................................................. 1
2.     Properties............................................................ 4
3.     Legal Proceedings..................................................... 4
4.     Submission of Matters to a Vote of Security Holders................... 4

                                     PART II

5.     Market for the Registrant's Common Equity and Related Stockholder
        Matters.............................................................. 4
6.     Selected Financial Data............................................... 7
7.     Management's Discussion and Analysis of Financial Condition and
        Results of Operations................................................ 7
8.     Financial Statements and Supplementary Data ..........................14
9.     Changes in and Disagreements With Accountants on Accounting and
        Financial Disclosure.................................................35
9a.    Internal Controls and Procedures......................................35

                                    PART III

10.    Directors and Executive Officers of the Registrant....................35
11.    Executive Compensation................................................38
12.    Security Ownership of Certain Beneficial Owners and Management........40
13.    Certain Relationships and Related Transactions........................40
14.    Principal Accountant Fees and Services ...............................42

                                     PART IV

15.    Exhibits, Financial Statement Schedules and Reports on Form 8-K.......43
       Signatures............................................................47

                                       i

<PAGE>


                                     PART I

ITEM 1.  BUSINESS

General

Cox  Technologies,  Inc. (the  "Company"),  is engaged in the process of orderly
liquidation of its remaining assets, the winding up of its business  operations,
the dissolution of the Company and the distribution of cash to shareholders.

The Company was incorporated as Mericle Oil Company in July 1968, under the laws
of the State of Arizona. The name was changed to Energy Reserve,  Inc. in August
1975. In November 1994, Energy Reserve acquired Twin-Chart, Inc. and altered its
primary  business focus from crude oil  operations to temperature  recording and
monitoring operations.  As a result of this change in focus, the Company changed
its name to Cox Technologies,  Inc. in April 1998. The Company reincorporated in
the State of North Carolina in December 2000.

Except where the context otherwise indicates,  all references to the Company are
to Cox  Technologies,  Inc., its wholly owned  subsidiaries,  Twin-Chart,  Inc.,
Transit  Services,  Inc.,  Vitsab,  Inc., Vitsab USA, Inc., Fresh Tag Research &
Manufacturing, Inc., Qualtag Engineering, Inc. and Cox Recorders Australia, Pty.
Ltd. ("Cox Recorders Australia"),  a 95% owned Australian  distribution company.
During July 2001, all domestic subsidiaries were merged into the parent company,
Cox Technologies,  Inc. On March 15, 2003, the Company sold all of its shares in
its Vitsab Sweden subsidiary to its Copenhagen distributor.

On December 12, 2003, the Company entered into an Asset Purchase Agreement (such
agreement,  as amended on January 29, 2004, the "Asset Purchase Agreement") with
Sensitech Inc., a Delaware corporation  ("Sensitech") and Cox Acquisition Corp.,
a Delaware  corporation and a wholly owned  subsidiary of Sensitech,  formed for
purposes  of  consummating  the  Asset  Purchase  Agreement  ("Buyer")  to  sell
substantially all of the Company's assets ("the Asset Sale").

Effective  April 16,  2004,  the Company  and  Sensitech  completed  Sensitech's
acquisition of  substantially  all of the assets of the Company  pursuant to the
terms of the Asset  Purchase  Agreement  dated  December  12,  2003,  as amended
January 29, 2004,  among the Company,  Sensitech and Cox  Acquisition  Corp. The
aggregate  consideration received by the Company at the closing was comprised of
$10,595,589 in cash. In addition,  Sensitech  assumed  $233,569 of the Company's
payables  and  certain  other  liabilities.  At  closing,  Sensitech  retained a
$250,000  holdback  amount  in  the  Asset  Sale.  Determination  of  the  final
consideration is subject to adjustment based upon  finalization of the Company's
balance  sheet as of the  closing  date.  Under the terms of the Asset  Purchase
Agreement,  the Company  retained  certain assets and  liabilities in connection
with the  transaction,  including  certain cash,  production  equipment,  office
equipment,   machines,   tools,   fixtures,   furniture  and  certain   retained
liabilities.

In  connection  with the Asset Sale,  the Company and  Sensitech  entered into a
Manufacturing   Services   Agreement  under  which  the  Company   continued  to
manufacture  the Company's  products on behalf of Sensitech  from April 16, 2004
through July 2, 2004.

The  parties  completed  the  Asset  Sale  following  a special  meeting  of the
Company's  shareholders on April 15, 2004,  whereby the holders of a majority of
the  Company's   common  stock  approved  the  Asset  Sale  and  the  subsequent
liquidation  and  dissolution  of the  Company  pursuant to the Plan of Complete
Liquidation and Dissolution (the "Plan").

On January 29, 2004 the Company  entered into an Asset  Purchase  Agreement with
Rask  Holding  ApS,  to sell its  Vitsab  division  for  $175,000  plus  assumed
liabilities.  The  transaction  was  consummated on the same date.  Rask Holding
acquired all of the assets  associated  with the Vitsab division except cash and
accounts  receivable,  and assumed all  liabilities  associated  with the Vitsab
division  except  liabilities  associated  with a raw material  purchase  from a
specific  vendor and for taxes  resulting from operations of the Vitsab division
prior to January 29, 2004.

The  Company  sold  most of its  remaining  assets  (principally  furniture  and
equipment) at auction on July 17, 2004.

                                       1
<PAGE>
Business Operations prior to the Asset Sale

Prior to the Asset Sale the core business of the Company was to provide reliable
temperature  monitoring  products and develop new and  technologically  advanced
monitoring  systems.  The Company produced and distributed  transit  temperature
recording  instruments,  including  electronic  "loggers,"  graphic  temperature
recorders   and  visual   indicator   tags,   both  in  the  United  States  and
internationally.

Temperature Recorder Operations

The  Company's   temperature   recorder   activities   included  production  and
distribution  of  graphic  temperature  recording  instruments,   the  sale  and
distribution  of  electronic   temperature  and  humidity  recorders  (sold  for
non-transit  quality  monitoring  purposes as well as for  transit  monitoring),
production and distribution of visual indicator labels,  the sale of fixed based
temperature  monitoring  systems,  and the  sale  and  distribution  of  various
temperature sensing probes and thermometers.

The graphic temperature recording  instruments,  known as temperature recorders,
are self-contained, battery-powered and designed to create a graphical "time vs.
temperature"  record. The electronic  temperature  recorders are battery-powered
devices that record  temperature  in a computer  memory chip.  The data is later
retrieved by transferring the information to a personal computer.

The graphic  recorders  were  marketed  under the trade name Cox  Recorders  and
produced a record which was documentary  proof of temperature  conditions useful
for compliance with governmental  regulations,  the monitoring of performance of
refrigerated  carriers,  and for claims in the transport of valuable perishables
such as  produce,  meat,  pharmaceuticals,  chemicals,  live  plants  and animal
material.  The electronic  temperature recording products were used for the same
purpose,  but also were used for internal checking of temperature  conditions in
storage and processing.

The Company sold two different  types of electronic  "data  loggers"  which were
manufactured by an offshore  contractor.  The Tracer(R)  product line, which can
record data for both temperature and humidity,  is a  research-grade  instrument
used in a broad  variety of  laboratory,  environmental,  process  control,  and
quality  assurance  applications.  A lower  cost  electronic  data  logger,  the
DataSource(R),   is  used  primarily  for  transit  temperature  monitoring  and
recording.  Both  loggers  deliver  their  data via a cable  link to a  personal
computer using specialized software.

The Company purchased for resale the TempList(R),  which is a data collection or
"listing" temperature recorder that is used for point-of-measurement  recording.
The TempList(R)  delivers the data via a cable link to a personal computer using
specialized  software.  The Company also  purchased  digital  thermometers  with
penetration probes for resale from a variety of manufacturers.

The Cox1 product accounted for  approximately 62% of the Company's  revenues for
the period  beginning  May 1, 2003 and ending  April 15,  2004.  The  balance of
revenues was generated  through the sale of electronic data loggers,  probes and
other temperature monitoring products.

During fiscal 2002, the Company contracted with a third party to manufacture and
assemble certain base versions of the Cox1 units at an offshore location. During
the  period  beginning  May 1, 2003 and ending  April 15,  2004,  that  offshore
location supplied approximately 40% of the total number of units utilized by the
Company.  Because  of  this  manufacturing  arrangement,  the  Company  realized
significant cost savings on units manufactured in both the offshore and Belmont,
North  Carolina  facilities.  The Company did not  experience  foreign  currency
exchange risks as all transactions were denominated in U.S. dollars.

The temperature  recorder operations of the Company did not depend upon a single
or  a  few  customers.  However,  the  Company  did  have  significant  business
relationships  with several  large retail  customers  and foreign  distributors.
Backlog of orders was not a major factor in the temperature  recorder operations
of the Company.

The Company was a major  competitor in the temperature  recording  industry with
regards to its production and distribution  activities.  The Company encountered
significant  competition  from a variety of  companies in all major areas of its
business  activity.  The Company competed  primarily on product  performance and
price.  Reliability,  technology,  customer service and company  reputation were
also important competitive factors.

The Company  generally  did not maintain  company owned  distribution  entities.
However,  in 1999, the Company established Cox Recorders Australia to retain its
market share and presence in this geographic  area.  Except for this subsidiary,
all distributors  were contracted.  All other  distribution and sales operations
were through  individual  sales persons  operating on salary,  sales  commission
basis or salary plus  incentive  basis.  The shares of Cox  Recorders  Australia
stock owned by the Company were sold to Sensitech in the Asset Sale.

                                       2
<PAGE>
Vitsab(R) Product

Vitsab(R)  is a technology  that employs  enzymatic  color  indicators  inside a
transparent  label to show the  amount of  temperature  exposure  of a stored or
shipped  temperature-sensitive  commodity. These labels are programmable devices
that run as a "biological clock" parallel to the biological clock of the product
it is set to monitor. They integrate both time and temperature and give a visual
indication  that  parallels the  monitored  food or drug product as it reaches a
certain definable state.

During the period from May 1, 2003 through  January 29, 2004, the Vitsab(R) line
of products  generated  sales equaling  approximately  3% of the Company's total
revenues.

Oilfield Operations

Until September 30, 2002, the Company owned working  interests through subleases
in developed  oil and gas  properties  located in  California.  These  developed
properties  contained  drilled wells that were capable of producing crude oil or
natural  gas.  The Company  attempted  to manage and improve  production  in the
fields by employing an independent oilfield operator through several contractual
agreements  dating  back to  1999.  The  Company  sold  its  interest  in  these
properties on September 30, 2002.

Intellectual Property

The  Company  owned a number of  patents,  trademarks,  trade  secrets and other
intellectual  property  directly  related to, and  important  to, the  Company's
business. All of these assets were sold to either Sensitech or Rask Holding.

Research and Development

No research and  development  expenses were incurred during fiscal 2004, 2003 or
2002.

Government Regulation

The Company is not currently  subject to direct  regulation by any  governmental
agency other than rules and regulations that apply to businesses generally.

Employees

On June 1, 2004, the Company had 35 full-time  employees  compared to 64 on June
1,  2003.  On August 17,  2004,  the  Company  had four  employees.  None of the
Company's employees are covered by collective bargaining agreements.

                      EXECUTIVE OFFICERS OF THE REGISTRANT

                                                                    Date Elected
Name and Age (1)                  Title (1)                          An Officer
----------------                  ---------                          ----------
Dr. James L. Cox          Chairman, President and                     08/01/95
     Age - 59                  Chief Technology Officer
Brian D. Fletcher         Co-Chief Executive Officer and              03/10/00
     Age - 42                  Director of Marketing
Kurt C. Reid              Co-Chief Executive Officer and              03/10/00
     Age - 44                  Director of Operations
John R. Stewart           Chief Financial Officer                     06/11/03
     Age - 56                  and  Secretary

(1)     As of August 17, 2004

The officers of the Company will serve in their respective  capacities until the
liquidation of the Company is completed.

Dr.  James L. Cox has been  employed by the Company as  President  for more than
five years and as Chief  Technology  Officer since April 1, 2003.  Prior thereto
and for more than five years,  he was employed by the Company as Chief Executive
Officer. He has served continuously as Chairman for the past five years.

                                       3
<PAGE>
Brian D. Fletcher has been employed by the Company as Co-Chief Executive Officer
and Director of Marketing since April 1, 2003. Prior thereto and since March 10,
2000, he was employed as Chief Operating Officer.  Prior to joining the Company,
he was a private investor for more than the previous two years.

Kurt C. Reid has been  employed  by the Company as  Co-Chief  Executive  Officer
since April 1, 2003 and Director of  Operations  since March 10, 2000.  Prior to
joining the  Company,  he was a private  investor for more than the previous two
years.

John R. Stewart has been employed by the Company as Chief Financial  Officer and
Secretary  since  June  11,  2003.   Prior  to  joining  the  Company,   he  was
self-employed  as an independent  accounting  and financial  consultant for more
than the previous five years.

Available Information

As of August 1, 2004, we began  maintaining a temporary office at 77 McAdenville
Road,  Belmont NC 28012.  Our phone  number is (704)  825-8146  and our  mailing
address is 137 Cross Center Dr - #329,  Denver,  NC 28037. The books and records
of the Company are in the possession of Kurt C. Reid, Co-Chief Executive Officer
and John R. Stewart, Chief Financial Officer.

Our Annual Report on Form 10-K,  Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K and amendments to reports filed pursuant to Sections 13(a) and 15(d)
of the Securities  Exchange Act of 1934, as amended,  are available.  The public
may read and copy any  materials  filed by the Company with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, NW, Washington,  DC 20549. The public
may obtain  information on the operation of the Public Reference Room by calling
the SEC at  1-800-SEC-0330.  The SEC  maintains an Internet  site that  contains
reports,  proxy  and  information  statements  and other  information  regarding
issuers that file electronically with the SEC at http://www.sec.gov. The content
of the  website  is not  incorporated  in the  filing.  Further,  the  Company's
references  to the URL for this  website is intended  to be an inactive  textual
reference only.

ITEM 2.  PROPERTIES

The  Company  had leased  manufacturing  facilities  located in  Belmont,  North
Carolina  through July 31, 2004. The facility in Belmont served as the Corporate
Office and as a manufacturing  facility during the Contract Manufacturing period
for Sensitech. As of August 1, 2004, the Company began maintaining a space at 77
McAdenville Road, Belmont NC, 28012 and maintaining  certain computer operations
and  books  and  records  in that  space  to  facilitate  customer,  vendor  and
shareholder  communications.  The space is being  occupied  without  cost to the
Company.

ITEM 3.  LEGAL PROCEEDINGS

None.

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

On April 15,  2004,  the Company  held a Special  Meeting of  shareholders  (the
"Special  Meeting").  At the Special  Meeting,  the  shareholders of the Company
voted to approve the Asset Sale and the Plan of  Dissolution  (the "Plan").  The
vote to approve the Asset Sale was 20,946,072 shares in favor and 904,671 shares
opposed. The vote to approve the Plan was 20,912,318 shares in favor and 926,399
shares opposed.

                                     PART II

ITEM 5.  MARKET  FOR THE  REGISTRANT'S  COMMON  EQUITY AND  RELATED  STOCKHOLDER
MATTERS

We intend to close our stock transfer books and discontinue  recording transfers
of our common stock at the close of business on the date we file the Articles of
Dissolution  with the North  Carolina  Secretary  of State,  referred  to as the
"final record date".  The articles of dissolution  will be filed at such time as
the Board of Directors, in its absolute discretion deems necessary,  appropriate
or  desirable.  It is  anticipated  that this action will be taken in the second
half of 2004.

The Company's Common Stock is traded on the nationwide  over-the-counter  market
and is listed  under the  symbol  "coxt.ob"  on the  electronic  bulletin  board
provided by the National Quotation Bureau, Inc.

                                       4
<PAGE>


The table below  presents the reported high and low common stock sale prices for
each quarter of fiscal 2004 and 2003. The Company has not declared any dividends
during the last two fiscal years.

                           2004                        2003
                    ----------------------------------------------
                    High          Low          High           Low
                    ----          ---          ----           ---
First Quarter       $0.09        $0.05         $0.30         $0.07
Second Quarter      $0.30        $0.05         $0.15         $0.06
Third Quarter       $0.25        $0.13         $0.08         $0.02
Fourth Quarter      $0.18        $0.14         $0.07         $0.04

At August 12, 2004, the Company had approximately 2,062 holders of record of the
Company's Common Stock.

The table below  presents  the  information  related to the equity  compensation
plans that have been previously approved by shareholders and equity compensation
plans not approved by shareholders, as of April 15, 2004.
<TABLE>
<CAPTION>

                                             Number of securities     Weighted-average       Number of securities
                                               to be issued upon      exercise price of     remaining available for
                                                  exercise of            outstanding         future issuance under
                                             outstanding options,     options, warrants    equity compensation plans
                                              warrants and rights        and rights
                                            ------------------------------------------------------------------------
<S>                                                <C>                    <C>                     <C>
Equity compensation plans approved by
security holders (2000 Stock Incentive
Plan)                                              4,289,000              $ .1737                 2,957,972
Equity compensation plans not approved by
security holders (Non-Qualified Stock
Option Agreements)                                 6,600,000              $ .6534                     -
                                            ------------------------------------------------------------------------
Total                                             10,899,000              $ .4510                 2,957,972
                                            ========================================================================
</TABLE>

The table below  presents  the  information  related to the equity  compensation
plans on a liquidation basis and presents only the "in-the-money" options, as of
April 15, 2004.  In-the-money  options are those granted to individuals  with an
exercise  price below the expected  liquidation  distribution  amount per common
share.
<TABLE>
<CAPTION>

                                                    Number of securities with an       Weighted-average exercise
                                                      exercise price below the           price of outstanding
                                                   estimated distribution amount     options, warrants and rights
                                                --------------------------------------------------------------------
<S>                                                           <C>                               <C>
Equity compensation plans approved by security
holders (2000 Stock Incentive Plan)                           690,000                           $ .1057
Equity compensation plans not approved by
security holders (Non-Qualified Stock Option
Agreements)                                                 1,800,000                           $ .1100
                                                --------------------------------------------------------------------
Total                                                       2,490,000                           $ .1088
                                                ====================================================================
</TABLE>

                                       5
<PAGE>
Since its  inception,  the Company has not paid any cash dividends on its common
stock and does not anticipate paying such dividends in the foreseeable future.

In calendar 2004, we expect to make cash distributions to shareholders of record
at the final record date. Since the Asset Sale to Sensitech, we have been taking
the necessary  steps to liquidate and convert the remaining  non-cash  assets of
the Company to cash and to pay the  liabilities  and obligations of the Company.
In lieu of satisfying all of our  liabilities  and  obligations  prior to making
distributions  to our  shareholders,  we will  create a  contingency  reserve to
provide  for  such  liabilities  and  obligations.  The  actual  amount  of  the
contingency  reserve will be based upon estimates and opinions of management and
the Board of Directors and review of our estimated operating expenses and future
estimated liabilities,  including, without limitation,  anticipated compensation
payments, estimated legal and accounting fees, operating lease expenses, payroll
and other taxes payable,  miscellaneous office expenses, and expenses accrued in
our financial statements. There can be no assurance that the contingency reserve
in fact will be sufficient.

After the  liabilities,  expenses  and  obligations  for  which the  contingency
reserve is established  have been  satisfied in full, we will  distribute to our
shareholders any remaining portion of the contingency reserve.

Under the  North  Carolina  Business  Corporation  Act,  in the event we fail to
create  an  adequate  contingency  reserve  for  payment  of  our  expenses  and
liabilities,  or should  such  contingency  reserve  be  exceeded  by the amount
ultimately  found  payable  in  respect  of  expenses  and   liabilities,   each
shareholder  could be held  liable for the  repayment  to  creditors  out of the
amounts theretofore received by such shareholder from us.

Management's current estimate is that the accumulative distribution will be in a
range from $0.16 to $0.18 per common share.

The following is a list of all  unregistered  stock issued during the last three
fiscal years.

Fiscal 2004

Pursuant to an Amended  Employment  Agreement  between Mr.  Peter Ronnow and the
Company dated August 17, 2000,  the Company  issued 148,148 shares of restricted
stock to satisfy  compensation due Mr. Ronnow.  The shares were issued under the
exemption set forth in Rule 701 under the Securities Act of 1933.

Fiscal 2003

Pursuant to an April 10, 2001 amendment to an agreement  between the Company and
BEN  Acquisition,  LLC, dated June 23, 2000, the Company issued 10,000 shares of
restricted  stock to each of the three members of BEN  Acquisition,  LLC on July
18, 2002.  The shares were issued under the  exemption  set forth in Rule 506 of
Regulation D of the Securities Act of 1933.

       Pursuant  to  the  TI  Stock  Purchase  Agreement,   the  Company  issued
12,500,000  shares of  restricted  stock to TI. The shares were issued under the
exemption set forth in Rule 506 of Regulation D of the Securities Act of 1933.

Fiscal 2002

       Pursuant  to an April 10,  2001  amendment  to an  agreement  between the
Company and BEN Acquisition,  LLC, dated June 23, 2000, the Company issued 9,500
shares of restricted stock to each of the three members of BEN Acquisition,  LLC
on November 20, 2001.  The shares were issued under the  exemption  set forth in
Rule 506 of Regulation D of the Securities Act of 1933.

       Pursuant to an April 30, 2001  agreement  between the Company and McManus
Financial  Consultants,  Inc.,  under which they  provided  consulting  services
related to investor  relations,  the Company  issued 41,667 and 41,666 shares of
restricted  stock,  respectively,  to the two  partners.  The shares were issued
under the exemption set forth in Rule 506 of Regulation D of the  Securities Act
of 1933.

       Pursuant to a February 15, 2002  agreement  between the Company and Stock
Enterprises,  Inc., under which Mr. James R. Stock, president,  agreed to cancel
for  consideration an investor  relations  services  agreement dated November 1,
2002,  the Company  issued to Mr. Stock 30,000 shares of restricted  stock.  The
shares were issued under the  exemption set forth in Rule 506 of Regulation D of
the Securities Act of 1933.

                                       6
<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA

       The following table sets forth selected historical consolidated financial
information  as of and for each of the fiscal  years,  which  have been  derived
from,  and should be read  together  with,  the audited  consolidated  financial
statements and the related notes,  which are included  elsewhere in this report.
The information  presented below should also be read together with  Management's
Discussion and Analysis of Financial Condition and Results of Operations.

       Upon the sale of substantially  all of the assets of the Company on April
16, 2004, we ceased  normal  operations  and began  contract  manufacturing  for
Sensitech.  Accordingly,  a comparison  of the selected  financial  data for the
period from May 1, 2003 through April 15, 2004 should take into account the fact
that the Company  ceased it operations 15 days before  completing a full year of
operations.
<TABLE>
<CAPTION>

                                    May 1, 2003                     Fiscal Years Ended April 30,
                                   thru April 15,
                                        2004            2003            2002            2001            2000
                                        ----            ----            ----            ----            ----
<S>                               <C>             <C>             <C>             <C>             <C>
Sales                             $  9,770,512    $  8,492,522    $  8,475,146    $  9,678,339    $  9,710,976
Income (loss) from continuing
 operations                       $  1,476,873    $    705,773    ($ 4,322,370)   ($ 5,403,922)   ($ 1,955,191)
Loss from discontinued
 operations                       ($   613,391)   ($   595,325)   ($   840,674)   ($ 1,370,087)           --
Basic and diluted income (loss)
 from continuing operations per
 average common share             $        .04    $        .02    ($       .17)   ($       .22)   ($       .08)
Weighted average number of
     Common shares outstanding      38,293,667      27,907,224      25,360,071      24,661,104      24,222,547
Total assets                                      $  3,512,201    $  4,072,391    $  8,654,189    $ 14,369,529
Long-term debt (1)                                $  4,189,893    $  3,233,913    $  3,090,044    $  2,908,359
Stockholders' equity (deficit)                    ($ 1,500,418)   ($ 2,305,523)   $  2,528,355    $  9,041,805

(1) Excludes current maturities
</TABLE>

Net assets in liquidation:            April 30, 2004
                                      --------------
   Cash and cash equivalents            $7,597,606
   Accounts receivable                     319,613
   Other assets                             36,711
   Total assets                          7,953,930
   Total liabilities                     1,337,575
                                       -----------
    Net assets in liquidation           $6,616,355
                                        ==========

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

Upon the sale of  substantially  all of the  assets of the  Company on April 16,
2004,  we  ceased  normal  operations  and  began  contract   manufacturing  for
Sensitech.  Accordingly,  a comparison  of the selected  financial  data for the
period from May 1, 2003 through April 15, 2004 should take into account the fact
that the Company  ceased it operations 15 days before  completing a full year of
operations.

We cannot  list here all of the risks and  uncertainties  that  could  cause our
actual  future  financial   results  to  differ   materially  from  our  present
expectations or projections regarding estimated distribution to shareholders but
we can identify many of them. For example,  our future results could be affected
by the cost of  satisfying  known  liabilities  for which we have  estimated the
value, the need to satisfy  unanticipated  liabilities arising in the future and
the expenses of dissolving and winding up the Company.

                                       7
<PAGE>
The following  discussion and analysis  should be read in  conjunction  with the
selected financial data in Item 6 and our financial statements and notes thereto
in Item 8.

The Company operated in one reporting segment,  Temperature Recorder Operations.
The  "Temperature  Recorder  Operations"  segment  involves the  production  and
distribution  of  temperature   recording  and  monitoring  devices,   including
electronic "loggers," graphic temperature recorders and visual indicator tags.

Critical Accounting Policies

The  Company's   accounting  and  reporting  policies  are  in  accordance  with
accounting  principles  general  accepted in the United  States of America.  The
application  of certain of these  principles  involves a  significant  amount of
judgment and the use of estimates based on assumptions that involve  significant
uncertainty at the time of estimation. We have identified the following policies
as being  particularly  sensitive to estimate or otherwise critical based on the
potential  impact on the  financial  statements:  accrued  cost of  liquidation,
revenue  recognition,  asset  impairment,  stock options,  and income taxes.  We
periodically review these policies,  the estimation processes involved,  and the
related disclosures.

Accrued  cost of  liquidation  and  effects  of  change to  liquidation  basis -
Pursuant to the Plan of dissolution  approved by shareholders on April 15, 2004,
we plan to file articles of  dissolution  with the North  Carolina  Secretary of
State in the second  half of calendar  2004.  Since April 15, 2004 , the Company
has been engaged in contract  manufacturing  for Sensitech (which services ended
on July 2, 2004),  selling and converting its non-cash  assets,  discharging its
liabilities and otherwise winding-up the business and affairs in preparation for
liquidation.  We expect to distribute the remaining assets to our  shareholders,
all in  accordance  with the Plan of  dissolution.  As a result,  we changed our
basis  of  accounting  to the  liquidation  basis  as of  April  16,  2004.  The
accompanying  statements of operations,  shareholders' equity and cash flows for
the period  from May 1, 2003 to April 15,  2004 and for each of the years in the
two-year  period  ended April 30, 2003 have been  presented  on a going  concern
basis  comparable to prior periods,  which assumes the realization of assets and
the  liquidation  of  liabilities  in the normal  course of business.  Under the
liquidation  basis of  accounting,  assets  are  stated at their  estimated  net
realizable  value and  liabilities  are stated at their  anticipated  settlement
amounts.  As a result  of the Asset  Sale and  change  to  liquidation  basis of
accounting,  we recorded a $7.27 million increase in net assets. Included in the
adjustment  to net  assets  recorded  in  connection  with the  change  from the
going-concern to the liquidation basis of accounting,  we recorded $0.63 million
of accrued  costs of  liquidation  representing  the estimate of the costs to be
incurred  during  dissolution;  however,  actual  costs  could  vary from  those
estimates.  Distributions  ultimately made to shareholders upon liquidation will
differ  from  the "net  assets  in  liquidation"  recorded  in the  accompanying
Statement  of Net  Assets  in  Liquidation  as a result  of  future  changes  in
estimated investment income, settlement of liabilities and obligations and final
costs of liquidation.

At April 30, 2004, the following represent the estimated costs of liquidation:

Officer compensation and benefits         $131,000
Legal, audit and tax services              124,500
Insurance                                  212,000
Other costs, including utilities, rent,
 supplies and miscellaneous expenses       162,631
                                          --------
Total                                     $630,131
                                          ========

Revenue recognition - Revenue was recognized as products are shipped,  net of an
allowance for estimated returns.

Asset  impairment - Goodwill was  evaluated  for  impairment  annually,  or more
frequently  when there were  indications of impairment.  Based on an analysis of
acquired  goodwill as of April 30, 2002,  the goodwill  previously  recorded was
deemed  impaired  and was written off as of that date.  Specifically  identified
intangible  assets  subject to  amortization,  such as patents,  and  long-lived
assets  were  evaluated  for  recoverability   whenever  events  or  changes  in
circumstances  indicated that the carrying amount of an asset or asset group may
not be recoverable. During fiscal year 2002, it was determined that the carrying
amount of  certain  equipment  under  development  was not  recoverable,  and an
impairment loss was recognized in the period ended April 30, 2002.

                                       8
<PAGE>
Stock options - The Company has adopted the  disclosure-only  provisions of SFAS
No. 123, "Accounting for Stock-Based Compensation" and SFAS No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure," which disclosures are
presented   in  Note  1,   "Significant   Accounting   Policies  -   Stock-based
Compensation." In accordance with this policy,  the Company continues to account
for its employee  stock-based  compensation  plans under  Accounting  Principles
Board  (APB)  Opinion  No.  25  and  related  interpretations.   No  stock-based
compensation  cost is  reflected in net income for options  granted  under those
plans  having an  exercise  price  equal to the market  value of the  underlying
common stock on the date of grant.

Income taxes - Until adopting the liquidation  basis of accounting,  the Company
accounted for income taxes using the asset and liability method. The Company has
deferred tax assets related principally to net operating loss carry forwards and
impairment  losses  recognized  for  financial  reporting  purposes.   Valuation
allowances  have been recorded to offset these deferred tax assets.  Certain net
operating loss carry forwards have been utilized to offset income from the asset
sale to Sensitech  and were  considered  in the  determination  of net assets in
liquidation.

Quantitative and Qualitative Analysis

The  Company  has  identified  certain  areas  that  potentially  subject  it to
significant  concentrations  of credit  risk.  These  areas for  potential  risk
include cash and cash equivalents and trade accounts receivable.  At times, cash
balances at financial institutions are in excess of FDIC insurance coverage. The
cash  balances  are  maintained  at  financial  institutions  with high credit -
quality ratings and the Company believes no significant risk of loss exists with
respect to those balances.  The Company  believes that amounts reported for cash
and cash  equivalents  and accounts  receivable  are considered to be reasonable
approximations of their fair values due to their short term nature.

Results of  operations  for the period May 1, 2003 to April 15,  2004 and fiscal
years ended April 30, 2003 and 2002

Fiscal period ended April 15, 2004

The  discussion  of the  results  of  operations  does not  include  the  Vitsab
division, which has been presented as discontinued operations.

Revenues from sales increased  $1,277,990,  or approximately 15%, as compared to
fiscal 2003.  For fiscal  2004,  revenues  from data logger  sales  increased by
approximately  $1,259,000, or approximately 59%, over revenues from sales of the
same  product in fiscal 2003,  while  revenues  from sales of graphic  recorders
decreased by approximately  $48,000, or approximately less than 1% over revenues
from sales of the same product in fiscal  2003.  Unit sales of Cox 1 improved by
less than 1% and unit sales of DataSource  improved by 68% over fiscal 2003. The
unit selling price for both Cox 1 and DataSource  eroded by  approximately 4% as
compare to unit  selling  prices of the same  products  in fiscal  2003.  During
fiscal  2004,   revenues  from  the  sale  of  graphic   recorders   represented
approximately $6,149,000, or approximately 62%, of total revenues, revenues from
the sale of electronic data loggers  represented  approximately  $3,387,000,  or
approximately  34% of total  revenues,  revenues  from the  sale of  probes  and
related products  represented  approximately  $234,000,  or approximately 2%, of
total  revenues.   Revenues  from  the  sale  of  other  miscellaneous  products
represented approximately 1% of total revenues.

Cost of sales increased by $58,841, or less than 1%, as compared to fiscal 2003.
The Company  continues to benefit from the lower cost of units purchased from an
offshore contract manufacturer;  however, those decreases in cost were more than
offset by increases in rebate fees, shipping costs and increases in both medical
and workman's compensation insurance expenses.

The Company continued to contract with a third party to manufacture and assemble
certain base versions of the Cox1 units at an offshore  location.  During fiscal
2004,  this  location  supplied  approximately  40% of the total number of units
utilized by the Company. Because of this manufacturing arrangement,  the Company
realized  cost savings on units  manufactured  in both the offshore and Belmont,
North Carolina facilities.

General and  administrative  expenses  for fiscal 2004  increased  $255,278,  or
approximately  15%, as compared to fiscal 2003.  This increase was due to higher
costs  associated  with  bad  debt,  labor,  legal  fees and  outside  services,
partially offset by decreases in telephone costs and other general expenses.

Selling expenses for fiscal 2004 increased  $180,281,  or approximately  21%, as
compared to fiscal 2003. The principal increase is due to higher sales salaries,
partially offset by decreases in travel expenses,  commissions, trade show costs
and outside sales services expenses.

No research and development costs were incurred during fiscal 2004.

                                       9
<PAGE>
Other income (expense)  decreased $60,709,  or approximately 41%, in fiscal 2004
as compared to fiscal  2003.  The  decrease was  primarily  attributable  to the
cessation  of option  payments for the  purchase of the  Company's  wholly owned
subsidiary,  Vitsab Sweden,  upon the consummation of the sale of the subsidiary
in fiscal 2003.  Other  expenses  decreased  because the Company did not realize
negative valuation  adjustments against a long term receivable in fiscal 2004 as
compared to fiscal 2003.

Interest  expense  decreased  $39,215  or  approximately  9%, in fiscal  2004 as
compared  to fiscal  2003.  Interest  payments to Centura  decreased  due to the
continued  retirement  of the debt balance  payable to Centura  combined  with a
lower  interest  rate for the full fiscal  year of 2004.  These  decreases  were
substantially offset by the interest that accrued on the $2,500,000 note payable
to TI, dated March 10, 2000, that was due in March 2005.

Liquidity and Capital Resources

Effective  April 16,  2004,  the Company  and  Sensitech  completed  Sensitech's
acquisition of  substantially  all of the assets of the Company  pursuant to the
terms of the Asset Purchase Agreement.  The aggregate  consideration received by
the Company at the closing was  comprised of  $10,595,589  in cash. In addition,
Sensitech  assumed  $233,569  of  the  Company's   payables  and  certain  other
liabilities.  At closing,  Sensitech  retained a $250,000 holdback amount in the
Asset Sale.

After the closing  and for the period  from April 16 through  April 30, 2004 the
Company  used  a  portion  of  the  proceeds  to  retire  remaining  outstanding
indebtedness and to pay normal costs of operations and expenses  associated with
the liquidation process.

As of April 30, 2004, our principal  assets  consisted of $7,597,606 of cash and
cash  equivalents.  We are now engaged in the process of orderly  liquidation of
the remaining assets, the winding up of its business operations, the dissolution
of the Company and the distribution of cash to shareholders.

Off-Balance Sheet Arrangements

The Company is not a party to or bound by any long-term guarantee agreements.

Contractual Obligations

The  amounts  set forth  below  represent  the  Company's  material  contractual
obligations to be paid in future periods:

                                         Payments due by period
                                         ----------------------
                                    Less than                          More than
Contractual obligations    Total     1 year    1-3 years    3-5 years   5 years
--------------------------------------------------------------------------------
Operating leases         $ 22,432   $  22,432    $   -      $   -       $   -
--------------------------------------------------------------------------------
Total                    $ 22,432   $  22,432    $   -      $   -       $   -
================================================================================

Fiscal 2003

The discussion of the results of operations  does not include  Vitsab  division,
which has been presented as discontinued operations.

Revenues  from  sales  increased  $17,376,  or less  than 1% in  fiscal  2003 as
compared to fiscal 2002.  As a whole both unit sales and average  selling  price
remained  relatively  flat in fiscal 2003.  For fiscal 2003,  revenues from data
logger sales increased by approximately  $630,000,  or  approximately  42%, over
revenues  from sales of the same product in fiscal  2002,  while  revenues  from
sales of graphic recorders decreased by approximately $604,000, or approximately
9%, over revenues  from sales of the same product in fiscal 2002.  During fiscal
2003,  revenues  from the sale of graphic  recorders  represented  approximately
$6,197,000,  or approximately 73%, of total revenues,  revenues from the sale of
electronic data loggers represented  approximately  $2,128,000, or approximately
25% of total  revenues,  revenues  from the sale of probes and related  products
represented  approximately  $154,202,  or  approximately  2%, of total revenues.
Revenues from the sale of other miscellaneous  products represented less than 1%
of total revenues.

Cost of sales decreased by $373,614,  or approximately 7%, as compared to fiscal
2002.  The  decrease was  realized  principally  because of a reduction in labor
costs and related fringe benefits,  lower raw material costs, and the lower cost
of units  purchased  from an offshore  contract  manufacturer.  The Company also
experienced  lower cost in the areas of freight and  postage  and shop  supplies
used  in  manufacturing.  These  decreases  in cost  were  partially  offset  by
increased cost of retriever fees.

                                     10
<PAGE>
General  and  administrative  expenses  for fiscal  2003  decreased  $457,935 or
approximately  21%, as compared to fiscal  2002.  This  decrease is due to lower
costs  associated  with  bad  debt,  labor,  legal  fees and  outside  services,
partially  offset by  increases  in insurance  premium  costs and other  general
expenses.

Selling expenses for fiscal 2003 decreased  $161,581,  or approximately  16%, as
compared  to  fiscal  2002.  The  decrease  is  due  to  lower  sales  salaries,
commissions,  trade show  expenses,  travel  expenses  and freight out  expense,
partially offset by increases in advertising,  temporary labor and outside sales
services expenses.

No research and development costs were incurred during fiscal 2003.

Depreciation expense in fiscal 2003 decreased $215,237, or approximately 67%, as
compared to fiscal 2002. The decrease occurred  principally because older assets
of the Company are becoming fully depreciated.

Amortization of intangible assets decreased $231,988, or 100%, in fiscal 2003 as
compared to fiscal 2002. The decrease is primarily  related to the impairment of
goodwill during fiscal 2002.

Other income (expense)  decreased $37,998,  or approximately 20%, in fiscal 2003
as compared to fiscal  2002.  The  decrease was  primarily  attributable  to the
cessation  of option  payments for the  purchase of the  Company's  wholly owned
subsidiary,  Vitsab Sweden, upon the consummation of the sale of the subsidiary.
Other  expenses  decreased  because  the  Company  is no  longer  paying  patent
licensing fees.

Interest expense  decreased  $70,565,  or  approximately  13%, in fiscal 2003 as
compared to fiscal 2002.  The decrease was  primarily  attributable  to interest
expense in fiscal 2002 related to the  construction of  manufacturing  equipment
that will not be  completed,  and that did not reoccur in fiscal 2003.  Interest
payments to Centura  decreased  due to the  retirement  of a portion of the debt
balance  payable to Centura.  These decreases were  substantially  offset by the
interest  that  accrued on the  $2,500,000  note  payable to TI, dated March 10,
2000, that was due in March 2005.

The  decrease in  inventory of $237,072 is related to the decrease in the number
of  units  in  finished  goods  inventory  and a  decrease  in  work-in-progress
inventory.  The Company has also lowered its costs of  purchasing  raw materials
through negotiations with vendors. Decreased direct labor and benefits costs and
overheads incurred in the production of the Cox1 units resulted in a decrease in
the valuation of finished goods.  The Company also established a $50,000 reserve
for slow moving or obsolete inventory in fiscal 2003.

The net  decrease in property  and  equipment  of $258,939 is  primarily  due to
depreciation  and the transfer of assets owned by the Company  related to Vitsab
Sweden.  This decrease was partially  offset by the acquisition of approximately
$84,000 of new assets.

Fiscal 2002

Prior to fiscal 2002, the Company had two operating  segments:  (1)  Temperature
Recorder  Operations and (2) oilfield  operations and other,  which included all
economic  activity  related  to the oil  production  and the  holding of the oil
subleases and the operation of its Phoenix,  Arizona office.  The Company closed
its Phoenix office effective  October 31, 2000. The activities  performed in its
Phoenix  office were  transferred  to the  Corporate  Office in  Belmont,  North
Carolina.  The Company entered into an agreement with a group in Dallas,  Texas,
to sell the  subleases  on  behalf  of the  Company.  The  group  contacted  and
solicited  potential  buyers  to make  purchase  offers to the  Company  for the
subleases. The Company terminated the agreement in April 2001 after receiving no
purchase  offers from  potential  buyers.  As a result of the  inability  of the
Company to attract a potential  buyer, the high cost and difficulty in producing
crude oil of the type found in the field and  losses  incurred  in the  oilfield
operations,  the Company evaluated the  recoverability of the carrying amount of
the oilfield net assets. In analyzing  expected future cash flows from potential
offers,  the Company  determined that $300,000 of net assets should be accounted
for as property  held for sale.  As a result,  the Company  recognized a loss on
impairment  of  $3,062,196  in the fourth  quarter of fiscal  2001.  The Company
determined  that no change in the  valuation  of this  asset was  necessary  for
fiscal 2002. The Company sold the oilfield  leases on September 30, 2002 and now
operates in one reporting segment, Temperature Recorder Operations.

Temperature Recorder Operations

Revenues from sales decreased $1,082,458, or approximately 11% in fiscal 2002 as
compared to fiscal 2001,  due to a 13% decrease in the number of Cox1 units sold
as a result of decreased demand and a 4% decrease in average sales price.  Sales
of DataSource(R)  units increased  approximately  129%,  slightly offset by a 4%

                                       11
<PAGE>
decrease in average sales price during fiscal 2002.  During fiscal 2002, a large
grocery  store chain  started  requiring  its shippers to use the  DataSource(R)
units  exclusively.  Fiscal  2002  reflects  a 22%  decrease  in the  number  of
Tracer(R) products sold and a 4% decrease in average sales price.  During fiscal
2002,  revenues  from the sale of graphic  recorders  represented  $6,751,000 or
approximately  78% of total revenues,  revenues from the sale of electronic data
loggers  represented  $1,472,000 or approximately 17%, revenues from the sale of
probes and  related  products  represented  $129,000  or  approximately  2%, and
revenues  from  the  sale  of  Vitsab(R)   products   represented   $112,000  or
approximately 1%. Revenues from the sale of oil and other miscellaneous products
represented the balance.

Cost of sales for fiscal 2002 increased $85,162, or approximately 2% as compared
to fiscal 2001. The increase was due to a reduction in the price the Company now
pays for raw material  components  and labor costs,  increased  retriever  fees,
shipping costs and supplies used in the manufacturing process,  partially offset
by decreased purchases of raw materials, decreasing labor and benefits costs and
postage expenses.

During fiscal 2002, the Company contracted with a third party to manufacture and
assemble certain base versions of the Cox1 units at an offshore location. During
fiscal 2002,  this  location  supplied  approximately  6% of the total number of
units utilized by the Company.  Because of this manufacturing  arrangement,  the
Company  realized  significant  cost savings on units  manufactured  in both the
offshore and Belmont, North Carolina facilities.

General and  administrative  expenses for fiscal 2002 decreased  $2,014,515,  or
approximately  44% as compared to fiscal  2001.  This  decrease was due to lower
costs associated with legal fees, professional services, salaries, payroll taxes
and employee  benefits,  partially  offset by increases in outside  services and
other general expenses.

Selling expenses for fiscal 2002 decreased  $551,400,  or  approximately  30% as
compared  to  fiscal  2001.  The  decrease  was  due to  lower  sales  salaries,
commissions, trade shows and travel expenses.

No  research  and  development  costs were  incurred  during  fiscal 2002 as the
Company reached the final development stages of the Vitsab(R) product and halted
the development of the EDS(TM) product in fiscal 2001.

Depreciation  and  depletion  expense  in  fiscal  2002  decreased  $90,422,  or
approximately  18% as compared to fiscal 2001.  There was no  depletion  expense
associated with the oilfield  operations  recorded in fiscal 2002 as a result of
the impairment of the oilfield operations.

Amortization of patents and goodwill increased $36,261,  or approximately 17% in
fiscal  2002 as  compared  to fiscal  2001.  This  increase  was  related to the
additional  goodwill recognized from the acquisition of Vitsab Sweden. In fiscal
2002, the Company  evaluated the fair value of goodwill from the  acquisition of
Vitsab  Sweden and  determined  the  goodwill to be impaired and  recognized  an
impairment loss of $2,695,689 in the fourth quarter of fiscal 2002, as discussed
in Note 8 to the consolidated financial statements.

Other  income  increased  $317,335,  or  approximately  248% in  fiscal  2002 as
compared to fiscal 2001.  This  increase  was related  primarily to the payments
received as a result of the  agreement  between  the Company and its  Copenhagen
distributor  for an option  to  purchase  all of the  shares  and  assets of the
Company's wholly owned subsidiary,  Vitsab Sweden, as discussed in Note 1 to the
consolidated financial statements.

Interest  expense  increased  $28,820,  or  approximately  6% in fiscal  2002 as
compared to fiscal  2001.  Reasons for this  increase  included  the increase in
interest  accrued on the note payable to TI, dated March 10, 2000, in the amount
of $2,500,000,  interest on the Revolving Loan with RBC Centura Bank ("Centura")
and the  reclassification of interest paid on progress payments made by Centura,
on behalf of the Company, from deposits to interest expense.

The fiscal 2002 decrease in inventory of $509,824 was related to the decrease in
the  number  of  units  in   finished   goods   inventory   and  a  decrease  in
work-in-progress inventory. The Company also lowered its costs of purchasing raw
materials through negotiations with vendors. Decreased direct labor and benefits
costs and overheads  incurred in the  production of the Cox1 units resulted in a
decrease in the  valuation  of  finished  goods and an increase in cost of goods
sold by an equal amount.

The fiscal  2002  decrease in  property  and  equipment,  net of  $397,836,  was
primarily due to depreciation.  There were no significant additions or deletions
to property and equipment in fiscal 2002.

Forward-Looking Statements

Statements  contained in this  document  that are not  historical  in nature are
forward-looking  within the meaning of the Private Securities  Litigation Reform
Act of  1995.  Forward-looking  statements  give  our  current  expectations  of

                                       12
<PAGE>
forecasts of future events.  You can identify these  statements by the fact that
they do not relate strictly to historical or current facts.  They use words such
as "estimate," "intend," "plan," and other words and terms of similar meaning in
connection  with any discussion of future  operating and financial  performance.
Forward-looking statements are subject to risks and uncertainties that may cause
future results to differ materially from those set forth in such forward-looking
statements.  The Company  undertakes  no  obligation  to update  forward-looking
statements to reflect events or circumstances  after the date hereof. Such risks
and uncertainties  with respect to the Company include,  but are not limited to,
its ability to successfully  implement internal  performance goals,  performance
issues with suppliers,  regulatory issues, competition, the effect of weather on
customers,  exposure to  environmental  issues and  liabilities,  variations  in
material costs and general and specific economic conditions.  From time to time,
the Company may include  forward-looking  statements in oral statements or other
written documents.

                                       13

<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENT OF NET ASSETS IN LIQUIDATION

                                                  April 30, 2004
                                                  --------------
ASSETS
      Cash and cash equivalents                     $7,597,606
      Accounts receivable                              319,613
      Other assets                                      36,711
                                                    ----------
          TOTAL ASSETS                              $7,953,930
                                                    ==========
LIABILITIES
      Accounts payable and accrued liabilities       $ 707,444
      Accrued costs of liquidation                     630,131
                                                     ----------
      Commitments and contingencies
          TOTAL LIABILITIES                          1,337,575
                                                    ----------
NET ASSETS IN LIQUIDATION                           $6,616,355
                                                    ==========


                 See Notes to Consolidated Financial Statements.

                                       14


<PAGE>


COX TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION

                                                  Period from April
                                                 16, 2004 thru April
                                                      30, 2004
                                                ----------------------
NET INCREASE IN NET ASSETS IN LIQUIDATION:
-----------------------------------------
   Interest Income                                  $     1,982
                                                    -----------
NET INCREASE IN ASSETS IN LIQUIDATION                     1,982
NET ASSETS IN LIQUIDATION AT APRIL 16, 2004         $ 6,614,373
                                                    -----------
NET ASSETS IN LIQUIDATION AT APRIL 30, 2004         $ 6,616,355
                                                    ===========


                 See Notes to Consolidated Financial Statements.

                                       15


<PAGE>


COX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

                                                     April 30, 2003
                                                    -----------------
ASSETS
------
CURRENT ASSETS:
      Cash and cash equivalents                         $572,149
      Accounts receivable, net                           874,668
      Inventory, net                                   1,078,966
      Notes receivable - current portion                  75,000
      Prepaid expenses                                    17,733
                                                      ----------
        TOTAL CURRENT ASSETS                           2,618,516

      Property and equipment, net                        223,579
      Due from officer, net                                8,928
      Other assets                                        71,510
      Assets of discontinued operations                  589,668
                                                      ----------
        TOTAL ASSETS                                  $3,512,201
                                                      ==========

LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
       Accounts payable and accrued expenses            $282,517
       Current portion of long-term debt                 387,927
       Liabilities of discontinued operations            152,282
                                                      ----------
         TOTAL CURRENT LIABILITIES                       822,726
                                                      ----------
OTHER LIABILITIES:
       Long-term debt                                    862,393
       Long-term debt - related party                  3,327,500
                                                      ----------
        TOTAL OTHER LIABILITIES                        4,189,893
                                                      ----------
        TOTAL LIABILITIES                              5,012,619

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
      Common stock, no par value; authorized
      100,000,000 shares; issued and outstanding;
      38,339,094 shares                               23,252,804
      Accumulated other comprehensive loss               (32,591)
      Accumulated deficit                            (24,696,452)
      Less - Notes receivable for common stock           (24,179)
                                                      ----------
        TOTAL STOCKHOLDERS' DEFICIT                   (1,500,418)
                                                      ----------
        TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT   $3,512,201
                                                      ==========


                 See Notes to Consolidated Financial Statements.

                                       16
<PAGE>


COX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>

                                                        May 1, 2003 thru
                                                            April 15,      Fiscal Years Ended April 30,
                                                              2004            2003            2002
                                                              ----            ----            ----
<S>                                                     <C>             <C>             <C>
REVENUE:
   Sales                                                $  9,770,512    $  8,492,522    $  8,475,146
COSTS AND EXPENSES:
   Cost of sales                                           4,854,624       4,795,783       5,169,397
   General and administrative                              1,955,487       1,700,210       2,158,146
   Selling                                                 1,059,073         878,791       1,040,372
   Depreciation                                               98,550         107,554         322,791
   Loss on impairment                                           --              --         3,537,597
   Amortization of intangibles                                  --              --           231,988
                                                        ------------    ------------    ------------
     TOTAL COSTS AND EXPENSES                              7,967,734       7,482,338      12,460,291
                                                        ------------    ------------    ------------
OPERATING INCOME (LOSS)                                    1,802,778       1,010,184      (3,985,145)

OTHER INCOME (EXPENSE):
   Other income                                               88,891         149,600         187,598
   Interest expense                                         (414,796)       (454,011)       (524,823)
                                                        ------------    ------------    ------------
     TOTAL OTHER EXPENSE                                    (325,905)       (304,411)       (337,225)
                                                        ------------    ------------    ------------
CONTINUING INCOME (LOSS) BEFORE INCOME TAXES               1,476,873         705,773      (4,322,370)
PROVISION FOR INCOME TAX                                        --              --              --
                                                        ------------    ------------    ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS                   1,476,873         705,773      (4,322,370)
OPERATING LOSS FROM DISCONTINUED OPERATIONS                  364,703         595,325         840,674
LOSS ON SALE OF ASSETS OF DISCONTINUED OPERATIONS            248,688            --              --
PROVISION FOR INCOME TAXES ON DISCONTINUED OPERATIONS           --              --              --
                                                        ------------    ------------    ------------
LOSS ON DISCONTINUED OPERATIONS                              613,391         595,325         840,674
                                                        ------------    ------------    ------------
NET INCOME (LOSS)                                       $    863,482    $    110,448    ($ 5,163,046)
                                                        ============    ============    ============
EARNINGS (LOSS) PER SHARE, BASIC AND DILUTED:
CONTINUING OPERATIONS                                   $        .04    $        .02    ($       .17)
DISCONTINUED OPERATIONS                                ($        .02)  ($        .02)   ($       .03)
NET INCOME (LOSS)                                       $        .02    $        .00    ($       .20)
WEIGHTED AVERAGE NUMBER
     OF COMMON SHARES OUTSTANDING                         38,293,667      27,907,224      25,360,071
</TABLE>


                 See Notes to Consolidated Financial Statements.

                                       17
<PAGE>


COX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
AND COMPREHENSIVE INCOME

Period  from April 16, 2004 to April 30, 2004  (Liquidation  Basis),  and Fiscal
Period from May 1, 2003 to April 15, 2004 and Fiscal  Years Ended April 30, 2003
and 2002
<TABLE>
<CAPTION>

                                                    Accumulated                    Subscribed
                                                       Other                          Stock
                                      Common       Comprehensive    Accumulated     Less Note
                                      Stock        Income (Loss)      Deficit       Receivable         Total
                                      -----        -------------      -------       ----------         -----
<S>                               <C>             <C>             <C>             <C>             <C>
  Balance, April 30, 2001         $ 22,311,921    ($   108,581)   ($19,643,854)   ($    31,131)   $  2,528,355
  Comprehensive income (loss) -
        Net income (loss)                 --              --        (5,163,046)           --        (5,163,046)
        Foreign currency
          translation
          adjustment                      --            40,413            --              --            40,413
                                                                                                  ------------
  Total comprehensive
    income (loss)                         --              --              --              --        (5,122,633)
  Payment on subscribed stock             --              --              --             6,952           6,952
  Common stock issued                  281,803            --              --              --           281,803
                                  ------------    ------------    ------------    ------------    ------------
  Balance, April 30, 2002           22,593,724         (68,168)    (24,806,900)        (24,179)     (2,305,523)

  Comprehensive income (loss) -
        Net income                        --              --           110,448            --           110,448
        Foreign currency
          translation
          adjustment                      --            35,577            --              --            35,577
                                                                                                  ------------
  Total comprehensive
    income                                --              --              --              --           146,025
  Common stock issued                  659,080            --              --              --           659,080
                                  ------------    ------------    ------------    ------------    ------------
  Balance, April 30, 2003           23,252,804         (32,591)    (24,696,452)        (24,179)     (1,500,418)

  Comprehensive income (loss) -
        Net income                        --              --           863,482            --           863,482
        Foreign currency
          translation
          adjustment                      --           (10,438)           --              --           (10,438)
                                                                                                  ------------
  Total comprehensive
    income                                --              --              --              --           853,044
  Adjust stock subscription               --              --            24,179          24,179
  Common stock redeemed                (30,233)           --              --              --           (30,233)
                                  ------------    ------------    ------------    ------------    ------------
  Balance, April 15, 2004           23,222,571         (43,029)    (23,832,970)           --          (653,428)
  Effect of change to
   liquidation basis                                    43,029       7,224,772                      7,267, 801
  Change in net assets in
   liquidation April 16,
   2004 to April 30, 2004                 --              --             1,982            --             1,982
                                  ------------    ------------    ------------    ------------    ------------
  Balance, April 30, 2004         $ 23,222,571            --      ($16,606,216)           --      $  6,616,355
                                  ============    ============    ============    ============    ============
</TABLE>


                 See Notes to Consolidated Financial Statements.

                                       18
<PAGE>


COX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                             May 1, 2003 thru
                                                                  April 15      Fiscal Years Ended April 30,
                                                                    2004           2003           2002
                                                                    ----           ----           ----
<S>                                                            <C>            <C>            <C>
CASH FLOW FROM OPERATING ACTIVITIES:
       Net income (loss)                                       $   863,482    $   110,448    ($5,163,046)
       Adjustments to reconcile net income (loss)
           to net cash from operating activities:
           Depreciation and depletion                              206,705        306,349        423,398
           Amortization of patents                                  28,711         33,951        255,564
           Loss on sale of assets of discontinued operations       248,688           --             --
           Loss on impairment                                         --             --        3,537,597
           Loss on disposal of property and equipment                 --             --            2,242
           Gain on sale of property held for sale                     --          (19,503)          --
           Loss on sale of subsidiary                                 --           17,013           --
           Allowance for doubtful accounts                          49,921         19,250          3,190
           Other                                                     3,953         13,129        (63,209)
           Increase in valuation allowance                            --           32,139         12,499
                                                               -----------    -----------    -----------
                                                                 1,401,460        512,776       (991,765)
       Changes in assets and liabilities:
          (Increase) decrease in current assets:
               Accounts receivable                                (282,055)        89,607         65,183
               Inventory                                          (382,402)       237,072        509,824
               Prepaid expenses                                   (100,397)        27,099        (14,339)
               Other receivable and investments                       --             --           19,230
          Increase (decrease) in current liabilities:
               Accounts payable and accrued expenses               338,575       (276,175)        55,345
                                                               -----------    -----------    -----------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                    975,181        590,380       (356,522)
                                                               -----------    -----------    -----------
CASH FLOW FROM INVESTING ACTIVITIES:
        Purchase of property and equipment                         (43,675)       (84,315)       (25,562)
        Proceeds from sale of Vitsab                               175,000           --             --
        Proceeds from sale of property held for sale                  --           54,504           --
        Equipment under development                                   --             --           28,603
        Collection of note receivable from property
         held for sale                                              75,000        100,000           --
                                                               -----------    -----------    -----------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                    206,325         70,189          3,041
                                                               -----------    -----------    -----------
CASH FLOW FROM FINANCING ACTIVITIES:
       Retirement of common stock, net                             (30,233)
       Issuance of common stock, net                                  --          659,080        281,803
       Repayment on debt                                        (1,020,309)    (1,301,620)      (370,813)
       Decrease in subscriptions receivable                         24,179           --            6,952
       Amounts borrowed under short-term debt                         --             --          252,548
       Amounts borrowed under long-term debt                          --          302,500        315,000
                                                               -----------    -----------    -----------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                 (1,026,363)      (340,040)       485,490
                                                               -----------    -----------    -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                            (16,207)        35,577         40,413
                                                               -----------    -----------    -----------
NET INCREASE IN CASH                                               140,904        356,107        172,422
CASH AND CASH EQUIVALENTS, beginning of period                     572,149        216,042         43,620
                                                               -----------    -----------    -----------
CASH AND CASH EQUIVALENTS, end of period                       $   713,053    $   572,149    $   216,042
                                                               ===========    ===========    ===========
Supplemental Cash Flow Information
Interest paid                                                  $   414,796    $   154,787    $   250,262
Income taxes paid                                              $      --      $      --      $      --

Note Receivable resulting from sale of property
 held for sale                                                 $      --      $   175,000    $      --
</TABLE>


                 See Notes to Consolidated Financial Statements.

                                       19
<PAGE>
COX TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   DESCRIPTION OF BUSINESS,  SALE OF SUBSTANTIALLY  ALL ASSETS AND SIGNIFICANT
     ACCOUNTING POLICIES

     Business

     Prior to the Asset Sale (see below), Cox Technologies, Inc. (the "Company")
was engaged in the business of producing and  distributing  transit  temperature
recording  instruments,  including  electronic  "loggers,"  graphic  temperature
recorders  and  visual  indicator   labels,   both  in  the  United  States  and
internationally.  Temperature  recorders  and  loggers  work by creating a strip
chart  record  of  temperature   changes  over  time,  or  record   temperatures
electronically  according to a preset  interval  ("logging").  Visual  indicator
labels are a relatively new technology that employs  enzymatic color  indicators
inside a  transparent  label to show the  amount of  temperature  exposure  of a
stored or shipped temperature-sensitive commodity. The visual indicator products
are  marketed  under the trade name  Vitsab(R).  The Company was involved in the
sale and  manufacture  of both types of  transit  monitoring  products,  and has
established  an  international  market  presence  and  reputation  for  reliable
temperature recording products.

     In April  2001,  the  Company  executed an  agreement  with its  Copenhagen
distributor ("Purchaser") for an option to purchase all of the shares and assets
of the Company's wholly owned subsidiary,  Vitsab Sweden, AB ("Vitsab  Sweden").
The option  agreement gave the Purchaser until November 30, 2001 to exercise the
option.  On October 18, 2001 the Company  entered into a verbal  agreement  with
Purchaser to extend the agreement  through  February  2002,  and thereafter on a
month-to-month basis. On April 15, 2002, the Purchaser notified the Company that
he was terminating the agreement  effective June 15, 2002.  During May 2002, the
Purchaser  rescinded the termination  notice and both parties agreed verbally to
extend the  agreement  until  September 15, 2002,  and then on a  month-to-month
basis. On December 10, 2002, the Company  executed an additional  amendment with
the Purchaser that extended the option period until March 31, 2003. On March 15,
2003, the Company,  under a Share Purchase Agreement,  sold all of its shares in
Vitsab Sweden to its Copenhagen  distributor.  The purchase price for all of the
Company's  shares in Vitsab Sweden was $1.00.  The Company  recognized a loss of
approximately $17,000 that is included in other income (expense).

     On January 29, 2004 the Company  entered into an Asset  Purchase  Agreement
with Rask  Holding ApS, to sell its Vitsab  division  for $175,000  plus assumed
liabilities.  The  transaction  was  consummated on the same date.  Rask Holding
acquired all of the assets  associated  with the Vitsab division except cash and
accounts  receivable,  and assumed all  liabilities  associated  with the Vitsab
division  except  liabilities  associated  with a raw material  purchase  from a
specific  vendor and for taxes  resulting from operations of the Vitsab division
prior to  January  29,  2004.  As the  Vitsab  division  was  sold  prior to the
shareholder approval and closing of the Asset Sale to Sensitech,  the operations
of the Vitsab  division  have been  reflected  as  discontinued  operations  for
periods prior to the adoption of the liquidation  basis of accounting  effective
April 16, 2004.  Revenues  and pre-tax  losses,  respectively,  generated by the
Vitsab  division were $288,385 and  ($364,703) for the fiscal period ended April
15, 2004,  $281,330 and  ($595,325) for fiscal 2003, and $151,957 and ($840,674)
for fiscal 2002.

     Sale of Substantially All of the Assets of the Company

     On December 12, 2003, the Company entered into an Asset Purchase  Agreement
(the "Asset Purchase  Agreement")  with Sensitech  Inc., a Delaware  corporation
("Sensitech")  and Cox  Acquisition  Corp., a Delaware  corporation and a wholly
owned  subsidiary of Sensitech,  formed for purposes of  consummating  the Asset
Purchase Agreement ("Buyer") to sell substantially all of its assets ("the Asset
Sale").

     Effective  April 16, 2004,  the Company and  Sensitech  completed the Asset
Sale.  The  aggregate  consideration  received by the Company at the closing was
comprised of $10,595,589 in cash. In addition, Sensitech assumed $233,569 of the
Company's payables and assumed other liabilities. At closing, Sensitech retained
a $250,000 holdback amount in the Asset Sale. The final consideration is subject
to adjustment based upon  finalization of the Company's  balance sheet as of the
closing  date.  Under the terms of the Asset  Purchase  Agreement,  the  Company
retained  certain  assets and  liabilities in connection  with the  transaction,
including certain cash,  receivables,  production  equipment,  office equipment,
machines, tools, fixtures, furniture and certain retained liabilities.

     In connection with the Asset Sale, the Company and Sensitech entered into a
Manufacturing   Services   Agreement  under  which  the  Company   continued  to
manufacture  the  Company's  products on behalf of  Sensitech  for a period from
April 16, 2004 through July 2, 2004.

                                       20
<PAGE>
     The parties  completed  the Asset Sale  following a special  meeting of the
Company's  shareholders on April 15, 2004,  whereby the holders of a majority of
the  Company's   common  stock  approved  the  Asset  Sale  and  the  subsequent
liquidation  and  dissolution  of the  Company  pursuant to the Plan of Complete
Liquidation and Dissolution (the "Plan").

     Significant Accounting Policies

     Accrued Cost of Liquidation and Effects of Change to Liquidation Basis

     Pursuant to the Plan of dissolution  approved by  shareholders on April 15,
2004, we plan to file articles of dissolution with the North Carolina  Secretary
of State in the second half of calendar 2004.  Since April 15, 2004, the Company
has been engaged in contract  manufacturing  for Sensitech (which services ended
on July 2, 2004),  selling and converting its non-cash  assets,  discharging its
liabilities and otherwise winding-up the business and affairs in preparation for
liquidation.  We expect to distribute the remaining assets to our  shareholders,
all in  accordance  with the Plan of  dissolution.  As a result,  we changed our
basis  of  accounting  to the  liquidation  basis  as of  April  16,  2004.  The
accompanying  statements of operations,  shareholders' equity and cash flows for
the period  from May 1, 2003 to April 15,  2004 and for each of the years in the
two-year  period  ended April 30, 2003 have been  presented  on a going  concern
basis  comparable to prior periods,  which assumes the realization of assets and
the  liquidation  of  liabilities  in the normal  course of business.  Under the
liquidation  basis of  accounting,  assets  are  stated at their  estimated  net
realizable  value and  liabilities  are stated at their  anticipated  settlement
amounts.  As a result of the Asset Sale and change to the  liquidation  basis of
accounting,  we recorded a $7.27 million increase in net assets. Included in the
adjustment  to net  assets  recorded  in  connection  with the  change  from the
going-concern to the liquidation basis of accounting,  we recorded $0.63 million
of accrued  costs of  liquidation  representing  the estimate of the costs to be
incurred  during  dissolution;  however,  actual  costs  could  vary from  those
estimates.  Distributions  ultimately made to shareholders upon liquidation will
differ  from  the "net  assets  in  liquidation"  recorded  in the  accompanying
Statement  of Net  Assets  in  Liquidation  as a result  of  future  changes  in
estimated investment income, settlement of liabilities and obligations and final
costs of liquidation.

     The  components  of the  effect of the change to the  liquidation  basis of
accounting are summarized below.

   Gain on Asset Sale                                         $8,374,000
   Costs of liquidation and dissolution, including
    losses to be incurred
   winding down operations, impairment of remaining
    assets, and accrued liquidation costs                       (814,199)
   Provision for federal and state income taxes                 (292,000)
                                                              ----------
   Net effect of change to liquidation basis of accounting    $7,267,801
                                                              ==========

     At  April  30,  2004,  the  following  represent  the  estimated  costs  of
liquidation:

   Officer compensation and benefits                         $ 131,000
   Legal, audit and tax services                               124,500
   Insurance                                                   212,000
   Other costs, including utilities, rent, supplies
    and miscellaneous expenses                                 162,631
                                                               -------
   Total                                                     $ 630,131
                                                             =========

     Stock-based Compensation

     The Company elected to follow  Accounting  Principles Board Opinion ("APB")
No. 25,  "Accounting  for Stock Issued to  Employees"  (APB No. 25), and related
interpretations  in accounting for its employee  stock options.  The Company has
adopted  the  disclosure-only  provisions  of  SFAS  No.  123,  "Accounting  for
Stock-Based  Compensation."  This  statement  defines  a fair  value  method  of

                                       21
<PAGE>
accounting for stock options or similar equity instruments. SFAS No. 123 permits
companies to continue to account for stock-based  compensation  awards under APB
No. 25, but requires disclosure in a note to the financial statements of the pro
forma net income and  earnings  per share as if the  Company had adopted the new
method of  accounting.  SFAS No. 123 has been  amended by  Financial  Accounting
Standards  Board  pronouncement  number  148 ("FASB No.  148),  "Accounting  for
Stock-based  Compensation  - Transition and  Disclosure".  FASB No. 148 requires
prominent  disclosure in the annual and  quarterly  statements of the Company on
stock-based compensation.

     The Company has two stock option plans, the Stock Option  Agreements By and
Between Cox Technologies, Inc. and Certain Executives ("Executive Plan") and the
2000 Stock Incentive Plan ("2000 Plan").  In accordance with the Executive Plan,
options to purchase an  aggregate  of up to  6,652,500  shares of the  Company's
Common  Stock  were  granted  to  certain  executives  of the  Company.  Options
generally  were granted at the fair market value of the  Company's  Common Stock
determined on the date of the grant. Certain options were granted at an exercise
price below fair market value and $600,000 of  compensation  expense was charged
to operations in fiscal 2000. Options from the Executive Plan are exercisable on
various dates and expire on various dates.  In accordance with the 2000 Plan, up
to 8,000,000  shares of the Company's Common Stock can be issued through the use
of stock-based incentives to employees,  consultants and non-employee members of
the Board of Directors.  The exercise price of options  granted through the 2000
Plan cannot be less than 85% of the fair market  value of the  Company's  Common
Stock on the date of the grant. All outstanding options have been granted at the
fair market value; therefore, no compensation expense has been recorded. Options
from the 2000 Plan are  exercisable  on various dates from the date of the grant
and expire on various dates.  Exceptions to the exercise date for both plans are
allowed upon the retirement,  disability or death of a participant. An exception
is also allowed upon a change in control as defined in both plans.

     Options  granted,  exercised  and  canceled  under both plans for the three
years ended April 30, 2004 were as follows:

                            Options           Weighted-Average
                          Outstanding          Exercise Price
                          -----------          --------------
April 30, 2001             7,910,000              $   .63
     Granted               3,742,500              $   .12
     Exercised                  --                 --
     Canceled               (120,000)             $   .38
                          ----------
April 30, 2002            11,532,500              $   .45
     Granted                 777,500              $   .11
     Exercised                  --                 --
     Canceled               (439,500)             $   .19
                          ----------
April 30, 2003            11,870,500              $   .45
     Granted                    --                 --
     Exercised                  --                 --
     Canceled               (981,500)             $   .29
                          ----------
April 30, 2004            10,889,000              $   .45
                          ==========

     The Company  applied APB No. 25 in accounting for both Plans.  Accordingly,
compensation  cost is determined  using the intrinsic value method under APB No.
25. Had  compensation  cost for both Plans been  determined  consistent with the
fair value method for  compensation  expense  encouraged under SFAS No. 123, the
Company's  net income and earnings per share (EPS) would have been the pro forma
amounts shown below for the fiscal period ended April 15th,  2004 and the fiscal
years ended April 30, 2003 and 2002. For purposes of pro forma disclosures,  the
estimated fair value of options is recorded in its entirety in the year granted.

                                       May 1, 2003           April 30,
                                      thru April 15, --------------------------
                                          2004         2003             2002
                                          ----         ----             ----
Net income (loss)        As reported    $863,482     $110,448      ($5,163,046)
Net income (loss)        Pro forma      $842,378     $ 95,587      ($5,191,687)
Basic and diluted EPS    As reported        $.02         $.00            ($.20)
Basic and diluted EPS    Pro forma          $.02         $.00            ($.20)

                                       22
<PAGE>
     For purposes of pro forma  disclosure,  the fair value of each option grant
was estimated on the date of grant using the Black-Scholes  option pricing model
with the following  assumptions used for nonqualified stock option grants in the
fiscal  period from May 1, 2003 through April 15, 2004 and fiscal 2003 and 2002,
respectively  (there were no options granted in the fiscal period May 1, 2003 to
April 15, 2004):

                                    2003              2002
                                    ----              ----
Risk free interest rate(s)     4.9% to 5.3%      4.8% to 6.0%
Volatility factor(s)           285% to 304%      224% to 249%
Expected life                 7 to 10 years     7 to 10 years

     The  weighted  average fair value of  nonqualified  stock  options  granted
during fiscal years 2003 and 2002 was $.11, and $.12,  respectively.  No options
were granted during fiscal year 2004. Options  outstanding at April 15, 2004 had
exercise  prices ranging from $.08 to $1.25,  and a weighted  average  remaining
contractual  life of 8.2  years.  The  number of  shares  and  weighted  average
exercise  price of those shares  exercisable  at the end of each fiscal year was
5,007,500  shares at $.61 for 2003,  and 3,733,500  shares at $.70 for 2002. The
total number of shares  exercisable and the weighted  average  exercise price at
April 15, 2004 was  5,502,000  shares at $.54. As a result of the Asset Sale and
the subsequent  acceleration of vesting of in-the-money options (options with an
exercise  price of less  than  $.16 per  share)  there  were  2,490,000  options
exercisable at April 30, 2004 with an average exercise price of $.11 per share.

     The Asset Sale  constitutes a change in control as defined in the two stock
option  plans.  As  provided  by the plans,  the Board of  Directors  elected to
accelerate the vesting of certain options.  Options to purchase 1,002,000 shares
at a weighted  average exercise price of $0.11 per share were  accelerated.  The
estimated  expense  associated  with the  accelerated  options  of  $152,400  is
included in the effect of the change to the liquidation basis of accounting.

     Restricted  stock  was  issued  out of the  2000  Plan to  consultants  and
employees  in  lieu  of  cash  payments  totaling  30,000  and  723,028  shares,
respectively  for fiscal 2003 and 2002. At April 30, 2003,  there were 2,957,972
shares reserved for issuance under the 2000 Plan.

     Principles of Consolidation

     The accompanying  consolidated financial statements include the accounts of
Cox  Technologies,  Inc. (the Company) and its wholly owned  subsidiary,  Vitsab
Sweden,  through  March  15,  2003,  the  date it was  sold,  and Cox  Recorders
Australia,  Pty. Ltd., a 95% owned Australian distribution company through April
16, 2004, the date it was sold as part of the Asset Sale.  Vitsab Sweden carried
out  development,  production and marketing  activities  that were a part of the
Vitsab(R)  operation.  Such  activities  were not  considered  a component of an
entity as defined in SFAS No. 144  "Accounting for the Impairment or Disposal of
Long-Lived Assets". In July 2001 all domestic  subsidiaries were merged into the
parent company, Cox Technologies,  Inc. All material  intercompany  transactions
and balances among the Company and its subsidiary companies have been eliminated
in the accompanying consolidated financial statements.

     Cash and Cash Equivalents

     For purposes of reporting  cash flows,  cash and cash  equivalents  include
cash on hand and investments with a maturity of three months or less.

     Accounts Receivable

     Until the Asset  Sale,  accounts  receivable  consisted  of trade  accounts
receivable  and were stated at cost less an  allowance  for  doubtful  accounts.
Credit was extended to customers after an evaluation of the customer's financial
condition and generally collateral was not required.  Management's determination
of the  allowance  for  doubtful  accounts  was  based on an  evaluation  of the
accounts  receivable,  past experience,  current  economic  conditions and other
risks  inherent  in  the  accounts  receivable  portfolio.  The  balance  in the
allowance for doubtful accounts was $45,750 at April 30, 2003.

     Depreciation and Amortization

     Depreciation  for property and equipment  was provided on a combination  of
straight-line   and  accelerated  cost  recovery  methods  over  the  respective
estimated lives over a range of five to twenty years.

                                       23
<PAGE>
     Inventory

     Prior to the  Asset  Sale,  inventories  were  stated  at the lower of cost
determined  by the  FIFO  (first-in,  first-out)  method  or  market.  Inventory
consists primarily of raw material,  work-in-process  and finished goods related
to the transit temperature  recording segment. The Company established a $50,000
reserve for slow moving or obsolete inventory in fiscal 2003.

     Goodwill

     Goodwill  represented the excess of the cost of companies acquired over the
fair value of their net assets at dates of acquisition  and was being  amortized
on the straight-line method over a range of six to seventeen years. Goodwill was
written  off as of  April  30,  2002,  therefore  no  amortization  expense  was
recognized  for 2003  (see  Note 8 to the  consolidated  financial  statements).
Amortization  expense for goodwill  charged to operations  totaled  $220,094 and
$200,910 for fiscal 2002 and 2001, respectively.  As goodwill was written off as
of April 30, 2002, the adoption of SFAS No. 142,  "Goodwill and Other Intangible
Assets" had no effect on goodwill.

     Patents

     The Company owned a number of patents  directly related to and important to
the  Company's  business.  The Company  adopted the  provisions of SFAS No. 142,
"Goodwill and Other  Intangible  Assets",  effective May 1, 2002. Under SFAS No.
142,  intangible  assets that have finite useful lives are amortized  over their
estimated  useful lives,  but without the constraint of the 40-year maximum life
required by APB Opinion No. 17.  Intangible assets with finite useful lives were
reviewed for  impairment in accordance  with SFAS No. 144,  "Accounting  for the
Impairment or Disposal of Long-Lived Assets".  SFAS No. 144 requires the Company
to evaluate the  recoverability  of long-lived assets whenever events or changes
in circumstances  indicate that its carrying amount may not be recoverable.  The
adoption of the provisions of SFAS 142 did not have a significant  impact on the
Company's financial position or results of operations.  Amortization expense for
patents charged to operations totaled $28,711, $33,951and $35,470 for the fiscal
period  from May 1,  2003  through  April  15,  2004 and  fiscal  2003 and 2002,
respectively.

     Long-lived Assets

     Long-lived assets held and used by the Company were reviewed for impairment
whenever changes in circumstances  indicate that the carrying value of the asset
may not be recoverable.

     Income Taxes

     Prior to the Asset Sale, the Company  accounts for income taxes pursuant to
the Statement of Financial Accounting Standards (SFAS) No. 109, which requires a
liability method of accounting for income taxes. Under this method, the deferred
tax liability  represents  the tax effect of temporary  differences  between the
financial  statement  and tax bases of assets and  liabilities  and is  measured
using current tax rates.  Valuation  allowances were established when management
believed  it was more  likely  than not that  deferred  tax assets  would not be
realized.

     Revenue Recognition

     The Company recognized revenue when products were shipped, net of estimated
allowance for product returns.

     Fair Value of Financial Instruments

     Financial   instruments   include  cash  and  cash  equivalents,   accounts
receivable,  notes receivable,  accounts payable,  accrued expenses,  short-term
debt and long-term debt. The amounts  reported for financial  instruments  other
than long-term debt are considered to be reasonable approximations of their fair
values  due to their  short-term  nature.  Based on  borrowing  rates  currently
available to the Company for loans with similar terms and  maturities,  the fair
value of the Company's long-term debt approximates the carrying value.

     Comprehensive Income (Loss)

     The effects of exchange  rate changes on the  translation  of the financial
statements of Cox Recorders  Australia from Australian  dollars to U.S.  dollars
are included in Other Comprehensive Income.The Company recorded foreign currency
translation  adjustments  in the period  from May 1, 2003 to April 15,  2004 and
fiscal years 2003 and 2002 of ($10,438), $35,577 and $40,413, respectively.

                                       24
<PAGE>
     Research and Development Costs

     The costs of research and development  activities are charged to operations
as incurred.

     Basic and Diluted Earnings Per Share

     Earnings per share have been  calculated in  conformity  with SFAS No. 128,
"Earnings  Per  Share."  The  Company  has  a  complex  capital  structure  with
significant  potential common shares.  However,  basic earnings per common share
are based on the weighted  average  number of common shares  outstanding  during
each year.  Potential  common  shares from the Senior  Subordinated  Convertible
Promissory  Note with Technology  Investors,  LLC ("TI") are  anti-dilutive  for
fiscal 2004,  2003 and 2002, and potential  common shares from stock options are
anti-dilutive for 2003 and 2002, and as such have been excluded for the earnings
per share calculations.

     For the period from May 1, 2003 to April 15, 2004,  the dilutive  effect of
stock options with an exercise  price less than the average  market price of the
Company's stock have been reflected in the  computation of diluted  earnings per
share. The earnings per share calculation is summarized below.
<TABLE>
<CAPTION>

                                      Period from May 1,         Fiscal Year ended April 30,
                                      2003 to April 15,          ---------------------------
                                             2004                 2003                2002
                                             ----                 ----                ----
<S>                                       <C>                   <C>              <C>
         Basic
Income from continuing operations         $1,476,873            $705,773         $(4,322,370)
Weighted average shares outstanding       38,293,667          27,907,224          25,360,071
Basic earnings per share                       $0.04               $0.02              $(0.17)

         Diluted
Income from continuing operations         $1,476,873            $705,773         $(4,322,370)
Weighted average shares outstanding       38,293,667          27,907,224          25,360,071
Dilutive effect of stock options             393,281
Average diluted shares outstanding        38,686,948          27,907,224          25,360,071
Diluted earnings per share                     $0.04               $0.02              $(0.17)
</TABLE>

     Reclassifications

     Certain  amounts   previously   reported  on  the  consolidated   financial
statements  have  been   reclassified   to  conform  to  the  current   period's
presentation.  Common  stock and paid in  capital  have been  combined  in their
presentation  on  the  consolidated   balance  sheet  and  on  the  consolidated
statements of changes in stockholder's equity (deficit).

     Concentrations of Credit Risk

     Financial instruments that potentially expose the Company to concentrations
of credit risk consist  primarily of cash and cash  equivalents  and,  until the
Asset  Sale,  accounts  receivable.  Credit  risk  of  accounts  receivable  was
generally  diversified  due to the  large  number  of  entities  comprising  the
customer base. At times,  cash balances at financial  institutions are in excess
of FDIC  insurance  coverage.  The cash  balances  are  maintained  at financial
institutions  with high credit - quality  ratings  and the  Company  believes no
significant risk of loss exists with respect to those balances.

                                       25
<PAGE>
     Use of Estimates in the Preparation of Financial Statements

     The  preparation  of financial  statements  in  conformity  with  generally
accepted accounting principles requires management to make certain estimates and
assumptions.  These affect the reported  amounts of assets and  liabilities  and
disclosure of  contingent  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.

     Recent Accounting Pronouncements

     SFAS No. 143 addresses  financial  accounting and reporting for obligations
associated with the retirement of tangible  long-lived assets and the associated
asset  retirement  costs.  The  provisions  of SFAS No. 143 are  required  to be
applied  starting with fiscal years  beginning  after June 15, 2002. The Company
adopted the  provisions of SFAS No. 143 effective May 1, 2003,  and the adoption
of the  provisions  of SFAS No.  143 did not have a  significant  effect  on its
financial position or results of operations.

     SFAS No. 150 addresses the  accounting  for certain  financial  instruments
with  characteristics  of both  liabilities  and equity,  and is  effective  for
interim periods beginning after June 15, 2003. The adoption of the provisions of
SFAS No. 150 did not have a  significant  effect on its  financial  position  or
results of operations.

2.  INVENTORIES

     Inventory at April 30, 2003 consists of the following:

                                            2003
                                            ----
Raw materials                         $    328,744
Work-in-process                            103,059
Finished goods                             800,467
                                      ------------
                                         1,232,270
Less reserve                                50,000
                                      ------------
                                         1,182,270
Less inventory of discontinued
 operations                                103,304
                                      ------------
     Total                            $  1,078,966
                                      ============

3.  PROPERTY AND EQUIPMENT

The  following  is a  summary  of  property  and  equipment  at  cost,  by major
classification,  less  accumulated  depreciation at April 30, 2004 and April 30,
2003:

                                                       2004           2003
                                                       ----           ----
Manufacturing Property and Equipment
------------------------------------
Tooling                                           $   394,339    $   518,840
Machinery and equipment                               399,900      1,567,752
Office furniture and equipment                         71,913        175,780
Leasehold improvements                                276,958        300,665
                                                  -----------    -----------
                                                    1,143,110      2,563,037
Less: Accumulated depreciation                        979,854      2,057,349
                                                  -----------    -----------
     Total manufacturing property and equipment       163,256        505,688
Equipment, net of accumulated depreciation of
 discontinued operations                                            (282,109)
Impairment for liquidation                           (126,545)          --
                                                  -----------    -----------
          Total property and equipment            $    36,711    $   223,579
                                                  ===========    ===========

Property  and  equipment  is included in other  assets in the  statement  of net
assets in liquidation.

4.  PATENTS

     Patents  were  being  amortized  over  their  estimated   useful  lives  in
accordance with SFAS No. 142. The carrying value and amortization of patents are
as follows:

                                                   As of April 30, 2003
                                                   --------------------
                                           Gross Carrying         Accumulated
                                                Value            Amortization
                                                -----            ------------
Amortized intangible asset
    Patents                                    $  206,597          $ 91,752
Aggregate amortization expense
Period from May 1, 2003 to April 15, 2004         $28,711
    2003                                          $33,951

                                       26
<PAGE>
5.  DEBT

     Prior to April 30,  2004,  the  Company  repaid  all  long-term  debt.  The
following is a summary of long-term debt obligations and lease contracts payable
at April 30, 2003:

2003 10% Senior Subordinated Convertible Promissory Note due
March 2005 (from related party, see Note 6) (principal
amount of the note and accrued interest are convertible into
the Company's no par common stock at a conversion price of
$1.25 per share)                                                      $3,327,500

Note payable to bank, secured by accounts receivable and
inventory. See details set forth in the narrative below.               1,184,999

Unsecured note payable to a vendor in 24 monthly
installments of $2,000.                                                   12,000

Capital leases secured by equipment, expiring in various
years, with terms ranging from 36 months to 60 months, due
in monthly installments ranging from $496 to $5,467                      196,172
                                                                         -------
                                                                       4,720,671
Less: Current maturities (including $142,851 related to
discontinued operations)                                                 530,778
                                                                         -------
Total long-term debt                                                 $ 4,189,893
                                                                     ===========

     In March 2000,  the Company  entered into an agreement  with TI whereby the
Company  issued  to TI a 10%  subordinated  convertible  promissory  note in the
amount of $2,500,000 (the "TI Note"), the entire principal and interest of which
are due on March 10, 2005.  Alternatively,  the principal  amount of the TI Note
and interest  accrued  thereon may be converted,  at the option of holder,  into
shares of the Company's  Common Stock at a conversion  price of $1.25 per share.
As of April 30, 2003, the principal and accrued  interest of $3,327,500 would be
converted into 2,662,000  shares of the Company's Common Stock. Mr. Fletcher and
Mr.  Reid serve as the sole  managers  of TI and share  voting and  dispositions
power with respect to the Common Stock issuable upon conversion of the TI Note.

     Prior to the Asset Sale,  the Company's  cash flow from  operations was not
adequate  to retire  the TI Note,  and it was  unlikely  that  cash  flow  would
increase in an amount  sufficient for the Company to meet its obligations  under
the TI Note when the  principal  and  accrued  interest  become due on March 10,
2005.  Upon  completion of the Asset Sale,  the Company paid TI  $3,700,362  and
retired the TI Note.

     On July 13, 2000 the  Company  entered  into a  five-year  term loan ("Term
Loan") with its primary  lender,  Centura in the amount of  $1,190,000.  Initial
principal payments of $9,920, in addition to accrued interest,  were due monthly
from  August 2, 2000 to July 2, 2001.  The rate of interest on the Term Loan was
Centura's  prime rate plus .625% per annum.  Thereafter,  principal  payments of
$22,313, in addition to accrued interest, were due monthly until July 13, 2005.

     On July 13, 2000 the Company also  established  a revolving  line of credit
with Centura for working  capital in the amount of up to $1,000,000  ("Revolving
Loan"),  subject to a maximum  percentage of eligible trade accounts  receivable
and inventories.  The rate of interest on the Revolving Loan was Centura's prime
rate plus  .25% per annum and was due  monthly  beginning  in August  2000.  The
principal of the Revolving Loan was due on September 2, 2001.

                                       27
<PAGE>
     On November 29, 2001, the Company executed (a) an amendment to the original
Revolving  Loan  agreement,  (b)  a  new  security  agreement  and  (c)  a  note
modification  agreement for the Term Note and for the  Revolving  Loan that were
effective October 30, 2001 (collectively "Modified Agreements").  These Modified
Agreements  extended the maturity date of the Revolving Loan to January 31, 2002
and  changed  the rate  that  interest  will  accrue  on the  Term  Note and the
Revolving Loan from prime rate plus .625% per annum and prime rate plus .25% per
annum,  respectively,  to 30-day  LIBOR plus 500 basis  points per annum.  These
Modified  Agreements  also stated that  Centura  would  forbear  exercise of its
rights and remedies  under the Modified  Agreements  until  January 31, 2002, so
long as the Company continued to pay the principal and interest on the Term Note
and pay  interest  on the  Revolving  Loan.  On  February  21,  2002 the Company
executed  documents with Centura,  effective  January 31, 2002, that amended the
Modified  Agreements to extend the maturity  dates of the Revolving Loan and the
Term Loan to July 31,  2002.  As a result,  the full balance of theses loans was
classified as current portion of long-term debt at April 30, 2002.

     The Company borrowed $1,000,000 related to this line of credit at April 30,
2002. On June 7, 2002, the Company paid $200,000 down on the amount  outstanding
on this line of credit, leaving a balance of $800,000.

     Centura also agreed to finance the lease of two major pieces of  production
equipment related to the manufacturing of the Vitsab(R) product. The Company had
advanced  approximately $842,000 in progress payments on the cost of both pieces
of equipment,  of which $464,000 had been advanced directly by Centura.  Through
January 31,  2002,  the Company  had accrued and paid  approximately  $57,000 of
interest  related  to the  progress  payments  made by  Centura on behalf of the
Company.

     In November 2001, the Company met with  representatives  of the engineering
firm  that  designed,  and was in the  later  stages  of  constructing,  the new
production  equipment for manufacturing the Vitsab(R) product.  In that meeting,
the  engineering  firm stated it was still having  technical  problems  with the
production  equipment.  These problems were preventing the engineering firm from
delivering a machine that would meet the Company's  production  requirements  at
the  agreed  upon  fees.  It was  agreed by both  parties  that the  design  and
construction of the new production  equipment would be put on hold indefinitely.
It was also agreed that the Company  could have  possession  and/or title to the
equipment at its current state of development.

     As a result of the indefinite  delay in the design and  construction of the
equipment,  the Company and Centura agreed to execute  documents on February 21,
2002 that  converted  the  $464,000  advanced  under the lease by  Centura  to a
five-year note payable ("Lease Loan"),  effective January 31, 2002. The executed
documents also incorporated the note into the Modified Agreements.  The interest
rate on the note was the  30-day  LIBOR plus 500 basis  points  per annum,  with
monthly payments of $7,700 plus accrued interest.  The maturity date of the note
was July 31, 2002.

     On July 31, 2002, the Company executed documents with Centura that extended
the  maturity  date of the Term  Loan,  the  Revolving  Loan and the Lease  Loan
("Loans")  to  October  31,  2002 and  decreased  the  amount  available  on the
Revolving Loan from $1,000,000 to the then outstanding balance of $800,000.

     On December 1, 2002,  the Company  executed  documents  with  Centura  that
extended  the  maturity  date of the Loans to March  15,  2003.  Under  this new
arrangement, the Company continued paying the current monthly principal payments
plus  accrued  interest  on the  Loans  during  this  forbearance  period.  This
extension gave the Company  additional time to procure additional debt or equity
funding  to allow the  Company  to  decrease  the  amount  owed to Centura by an
additional  $450,000 (the "Loan Reduction").  The Company was required to reduce
the amount of principal outstanding under the Loans to $1,215,000, including the
Loan  Reduction,  by March 15, 2003.  The Loan  Reduction was in addition to the
Company's  normal  monthly  principal  payments due on the Loans and the $91,000
payment that the Company  received on January 30, 2003 from the purchaser of the
oilfield subleases.

     On March 19, 2003, the Company  executed with Centura:  (a) an amendment to
the loan  agreement,  (b) a promissory  note and (c) a security  agreement.  The
amendment to the loan  agreement  required among other  considerations  that the
outstanding  Term  Loan,  Revolving  Loan and Lease  Loan  should  not  exceed a
combined balance of $1,214,999.  Also,  under this agreement the  aforementioned
notes would be amended and restated to one promissory note.  Principal  payments

                                       28
<PAGE>
on the note were  $30,000  plus accrued  interest  beginning  April 15, 2003 and
continuing each month  thereafter  through August 19, 2006. The interest rate on
the  outstanding  principal is  calculated  at the bank's 30-day LIBOR base rate
plus 4% per annum (5.32% on April 30, 2003). On the first day of the month after
the principal balance was paid equal to or less than $800,000, the interest rate
will  decrease to the bank's  30-day LIBOR base rate plus 3% per annum  provided
there is no event of  default.  Effective  October  1,  2003,  the  Company  was
required to submit a monthly  borrowing base  calculation in support of the loan
balance and would have been  required to pay a sufficient  principal  payment to
reduce the loan balance to the amount  supported  by such  borrowing  base.  The
borrowing base was defined as the sum of 80% of the eligible accounts receivable
and 35% of the eligible inventory of the Company.

     On May 19,  2003,  the Company  executed a note  modification  agreement to
modify the note dated March 19, 2003. The effective date of the modification was
established when the Company made a principal  payment on the note for $355,000.
The payment was made to Centura on May 21, 2003. The results of the modification
were to reduce the monthly  principal  payment to $21,000 plus accrued  interest
beginning on June 15, 2003 and continuing  until July 15, 2006 on which date the
balance of the note would have matured. Also, beginning on the effective date of
the modification,  the interest rate on the outstanding principal was calculated
at the bank's 30-day LIBOR base rate plus 2.5% per annum.

     On March 31,  2004,  the  Company  paid  Centura  $538,566  and retired the
remaining balance of the debt.

     Capital leases consisted primarily of manufacturing  property and equipment
with a capitalized cost of approximately  $672,000 and accumulated  depreciation
of  approximately  $537,000 as of April 30, 2003. In  anticipation  of the Asset
Sale, the Company in January and February 2004 paid a total of $88,071 to retire
all indebtedness associated with capitalized leases.

6.  RELATED PARTY TRANSACTIONS

     On January 20, 2003, the Company  entered into a Stock  Purchase  Agreement
(the "TI Stock Purchase  Agreement") with Technology  Investors,  LLC ("TI"), an
affiliate of certain executive officer and directors of the Company, pursuant to
which TI agreed to purchase and the Company agreed to sell 12,500,000  shares of
the Company's  Common Stock at a price of $0.06 per share,  for a total purchase
price of $750,000.  This transaction was submitted to the Company's shareholders
for their approval at a special  meeting of the  shareholders on March 12, 2003.
With a quorum of shareholders present, a motion was made and seconded to approve
the TI Stock Purchase  Agreement,  and the motion was passed by a unanimous vote
of those  present  in  person  or  represented  by proxy.  The  transaction  was
consummated on March 19, 2003. TI,  together with Mr.  Fletcher and Mr. Reid and
their affiliates,  now collectively own and control beneficially an aggregate of
15,594,966  shares of the Company's  Common Stock, or  approximately  38% of the
Company's  issued and  outstanding  common  stock.  These  figures  include  the
2,662,000  shares of the Company's Common Stock that TI may obtain by converting
its existing  promissory note, but exclude the options that Mr. Fletcher and Mr.
Reid own to purchase, in the aggregate, 3,000,000 shares of the Company's Common
Stock.

     A more detailed  description of this  transaction  can be read in the Proxy
Statement, dated February 6, 2003, which was mailed to shareholders of record on
January 17, 2003.

     In March  2000,  the  Company  issued the TI Note to TI. The balance of the
note and accumulated  interest amounting to $3,700,362 were repaid in April 2004
with a portion of the proceeds from the Asset Sale.

     In addition, Mr. Fletcher and Mr. Reid were named directors of the Company.
The  Company  has  agreed  to  nominate  Mr.  Fletcher  and Mr.  Reid for  three
consecutive terms on the Board of Directors. Mr. Fletcher and Mr. Reid were also
both retained as consultants to the Company.  In connection  with their services
they each would  receive  compensation  of $1 annually  and a one-time  grant of
immediately  exercisable  options to purchase  300,000  shares of the  Company's
Common  Stock at an exercise  price of $1.25 per share for a period of up to ten
years.

     In fiscal 2001,  Mr.  Fletcher and Mr. Reid each received  stock options to
purchase  2,000,000 shares of the Company's Common Stock at an exercise price of
$.59 per share for a period of up to ten years.

                                       29
<PAGE>
     In fiscal 2002,  Mr.  Fletcher and Mr. Reid each received  stock options to
purchase  800,000  shares of the Company's  Common Stock at an exercise price of
$.11 per share for a period of up to seven years.  Also,  the Board of Directors
approved an increase in compensation  for Mr. Fletcher and Mr. Reid  retroactive
to January 1, 2001,  in which they each would  receive  annual  compensation  of
$100,000, payable quarterly in unrestricted shares of the Company's Common Stock
valued at the average  daily  closing  price during the quarter.  During  fiscal
2002,  Mr.  Fletcher  and Mr. Reid were paid  $75,000 of salary in  unrestricted
shares of the  Company's  Common  Stock at an average  market  price of $.35 per
share  under this  structure.  On December 7, 2001,  Mr.  Fletcher  and Mr. Reid
agreed to a decrease in their annual  compensation  to $1  effective  October 1,
2001. On March 15, 2002,  the  Compensation  Committee of the Board of Directors
approved a compensation structure, effective March 1, 2002, whereby Mr. Fletcher
and Mr.  Reid would be  compensated  based on the actual  monthly  cash flow and
quarterly net income generated by the Company.  The maximum annual  compensation
would be capped at $210,000 each.  During fiscal 2002, Mr. Fletcher and Mr. Reid
were compensated $7,500 each under this structure.

     During fiscal 2003, Mr.  Fletcher and Mr. Reid were each granted options to
purchase  200,000  shares of the Company's  Common Stock at an exercise price of
$.11 per share for a period of up to seven  years.  Effective  November 1, 2002,
the Board of Directors ratified the recommendation of the Compensation Committee
to change the compensation  structure for both Mr. Fletcher and Mr. Reid and set
the annual  salary rate at  $100,000  per year.  On April 1, 2003,  the Board of
Directors  modified  the  compensation  plan  for  Mr.  Fletcher  and  Mr.  Reid
increasing  their annual salary rate to $120,000 per year,  effective  April 15,
2003, and  establishing a quarterly  bonus plan beginning with the first quarter
of fiscal 2004 based on the profitability of the company. The quarterly bonus is
limited to 50% of the Company's net income for the quarter and Mr.  Fletcher and
Mr.  Reid can earn a  non-cumulative  bonus up to $10,000  per  quarter.  During
fiscal  2003,  Mr.  Fletcher  and Mr. Reid were each  compensated  approximately
$99,000  as  a  payout  from  the  fiscal  2002  compensation   arrangement  and
approximately $50,000 from the fiscal 2003 compensation arrangement.

     During  fiscal 2004,  Mr.  Fletcher and Mr. Reid each  received  $30,000 in
payments  from the bonus plan and an accrual of $10,000  each has been  recorded
for future  payment as of April 15,  2004.  For the period  starting May 1, 2003
through  April 15, 2004,  Mr.  Fletcher and Mr. Reid were each paid at an annual
rate of $120,000 and effective April 16, 2004,  their individual rate of pay was
changed to an annual rate of $90,000.  Mr.  Fletcher and Mr. Reid each  received
$118,846 of salary compensation during fiscal 2004.

     As a result of the Asset Sale, options granted to Mr. Fletcher and Mr. Reid
equaling  200,000 common shares each that would vest and be exercisable  between
March 08, 2005 and September 9, 2007 were accelerated and became  exercisable at
the date of the Asset Sale closing.  The total  exercisable  options held by Mr.
Fletcher and Mr. Reid at April 15, 2004 equal 600,000  common  shares each.  The
exercise price of the options is $.11 per share;  therefore,  both Mr.  Fletcher
and Mr. Reid will be entitled to receive  the  difference  between the  exercise
price and the amount of the liquidation proceeds paid per common share. Based on
a  distribution  rate of $.16 per share  both Mr.  Fletcher  and Mr.  Reid would
receive an in-the-money option payment of $30,000.

7.  RETIREMENT PLAN

     The  Company  maintained  a 401(k)  plan  that  covered  substantially  all
employees,  including  subsidiary  companies.  Effective  January 1,  2002,  the
Company elected to discontinue matching  contributions.  Prior to that date, the
Company matched 50% of employee  contributions  up to 4% of gross earnings.  The
Company's matching  contributions  amounted to approximately  $15,400 for fiscal
2002. The Company is in the process of terminating the plan and distributing the
assets to the participants.

                                       30
<PAGE>
8.  IMPAIRMENT OF ASSETS

     During fiscal 2002 goodwill and  non-depreciable  assets were determined to
be  impaired  and these  amounts  were  recognized  as a loss on  impairment  of
$3,537,597 in the fourth quarter of fiscal 2002.

     Goodwill originated primarily from the acquisition of Vitsab, AB ("Vitsab")
(see Note 13 to the consolidated  financial  statements)  during fiscal 1999. At
April 30,  2002 the  Company  evaluated  the fair value of  goodwill,  which was
determined  by reference to the present  value of estimated  future cash inflows
and a significant  change in technology to get the product to market. Due to the
significant  change in  technology  and  projected  future  cash  flows for this
product,  management determined goodwill from the Vitsab(R) product was impaired
and recognized an impairment  loss of $2,695,689 in the fourth quarter of fiscal
2002.

     The  Company  invested  funds to  construct  machinery  for the  high-speed
production of the Vitsab(R) product. The machinery was not completed and was not
expected  to produce  any  positive  future  cash flows and had a minimal  scrap
value, management determined the equipment was impaired and recognized a loss on
impairment of $841,908 in the fourth quarter of fiscal 2002.

9.  INCOME TAXES

     The  reconciliation  of income tax computed at federal and state  statutory
rates to the income tax  provision  is as follows for the fiscal  periods  ended
April 15, 2004, April 30, 2003 and April 30, 2002.

                                         2004            2003            2002
                                         ----            ----            ----
Income (loss) before income taxes   $   863,482     $   110,448     ($5,163,046)
Statutory federal income tax rate:           34%             34%             34%
Expected federal income tax
   expense at statutory rate            293,584          37,552            --
Utilization of deferred tax asset      (293,584)        (37,552)           --
                                    -----------     -----------     -----------
Provision for income taxes          $      --       $      --       $      --
                                    ===========     ===========     ===========

     The following is a summary of the  significant  components of the Company's
deferred tax assets for the fiscal periods ended April 15, 2004,  April 30, 2003
and April 30, 2002

                                           2004           2003          2002
                                           ----           ----          ----
Deferred tax assets:
   Net operating loss carryforwards   $ 3,460,000    $ 3,754,000   $ 2,978,000
   Impairment on long-lived assets        345,000        345,000     1,600,000
   Other                                  168,000        168,000       322,000
                                      -----------    -----------   -----------
                                        3,973,000      4,267,000     4,900,000
   Less:  Valuation allowance          (3,973,000)     4,267,000     4,900,000
                                      -----------    -----------   -----------
Net deferred tax asset                $      --      $      --     $      --
                                      ===========    ===========   ===========

     The valuation  allowance  primarily  represents the tax benefits of certain
operating  loss carry  forwards  and other  deferred  tax assets that may expire
without  being  utilized.  During  fiscal  2004,  2003 and 2002,  the  valuation
allowance decreased $3,269,000, $633,000 and $494,000, respectively.

     During the liquidation period of April 16, 2004 through April 30, 2004, the
Company  recognized  approximately  $292,000 of federal and state  income  taxes
primarily  due to the gain on the sale of its assets to Sensitech,  Inc.,  which
amounts are included in the effect of the adoption of the  liquidation  basis of
accounting.

                                       31
<PAGE>
10.  SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

     The following table presents certain financial information for each quarter
during the fiscal periods ended April 15, 2004, and April 30, 2003.

                                                    2004
                         -------------------------------------------------------
                            Fourth          Third      Second (a)      First (a)
                         -------------------------------------------------------
Sales                    $ 2,324,141    $ 2,481,510   $ 2,631,310    $ 2,333,551
Income from
  operations                  23,661        589,555       671,142        518,418
Net income                    22,131        145,308       368,672        327,325
Basic and diluted net
  income (loss) per
  average common share   $       .00    $       .00   $       .01    $       .01

                                                   2003(a)
                         -------------------------------------------------------
                            Fourth          Third        Second          First
                         -------------------------------------------------------
Sales                    $ 2,104,784    $ 2,212,601   $ 1,964,391    $ 2,210,747
Income (loss) from
  operations                  99,437        493,274        39,687        377,786
Net income (loss)             80,025        158,585   (209,842)           81,680
Basic and diluted net
  income (loss) per
  average common  share          .00    $       .01   ($      .01)   $       .00

(a)  Restated  to  reflect  the  sale of the  Vitsab  division  as  discontinued
     operations.

11.  SEGMENT INFORMATION

     Information on the enterprise-wide  operations  (including the discontinued
Vitsab  operations) by domestic and  international is presented in the following
table.

                                     Domestic     International      Total
                                     --------     -------------      -----
Fiscal Period Ended April 15, 2004
Revenues                            $6,787,285     $3,271,612    $10,058,897
Net income                            $805,608        $87,874       $863,482
Identifiable assets                   $163,255        $10,541       $173,796

Fiscal Years Ended April 30,
----------------------------
Revenues:
     2003                           $6,897,095     $1,876,757     $8,773,852
     2002                           $5,719,605     $2,907,498     $8,627,103

Net income (loss):
     2003                             $522,755     ($362,307)       $160,448
     2002                          ($3,456,703)  ($1,706,343)    ($5,163,046)

Identifiable assets:
     2003                            $ 468,314        $37,375      $ 505,689
     2002                            $ 993,738        $70,890    $ 1,064,628

                                       32
<PAGE>
12.  LEASES

     The Company  leased its corporate  office,  sales office and  manufacturing
facilities  under  non-cancelable  operating  leases.  Rental expense for fiscal
2004, 2003 and 2002 was $116,944,  $113,291,and $110,578 respectively.  At April
30, 2004, future minimum rental payments for non-cancelable operating leases are
approximately $22,432 for fiscal 2005.

13.  BUSINESS COMBINATION

     In November 1997,  the Company  acquired a nominal  interest in Vitsab,  AG
("Vitsag"),  a corporation  formed under the laws of the Country of Switzerland,
for  $300,000.  In June  1998,  the  Company  acquired  from  Vitsag  all of the
outstanding shares of Vitsab, a corporation formed under the laws of the Country
of  Sweden,  and a wholly  owned  subsidiary  of  Vitsag.  The  acquisition  was
accomplished by (i) the issuance to Vitsag of 3,375,734  shares of the Company's
unregistered  common stock and 950,000 shares of the common stock of Vitsab USA,
Inc.  ("Vitsab USA"), a wholly owned  subsidiary of the Company in the formation
stage with  4,750,000  issued shares of common stock  outstanding,  and (ii) the
assumption  by the  Company  of  certain  debt owed by  Vitsab  to an  unrelated
company. In an agreement dated July 18, 1999, the Company purchased its minority
interest in Vitsab USA through the issuance of 527,458  shares of the  Company's
unregistered  common stock. The transaction has been accounted for as a purchase
and the results of Vitsab's  operations  have been included in the  accompanying
consolidated  financial statements since the date of the acquisition,  which was
June 30, 1998. The cost of the acquired enterprise was approximately $2,600,000,
including debt assumed of  approximately  $1,750,000.  At acquisition,  the fair
value of liabilities assumed exceeded the fair value of assets acquired, and the
excess plus the cost of  acquisition  were  recorded as goodwill.  During fiscal
2000, the Company  adjusted the initial  purchase price allocation that resulted
in additional goodwill of approximately  $469,000.  Goodwill was being amortized
over the  average  estimated  useful life of 16 years.  The  Company  determined
goodwill to be impaired and  recognized an impairment  loss of $2,695,689 in the
fourth  quarter of fiscal  2002.  As of March 15, 2003 , the Company sold all of
its shares in Vitsab  Sweden,  the  successor  to Vitsab,  to its  Copenpenhagen
distributor. See Note 1 for further detail.

14.  CONTINGENCIES

     From  time  to  time,  we  have  been  subject  to  pending  or  threatened
litigation.  We have been advised that certain  parties may exert claims related
to our previous business activities and current dissolution  efforts. We believe
these claims are without merit and intend to defend these claims vigorously.  We
currently  believe that these matters will not have a material adverse effect on
our financial  position.  However,  the results of legal  proceedings  cannot be
predicted with certainty.  Pending or future  litigation could be costly,  could
cause the diversion of management's attention and could upon resolution,  have a
material adverse affect on the net assets available for distribution.

                                       33
<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors and Stockholders
Cox Technologies, Inc.
Belmont, North Carolina


We have  audited  the  accompanying  consolidated  statement  of net  assets  in
liquidation of Cox Technologies, Inc. and subsidiaries as of April 30, 2004, and
the related statements of changes in net assets in liquidation and stockholders'
equity  for the  period  from  April 16,  2004 to April 30,  2004.  We have also
audited  the  consolidated  balance  sheet as of April 30,  2003 and the related
consolidated statements of income, changes in stockholders' equity (deficit) and
comprehensive  income,  and cash flows for the period  from May 1, 2003 to April
15, 2004 and for each of the years in the two-year  period ended April 30, 2003.
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  standards  of the Public  Company
Accounting  Oversight Board (United States of America).  Those standards require
that we plan and perform the audit to obtain reasonable  assurance about whether
the financial  statements are free of material  misstatement.  An audit includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

As  described  in  Note  1  to  the  consolidated   financial  statements,   the
stockholders  of Cox  Technologies,  Inc.  approved  an asset sale and a plan of
complete  liquidation  and  dissolution  on  April  15,  2004,  and the  Company
completed  the asset sale and commenced  liquidation  shortly  thereafter.  As a
result,  the Company has changed its basis of accounting for periods  subsequent
to April 15, 2004, from the going concern basis to the liquidation basis.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the net assets in liquidation of Cox Technologies,  Inc.
and  subsidiaries as of April 30, 2004, the changes in net assets in liquidation
for the period from April 16, 2004 to April 30, 2004,  their financial  position
as of April 30, 2003, and the results of their operations and cash flows for the
period  from May 1,  2003 to  April  15,  2004 and for each of the  years in the
two-year period ended April 30, 2003, in conformity  with accounting  principles
generally accepted in the United States of America.


/s/ Cherry, Bekaert & Holland, L.L.P.


Cherry, Bekaert & Holland, L.L.P.
Gastonia, North Carolina
July 30, 2004

                                       34
<PAGE>
     Supplementary Data

The  information  for this item is  contained  in Note 10  entitled  "SUMMARY OF
QUARTERLY FINANCIAL INFORMATION (UNAUDITED) on page 32 of this annual report.

ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

          None.

ITEM 9A.  INTERNAL CONTROLS AND PROCEDURES

     (a)  Evaluation of Disclosure Controls and Procedures. As of the end of the
          period covered by this report,  an evaluation of the  effectiveness of
          the Company's disclosure controls and procedures was carried out under
          the  supervision and with the  participation  of Brian D. Fletcher and
          Kurt C. Reid, the Company's Co-Chief Executive  Officers,  and John R.
          Stewart,  the  Company's  Chief  Financial  Officer.  Based  upon that
          evaluation,  the Chief Executive  Officers and Chief Financial Officer
          concluded that the Company's  disclosure  controls and procedures were
          effective.

     (b)  Changes to Internal Controls. There has been no change in our internal
          controls over  financial  reporting  that  occurred  during our fiscal
          fourth quarter that has materially  affected,  or is reasonably likely
          to materially affect, our internal controls over financial  reporting.
          Since the Asset Sale on April 16, 2004, we have been in the process of
          winding down our operations  and  liquidating  the Company,  including
          significantly  reducing  our  workforce.  As of August 13,  2004,  the
          Company has four employees.  As a result of the decrease in workforce,
          the  Company  has  limitations  on its  ability  to  provide  adequate
          segregation  of  duties  and  employ  other  common  internal  control
          practices.  While the  activities  of the  Company  are being  closely
          monitored by the Board of Directors, our inability to provide adequate
          segregation of duties and other mitigating  controls may be considered
          a material weakness in internal controls over financial reporting.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Directors

     Set forth below is a table showing the names,  ages, terms and positions of
the three remaining directors:

                       Director  Term
Name               Age  Since   Expires Position
------------------ --- -------- ------- --------------------------------------
DR. JAMES L. COX   59    1995    2004   Chairman, President and Chief
                                         Technology Officer of the Company
BRIAN D. FLETCHER  42    2000    2004   Director, Co-Chief Executive Officer and
                                         Director of Marketing of the Company
KURT C. REID       44    2000    2004   Director, Co-Chief Executive Officer and
                                         Chief Operating Officer of the Company

     Biography of Directors

     DR. JAMES L. COX has been  President  and Chief  Technology  Officer of the
Company since April 1, 2003.  Prior to holding these offices,  Dr. Cox served as
the President and Chief  Executive  Officer of the Company since  November 1997.
Dr. Cox served as  President  and Chief  Operating  Officer  from August 1995 to
November  1997.  Dr. Cox has been a director of the Company since 1995 and since
November  1998,  he has served as  Chairman of the Board of  Directors.  Dr. Cox
holds a Ph.D.  from  Stanford  University  and has  held  various  teaching  and
research  positions  with  Duke  University,  Stanford  Research  Institute  and
University of California, Santa Barbara.

     BRIAN D.  FLETCHER  has been  Co-Chief  Executive  Officer and  Director of
Marketing of the Company since April 1, 2003.  Prior to holding  these  offices,
Mr.  Fletcher  served as Co-Chief  Executive  Officer of the Company since March
2000.  Mr.  Fletcher  has also been a director of the Company  since March 2000.
Since 1995, Mr. Fletcher has been a private investor. Mr. Fletcher is a Managing
Director  of  Technology  Investors,  LLC  ("TI"),  a group  that  has  provided
financing  for the Company and  currently  directly  owns  12,500,000  shares of
Company  common  stock.  Mr.  Fletcher  earned his B.S.  degree in Economics and
Finance from Rockhurst College.

                                       35
<PAGE>
     KURT C.  REID has been  Co-Chief  Executive  Officer  and  Chief  Operating
Officer of the Company since April 1, 2003. Prior to holding these offices,  Mr.
Reid served as Co-Chief  Executive  Officer of the Company since March 2000. Mr.
Reid has also been a director of the Company since March 2000.  Since 1995,  Mr.
Reid has been a private investor. Mr. Reid is a Managing Director of TI, a group
that  has  provided  financing  for the  Company  and  currently  directly  owns
12,500,000  shares of Company common stock. Mr. Reid earned his B.S. degree from
Southern Illinois University at Carbondale.

COMMON STOCK OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Set forth  below is the  number of  shares of Common  Stock of the  Company
owned by certain beneficial owners, the directors,  the executive officers named
in the Summary Compensation Table, and the directors and executive officers as a
group, as of August 12, 2004.

Dr. James L. Cox..........................................8,228,108(2)    19.5%
Brian D. Fletcher........................................14,417,983(3)    36.2%
Kurt C. Reid.............................................14,414,983(4)    36.2%
Technology Investors, LLC................................12,500,000(5)    32.8%
Directors and executive officers as a group (3 persons)..24,561,074(6)    54.0%

(1)  Includes shares, if any, held by each person's spouse.

(2)  Dr. Cox owns 3,280,279  shares  directly.  1,005,829  shares are owned by a
     trust over which Dr. Cox has  investment and voting power and 12,000 shares
     are owned by the  estate of his  deceased  father.  Includes  a warrant  to
     purchase  2,500,000 shares.  Includes options to purchase  1,430,000 shares
     exercisable within 60 days of August 12, 2004.

(3)  Mr.  Fletcher owns 217,983 shares  directly.  Includes  options to purchase
     1,700,000 shares  exercisable  within 60 days of August 12, 2004.  Includes
     12,500,000 shares  beneficially  owned through TI that were issued to TI on
     March 19, 2003.

(4)  Mr.  Reid owns  214,983  shares  directly.  Includes  options  to  purchase
     1,700,000 shares  exercisable  within 60 days of August 12, 2004.  Includes
     12,500,000 shares  beneficially  owned through TI that were issued to TI on
     March 19, 2003

(5)  The address for TI is 191 Bridgeport Drive, Mooresville, North Carolina.

(6)  Includes  options and warrants to  purchase,  in the  aggregate,  7,700,000
     common shares within 60 days of August 12, 2004.

THE BOARD OF DIRECTORS

     The business of the Company is managed  under the direction of the Board of
Directors.  The Board meets  regularly  during the year to review the  Company's
operations, strategic and business plans, major capital appropriations and other
significant  developments  affecting the Company and to act on matters requiring
Board approval.  It also holds special  meetings when important  matters require
Board action. Members of senior management attend Board meetings on an as needed
basis  to  discuss  the   progress   and  plans   relating  to  their  areas  of
responsibility.  During the fiscal year ended April 30,  2004,  there were three
meetings of the Board.  Each  director  attended  all of the board  meetings and
meetings of any board committee on which he served.

     The Company has no nominating  committee.  Because of the number of matters
requiring Board  consideration  and to make the most effective use of individual
directors' capabilities, the Board created a Compensation Committee and an Audit
Committee.

     The Compensation  Committee recommends to the Board the compensation of the
executive  and senior  management  of the Company  that, in the judgment of such
committee's  members,  should  from  time to time be  fixed  by the  Board.  The
Compensation  Committee also performs other such duties as are assigned to it by

                                       36
<PAGE>
the Board.  The Board has  assigned  to such  committee  the  responsibility  of
administering  the Company's 2000 Stock Incentive Plan (the  "Incentive  Plan").
With only three  employees as Directors,  the Board suspended any prohibition on
employees  serving on the  Compensation  Committee.  The Board has appointed Dr.
Cox,  Mr.  Fletcher  and Mr.  Reid to serve as the  members of the  Compensation
Committee, each of whom is an employee of the Company.

     Since the Incentive Plan requires that the Compensation  Committee  contain
at least two members who are both disinterested directors and non-employees, and
since only the Compensation  Committee can issue  equity-based  incentives,  the
Company has been unable to issue any equity-based  incentives until such time as
it can meet the requirements set forth in the Plan or amends the Plan.

     The Audit Committee has  responsibility  for considering the appointment of
the independent  auditors for the Company,  reviewing with the auditors the plan
and scope of the audit and audit fees and  monitoring  the adequacy of reporting
and  internal  controls.  With only  three  employees  as  Directors,  the Board
suspended any prohibition on employees serving on the Audit Committee until such
time as the Board  contains  at least two  members  who are not  employed by the
Company.  In the meantime,  the Board has appointed Mr. Fletcher and Mr. Reid to
serve as the members of the Audit Committee.  Both Mr. Fletcher and Mr. Reid are
employees of the Company,  and neither of them is "independent," as such term is
defined in Rule 4200(a)(14) of the NASD's listing standards. The Company's Board
of  Directors  has not adopted a written  charter for the Audit  Committee.  The
Audit  Committee  has not  identified a member as being a financial  expert,  as
defined in the rules of the Securities and Exchange  Commission.  As the Company
is in the process of  liquidation  and  dissolution,  it is unlikely to seek new
Audit Committee members that could be identified as a financial expert.

     Audit Committee Report

     The Audit  Committee  has  reviewed  and  discussed  the audited  financial
statements with the Company's management. The Audit Committee has discussed with
the  independent  auditors the matters  required to be discussed by Statement of
Auditing  Standards  No.  61,  as may be  modified  or  supplemented.  The Audit
Committee  has  received  the  written  disclosures  and  the  letter  from  the
independent auditors required by Independence Standards Board Standard No. 1, as
may be modified or supplemented, and has discussed with the independent auditors
their independence.  Based on the review and discussions  referred to above, the
Audit  Committee  has  recommended  to the Board of  Directors  that the audited
financial statements be included in the Company's Annual Report on Form 10-K for
Fiscal 2004 for filing with the Securities and Exchange Commission.

       Audit Committee:
       ---------------
       Mr. Brian D. Fletcher
       Mr. Kurt C. Reid

     Compensation of Directors

     Directors who are not employees of the Company receive  annually options to
purchase 7,500 shares of the Company's common stock, priced at market value. All
directors are  reimbursed in cash for their  reasonable  out-of-pocket  expenses
incurred in connection with their  attendance at Board  meetings.  Directors who
are  employees  of the  Company do not receive  compensation  for service on the
Board other than their compensation as employees.

     SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934, as amended,  requires
the Company's  directors and executive  officers,  and persons who own more than
10% of the Company's  Common  Stock,  to file with the  Securities  and Exchange
Commission  reports of  ownership  and  changes in  ownership  of Common  Stock.
Officers,  directors  and greater  than 10%  beneficial  owners are  required by
Securities and Exchange Commission regulation to furnish the Company with copies
of all Section 16(a) forms they file.

                                       37
<PAGE>
     Based  solely on review of the  copies  of such  reports  furnished  to the
Company,  the Company is not aware of any failure to file on a timely  basis any
Form 3, 4 or 5 during the fiscal year ended April 30, 2004.

     COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     With only three employees as Directors, the Board suspended any prohibition
on employees serving on the Compensation  Committee until such time as the Board
contains at least two members who are not employed by the Company.  Dr. Cox, Mr.
Fletcher  and Mr.  Reid,  as the  remaining  members of the Board,  serve as the
current  members  of the  Compensation  Committee.  Accordingly,  Dr.  Cox,  Mr.
Fletcher and Mr. Reid  establish  the  compensation  of the executive and senior
management  of the Company.  Dr. Cox serves as the  Company's  President,  Chief
Technology  Officer  and  Chairman  of the  Board  of  Directors.  Mr.  Fletcher
currently serves as Co-Chief  Executive Officer and Director of Marketing of the
Company, and also serves on the Company's Board of Directors. Mr. Reid currently
serves as Co-Chief Executive Officer and Chief Operating Officer of the Company,
and also serves on the Company's Board of Directors.

     Executive Officers

     The information for this item is set forth on page 3 of this annual report.

     Code of Ethics

     The  executive  offcers of the  Company  strongly  support  the  concept of
ethical behavior including the publication of a code of ethics to illustrate our
beliefs in the conduct of business  and we have strived to perform our duties in
a fashion that would indicate  strong ethical  standards.  In light of the Asset
Sale and the upcoming  Plan of  dissolutions  we have not expended the resources
necessary to prepare and adopt a written code of ethics.

ITEM 11.  EXECUTIVE COMPENSATION

     The Summary  Compensation  Table below  includes  compensation  paid by the
Company  for  services   rendered  by  all   executive   officers  who  received
compensation for the fiscal year ended April 30, 2004.

<TABLE>
<CAPTION>
        Summary Compensation Table
        --------------------------
                                                                Long Term
                                                               Compensation
                                   Annual Compensation            Awards
                             -------------------------------   -----------     All Other
Name and Principal Position  Fiscal Year   Salary(1)   Bonus   Options (#)  Compensation (2)
---------------------------  -----------   ---------   -----   -----------  ----------------
<S>                             <C>        <C>        <C>       <C>            <C>
Dr. James L. Cox                2004       $101,552   $30,000         -            -
 Chairman, President and        2003         94,610       -      230,000           -
 Chief Technology Officer       2002         95,765       -      800,000         846

Brian D. Fletcher (3)           2004       $118,846   $30,000         -
 Co-Chief Executive Officer     2003        147,834       -      200,000           -
 and Director of Marketing      2002         82,500       -      800,000           -

Kurt C. Reid (3)                2004       $118,846   $30,000         -
 Co-Chief Executive Officer     2003        147,834       -      200,000           -
 and Chief Operating Officer    2002         82,500       -      800,000           -

John R. Stewart                 2004        $80,300       -           -            -
</TABLE>
------------

(1)  For the years indicated, includes amounts contributed on a pre-tax basis to
     the Special Savings and Retirement Plan (the Company's 401(k) plan) by each
     of the named executive officers.

(2)  For the years  indicated,  consists of  contributions by the Company to the
     executive's  account  under  the  Company's   tax-qualified  Section  401-K
     retirement plan.

(3)  See "Compensation for Mr. Fletcher and Mr. Reid" under the caption "Certain
     Relationships   and  Related   Transactions"   for  a  discussion   of  the
     compensation plans established by the Board for Mr. Fletcher and Mr. Reid.

     Option Grants in Last Fiscal Year

     No options were granted in the fiscal year ended April 30, 2004.

The following table illustrates,  for each officer,  the aggregate  in-the-money
options and the  aggregate  value of the options  determined  by the  difference
between the exercise price and a liquidation distribution of $0.16 per share:
<TABLE>
<CAPTION>

                      Shares                       Number of securities
                    acquired on   Value realized        underlying          Value of unexercised
Name of officer      exercise     on exercise       unexercised options     in-the-money options
---------------      --------     -----------       -------------------     --------------------
<S>                   <C>              <C>                   <C>                      <C>
James L. Cox            --          $   --                600,000                  $30,000
Brian D. Fletcher       --          $   --                600,000                  $30,000
Kurt C. Reid            --          $   --                600,000                  $30,000
</TABLE>

                                       38
<PAGE>
Compensation Committee Report on Executive Compensation

The Company's Board of Directors approves all compensation decisions with regard
to executive  officers,  including  the Co-Chief  Executive  Officers,  based on
recommendations by the Compensation  Committee.  As a result of the recent Board
resignations, each of the remaining Board members now serves on the Compensation
Committee,  effectively  eliminating the need for a  recommendation  to the full
Board.  However,  in order to  maximize  continuity  of the  proceedings  of the
Compensation   Committee,   separate  Committee  minutes  are  maintained.   The
Compensation   Committee  is  responsible  for  the  establishment  and  overall
monitoring of all compensation programs for executives and senior management, as
well as the stock  option  plans.  The  Company's  compensation  philosophy  and
executive compensation programs are discussed in this report.

Executive Compensation Philosophy.  In general,  executive officers who are in a
position  to make a  substantial  contribution  to the success and growth of the
Company should have interests  similar to those of the  shareholders.  Executive
officers  should be motivated by and benefit from increased  shareholder  value.
Therefore, the Company believes that executive officers should hold a meaningful
equity position in the Company through the purchase of Common Stock or the award
of options to purchase Common Stock.  The Company's Board of Directors  believes
that the executive  compensation program must be competitive with those of other
companies of  comparable  size and  complexity  in order to attract,  retain and
motivate talented individuals.

Executive Compensation Program. The Company's compensation program has consisted
of base salary and grants of options to purchase Common Stock.

Base Salary. The Board of Directors  generally reviews and approves the relative
levels  of base  salary  for all  executive  officers,  including  the  Co-Chief
Executive  Officers,  on  an  annual  basis  based  on  recommendations  by  the
Compensation  Committee.  In  determining  the  levels  of  base  salary  for an
executive  officer,  the  Compensation  Committee  considers  relative levels of
responsibility  and  individual  and  Company  performance.   In  addition,  the
Compensation  Committee  uses  executive  compensation  indexes  and  studies or
reports to gather compensation data relative to the duties, responsibilities and
compensation levels of the Company's executives. This comparative market data is
carefully  weighed  in  recommending   compensation  levels  for  the  Company's
executives.

Chief Executive Officer  Compensation.  On April 1, 2003, the Board of Directors
appointed  Mr.  Fletcher  and  Mr.  Reid as  Co-Chief  Executive  Officers.  The
Compensation  Committee  determined  the base salaries for Mr.  Fletcher and Mr.
Reid,  after  evaluating  a  number  of  factors,  including  salaries  of chief
executive  officers  of  companies  of  comparable  size in the  industry,  each
individual's past performance and the Company's performance in general. The base
annual salary for both Mr. Fletcher and Mr. Reid for the period from May 1, 2003
through April 19, 2004 was $120,000 and effective  April 19, 2004 was reduced to
an annual salary rate of $90,000 each.

The base salary and  incentive  awards for the Chief  Executive  Officer(s)  for
future periods will be determined by the Compensation  Committee based upon such
factors as the Compensation Committee deems to be appropriate.

     Compensation Committee:
     ----------------------
     Dr. James L. Cox
     Mr. Brian D. Fletcher
     Mr. Kurt C. Reid

                                       39
<PAGE>
                                PERFORMANCE GRAPH

The line graph set forth below  charts  performance  (on an annual  basis) of an
investment  in the Company's  Common Stock against each of the NASDAQ  Composite
Index and an SIC Code  Index,  in each case  assuming an  investment  of $100 on
April 30, 1999 through April 30, 2004. The following graph is presented pursuant
to rules of the Securities and Exchange Commission.  The stock price performance
comparisons  below shall not be deemed  incorporated by reference by any general
statement  incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933, as amended,  or under the Securities Exchange Act of
1934,  as  amended,   except  to  the  extent  that  the  Company   specifically
incorporates  this graph by  reference,  and shall not otherwise be deemed filed
under such acts.  While total  stockholder  return is an important  criterion of
corporate performance, it is subject to the vagaries of the equity market, which
affect  common  stock  price  performance.  There can be no  assurance  that the
Company's Common Stock price  performance will continue into the future with the
same or similar  trends  depicted in the graph below.  As of April 30, 2004, the
closing  price of the Company's  Common Stock was $0.17.  As of August 12, 2004,
the closing price of the Company's Common Stock was $0.17.


         [OBJECT OMITTED]


ITEM 12.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

The information for this item is set forth in the section entitled "Common Stock
Ownership by Certain Beneficial Owners and Management" presented above.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                                       40
<PAGE>
     In March 2000,  the Company  entered into an agreement  with TI whereby the
Company  issued  to TI a 10%  subordinated  convertible  promissory  note in the
amount of $2,500,000 (the "TI Note"), the entire principal and interest of which
were  due on  March  10,  2005.  Alternatively,  the TI Note  provided  that the
principal  amount of the TI Note and interest  accrued thereon may be converted,
at the  option  of  holder,  into  shares  of the  Company's  Common  Stock at a
conversion price of $1.25 per share.

     Prior to the Asset Sale,  the Company's  cash flow from  operations was not
adequate  to retire  the TI Note,  and it was  unlikely  that  cash  flow  would
increase in an amount  sufficient for the Company to meet its obligations  under
the TI Note when the  principal  and  accrued  interest  became due on March 10,
2005. In April 2004, the principal and accrued interest of the TI Note amounting
to $3,700,362 were repaid with a portion of the proceeds from the Asset Sale.

     On January 20, 2003, the Company  entered into a Stock  Purchase  Agreement
(the "TI  Stock  Purchase  Agreement")  with TI  pursuant  to which TI agreed to
purchase  and the  Company  agreed to sell  12,500,000  shares of the  Company's
Common  Stock at a price of  $0.06  per  share,  for a total  purchase  price of
$750,000. This transaction was submitted to the Company's shareholders for their
approval at a special  meeting of the  shareholders  on March 12,  2003.  With a
quorum of shareholders present, a motion was made and seconded to approve the TI
Stock  Purchase  Agreement,  and the motion  passed by  unanimous  vote of those
present in person or represented by proxy.  The  transaction  was consummated on
March  19,  2003.  TI,  together  with  Mr.  Fletcher  and Mr.  Reid  and  their
affiliates,  now  collectively  own and control  beneficially  an  aggregate  of
12,932,966  shares of the Company's  Common Stock, or  approximately  34% of the
Company's issued and outstanding common stock. These figures exclude the options
that Mr.  Fletcher and Mr. Reid own to  purchase,  in the  aggregate,  3,400,000
shares of the  Company's  Common  Stock,  which options  become  exercisable  on
September 9, 2004.

     The Company's  primary  purpose in issuing the shares of Common Stock to TI
was to secure funding in order to reduce the principal  outstanding on its loans
with RBC Centura  Bank,  the  Company's  primary  lender.  The Company  used all
$750,000  of the net  proceeds  from the  offering  to pay down  the  amount  of
principal  outstanding  under the Centura  loans to below the target  balance of
$1,215,000.  Upon  obtaining  this  target  balance,  Centura  consolidated  the
Company's three existing loans into one loan and amortized the remaining balance
over a 41-month period.  Centura also agreed to immediately  lower the rate that
interest will accrue on the loan to 30-day LIBOR plus 4% per annum and, once the
balance is paid down below $800,000,  to lower the interest rate to 30-day LIBOR
plus 3% per annum. The Centura loan was repaid prior to the Asset Sale.

Compensation for Mr. Fletcher and Mr. Reid

In fiscal  2002,  Mr.  Fletcher  and Mr.  Reid each  received  stock  options to
purchase  800,000  shares of the Company's  Common Stock at an exercise price of
$.11 per share for a period of up to seven years.  Also,  the Board of Directors
approved an increase in compensation  for Mr. Fletcher and Mr. Reid  retroactive
to January 1, 2001,  in which they each would  receive  annual  compensation  of
$100,000, payable quarterly in unrestricted shares of the Company's Common Stock
valued at the average  daily  closing  price during the quarter.  During  fiscal
2002,  Mr.  Fletcher  and Mr. Reid were paid  $75,000 of salary in  unrestricted
shares of the  Company's  Common  Stock at an average  market  price of $.35 per
share under this  structure.  On December 7, 2001,  each of Mr. Fletcher and Mr.
Reid agreed to a decrease in his annual  compensation to $1 effective October 1,
2001. On March 15, 2002,  the  Compensation  Committee of the Board of Directors
approved a compensation structure, effective March 1, 2002, whereby Mr. Fletcher
and Mr.  Reid would be  compensated  based on the actual  monthly  cash flow and
quarterly net income generated by the Company.  The maximum annual  compensation
would be capped at $210,000 each.  During fiscal 2002, Mr. Fletcher and Mr. Reid
were compensated $7,500 each under this structure.

During  fiscal 2003,  Mr.  Fletcher  and Mr. Reid were each  granted  options to
purchase  200,000  shares of the Company's  Common Stock at an exercise price of
$.11 per share for a period of up to seven  years.  Effective  November 1, 2002,
the Board of Directors ratified the Compensation  Committee's  recommendation to
change the compensation structure for both Mr. Fletcher and Mr. Reid and set the

                                       41
<PAGE>
annual  salary  rate at  $100,000  per  year.  On April 1,  2003,  the  Board of
Directors  modified  the  compensation  plan  for  Mr.  Fletcher  and  Mr.  Reid
increasing each individual's annual salary rate to $120,000 per year,  effective
April 15, 2003, and establishing a quarterly bonus plan beginning with the first
quarter of fiscal 2004 based on the profitability of the company.  The quarterly
bonus is limited to 50% of the  Company's  net income for the  quarter,  and Mr.
Fletcher  and Mr.  Reid can each earn a  non-cumulative  bonus up to $10,000 per
quarter.  During fiscal 2003,  Mr.  Fletcher and Mr. Reid were each  compensated
$97,834 as a payout from the fiscal 2002  compensation  arrangement  and $50,000
from the fiscal 2003 compensation arrangement.

During fiscal 2004, Mr. Fletcher and Mr. Reid each received  $30,000 in payments
from the bonus plan and an accrual of $10,000 each has been  recorded for future
payment as of April 15, 2004. For the period  starting May 1, 2003 through April
15, 2004, Mr. Fletcher and Mr. Reid were each paid at an annual rate of $120,000
and effective  April 16, 2004;  their  individual  rate of pay was changed to an
annual rate of $90,000.  Mr.  Fletcher  and Mr. Reid each  received  $118,846 of
salary compensation during fiscal 2004.

As a result of the Asset  Sale,  options  granted to Mr.  Fletcher  and Mr. Reid
equaling  200,000 common shares each that would vest and be exercisable  between
March 08, 2005 and September 9, 2007 were accelerated and became  exercisable at
the date of the Asset Sale closing.  The total  exercisable  options held by Mr.
Fletcher and Mr. Reid at April 15, 2004 equal 600,000  common  shares each.  The
exercise price of the options is $.11 per share;  therefore,  both Mr.  Fletcher
and Mr. Reid will be entitled to receive  the  difference  between the  exercise
price and the amount of the liquidation proceeds paid per common share. Based on
a  distribution  rate of $.16 per share  both Mr.  Fletcher  and Mr.  Reid would
receive an in-the-money option payment of $30,000.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

The  following  table  set  forth  the fees  paid to the  Company's  independent
auditor, Cherry, Bekaert & Holland, L.L.P. for fiscal years 2004 and 2003.

                                2004            2003
Audit and Non-Audit Fees        ----            ----
Audit fees (1)                $58,300         $41,786
Audit related fees               --              --
Tax fees (2)                    9,700          11,250
All other fees (3)              3,500            --
                              -------         -------
Total                         $71,500         $53,036
                              =======         =======

(1)  Audit fees relate to professional  services rendered in connection with the
     audit of the Company's  annual  financial  statements,  quarterly review of
     financial  statements  included in the  Company's  Forms 10-Q,  services in
     connection with registration  statements filed with the U.S. Securities and
     Exchange  Commission and audit services  provided in connection  with other
     statutory and regulatory filings.

(2)  Tax fees include  professional  services  rendered in  connection  with tax
     compliance and peparation and for tax consulting and planning services.

(3)  Other fees relate to due diligence in connection with the sale of assets to
     Sensitech, Inc.

Audit Committee Pre-Approval Policies and Procedures

The Audit  Committee,  on at least an annual basis,  reviews audit and non-audit
services performed by Cherry, Bekaert & Holland, LLP as well as the fees charged
by Cherry,  Bekaert & Holland,  LLP for such  services.  All audit and non-audit
services are pre-approved by the Audit Committee,  which considers,  among other
things, the possible effect of the performance of such services on the auditors'
independence.  The Audit Committee has considered the role of Cherry,  Bekaert &
Holland, LLP in providing its audit, audit-related and non-audit services to the
Company,  and has  concluded  that such  services  are  compatible  with Cherry,
Bekaert & Holland, LLP's independence as the Company's auditors.

                                       42
<PAGE>
                                     PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
                                                                            Page
1.   Financial statements -

     Statement of Net Assets in Liquidation at April 30, 2004                 14

     Statement of Changes in Net Assets in Liquidation for the Period
          April 16 - 30, 2004                                                 15

     Consolidated Balance Sheets at April 30, 2003                            16

     Consolidated Statements of Income for the
          Fiscal Years Ended April 16, 2004 and April 30, 2003 and 2002       17

     Consolidated Statements of Changes in Stockholders'
          Equity for the Fiscal Years Ended April 30, 2004, 2003 and 2002     18

     Consolidated Statements of Cash Flows for the
          Fiscal Years Ended April 30, 2004, 2003 and 2002                    19

     Notes to Consolidated Financial Statements for the
          Fiscal Years Ended April 30, 2004, 2003 and 2002                 20-33

     Report of Independent Registered Public Accounting Firm                  34

2.   Financial statement schedules -

     The  following  financial  statement  schedules  are included herein:

     Supplemental Schedules:

     Consent of Independent Registered Public Accounting Firm                 44

     Report of Independent Registered Public Accounting Firm on
          Financial Statement Schedules                                       45

     Schedule II - Valuation and Qualifying Accounts for the
          Fiscal Years Ended April 16, 2004 and April 30, 2003 and 2002       46

All other  financial  statement  schedules  are omitted as not  applicable,  not
required, or the required information is included in the consolidated  financial
statements and notes thereto.

3.   Exhibits -
     31.1 Certification of Co-Chief Executive Officer                        A-1

     31.2 Certification of Co-Chief Executive Officer                        A-2

     31.3 Certification of Chief Financial Officer and Secretary             A-3

     32.1 Certification of Co-Chief Executive Officers                       A-4

     32.2 Certification of Chief Financial Officer                           A-5

4.   Reports on Form 8-K -

     The  registrant  filed a  current  report  on Form  8-K on April  16,  2004
     reporting the completion of the  transaction to sell  substantially  all of
     the assets of the Company to Sensitech,  Inc. The  aggregate  consideration
     received  by the Company at the closing was  comprised  of  $10,595,589  in
     cash. In addition, Sensitech assumed $233,569 of the Company's payables and
     assumed  other  liabilities.  At  closing,  Sensitech  retained  a $250,000
     holdback  amount in the Asset Sale. The final  consideration  is subject to
     adjustment based upon finalization of the Company's balance sheet as of the
     closing date. Under the terms of the Asset Purchase Agreement,  the Company
     retained certain assets and liabilities in connection with the transaction,
     including cash, certain production equipment,  office equipment,  machines,
     tools, fixtures, furniture and certain retained liabilities.

     The  registrant  filed a  current  report on Form 8-K on  February  2, 2004
     reporting the completion of the  transaction to sell its Vitsab division to
     Rask Holding, ApS.

                                       43
<PAGE>
            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors and Stockholders
Cox Technologies, Inc.
Belmont, North Carolina


We consent to  incorporation  by reference in the  registration  statement  (No.
333-52738)  on Form S-8 of Cox  Technologies,  Inc. of our report dated July 30,
2004,   relating  to  the  statement  of  net  assets  in   liquidation  of  Cox
Technologies, Inc. and subsidiaries as of April 30, 2004, the related statements
of changes in net assets in liquidation and stockholders'  equity for the period
from April 16, 2004 to April 30, 2004,  the  consolidated  balance  sheet of Cox
Technologies,  Inc.  and  subsidiaries  as of April 30,  2003,  and the  related
consolidated statements of income, changes in stockholders' equity (deficit) and
comprehensive  income,  and cash flows for the period  from May 1, 2003 to April
15, 2004 and each of the years in the two-year  period ended April 30, 2003, and
all related schedules,  which report appears in the April 30, 2004 annual report
on Form 10-K of Cox Technologies, Inc.


/s/ Cherry, Bekaert & Holland, L.L.P.


Cherry, Bekaert & Holland, L.L.P.
Gastonia, North Carolina

August 17, 2004


                                       44


<PAGE>
REPORT OF INDEPENDENT  REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL  STATEMENT
SCHEDULES


The Board of Directors and Stockholders
Cox Technologies, Inc.
Belmont, North Carolina


Under date of July 30,  2004,  we  reported  on the  statement  of net assets in
liquidation of Cox Technologies, Inc. and subsidiaries as of April 30, 2004, the
related  statements of changes in net assets in  liquidation  and  stockholders'
equity for the period from April 16, 2004 to April 30,  2004,  the  consolidated
balance sheet as of April 30, 2003, and the related  consolidated  statements of
income,  stockholders' equity (deficit) and comprehensive income, and cash flows
for the period  from May 1, 2003 to April 15,  2004 and for each of the years in
the  two-year  period  ended April 30,  2003,  which are included in this annual
report  on Form  10-K.  In  connection  with  our  audit  of the  aforementioned
consolidated  financial  statements,  we also  audited the related  accompanying
consolidated financial statement schedules.  These financial statement schedules
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statement schedules based on our audit.

In our opinion, such financial statement schedules,  when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.


/s/ Cherry, Bekaert & Holland, L.L.P.


Cherry, Bekaert & Holland, L.L.P.
Gastonia, North Carolina

July 30, 2004

                                       45

<PAGE>
                     COX TECHNOLOGIES, INC. AND SUBSIDIARIES

                                   SCHEDULE II

                        VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>

                                                              Additions
                                                    ------------------------------
                                                                     Charged to        Other
                                      Balance at     Charged to         Other      Changes - Add       Balance
Fiscal                               Beginning of    Costs and        Accounts -     (Deduct) -       at End of
 Year           Description         Fiscal Period     Expenses       Describe (1)   Describe (2)    Fiscal Period
----------------------------------------------------------------------------------------------------------------
<S>                                 <C>             <C>             <C>             <C>              <C>
 2002     Allowance for
           doubtful accounts        $    61,810     $    23,898     $      --       ($   20,708)     $    65,000
          Deferred tax assets         5,394,000            --          (494,000)           --          4,900,000
                                    -----------     -----------     -----------     -----------      -----------
                                    $ 5,455,810     $    23,898     ($  494,000)    ($   20,708)     $ 4,965,000
                                    ===========     ===========     ===========     ===========      ===========
 2003     Allowance for
           doubtful accounts        $    65,000     $     9,154     $      --       ($   28,404)     $    45,750
          Inventory reserve                --            50,000            --              --             50,000
          Deferred tax assets         4,900,000            --          (633,000)           --          4,267,000
                                    -----------     -----------     -----------     -----------      -----------
                                    $ 9,965,000     $    59,154     ($  633,000)    ($   28,404)     $ 4,362,750
                                    ===========     ===========     ===========     ===========      ===========
 Thru
April 15, Allowance for
 2004      doubtful accounts        $    45,750     $   112,477     $      --       ($   62,477)     $    95,750
          Inventory reserve              50,000            --              --              --             50,000
          Deferred tax assets         4,267,000            --          (294,000)           --          3,973,000
                                    -----------     -----------     -----------     -----------      -----------
                                    $ 4,362,750     $   112,477     ($  294,000)    ($   62,477)     $ 4,118,750
                                    ===========     ===========     ===========     ===========      ===========
</TABLE>

(1)  Deferred tax valuation allowance offsets gross deferred tax assets.

(2)  Write-off of accounts  considered to be  uncollectible  and  realization of
     impairment loss.

                                       46
<PAGE>


                                   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.


                          COX TECHNOLOGIES, INC.
                          ----------------------
                          (Registrant)


August 17, 2004    /s/ Brian D. Fletcher              /s/ Kurt C. Reid
                   --------------------------         --------------------------
                   Brian D. Fletcher                  Kurt C. Reid
                   Co-Chief Executive Officer         Co-Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities indicated on August 17, 2004.


/s/ Brian D. Fletcher                                 /s/ Kurt C. Reid
--------------------------                            --------------------------
Brian D. Fletcher                                     Kurt C. Reid
Co-Chief Executive Officer                            Co-Chief Executive Officer


/s/ John R. Stewart
----------------------------
John R. Stewart
Chief Financial Officer
 and Secretary
 (Principal financial and
 accounting officer)


     Pursuant to the  requirements  of the  Securities and Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities indicated on August 17, 2004.

                                        /s/ James L. Cox
                                        ---------------------------------------
                                        James L. Cox
                                        Chairman and President and Director

                                        /s/ Brian D. Fletcher
                                        ---------------------------------------
                                        Brian D. Fletcher
                                        Co-Chief Executive Officer and Director

                                        /s/ Kurt C. Reid
                                        ---------------------------------------
                                        Kurt C. Reid
                                        Co-Chief Executive Officer and Director

                                       47