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, 2003

( )  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.)

         69 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:

                         $1,055,126 as of July 29, 2003
--------------------------------------------------------------------------------

Number of shares of Common  Stock,  no par value,  as of the latest  practicable
date:

                      38,339,094 shares as of July 29, 2003
--------------------------------------------------------------------------------

Documents incorporated by reference: Portions of the proxy statement dated July
29, 2003, relating to the August 29, 2003 annual meeting of shareholders, are
incorporated by reference into Part III of this annual report.


<PAGE>


                             COX TECHNOLOGIES, INC.

                                    FORM 10-K

                                ANNUAL REPORT TO
                     THE SECURITIES AND EXCHANGE COMMISSION
                    FOR THE FISCAL YEAR ENDED APRIL 30, 2003

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

                                TABLE OF CONTENTS

Item                                                                        Page

                                     PART I

1.     Business..........................................................      1
2.     Properties........................................................      6
3.     Legal Proceedings.................................................      6
4.     Submission of Matters to a Vote of Security Holders...............      7

                                     PART II

5.     Market for the Registrant's Common Equity and Related Stockholder
        Matters..........................................................      7
6.     Selected Financial Data...........................................     10
7.     Management's Discussion and Analysis of Financial Condition and
        Results of Operations............................................     10
8.     Financial Statements and Supplementary Data ......................     18
9.     Changes in and Disagreements With Accountants on Accounting and
        Financial Disclosure.............................................     38

                                    PART III

10.    Directors and Executive Officers of the Registrant................     38
11.    Executive Compensation............................................     38
12.    Security Ownership of Certain Beneficial Owners and Management....     38
13.    Certain Relationships and Related Transactions....................     38
14.    Internal Controls and Procedures..................................     38

                                     PART IV

16.    Exhibits, Financial Statement Schedules and Reports on Form 8-K...     39
       Signatures........................................................     42

                                       i

<PAGE>


                                     PART I

ITEM 1.  BUSINESS

General

        Cox Technologies,  Inc. (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.

        The Company's  executive offices and manufacturing  facility are located
at 69 McAdenville  Road,  Belmont,  North Carolina  28012-2434;  telephone (704)
825-8146.  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 Sweden, AB ("Vitsab Sweden"),
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.  Only the foreign  subsidiary,  Cox
Recorders Australia, remains. The Company will continue to operate Cox Recorders
Australia as an operational subsidiary.

        The core  business  of the  Company is to provide  reliable  temperature
monitoring  products  and develop new and  technologically  advanced  monitoring
systems.  The Company  produces and distributes  transit  temperature  recording
instruments,  including electronic  "loggers," graphic temperature recorders and
visual indicator labels, both in the United States and internationally.  Transit
temperature  recording  instruments  create a strip chart record of  temperature
changes over time, or record temperatures  electronically  according to a preset
interval  ("logging").  The Company sells and manufactures both types of transit
monitoring  products,  and has established an international  market presence and
reputation for reliable temperature recording products.

        The  Company  has  expended   funds  to  further  the   development   of
enzyme-based  "smart  labels"  that  detect  temperature  abuse in  packages  of
perishable  goods.  The Company has  introduced  this new  technology,  known as
Vitsab(R),  to the food and  pharmaceutical  industries  as a  monitoring  label
applied to packages of temperature  sensitive  products.

        The Company  previously had two current operating segments that involved
the (1) production  and  distribution  of  temperature  recording and monitoring
devices,  including  electronic  "loggers,"  graphic  temperature  recorders and
visual indicator labels (referred to as "Temperature  Recorder  Operations" as a
group) 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  office.  The Company  closed its Phoenix  office
effective October 31, 2000. The activities performed in Phoenix were transferred
to the Corporate Office in Belmont,  North Carolina.  On September 30, 2002, the
Company  concluded the sale of its interest in the oil subleases to an unrelated
third party.

        The Company now operates in one reporting segment,  Temperature Recorder
Operations.

Temperature Recorder Operations

        The Company's  temperature  recorder  activities  include 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 Company also performs contract
manufacturing.

        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  are marketed  under the trade name Cox Recorders
and produce a record which is documentary proof of temperature conditions useful
for compliance with governmental regulations, the monitoring

                                       1
<PAGE>


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 are
used  for the  same  purpose,  but  also  are  used  for  internal  checking  of
temperature  conditions in storage and  processing.  The visual  indicator label
product  determines  the  exposure of a stored or shipped  temperature-sensitive
commodity.

        In  previous  years,  the  Company  manufactured  two  separate  graphic
recorders.  The Cox(1) and  Cobra(R)  record the air  temperature  in a truck or
container.  Both  are  used  primarily  in  transit  monitoring  of  temperature
variations. Manufacture of the Cobra(R) design was halted during fiscal 2001 due
to a declining demand for the product.

        The Company sells two different types of electronic "data loggers" which
are 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.

        Several  large  grocery  store  chains and food  wholesale  distribution
companies  currently  either  require  their  shippers to use the  DataSource(R)
product  exclusively  when shipping  perishable  products to their  distribution
centers, or they accept DataSource(R) as well as other data loggers. The Company
is currently in discussions  with other retail and wholesale  food  distributors
that have shown interest in using the DataSource(R)  product in their operations
as well as in discussion with  manufacturers of temperature  sensitive  products
about the use of the  DataSource(R)  product.  Management  is  encouraged by the
recent  increase  in  sales  of this  product  and has  hired  additional  sales
personnel to  introduce  the  DataSource(R)  product to other  potential  users.
Management cannot predict whether the current users of the DataSource(R) product
will  continue  using it nor can they  predict if the current  discussions  will
result in creating additional users of the DataSource(R) product.

        The  Company  purchases  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
purchases digital thermometers with penetration probes for resale from a variety
of manufacturers.

        During  fiscal 2003 the Company  began  selling  fixed base  temperature
monitoring  systems which are designed to monitor facilities such as warehouses,
coolers,  processing rooms, as well as other temperature  sensitive  facilities.
These  wireless  systems  are  designed  to  use  multiple  permanently  mounted
temperature  sensors that  communicate  the  temperature by radio frequency to a
server device.  The system has an integral software component that automatically
records the temperature  and has the ability to send alerts when  pre-determined
temperature  parameters  have been  exceeded.  Remote access to the data via the
internet is an optional  feature.  The Company acts as a reseller of these fixed
base systems.

        The Cox(1)  product  accounts  for  approximately  71% of the  Company's
revenues. The balance of revenue is accounted for 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  Cox(1)  units at an
offshore   location.   During  fiscal  2003,  that  offshore  location  supplied
approximately 40% of the total number of units utilized by the Company.  Because
of this  manufacturing  arrangement,  the Company has realized  significant cost
savings on units  manufactured in both the offshore and Belmont,  North Carolina
facilities.  The Belmont  facility will continue to  manufacture  and assemble a
certain percentage of the base Cox(1) units while increasing the number of units
supplied by its offshore source.  If necessary,  the production  capabilities of
the Belmont  facility  can be  expanded to meet the total  demand for all Cox(1)
units. The Company's current plans are to continue assembling special-use Cox(1)
units in the Belmont  facility.  The Company has  identified  certain  risks and
uncertainties that are associated with offshore production that include, but are
not limited to, political issues,  transportation  risks and the availability of
raw materials.  The Company will not experience  foreign currency exchange risks
as all transactions are denominated in U.S. dollars.

        The  source  and  availability  of raw  materials  are not  critical  or
significant factors in the temperature  recorder operations of the Company.  The
temperature  recorder  operations of the Company are  non-seasonal.  The Company
does  and is  required  to  carry  significant  amounts  of  inventory  for  its
temperature  recorder  operations  and neither  Company nor  industry  practices
provide extended payment terms to customers.

        The  temperature  recorder  operations  of the Company are not dependent
upon a single or a few  customers.  However,  the  Company  does  have  business
relationships with several large retail customers and foreign distributors

                                       2
<PAGE>


that, if severed,  could have a material adverse effect upon the earnings or the
financial  position of the  Company.  Backlog of orders is not a major factor in
the temperature recorder operations of the Company.

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

        The Company  generally  does 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 are contracted.  All other  distribution and sales
operations  are through  individual  sales  persons  operating on salary,  sales
commission basis or salary plus incentive basis.

Vitsab(R) Product

        Vitsab(R) is 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 enzyme  indicator
reaction is activated  at the  beginning  of the  monitoring  period by applying
pressure on a plastic bubble strip that is a structural part of the label.  This
strip contains sealed packets of non-toxic  liquids that are broken by pressure.
These non-toxic liquids mix to form the indicating solution.

        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 which parallels
the monitored food or drug product as it reaches a certain definable state. This
device is known as a TTI (time-temperature integrator).

        The Company produces two distinct Vitsab(R) TTI configurations: a "three
dot" indicator  (for  wholesale  distribution  of  perishables)  and a "one dot"
indicator  (primarily  for food safety and consumer  packages).  Each product is
produced on automated machinery.

        The Company is in the final stages of the  development,  production  and
marketing  of the  Vitsab(R)  products.  Final  development  of this  technology
continues to require  substantial effort to refine the manufacturing  procedures
to achieve a reliable and consistent product delivery. In addition, the chemical
formulation of the label itself,  including the specific  chemical nature of the
enclosure,  continues to require testing and validation. During fiscal 2003, the
Vitsab(R) line of products  generated  approximately  3% of the Company's  total
revenues.

        The source and  availability  of certain raw materials may be a critical
and  significant  factor  for  the  Vitsab(R)  TTI if it  begins  production  in
significant  volumes.  The  Company's  current  plans  are  to  manufacture  the
Vitsab(R) TTI at the Belmont, North Carolina location.

        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.  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 the
Purchaser.  The purchase price for all of the Company's  shares in Vitsab Sweden
was $1.00.  Additionally,  the  Purchaser is under an obligation to make monthly
payments of $6,000 to the Company, which obligation commenced on the first month
after the sale and ends in June  2004.  Upon  completion  of these  payments  by
Purchaser,  the Company will transfer  title and ownership of certain  equipment
located at the Malmo,  Sweden  location.  Should the Purchaser  fail to make any
payment within 30 days of its due date, it will forfeit its ownership  rights in
the assets,  and the Company will be entitled to take  immediate  possession  of
those assets.

        In connection with the sale of the Company's  shares in Vitsab Sweden to
the  Purchaser,  the  Company  granted  Vitsab  Sweden  a  ten-year,  exclusive,
royalty-bearing  license to manufacture,  sell and distribute Vitsab(R) products
in certain European countries  designated in the agreement.  The royalty will be
based on the volume of Vitsab(R)  products  sold by Vitsab  Sweden,  and will be
paid to the Company on a quarterly basis. The Company does

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<PAGE>


not anticipate  that the sales of Vitsab(R)  products  through the Vitsab Sweden
license will represent a significant  portion of the Company's  overall sales of
Vitsab(R) products.

         The Company's entire Vitsab(R)  operation has been largely dependent on
one  customer.  That  customer  has been testing  these  products for use in the
distribution  of their  perishable  products.  On  September 5, 2002 the Company
received  notification  from the customer that it was not going to continue with
the pilot program. The Company also received  notification from the largest user
of Vitsab(R)  products in that customer's  pilot program that they will continue
to  purchase  and use the  Vitsab(R)  product in their  operations.  The Company
continues to manufacture and sell the Vitsab(R)  products to the largest user in
the pilot program and other  customers.  The Company added several new customers
during the fiscal year.

        The Company's  existing  manufacturing  equipment located in Belmont has
the capacity to produce  enough of the Vitsab(R)  products to meet the currently
projected  demands of the  current  customer  base.  The labels  have  proved to
perform as effective time-temperature monitors.

        The Company's visual indicator label operations  previously included the
development,   production  and   distribution  of  FreshTag(TM)   food  spoilage
indicators.  FreshTag(TM)  is  based  on  a  licensed  and  patented  technology
developed  by the U.S.  Food and Drug  Administration  ("FDA")  that enables the
detection of specific chemical  compounds that signal the incipient  spoilage of
seafood and other food types.  Effective  April 10, 2002 the Company  terminated
the Patent License Agreement.  The Company had no significant operations related
to the FreshTag(TM) product.

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.

        As previously disclosed in prior years, the sublessor had declared these
subleases  in default  due to the failure by the  Company to meet  certain  well
drilling  requirements.  In May 2000, the Company paid the sublessor  $50,000 to
cure the default.  By agreement  and amendment to the  subleases,  the sublessor
acknowledged that all drilling requirements had been fulfilled, that the Company
had no  further  obligation  to drill  any  additional  wells,  that any and all
notices of default were canceled,  and that the subleases were in full force and
effect.

        As a result of 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 was of the opinion that  $300,000 of net assets  should be recognized 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.

        On July 31,  2001,  the  operator  filed a lien  against  the  subleased
properties.  On January 29, 2002,  the operator  filed a lawsuit (the  "Oilfield
Litigation")  against  the  Company,  two of its current  officers  and a former
officer,  claiming breach of contract,  fraud and damages totaling approximately
$87,000.  At April 30, 2002, the Company accrued $90,000,  which was the balance
of capital and related  interest  that the operator  invested into the subleases
under an agreement with the Company and to which he had a reasonable claim.

        On March 21,  2002,  the Company  received an offer from a group,  which
includes  the  operator of the  subleases,  to purchase  the oil  subleases  for
approximately  $362,000. The lien filed by the operator would be paid out of the
proceeds in order to have the lien filed on the  subleases  released.  The offer
was accepted on March 25, 2002,  and the parties  began to draft the  definitive
purchase and sale  agreement.  The purchase and sale  agreement  was executed by
both parties on June 3, 2002. The purchaser was required to deposit $50,000 into
an escrow  account  within two business  days upon  execution of the  agreement.
These funds were never deposited into the escrow account by the purchaser.  In a
letter dated June 20, 2002,  the Company  notified the purchaser  that it was in
default of the purchase and sale  agreement and therefore the agreement had been
terminated.  On July 11, 2002, the Company  executed an addendum to the original
purchase and sale agreement with the same  purchaser  after  receiving a $25,000
non-refundable  deposit.  The closing of the transaction took place on September
30,  2002.  At closing,  the  Company  received an  additional  $50,000,  net of
transaction  fees.  The balance of the sale price was  comprised  primarily of a
promissory  note  payable to the Company in the amount of $175,000 and a payment
of $87,000 to the  operator of the  oilfield  subleases  to settle the  Oilfield
Litigation.  The  operator  of the  oilfield  received  the  $87,000  payment on
September 30, 2002 and the Oilfield Litigation was settled as of that date. The

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<PAGE>


Company received the first  installment under the note in the amount of $100,000
on January 30, 2003,  and the last  installment  in the amount of $75,000 on May
30,  2003.  Proceeds  from both  installments  were  reduced  by a $9,000  sales
commission paid to a third party.

Intellectual Property

        The Company  owns a number of  patents,  trademarks,  trade  secrets and
other intellectual property directly related to, and important to, the Company's
business.  Although the conduct of business  involves the manufacture of various
products that are covered by patents,  the Company does not believe that any one
single  existing  patent or group of patents is  material  to the success of the
business as a whole.

Research and Development

        No research and development expenses were incurred during fiscal 2003 or
2002 due to the Company reaching the final  development  stages of the Vitsab(R)
product and the halt in the  development  of the EDS(TM)  product.  Research and
development expenses were $345,393 for the fiscal year ended 2001.

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 and any export  controls and import  controls,  which may apply to our
products.  Many of the Company's  customers'  products,  however, are subject to
extensive  regulation  by  agencies  such as the FDA.  The  Company  designs and
manufactures  its  products to ensure that its  customers  are able to satisfy a
variety of regulatory  requirements  and protocols  established  to, among other
things,  avoid  the  spoiling  of  perishable  goods  such  as  produce,   meat,
pharmaceuticals and chemicals.

        The  regulatory  environment  in which  customers  operate is subject to
changes due to political,  economic and technical factors. In particular, as use
of  temperature  recording  and  monitoring  technology  expands and as national
governments  continue to develop regulations for this technology,  customers may
need to comply with new regulatory standards. The failure to comply with current
or future regulations or changes in the  interpretation of existing  regulations
could  result in the  suspension  or  cessation  of sales by the  Company to its
customers.

Employees

        On June 1, 2003, the Company had 64 full-time  employees  compared to 78
on June 1,  2002.  A  significant  portion  of this 18%  decrease  in  full-time
employees is due to the  termination of seven assembly  employees as the Company
outsourced a large  portion of its Cox(1)  manufacturing  to a third party.  The
balance of the decrease was due to the  attrition and  consolidation  of certain
corporate and sales activities.  None of the Company's  employees are covered by
collective  bargaining  agreements.   Relations  between  the  Company  and  its
employees are generally considered good.

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<PAGE>


                      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 - 58                 Chief Technology Officer
David K. Caskey          President - Cox Recorders Division           11/01/97
     Age - 41
Brian D. Fletcher        Co-Chief Executive Officer and               03/10/00
     Age - 41                 Director of Marketing
James R. McCue           President - Vitsab Division                  03/12/00
     Age - 45
Kurt C. Reid             Co-Chief Executive Officer and               03/10/00
     Age - 43                 Chief Operating Officer
John R. Stewart          Chief Financial Officer                      06/11/03
     Age - 55                 and Secretary

----------
(1)      As of June 30, 2003

        The present terms of all officers extend to August 29, 2003, the date of
the next annual meeting of  shareholders  and the annual meeting of the Board of
Directors, or until their successors are elected and qualified.

        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.

        David K. Caskey has been employed by the Company as President of the Cox
Recorders Division for the past five years.

        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.

        James R. McCue has been  employed  by the  Company as  President  of the
Vitsab  Division  since March 21,  2000.  Prior to joining the  Company,  he was
employed  in  marketing  with  Hill-Rom  Company,   a  division  of  Hillenbrand
Industries 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 Chief  Operating  Officer 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.

ITEM 2.  PROPERTIES

        The  Company  has leased  manufacturing  facilities  located in Belmont,
North Carolina.  The Company also had a leased manufacturing  facility in Malmo,
Sweden until March 2003. The facility in Belmont serves as the Corporate  Office
and in the capacity of manufacturing  and  distributing the Company's  products.
The Malmo facility was used for the limited production of the Vitsab(R) product.
The Company also leases office space in Upland, California, to support the sales
and distribution functions.

ITEM 3.  LEGAL PROCEEDINGS

        The Company is not involved in any legal proceedings presently.

                                       6
<PAGE>


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

        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, which options become exercisable on September 12, 2003.

        A more detailed description of this transaction can be read in the Proxy
Statement, dated March 12, 2003, which was mailed to shareholders on February 6,
2003.


                                     PART II

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

        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.

        The table below  presents  the  reported  high and low common stock sale
prices for each  quarter of fiscal 2003 and 2002.  The Company has not  declared
any dividends during the last two fiscal years.


                             2003                               2002
                      -----------------------------------------------------
                      High         Low                 High            Low
                      ----         ---                 ----            ---
First Quarter         $0.30       $0.07                $0.45          $0.27
Second Quarter        $0.15       $0.06                $0.38          $0.20
Third Quarter         $0.08       $0.02                $0.52          $0.29
Fourth Quarter        $0.07       $0.04                $0.28          $0.07

        At July 14, 2003, 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 30, 2003.
<TABLE>
<CAPTION>

                                             Number of securities    Weighted-average
                                              to be issued upon      exercise price of       Number of securities
                                                 exercise of            outstanding        remaining available for
                                             outstanding options,    options, warrants      future issuance under
                                             warrants and rights        and rights        equity compensation plans
                                             --------------------    -----------------    -------------------------
<S>                                                <C>                    <C>                     <C>
Equity compensation plans approved by
security holders (2000 Stock Incentive             5,218,000              $ .1885                 2,028,972
Plan)

Equity compensation plans not approved by
security holders (Non-Qualified Stock              6,652,500              $ .6568                     --
Option Agreements)
                                             --------------------    -----------------    -------------------------
Total                                             11,870,500              $ .4510                 2,028,972
                                             ====================    =================    =========================
</TABLE>

                                       7
<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.

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

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.

Fiscal 2001

        Pursuant to an  agreement  between the Company and Mr. Jens Rask,  under
which Mr. Rask  provided  consulting  services,  the Company  issued to Mr. Rask
50,000  shares of restricted  stock.  The shares were issued under the exemption
set forth in Rule 701 of the Securities Act of 1933.

       Pursuant to an agreement  between the Company and Mr. Jayanth  Prabhakar,
under which Mr. Prabhakar provided engineering  consulting services, the Company
issued to Mr.  Prabhaker a 43,000  shares of restricted  stock.  The shares were
issued under the exemption set forth in Rule 701 of the Securities Act of 1933.

       Pursuant to a March 28, 2000 agreement  between the Company and Strategic
Equity  Marketing,  LLC,  under  which they would  provide  consulting  services
related to investor relations, the Company issued to Strategic Equity Marketing,
LLC a total of 12,013 shares of restricted  stock.  The shares were issued under
the exemption set forth in Section 4(2) of the Securities Act of 1933.

        Pursuant to an agreement between the Company and Mr. Jack Wright,  under
which Mr. Wright provided engineering consulting services, the Company issued to
Ms. M. Jean Wright 500 shares of restricted  stock. The shares were issued under
the exemption set forth in Rule 701 of the Securities Act of 1933.

       Pursuant to a September 12, 2000  engagement  letter  between the Company
and  McGuireWoods,  LLP,  under which they would  provide  legal  services,  the
Company  issued  to  McGuireWoods,  LLP a total of 97,500  shares of  restricted
stock.  The shares were issued under the  exemption set forth in Section 4(2) of
the Securities Act of 1933.

       Pursuant  to an August 30,  2000  agreement  between  the Company and Mr.
Steven J. Inguillo, an employee, the Company issued to Mr. Inguillo 7,720 shares
of restricted stock for compensation. The shares were issued under the exemption
set forth in Rule 701 of the Securities Act of 1933.

        Pursuant to an August 1, 2000 employment  acceptance  agreement  between
the Company and Mr. Robert L. Thornton, the Company issued to Mr. Thornton 2,500
shares of restricted stock. The shares were issued under the exemption set forth
in Rule 701 of the Securities Act of 1933.

                                       8
<PAGE>


        Pursuant to an April 6, 2000 agreement between the Company and Mr. Steve
Otwell,  under which Mr. Otwell would provide consulting  services,  the Company
issued to Mr. Otwell a total of 33,878 shares of  restricted  stock.  The shares
were issued under the exemption set forth in Rule 701 of the  Securities  Act of
1933.

        Pursuant  to an April 6, 2000  agreement  between  the  Company  and Mr.
Frederick W. Leak, under which Mr. Leak would provide consulting  services,  the
Company  issued to Mr. Leak a total of 33,878  shares of restricted  stock.  The
shares were issued under the exemption  set forth in Rule 701 of the  Securities
Act of 1933.

        Pursuant to a September 13, 2000  agreement  between the Company and Mr.
John W. Farquhar,  under which Mr. Farquhar would provide  consulting  services,
the Company issued to Mr. Farquhar 2,400 shares of restricted  stock. The shares
were issued under the exemption set forth in Rule 701 of the  Securities  Act of
1933.

        Pursuant to an September 20, 2000 agreement  between the Company and Ms.
Mary R. Norris,  an employee,  the Company  issued to Ms. Norris 5,000 shares of
restricted  stock for  compensation.  The shares were issued under the exemption
set forth in Rule 701 of the Securities Act of 1933.

        Pursuant to an October 23,  2000  agreement  between the Company and New
Hope  Electrical  Services,  LLC,  under  which  they would  provide  consulting
services,  the Company issued to New Hope Electrical Services,  LLC 5,008 shares
of  restricted  stock.  The shares were issued under the  exemption set forth in
Section 4(2) of the Securities Act of 1933.

        Pursuant to a subscription agreement dated November 29, 2000 between the
Company and Ronald H. and Marijke W. Smith,  under which they agreed to purchase
$66,600 of restricted  stock at $.666 per share, the Company issued to Ronald H.
and Marijke W. Smith 100,000 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.

        Pursuant  to an August 16,  2000  agreement  between the Company and Mr.
Peter H. Ronnow, an employee,  the Company issued to Mr. Ronnow 16,600 shares of
restricted  stock for  compensation.  The shares were issued under the exemption
set forth in Rule 701 of the Securities Act of 1933.

        Pursuant  to a June 13,  2000  agreement  between the Company and Hilary
Kaye Associates, Inc. under which they would provide consulting services related
to public  relations,  the Company issued to Hilary Kaye Associates,  Inc. 6,862
shares of restricted stock. The shares were issued under the exemption set forth
in Section 4(2) of the Securities Act of 1933.

        Pursuant to a November 16, 2000  engagement  letter  between the Company
and Danielson  Harrigan & Tollefson,  LLP,  under which they would provide legal
services,  the Company issued to Danielson Harrigan & Tollefson,  LLP a total of
48,547  shares of restricted  stock.  The shares were issued under the exemption
set forth in Section 4(2) of the Securities Act of 1933.

        Pursuant  to a December  5, 2000  agreement  between  the Company and by
Remote,  Incorporated  under which they would provide consulting  services,  the
Company issued to by Remote, Incorporated 15,129 shares of restricted stock. The
shares  were  issued  under  the  exemption  set  forth in  Section  4(2) of the
Securities Act of 1933.

        Pursuant to a November 14, 2000  engagement  letter  between the Company
and  Gilmore,  Rees &  Carlson,  P.C.,  under  which they  would  provide  legal
services,  the Company issued to Gilmore,  Rees & Carlson,  P.C. 7,946 shares of
restricted  stock.  The shares  were  issued  under the  exemption  set forth in
Section 4(2) of the Securities Act of 1933.

                                       9
<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.
<TABLE>
<CAPTION>
Fiscal Years Ended April 30,             2003            2002            2001           2000(2)        1999
----------------------------             ----            ----            ----           -------        ----
<S>                                 <C>             <C>             <C>             <C>            <C>
Sales                               $ 8,773,852     $ 8,627,103     $ 9,709,561     $ 9,710,976    $ 8,954,544
Income (loss) from operations       $   413,556    ($ 4,826,969)   ($ 6,149,417)   ($ 1,955,191)   $   163,292
Basic and diluted net income
     (loss) per average common
     share                               $  .00         ($  .20)        ($  .27)        ($  .09)        $  .01
Weighted average number of
     Common shares outstanding       27,907,224      25,360,071      24,661,104      24,222,547     21,368,188
Total assets                        $ 3,512,201     $ 4,072,391     $ 8,654,189     $14,369,529    $12,877,192
Stockholders' equity (deficit)     ($ 1,500,418)   ($ 2,305,523)    $ 2,528,355     $ 9,041,805    $10,025,938
Long-term debt (1)                  $ 4,189,893     $ 3,233,913     $ 3,090,044     $ 2,908,359    $   581,374
</TABLE>
----------
(1)      Excludes current maturities
(2)      As restated

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

Fiscal 2003

        The Company  operates 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 labels.

        Revenues from sales increased  $146,749,  or  approximately 2% 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  $608,000,  or  approximately  41%,
over revenues from sales of the same product in fiscal 2002, while revenues from
sales of graphic recorders decreased by approximately $491,000, or approximately
7%, over revenues  from sales of the same product in fiscal 2002.  During fiscal
2003,  revenues  from the sale of graphic  recorders  represented  approximately
$6,260,000,  or approximately 71%, of total revenues,  revenues from the sale of
electronic data loggers represented  approximately  $2,080,000, or approximately
24% of total  revenues,  revenues  from the sale of probes and related  products
represented  approximately  $137,000, or approximately 2%, of total revenues and
revenues from the sale of Vitsab(R) products represented approximately $279,000,
or  approximately  3%,  of  total  revenues.  Revenues  from  the  sale of other
miscellaneous products represented less than 1% of total revenues.

        Cost of sales decreased by $519,133,  or approximately  10%, 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.

        The Company  continues to contract with a third party to manufacture and
assemble  certain  base  versions of the Cox(1)  units at an offshore  location.
During fiscal 2003, this location supplied approximately 40% of the total number
of units utilized by the Company. Because of this manufacturing arrangement, the
Company has realized  significant cost savings on units manufactured in both the
offshore and Belmont, North Carolina facilities. The Company's current plans are
to continue  assembling  special-use  Cox(1) units in the Belmont facility.  The
Belmont  facility  will also  continue  to  manufacture  and  assemble a certain
percentage of the base Cox(1) units. If necessary,  the production  capabilities
of the Belmont  facility can be expanded to meet the total demand for all Cox(1)
units.  The Company has  identified  certain  risks and  uncertainties  that are
associated with offshore production that include, but

                                       10
<PAGE>

are not limited to, political issues,  transportation risks and the availability
of raw materials.  The Company will not  experience  foreign  currency  exchange
risks as all transactions are denominated in U.S. dollars.

        General and administrative  expenses for fiscal 2003 decreased $494,841,
or approximately  19%, 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  $203,543,  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 as
the Company reached the final development stages of the Vitsab(R) product.

        Depreciation expense in fiscal 2003 decreased $117,049, or approximately
27%, as compared to fiscal 2002. The decrease occurred principally because older
assets of the Company are becoming fully depreciated.

        Amortization   of  patents   and   goodwill   decreased   $221,613,   or
approximately  86%, in fiscal 2003 as compared to fiscal 2002.  Amortization  of
patents was  essentially  equal between fiscal 2003 and 2002 and the decrease is
directly related to the impairment of goodwill during fiscal 2002.

        Other income  (expense)  decreased  $38,035,  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 $71,004, 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 becomes 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 Cox(1) 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 $258,940 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.

       Liquidity and Capital Resources

        The Company derives cash from  operations,  equity sales,  and borrowing
from long- and  short-term  lending  sources to meet its cash  requirements.  At
present,   the  cash  flow  from  operations   appears  adequate  to  meet  cash
requirements and commitments of the Company during the 2004 fiscal year.

        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.

        The  Company's  cash flow from  operations  is currently not adequate to
retire the TI Note, and it is unlikely that cash flow will 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. TI has indicated
that, in the event the Company becomes unable to meet its obligations  under the
TI Note,  TI may be  willing  to  explore  alternative  financing  arrangements,
including a restructuring  of the TI Note prior to its due date.  Alternatively,
the  Company  may seek a cash  infusion  elsewhere,  through a separate  debt or
equity offering, a strategic partnership or some form of business

                                       11
<PAGE>
combination.  The Company may consider any or all of these  alternatives  in the
event it becomes  unable to meet its debt  obligation to TI, but there can be no
assurance  that any deal will be  consummated  on terms  acceptable  to both the
Company and TI or another third party. Without such an arrangement, it is highly
likely that the Company would default on its  obligations  under the TI Note, at
which time TI would be entitled to exercise any and all remedies available to it
under the TI Note and  applicable  law,  including  bringing  suit  against  the
Company and its assets.  Should TI seek to enforce its right to timely repayment
of the TI Note, there is a risk that the Company will not be able to continue as
a going concern.

        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.

        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  would  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. The date of completion of the new
production equipment, if ever, will be determined at a later date.

        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.

                                       12
<PAGE>


        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
on the note are  $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 has been 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
will be required to submit a monthly  borrowing  base  calculation in support of
the loan balance and would be required to pay a sufficient  principal payment to
reduce the loan balance to the amount  supported  by such  borrowing  base.  The
borrowing base is 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 May 19, 2003  modification
reduced 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 will mature. Also, beginning on the effective date of the modification,
the interest rate on the outstanding principal shall be calculated at the bank's
30-day LIBOR base rate plus 2.5% per annum.

       Off-Balance Sheet Arrangements

        The  Company  is not a party  to or bound  by any  long-term  guaranteed
purchase   agreements.   The  Company   procures  raw  materials   used  in  its
manufacturing  process using a standard  purchase  order form. A small number of
purchase  orders may extend out to a life of six months and, on rare  occasions,
up to one year. The terms and conditions presented in the purchase order provide
for several situations by which an order could be canceled or stopped during the
fulfillment  of the  order.  The  Company  would be  liable  for  goods  already
delivered  under a purchase  order or costs  incurred by a vendor for unfinished
goods  manufactured  specifically for the Company that are not standard products
of the vendor,  plus a reasonable  profit on such unfinished  goods. The Company
does not believe the  cancellation  by the Company of any of its purchase  order
agreements  would have a material  adverse effect on the liquidity or operations
of the Company.  Except as set forth above, the Company has not entered into any
financial  derivative  transactions or other off-balance sheet  arrangements for
risk management or financing purposes.

                                       13
<PAGE>


        Contractual Obligations

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

                                                          Payments due by period
                                                          ----------------------
                                                          Less than                                   More than
Contractual obligations                      Total          1 year       1-3 years      3-5 years      5 years
-----------------------                      -----          ------       ---------      ---------      -------
<S>                                       <C>            <C>            <C>            <C>            <C>
10% Senior Subordinated Convertible
Note due March 2005                       $3,327,500     $     --       $3,327,500     $     --       $     --
Note payable to bank                       1,184,999        360,000        720,000        104,999           --
Unsecured note payable                        12,000         12,000           --             --             --
Capital leases                               196,172        158,780         37,392           --             --
Operating leases                             137,419        119,254         18,165           --             --
Purchase obligations                            --             --             --             --             --
---------------------------------------   ----------     ----------     ----------     ----------     ----------
Total                                     $4,858,090     $  650,034     $4,103,057     $  104,999     $     --
=======================================   ==========     ==========     ==========     ==========     ==========
</TABLE>


        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:  revenue  recognition,  asset
impairment,  stock  options,  and income  taxes.  We  periodically  review these
policies, the estimation processes involved, and the related disclosures.

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

        Asset  impairment - Goodwill is evaluated for  impairment  annually,  or
more frequently  when there are 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  are  evaluated  for   recoverability   whenever  events  or  changes  in
circumstances  indicate 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.

        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 - The Company accounts for income taxes using the asset and
liability  method.  As of April 30,  2003,  the Company has  approximately  $4.3
million of deferred tax assets  related  principally to net operating loss carry
forwards and impairment losses recognized for financial  reporting  purposes.  A
valuation  allowance has been recorded to offset these deferred tax assets.  The
ability of the Company to  ultimately  realize its  deferred  tax assets will be
contingent upon the Company achieving taxable income.  There can be no assurance
that this will occur in amounts  sufficient  to utilize the deferred tax assets.
Should the Company determine that it would be able to realize some or all of the
deferred  tax assets in the future,  an  adjustment  to the  deferred  tax asset
valuation  allowance would increase income in the period such  determination was
made.

                                       14
<PAGE>


        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. Credit risk associated with trade accounts receivable
is  generally  diversified  due to the large number of entities  comprising  the
customer  base.  The Company  believes  that amounts  reported for cash and cash
equivalents  and trade  accounts  receivable  are  considered  to be  reasonable
approximations of their fair values due to their short term nature.

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  subleases 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 Cox(1)
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% 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  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  Cox(1)  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.

                                       15
<PAGE>


        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,  as  discussed  in  Note 3 to the
consolidated financial statements.

        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 Cox(1) 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.

Fiscal 2001

        The Company had two operating  segments in fiscal 2001: (1)  Temperature
Recorder  Operations and (2) oilfield operations and other. For both fiscal 2001
and  fiscal  2000,   revenues  from  sales  of  temperature   recording  devices
represented greater than 99% of the Company's  consolidated  revenues.  Revenues
from sales of temperature  recording  devices were $9,637,075 and $9,700,282 for
fiscal  2001  and  fiscal  2000,  respectively,  while  revenues  from  oilfield
operations  and other  revenues  were  $72,486  and  $10,694 for fiscal 2001 and
fiscal 2000, respectively.

        Temperature Recorder Operations

        Sales decreased $63,207,  or approximately 1% in fiscal 2001 as compared
to fiscal  2000,  due to a  decrease  in the  number of units  sold,  lower unit
selling  prices and an increase in the amount of returned  units.  Cost of sales
for fiscal 2001 decreased  $213,864,  or  approximately 4% as compared to fiscal
2000 due  primarily to decreased  purchases of recorder  units and data loggers,
partially  offset by increased labor costs,  retriever fees,  shipping costs and
supplies used in the manufacturing  process.  During fiscal 2001,  revenues from
the sale of graphic  recorders  represented  $8,252,000 or approximately  85% of
total revenues,  revenues from the sale of electronic  data loggers  represented
$1,019,000 or  approximately  10%,  revenues from the sale of probes and related
products represented $164,000 or approximately 2%, and revenues from the sale of
Vitsab(R)  products  represented  $4,000 or less than approximately 1%. Revenues
from the sale of oil and other miscellaneous products represented the balance.

        General and administrative  expenses for fiscal 2001 increased $942,719,
or  approximately  26% as  compared  to fiscal  2000.  The  increase  was due to
salaries, outside services,  insurance, payroll taxes, legal fees and rent. Also
included in fiscal 2001 was approximately  $288,000 of non-recurring charges and
write-offs  related to a  technology  investment,  the  closing  of the  Phoenix
office, an increase in the allowance for bad debts and to legal fees. Offsets to
the increase  include  decreases in travel expenses,  professional  services and
office supplies.

        Selling  expenses for fiscal 2001 increased  $162,805,  or approximately
10%, as compared to fiscal  2000.  The  increase  was due to  increases in sales
salaries  related to the  EDS(TM)  product,  commissions  and  travel  expenses,
partially offset by decreases in trade show expenses and professional services.

                                       16
<PAGE>
        Research and  development  expenses  were related to costs  incurred for
both the EDS(TM) and  Vitsab(R)  products.  Research  and  development  expenses
decreased  $63,969,  or approximately  16%, in fiscal 2001 as compared to fiscal
2000, due to the Company reaching the final development  stages of the Vitsab(R)
product and the halt in the development of the EDS(TM) product.

        Depreciation and depletion expense in fiscal 2001 increased $80,312,  or
approximately  19%, as compared to fiscal 2000 primarily due to asset additions.
Fiscal 2000  reflects  the  restatement  of $349,713  recorded as a prior period
adjustment.  All depletion expenses associated with the oilfield operations were
written off as a loss on impairment,  as discussed in Note 3 to the consolidated
financial statements.

        Amortization of goodwill  increased  $21,751,  or  approximately  11% in
fiscal  2001 as  compared  to fiscal  2000.  This  increase  was  related to the
increase  in the amount of goodwill  resulting  from the  acquisition  of Vitsab
Sweden.

        Included  in costs  and  expenses  were the  costs  associated  with the
development  of the EDS(TM) and  Vitsab(R)  products.  During  fiscal 2001,  the
Company  incurred  $3,044,583 of costs related to the  development  of these new
products.  Without these development costs, net loss in the Temperature Recorder
Operations for fiscal 2001 would have been ($384,274).

        Other expenses increased $171,546, or approximately 395%, in fiscal 2001
as compared to fiscal 2000  primarily due to a valuation  adjustment  related to
the note due from officer.

        Interest expense increased  $326,179,  or approximately  192%, in fiscal
2001 as compared to fiscal 2000.  The primary  reason for this  increase was the
interest  cost  related to the note  payable to TI dated  March 10,  2000 in the
amount of  $2,500,000  and interest on the  revolving  line of credit with,  and
interest accrued on progress payments made by, Centura.

        The fiscal 2001  decrease in  accounts  receivable  was due to the lower
sales  during  the  fiscal  year and  enhanced  collection  efforts  on past due
receivables.

        The fiscal 2001  increase  in  inventory  was  related to the  continued
production  of recorder  units in order to  increase  on-hand  inventory  and to
purchases of raw material related to the production of the Vitsab(R) product.

        Oilfield Operations and Other

        There were limited oil  production  operations  conducted  during fiscal
2001. The Company  maintained  certain  insurance and other  compliance  matters
pertaining  to the  oilfield  operations  during this fiscal  year.  The Company
recognized  $3,062,196  of the  oilfield  operations  net  assets  as a loss  on
impairment in the fourth quarter of fiscal 2001.

        The other expenses  related to the Phoenix,  Arizona office  operations,
which  functioned as a management  office for certain of the overall  affairs of
the  Company,   the  center  for  administration  of  oilfield   activities  and
transactions,  and as a location for aspects of software development.  Effective
August 31, 2000, the Company ceased all software development in this office. The
Company  wrote off this  investment  in software  development  of  approximately
$155,000 in fiscal  2001.  Effective  October 31, 2000,  the Company  closed the
Phoenix  office and  transferred  the activities of this office to the Corporate
Office in Belmont, North Carolina.

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
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.

                                       17
<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

COX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                      April 30, 2003  April 30, 2002
                                                                      --------------  --------------
<S>                                                                   <C>             <C>
ASSETS
------
CURRENT ASSETS:
      Cash and cash equivalents                                       $    572,149    $    216,042
      Accounts receivable, net                                             964,078       1,072,935
      Inventory, net                                                     1,182,270       1,419,342
      Notes receivable - current portion                                    75,000            --
      Prepaid expenses                                                      17,733          44,832
                                                                      ------------    ------------
          TOTAL CURRENT ASSETS                                           2,811,230       2,753,151

      Property and equipment, net                                          505,688         764,628
      Property held for sale, net                                             --           300,000
      Due from officer, net                                                  8,928          41,067
      Other assets                                                          71,510          64,749
      Patents                                                              114,845         148,796
                                                                      ------------    ------------
          TOTAL ASSETS                                                $  3,512,201    $  4,072,391
                                                                      ============    ============

LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
       Accounts payable and accrued expenses                          $    291,948    $    658,123
       Short-term debt                                                        --         1,000,000
       Current portion of long-term debt                                   530,778       1,485,878
                                                                      ------------    ------------
            TOTAL CURRENT LIABILITIES                                      822,726       3,144,001

OTHER LIABILITIES:
       Long-term debt                                                      862,393         208,913
       Long-term debt - related party                                    3,327,500       3,025,000
                                                                      ------------    ------------
           TOTAL OTHER LIABLITIES                                        4,189,893       3,233,913
                                                                      ------------    ------------
          TOTAL LIABILITIES                                           $  5,012,619    $  6,377,914
                                                                      ------------    ------------

COMMITMENTS AND CONTINGENCIES
-----------------------------
STOCKHOLDERS' DEFICIT:
      Common stock, no par value; authorized 100,000,000
      shares;issued and outstanding; 38,339,094 shares
      at April 30, 2003 and 25,769,684 shares at April 30, 2002       $ 23,252,804    $ 22,593,724
      Accumulated other comprehensive loss                                 (32,591)        (68,168)
      Accumulated deficit                                              (24,696,452)    (24,806,900)
      Less - Notes receivable for common stock                             (24,179)        (24,179)
                                                                      ------------    ------------
          TOTAL STOCKHOLDERS' DEFICIT                                 ($ 1,500,418)   ($ 2,305,523)
                                                                      ------------    ------------
          TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                 $  3,512,201    $  4,072,391
                                                                      ============    ============
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                       18
<PAGE>


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

                                                   Fiscal Years Ended April 30,
                                          --------------------------------------------
                                                2003            2002            2001
                                                ----            ----            ----
<S>                                       <C>             <C>             <C>
REVENUE:
   Sales                                  $  8,773,852    $  8,627,103    $  9,709,561
                                          ------------    ------------    ------------
COSTS AND EXPENSES:
   Cost of sales                             4,917,048       5,436,181       5,351,019
   General and administrative                2,045,839       2,540,680       4,555,195
   Selling                                   1,057,109       1,260,652       1,812,052
   Research and development                       --              --           345,393
   Depreciation and depletion                  306,349         423,398         513,820
   Loss on impairment                             --         3,537,597       3,062,196
   Amortization of patents and goodwill         33,951         255,564         219,303
                                          ------------    ------------    ------------
     TOTAL COSTS AND EXPENSES                8,360,296      13,454,072      15,858,978
                                          ------------    ------------    ------------
INCOME (LOSS) FROM OPERATIONS                  413,556      (4,826,969)     (6,149,417)
                                          ------------    ------------    ------------
OTHER INCOME (EXPENSE):
   Other income (expense)                      151,150         189,185        (128,150)
   Interest expense                           (454,258)       (525,262)       (496,442)
                                          ------------    ------------    ------------
     TOTAL OTHER INCOME (EXPENSE)             (303,108)       (336,077)       (624,592)
                                          ------------    ------------    ------------
INCOME (LOSS) BEFORE INCOME TAXES              110,448      (5,163,046)     (6,774,009)
Provision for income taxes                        --              --              --
                                          ------------    ------------    ------------
NET INCOME (LOSS)                         $    110,448    ($ 5,163,046)   ($ 6,774,009)
                                          ============    ============    ============
BASIC AND DILUTED:
NET INCOME (LOSS) PER SHARE               $        .00    ($       .20)   ($       .27)
WEIGHTED AVERAGE NUMBER
     OF COMMON SHARES OUTSTANDING           27,907,224      25,360,071      24,661,104
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                       19
<PAGE>


COX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<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, 2000           $ 21,889,449   $       --      ($12,869,845)   $     22,201    $  9,041,805
Comprehensive income (loss)
      Net income (loss)                   --             --        (6,774,009)           --        (6,774,009)
      Foreign currency
        translation adjustment            --         (108,581)           --              --          (108,581)
                                                                                                 ------------
Total comprehensive
  income (loss)                           --             --              --              --        (6,882,590)
Change in subscribed stock, net           --             --              --           (53,332)        (53,332)
 Common stock issued                   422,472           --              --              --           422,472
                                  ------------   ------------    ------------    ------------    ------------
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)
                                  ============   ============    ============    ============    ============
</TABLE>


                 See Notes to Consolidated Financial Statements.

                                       20
<PAGE>


COX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                Fiscal Years Ended April 30,
                                                             2003           2002          2001
                                                             ----           ----          ----
<S>                                                     <C>            <C>            <C>
CASH FLOW FROM OPERATING ACTIVITIES:
       Net income (loss)                                $   110,448    ($5,163,046)   ($6,774,009)
       Adjustments to reconcile net income (loss)
           to net cash from operating activities:
           Depreciation and depletion                       306,349        423,398        513,820
           Amortization of patents                           33,951        255,564        219,303
           Loss on impairment                                  --        3,537,597      3,062,196
           Loss on disposal of property and equipment          --            2,242         22,628
           Gain on sale of property held for sale           (19,503)          --             --
           Loss on sale of subsidiary                        17,013           --             --
           Allowance for doubtful accounts                   19,250          3,190         33,286
           Other                                             13,131        (63,209)        21,783
           Increase in valuation allowance                   32,139         12,499        211,787
                                                        -----------    -----------    -----------
                                                            512,778       (991,765)    (2,689,206)
       Changes in assets and liabilities:
          (Increase) decrease in current assets:
               Accounts receivable                           89,607         65,183        483,425
               Inventory                                    237,072        509,824       (303,551)
               Prepaid expenses                              27,099        (14,339)       (27,380)
               Other receivable and investments                --           19,230          8,586
          Increase (decrease) in current liabilities:
               Accounts payable and accrued expenses       (276,175)        55,345       (329,673)
                                                        -----------    -----------    -----------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES             590,381       (356,522)    (2,857,799)
                                                        -----------    -----------    -----------

CASH FLOW FROM INVESTING ACTIVITIES:
        Purchase of property and equipment                  (84,315)       (25,562)       (81,039)
        Proceeds from sale of property held for sale         54,504           --             --
        Equipment under development                            --           28,603       (689,176)
        Collection of note receivable from property
         held for sale                                      100,000           --             --
                                                        -----------    -----------    -----------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES              70,189          3,041       (770,215)
                                                        -----------    -----------    -----------

CASH FLOW FROM FINANCING ACTIVITIES:
       Issuance of common stock, net                        659,080        281,803        422,472
       Repayment on debt                                 (1,301,620)      (370,813)    (1,273,669)
       Subscriptions receivable                                --            6,952          4,768
       Amounts borrowed under short-term debt                  --          252,548      1,211,452
       Amounts borrowed under long-term debt                302,500        315,000      1,190,000
                                                        -----------    -----------    -----------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES            (340,040)       485,490      1,555,023
                                                        -----------    -----------    -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                      35,577         40,413       (108,581)
                                                        -----------    -----------    -----------
NET INCREASE (DECREASE) IN CASH                             356,107        172,422     (2,181,572)
CASH AND CASH EQUIVALENTS, beginning of period              216,042         43,620      2,225,192
                                                        -----------    -----------    -----------
CASH AND CASH EQUIVALENTS, end of period                $   572,149    $   216,042    $    43,620
                                                        ===========    ===========    ===========

Supplemental Cash Flow Information
Interest paid                                           $   154,787    $   250,262    $   246,442
Income taxes paid                                       $      --      $      --      $      --
Note Receivable resulting from sale of property
  held for sale                                         $   175,000    $      --      $      --
</TABLE>


                 See Notes to Consolidated Financial Statements.

                                       21
<PAGE>


COX TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED APRIL 30, 2003, 2002 AND 2001

          1. SIGNIFICANT ACCOUNTING POLICIES

               Nature of Operations

               Cox Technologies, Inc. (the "Company") is 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 has been 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 the  Purchaser.  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).  Additionally,  the Purchaser must make monthly payments of
          $6,000 to the  Company  beginning  the month after the sale and ending
          with a final payment in June 2004.  Upon  completion of these payments
          by Purchaser, the Company will transfer title and ownership of certain
          equipment located at the Malmo, Sweden location.  Should the Purchaser
          fail to make any  payment  within 30 days of its due  date,  then they
          will  forfeit  their  ownership  rights in the assets and the  Company
          shall be entitled to take  immediate  possession of those assets.  The
          Company  will be paid a  quarterly  royalty  based  on the  volume  of
          Vitsab(R) products sold by the Purchaser.  The Purchaser will have the
          exclusive right for ten years to manufacture,  sell and distribute the
          Vitsab(R) product in certain countries designated in the agreement

               The  Company's  entire  Vitsab(R)   operation  has  been  largely
          dependent  on one  customer.  That  customer  has been  testing  these
          products for use in the distribution of their perishable products.  On
          September 5, 2002 the Company received  notification from the customer
          that it was not going to continue with the pilot program.  The Company
          also received notification from the largest user of Vitsab(R) products
          in that  customer's  pilot program that they will continue to purchase
          and use  the  Vitsab(R)  product  in  their  operations.  The  Company
          continues  to  manufacture  and sell  the  Vitsab(R)  products  to the
          largest  user in the pilot  program and other  customers.  The Company
          added several new customers during the fiscal year.

               Stock-based Compensation

               The  Company has 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  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.

                                       22
<PAGE>


               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.  All options  under the Executive  Plan have been  granted.  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, 2003 were as follows:

                            Options           Weighted-Average
                          Outstanding          Exercise Price
                     ---------------------  ---------------------
April 30, 1999                --                     --
     Granted               600,000                 $1.25
     Exercised                --                     --
     Canceled                 --                     --
                        ----------
April 30, 2000             600,000                 $1.25
     Granted             7,310,000                  $.58
     Exercised                --                     --
     Canceled                 --                     --
                        ----------
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
                        ==========

               The  Company  applies  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  years ended April 30. For  purposes of pro forma
          disclosures,  the  estimated  fair value of options is recorded in its
          entirety in the year granted.

                                        2003            2002             2001
                                        ----            ----             ----
Net income (loss)       As reported   $110,448     ($5,163,046)     ($6,774,009)
Net income (loss)       Pro forma       95,587     ($5,191,687)     ($7,036,503)

Basic and diluted EPS   As reported       $.00           ($.20)           ($.27)
Basic and diluted EPS   Pro forma         $.00           ($.20)           ($.29)

               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 fiscal 2003,  2002 and 2001,
          respectively:

                                     2003              2002             2001
                                     ----              ----             ----
Risk free interest rate(s)       4.9% to 5.3%      4.8% to 5.2%     4.8% to 6.0%
Volatility factor(s)             285% to 304%      224% to 249%      98% to 243%
Expected life                   7 to 10 years     7 to 10 years    4 to 10 years

               The weighted  average fair value of  nonqualified  stock  options
          granted  during fiscal 2003,  2002 and 2001 was $.11,  $.12, and $.55,
          respectively.  Options  outstanding  at April 30,  2003 have  exercise
          prices ranging from $.08 to $1.25,  and a weighted  average  remaining
          contractual life of 8.2 years. The number of

                                       23
<PAGE>


          shares and weighted average exercise price of those shares exercisable
          at the end of each  fiscal  year was  7,500  shares  at $.11 for 2003,
          67,500 shares at $.34 for 2002, and 2,697,501 shares at $.55 for 2001.

               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 2,028,972 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, a 95% owned Australian distribution
          company.  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

               Accounts  receivable consist of trade accounts receivable and are
          stated at cost less an  allowance  for  doubtful  accounts.  Credit is
          extended  to  customers  and  generally  collateral  is not  required.
          Management's  determination of the allowance for doubtful  accounts is
          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   is  $45,750  and  $65,000  at  April  30,  2003  and  2002,
          respectively.

               Depreciation, Depletion and Amortization

               Depreciation   for  property  and  equipment  is  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. Depletion expense for fiscal 2001 was based on production.

               Inventory

               Inventories  are  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  represents 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
          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" has no effect on goodwill.

                                       24
<PAGE>


               Patents

               The  Company  owns 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 are
          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
          charged to operations totaled $33,951,  $35,470 and $18,793 for fiscal
          2003, 2002 and 2001, respectively.

               Long-lived Assets

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

               Income Taxes

               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.

               Revenue Recognition

               The Company recognizes revenue when products are 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 Company recorded a foreign currency translation adjustment in
       fiscal  2003,   2002  and  2001  of  $35,577,   $40,413  and  ($108,581),
       respectively.  As a result,  total  comprehensive  income was $146,025 as
       compared  to  a  net  income  of  $110,448   for  fiscal  2003,  a  total
       comprehensive  loss of $5,122,633 as compared to a net loss of $5,163,046
       for fiscal 2002 and a total  comprehensive loss of $6,882,590 as compared
       to a net loss of $6,774,009 for fiscal 2001.

               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 is 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")  and  stock  option  grants  are
          anti-dilutive  for fiscal 2003,  2002 and 2001 and have been  excluded
          for the earnings per share calculations.

               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).

                                       25

<PAGE>


               Concentrations of Credit Risk

               Financial  instruments  that  potentially  expose the  Company to
          concentrations  of  credit  risk  consist  primarily  of cash and cash
          equivalents  and  accounts   receivable.   Credit  risk  is  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.

               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  expects  to adopt the
          provisions  of SFAS No. 143  effective  May 1, 2003,  and the  Company
          believes the adoption of the  provisions of SFAS No. 143 will 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
          Company  believes the adoption of the  provisions of SFAS No. 150 will
          not have a significant  effect on its financial position or results of
          operations.

          2. INVENTORIES

               Inventory at April 30, 2003 and 2002 consists of the following:

                            2003             2002
                            ----             ----
Raw materials             $328,744         $377,478
Work-in-process            103,059          143,339
Finished goods             800,467          898,525
                        ----------       ----------
                         1,232,270        1,419,342
Less reserve                50,000             --
                        ----------       ----------
      Total             $1,182,270       $1,419,342
                        ==========       ==========

                                       26

<PAGE>


          3. PROPERTY AND EQUIPMENT

               The  following is a summary of property and equipment at cost, by
          major classification,  less accumulated depreciation at April 30, 2003
          and 2002:

                                                          2003           2002
                                                          ----           ----
Manufacturing Property and Equipment
------------------------------------
Tooling                                                 $518,840       $495,507
Machinery and equipment                                1,567,752      1,558,060
Office furniture and equipment                           175,780        167,538
Leasehold improvements                                   300,665        293,635
                                                      ----------     ----------
                                                       2,563,037      2,514,740
Less: Accumulated depreciation                         2,057,349      1,750,112
                                                      ----------     ----------
     Total manufacturing property and equipment          505,688        764,628
                                                      ----------     ----------
Properties Held for Sale:
-------------------------
Oil and Gas Properties and Equipment
------------------------------------
Intangible drilling costs                                   --          883,023
Lease and well equipment                                    --        1,828,881
Leasehold improvements                                      --          715,891
Undeveloped leases                                          --           72,167
Repurchased participating units                             --        2,608,640
Other                                                       --           24,600
                                                      ----------     ----------
                                                            --        6,133,202
Less: Accumulated depreciation and depletion                --        2,771,006
         Allowance for loss on impairment                   --        3,062,196
                                                      ----------     ----------
     Total oil and gas properties and equipment             --          300,000
                                                      ----------     ----------
          Total property and equipment                  $505,688     $1,064,628
                                                      ==========     ==========

               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.

               As a result of 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  was of the  opinion  that
          $300,000 of net assets should be recognized 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.

               On July 31, 2001, the operator filed a lien against the subleased
          properties.  On January 29, 2002, the operator filed a lawsuit against
          the Company, two of its current officers and a former officer claiming
          breach of contract,  fraud and damages totaling approximately $87,000.
          At April 30, 2002, the Company accrued $90,000,  which was the balance
          of capital and related  interest  that the operator  invested into the
          subleases  under an  agreement  with the Company and to which he had a
          reasonable claim.

               On March 21,  2002,  the Company  received an offer from a group,
          which  includes  the  operator of the  subleases,  to purchase the oil
          subleases for approximately  $362,000.  The lien filed by the operator
          would be paid out of the  proceeds  in order to have the lien filed on
          the subleases released.  The offer was accepted on March 25, 2002, and
          the parties began to draft the definitive purchase and sale agreement.
          The purchase and sale  agreement  was executed by both parties on June
          3, 2002. The purchaser was required to deposit  $50,000 into an escrow
          account  within two business  days upon  execution  of the  agreement.
          These  funds  were  never  deposited  into the  escrow  account by the
          purchaser.  In a letter dated June 20, 2002, the Company  notified the
          purchaser  that it was in default of the purchase  and sale  agreement
          and therefore the agreement had been terminated. On July 11, 2002, the
          Company  executed  an  addendum  to the  original  purchase  and  sale
          agreement   with  the  same  purchaser   after   receiving  a  $25,000
          non-refundable  deposit.  The closing of the transaction took place on
          September  30, 2002.  The Company  recognized a gain of  approximately
          $19,000 that is included in other income  (expense).  At closing,  the
          Company received an additional  $50,000,  net of transaction fees. The
          balance of the sale price was comprised primarily of a promissory note
          payable  to the  Company in the  amount of  $175,000  and a payment of
          $87,000 to the operator of the oilfield subleases to

                                       27
<PAGE>
          settle the  lawsuit  (the  "Oilfield  Litigation")  filed  against the
          Company,  two of its current  officers and a former officer,  claiming
          breach of contract,  fraud and damages totaling approximately $87,000.
          The operator of the oilfield received the $87,000 payment on September
          30, 2002 and the Oilfield  Litigation was settled as of that date. The
          Company received the first installment under the note in the amount of
          $100,000 on January 30, 2003,  and the last  installment in the amount
          of $75,000  on May 30,  2003.  Proceeds  from both  installments  were
          reduced by a $9,000 sales commission paid to a third party.

          4. PATENTS

               Patents are 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
        2003                                  $ 33,951
    Estimated amortization expense
        2004                                  $ 38,282
        2005                                  $ 38,282
        2006                                  $ 38,281
        2007                                       --
        2008                                       --

               5. DEBT

               The  following is a summary of  long-term  debt  obligations  and
          lease contracts payable at April 30, 2003 and 2002:

                                            2003                   2002
                                            ----                   ----
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             $3,025,000

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

Note payable to bank secured by
general business assets. See details
set forth in the narrative below.              --                  870,148

Unsecured note payable to a
vendor in 24 monthly
installments of $2,000.                      12,000                 36,000

Note payable to bank, secured by
equipment. See details set forth
in the narrative below.                         --                 448,600

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               340,043
                                        ------------          ------------
                                           4,720,671             4,719,791
Less:  Current maturities                    530,778             1,485,878
                                        ------------          ------------
       Total long-term debt              $ 4,189,893           $ 3,233,913
                                        ============          ============

                                       28
<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 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.

               The Company's cash flow from operations is currently not adequate
          to retire the TI Note, and it is unlikely that cash flow will 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.  TI has  indicated  that,  in the  event the  Company
          becomes  unable to meet its  obligations  under the TI Note, TI may be
          willing to explore  alternative  financing  arrangements,  including a
          restructuring of the TI Note prior to its due date. Alternatively, the
          Company may seek a cash infusion elsewhere, through a separate debt or
          equity  offering,  a  strategic  partnership  or some form of business
          combination. The Company may consider any or all of these alternatives
          in the event it becomes unable to meet its debt  obligation to TI, but
          there can be no assurance  that any deal will be  consummated on terms
          acceptable to both the Company and TI or another third party.  Without
          such an  arrangement,  it is  highly  likely  that the  Company  would
          default on its  obligations  under the TI Note, at which time TI would
          be entitled to exercise any and all remedies available to it under the
          TI Note and  applicable  law,  including  bringing  suit  against  the
          Company and its assets.  Should TI seek to enforce its right to timely
          repayment of the TI Note, there is a risk that the Company will not be
          able to continue as a going concern.

               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.

               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

                                       29
<PAGE>


          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.  The date of completion
          of the new  production  equipment,  if ever,  will be  determined at a
          later date.

               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 on the note
          are  $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 has been 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  will be
          required to submit a monthly  borrowing base calculation in support of
          the loan balance and would be required to pay a  sufficient  principal
          payment to reduce the loan  balance  to the amount  supported  by such
          borrowing base. The borrowing base is 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 is 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 will mature.  Also, beginning on the effective date of the
          modification,  the interest rate on the outstanding principal shall be
          calculated at the bank's 30-day LIBOR base rate plus 2.5% per annum.

               Capital leases consist  primarily of  manufacturing  property and
          equipment  with a  capitalized  cost  of  approximately  $672,000  and
          accumulated  depreciation of approximately $537,000 and $403,000 as of
          April 30, 2003 and 2002, respectively.

               Following are  maturities of long-term  debt for each of the next
          five fiscal years ended April 30:

           2003                    $   530,778
           2004                      3,724,894
           2005                        360,000
           2006                        104,999
                                   -----------
           Total                    $4,720,671
                                   ===========

                                       30
<PAGE>


          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,  which
          options become exercisable on September 12, 2003.

               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. See Note 5
          for further discussion of this transaction and the consequences to the
          Company  if it  fails  to meet  its  principal  and  accrued  interest
          obligations under the TI Note when they become due on March 10, 2005.

               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.

               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.

                                       31
<PAGE>


          7.RETIREMENT PLAN

               The Company maintains a 401(k) plan that covers 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 and $33,000,  respectively,  for fiscal 2002 and
          2001.

          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  has determined  goodwill from the Vitsab(R)  product to be
          impaired and has  recognized an  impairment  loss of $2,695,689 in the
          fourth quarter of fiscal 2002.

               The non-depreciable asset represents machinery for the high-speed
          production of the Vitsab(R)  product.  Since the machinery will not be
          completed  and not  produce any  positive  future cash flows and has a
          minimal scrap value,  management  has  determined  the equipment to be
          impaired and has  recognized a loss on  impairment  of $841,908 in the
          fourth quarter of fiscal 2002.

          9.INCOME TAXES

               The Company and its subsidiaries file consolidated federal income
          tax  returns.  There  is  an  aggregate  federal  net  operating  loss
          carryforward of $9,796,000  available to reduce future federal taxable
          income of the parent company.  These net operating loss  carryforwards
          will expire in various amounts between fiscal 2004 and fiscal 2023.

               For the fiscal  years ended April 30,  2003,  2002 and 2001,  the
          Company has not  recognized  an income tax  provision due to operating
          losses and deferred tax asset valuation allowances.

               The  reconciliation  of income tax  computed at federal and state
          statutory  rates to the income  tax  provision  is as follows  for the
          fiscal years ended April 30,

                                         2003            2002            2001
                                         ----            ----            ----
Income (loss) before income taxes      $110,448     ($5,163,046)    ($6,774,009)
Statutory federal income tax rate:           34%             34%             34%
Expected federal income tax
   expense at statutory rate             37,552            --              --
Utilization of deferred tax asset       (37,552)           --              --
                                    -----------     -----------     -----------
Provision for income taxes          $      --       $      --       $      --
                                    ===========     ===========     ===========

                                       32
<PAGE>


               The following is a summary of the  significant  components of the
          Company's deferred tax assets for the fiscal years ended April 30,
<TABLE>
<CAPTION>

                                                   2003              2002             2001
                                                   ----              ----             ----
<S>                                            <C>               <C>              <C>
Deferred tax assets:
   Net operating loss carryforwards            $3,754,000        $2,978,000       $3,960,000
   Impairment on long-lived assets                345,000         1,600,000        1,285,000
   Other                                          168,000           322,000          149,000
                                                ---------         ---------        ---------
                                                4,267,000         4,900,000        5,394,000
   Less:  Valuation allowance                   4,267,000         4,900,000        5,394,000
                                                ---------         ---------        ---------
Net deferred tax asset                         $     --          $     --         $     --
                                                =========         =========        =========
</TABLE>

               The valuation allowance primarily  represents the tax benefits of
          certain  operating  loss  carryforwards  and other deferred tax assets
          that may expire without being  utilized.  During fiscal 2003, 2002 and
          2001,  the  valuation  allowance   (decreased)  increased  ($633,000),
          ($494,000) and $2,504,000, respectively.

               The unused net operating  loss  carryforwards,  which may provide
          future tax benefits, expire at the end of each fiscal year as follows:

                                Unused Net Operating
 Fiscal Year of Expiration    Loss Carryforward Amount
 -------------------------    ------------------------
           2004                    $   282,000
           2005                        641,000
           2006                        411,000
           2007                        253,000
           2008                        253,000
Remaining years                      7,956,000
                                   -----------
     Total                          $9,796,000
                                    ==========

          10. SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

               The following table presents  certain  financial  information for
          each quarter during the fiscal years ended April 30,

                                                 2003
                      --------------------------------------------------------
                         Fourth          Third         Second          First
                      --------------------------------------------------------
Sales                 $2,177,619     $2,289,867     $2,040,459     $2,265,907
Income (loss) from
  operations
                         171,030        222,372       (128,324)       148,478
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

                                                 2002
                      --------------------------------------------------------
                         Fourth          Third         Second          First
                      --------------------------------------------------------
Sales                 $2,158,846     $2,045,969     $2,213,633     $2,208,655
Income (loss) from
  operations
                      (3,818,566)      (206,114)      (260,520)      (541,769)
Net income (loss)       (340,716)
                                     (3,940,428)      (339,258)      (542,644)
Basic and diluted net
  income (loss) per
  average common
  share                     (.16)          (.01)          (.01)          (.02)

                                       33
<PAGE>


          11. SEGMENT INFORMATION

               Prior to fiscal  2002,  the  Company  had two  current  operating
          segments  that  involved  the  (1)  production  and   distribution  of
          temperature  recording and monitoring  devices,  including  electronic
          "loggers",  graphic temperature  recorders and visual indicator labels
          (referred to as "Temperature  Recorder Operations" as a group) and (2)
          oilfield  operations and other,  which included all economic  activity
          related to the oil  production  and the  holding of the oil leases and
          the operation of its Phoenix,  Arizona office.  The Company closed its
          Phoenix office effective October 31, 2000. The activities performed in
          Phoenix were  transferred  to the Corporate  Office in Belmont,  North
          Carolina.   The  Company  now  operates  in  one  reporting   segment,
          Temperature Recorder Operations.  Therefore, no segment information is
          required to be reported for fiscal 2003 or fiscal 2002.

Fiscal Year Ended April 30,                               2001
---------------------------                               ----
Revenues:
     Temperature Recorder Operations                   $9,637,075
     Oilfield Operations and Other                         72,486
                                                      -----------
                                                       $9,709,561
                                                      ===========
Net income (loss):
     Temperature Recorder Operations                  ($3,428,857)
     Oilfield Operations and Other (1)                 (3,345,152)
                                                      -----------
                                                      ($6,774,009)
                                                      ===========
Identifiable assets:
     Temperature Recorder Operations                   $4,377,067
        Oilfield Operations and Other (1)                 300,000
                                                      -----------
                                                       $4,677,067
                                                      ===========
Capital expenditures:
     Temperature Recorder Operations                    $  84,388
     Oilfield Operations and Other                            --
                                                      -----------
                                                        $  84,388
                                                      ===========
Depreciation, depletion and amortization:
     Temperature Recorder Operations                    $ 733,123
        Oilfield Operations and Other (1)                     --
                                                      -----------
                                                        $ 733,123
                                                      ===========
Interest expense:
     Temperature Recorder Operations                    $ 496,442
     Oilfield Operations and Other                            --
                                                      -----------
                                                        $ 496,442
                                                      ===========

(1)  The Company recognized  $3,062,196 of the oilfield operations net assets as
     a loss on impairment in the fourth quarter of fiscal 2001.

                                       34
<PAGE>
               Information on the  Temperature  Recorder  Operations by domestic
          and international is presented in the following table.

Fiscal Years Ended April 30,   Domestic       International           Total
----------------------------  ----------     ---------------       ----------
Revenues:
     2003                     $6,897,095        $1,876,757         $8,773,852
     2002                     $5,719,605        $2,907,498         $8,627,103
     2001                     $6,461,359        $3,175,716         $9,637,075
     2000                     $7,497,224        $2,203,058         $9,700,282
Net income (loss):
     2003                       $522,755         ($362,307)          $160,448
     2002                    ($3,456,703)      ($1,706,343)       ($5,163,046)
     2001                    ($2,298,835)      ($1,130,022)       ($3,428,857)
     2000                    ($1,530,259)        ($449,666)       ($1,979,925)
Identifiable assets:
     2003                      $ 468,314           $37,375          $ 505,689
     2002                      $ 993,738           $70,890        $ 1,064,628
     2001                     $1,370,091           $92,373        $ 1,462,464
     2000                     $4,912,310          $144,737        $ 5,057,047

          12. LEASES

               The  Company  leases  its  corporate  office,  sales  office  and
          manufacturing facilities under non-cancelable operating leases. Rental
          expense for fiscal  2003,  2002 and 2001 was  $113,291,  $110,578  and
          $174,723,  respectively.  At April 30,  2003,  future  minimum  rental
          payments  for   non-cancelable   operating  leases  are  approximately
          $119,000 for fiscal 2004, and $18,000 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. GOING CONCERN CONSIDERATION

               The  accompanying  financial  statements  have been  prepared  in
          conformity with accounting principles generally accepted in the United
          States of America, which contemplates continuation of the Company as a
          going concern.  During fiscal 2003,  the Company  produced both income
          and working  capital from  operations;  however,  fiscal 2002 and 2001
          produced substantial operating losses and consumed substantial working
          capital as well.  Current assets exceed  current  liabilities at April
          30, 2003 by  $2,038,504 as compared to current  liabilities  exceeding
          current  assets by  $390,850  on April  30,  2002.  Total  liabilities
          continue to exceed total assets by  $1,500,418  and  $2,305,523  as of
          April 30, 2003 and 2002, respectively.

                                       35
<PAGE>


               At present,  the cash flow from  operations  appears  adequate to
          meet cash  requirements and commitments of the Company during the 2004
          fiscal year.  However,  the  Company's  cash flow from  operations  is
          currently not adequate to retire the principal and accrued interest on
          the TI Note when such obligation becomes due on March 10, 2005. A more
          detailed  description  of the TI  Note  and  the  consequences  to the
          Company  if it  fails  to meet its  obligations  under  the TI Note is
          provided in Note 5. Mr.  Fletcher and Mr. Reid currently  serve as the
          sole managers of TI.

               Realization of a major portion of the assets in the  accompanying
          balance sheet is dependent upon  continued  operations of the Company,
          which in turn is  dependent  upon the  Company's  ability  to meet its
          financing requirements,  and the success of its future operations. The
          consolidated  financial  statements  do not  reflect  any  adjustments
          related to the  recoverability  and classification of recorded assets,
          or the  amounts  and  classification  of  liabilities  that  might  be
          necessary in the event the Company cannot continue as a going concern.

                                       36

<PAGE>


INDEPENDENT AUDITORS' REPORT


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


We  have  audited  the   accompanying   consolidated   balance   sheets  of  Cox
Technologies,  Inc.  and  subsidiaries  as of  April  30,  2003 and 2002 and the
related  consolidated  statements  of income,  changes in  stockholders'  equity
(deficit),  and cash flows for each of the years in the three-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 auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated financial position of Cox Technologies,
Inc.  and  subsidiaries  as of April 30,  2003 and 2002 and the results of their
operations and cash flows for each of the years in the  three-year  period ended
April 30, 2003, in conformity with accounting  principles  generally accepted in
the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern.  As shown in the consolidated
financial  statements,  the Company incurred  substantial losses in the previous
two  years  and at April 30,  2003  total  liabilities  exceed  total  assets by
$1,500,418.  In  addition,  the cash  flows from  operations  is  currently  not
adequate to retire the Company's debt obligation to Technology  Investors,  LLC,
which matures on March 10, 2005.  Notes 5 and 14 to the  consolidated  financial
statements discuss  management's plans relating to these matters.  These factors
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern.  The consolidated  financial  statements do not include any adjustments
relating to the  recoverability  and  classification  of recorded assets, or the
amounts and  classification  of liabilities that might be necessary in the event
the Company cannot continue in existence.


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

Cherry, Bekaert & Holland, L.L.P.
Gastonia, North Carolina
July 3, 2003

                                       37
<PAGE>


          Supplementary Data

               The  information  for this item is  contained in Note 10 entitled
          "SUMMARY OF QUARTERLY FINANCIAL INFORMATION  (UNAUDITED) on page 33 of
          this annual report.


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

               None.

                                    PART III

          ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

                    Directors

                    The  information  for this item is set forth in the sections
               entitled "Election of Directors" and "The Board of Directors" and
               "Section 16(a) Beneficial Ownership Reporting  Compliance" in Cox
               Technologies'  proxy statement  dated July 29, 2003,  relating to
               the August 29, 2003 annual meeting of shareholders, which section
               is incorporated herein by reference.

                    Executive Officers

                    The information for this item is set forth on page 6 of this
               annual report.

          ITEM 11. EXECUTIVE COMPENSATION

                    The  information  for this item is set forth in the sections
               entitled  "Executive   Compensation,"   "Performance  Graph"  and
               "Report of Board of Directors on Executive  Compensation"  in Cox
               Technologies'  proxy statement  dated July 29, 2003,  relating to
               the August 29, 2003 annual meeting of shareholders, which section
               is  incorporated  herein  by  reference  (specifically  excluding
               disclosures in such sections  relating to Items 402(k) and (1) of
               Regulation S-K).

          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" in Cox  Technologies'  proxy statement dated July 29,
               2003,   relating  to  the  August  29,  2003  annual  meeting  of
               shareholders, which section is incorporated herein by reference.

          ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                    The  information  for this  item is set  forth on page 31 of
               this annual  report and in the  sections  entitled  "Election  of
               Directors" and "Certain  Relationships and Related  Transactions"
               in  Cox  Technologies'  proxy  statement  dated  July  29,  2003,
               relating to the August 29, 2003 annual  meeting of  shareholders,
               which sections are incorporated herein by reference.

          ITEM 14. INTERNAL CONTROLS AND PROCEDURES

               (a)  Evaluation of Disclosure  Controls and  Procedures.  As of a
               date  within  90 days  prior to the  filing  of 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.

                                       38
<PAGE>


               (b)  Changes to  Internal  Controls.  There  were no  significant
               changes to the  Company's  internal  controls or in other factors
               that could significantly  affect these controls subsequent to the
               date of their evaluation,  including any corrective  actions with
               regard to significant deficiencies and material weaknesses.

                                     PART IV

          ITEM 16.  EXHIBITS,  FINANCIAL  STATEMENTS  SCHEDULES  AND  REPORTS ON
                    FORM 8-K                                                Page

               1.  Financial statements -

                   Consolidated Balance Sheets at April 30, 2003 and 2002    18

                   Consolidated Statements of Income for the
                        Fiscal Years Ended April 30, 2003, 2002 and 2001     19

                   Consolidated Statements of Changes in Stockholders'
                        Equity (Deficit) for the Fiscal Years Ended
                        April 30, 2003, 2002 and 2001                        20

                   Consolidated Statements of Cash Flows for the
                        Fiscal Years Ended April 30, 2003, 2002 and 2001     21

                   Notes to Consolidated Financial Statements for the
                        Fiscal Years Ended April 30, 2003, 2002 and 2001  22-36

                   Independent Auditors' Report                              37

               2.  Financial statement schedules -

                   The following financial statement schedules
                   are included herein:

                   Supplemental Schedules:
                   Independent Auditors' Report on Financial
                    Statement Schedules                                      40
                   Schedule II - Valuation and Qualifying Accounts
                    for the Fiscal Years Ended April 30, 2003,
                    2002 and 2001                                            41

                    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 -

                   23.1 - Consent of Independent Public Accountants         A-1

                   Certifications                                           A-2

                   99.1 - Certificate of Co-Chief Executive Officers        A-5

                   99.2 - Certificate of Chief Financial Officer            A-6

               4.  Reports on Form 8-K -

                   The registrant filed an 8-K on March 19, 2003 that included a
                   press  release  reporting  that,  at  a  special  meeting  of
                   shareholders   held  on  March  12,  2003,  the  registrant's
                   shareholders approved the registrant's issuance of 12,500,000
                   shares of its common stock to Technology  Investors,  LLC, an
                   affiliate  of Brian D.  Fletcher  and  Kurt C.  Reid,  for an
                   aggregate  purchase  price of  $750,000,  pursuant to a Stock
                   Purchase Agreement dated as of January 20, 2003.

                                       39

<PAGE>


INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES



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

Under date of July 3, 2003, we reported on the  consolidated  balance  sheets of
Cox  Technologies,  Inc. and subsidiaries as of April 30, 2003 and 2002, and the
related consolidated statements of income,  stockholders' equity (deficit),  and
cash flows for each of the three years in the three-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.

Our report on the  consolidated  financial  statements  referred to factors that
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern.  The  consolidated  financial  statement  schedules  do not include any
adjustments that might be necessary if the Company cannot continue in existence.


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

Cherry, Bekaert & Holland, L.L.P.
Gastonia, North Carolina
July 3, 2003

                                       40
<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 Year      Expenses     Describe (1)   Describe (2)   Fiscal Year
-------------------------------------------------------------------------------------------------------
<S>                             <C>            <C>            <C>            <C>            <C>
 2001    Allowance for
            doubtful accounts   $    28,524    $    33,286    $      --      $      --      $    61,810
          Impairment loss              --        3,062,196           --             --        3,062,196
          Deferred tax assets     2,890,000           --        2,504,000      5,394,000
                                -----------    -----------    -----------    -----------    -----------
                                $ 2,918,524    $ 3,095,482    $ 2,504,000    $      --      $ 8,518,006
                                ===========    ===========    ===========    ===========    ===========
 2002    Allowance for
            doubtful accounts   $    61,810    $    23,898    $      --      ($   20,708)   $    65,000
          Impairment loss         3,062,196      3,537,597           --             --        6,599,793
          Deferred tax assets     5,394,000           --         (494,000)          --        4,900,000
                                -----------    -----------    -----------    -----------    -----------
                                $ 8,518,006    $ 3,561,495    ($  494,000)   ($   20,708)   $11,564,793
                                ===========    ===========    ===========    ===========    ===========
 2003    Allowance for
            doubtful accounts   $    65,000    $     9,154    $      --      ($   28,404)   $    45,750
          Inventory reserve            --           50,000           --             --           50,000
          Impairment loss         6,599,793           --             --       (3,062,196)     3,537,597
          Deferred tax assets     4,900,000           --         (633,000)          --        4,267,000
                                -----------    -----------    -----------    -----------    -----------
                                $11,564,793    $    59,154    ($  633,000)   ($3,090,600)   $ 7,900,347
                                ===========    ===========    ===========    ===========    ===========
</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.

                                       41
<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)



July 29, 2003   /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 July 29, 2003.

/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 July 29, 2003.

                                      /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

                                       42
<PAGE>


                                 Certifications

          I, Brian D. Fletcher, certify that:

          1.   I  have   reviewed  this  annual  report  on  Form  10-K  of  Cox
               Technologies, Inc.;

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

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

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

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

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

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

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

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

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

          6.   The registrant's  other certifying  officers and I have indicated
               in this  annual  report  whether  or not there  were  significant
               changes  in  internal  controls  or in other  factors  that could
               significantly  affect internal controls subsequent to the date of
               our most recent evaluation, including any corrective actions with
               regard to significant deficiencies and material weaknesses.


Date:    7-29-03               /s/ Brian D Fletcher
         -----------           -----------------------------------
                               Brian D. Fletcher
                               Co-Chief Executive Officer


                                      A-2

<PAGE>


                                 Certifications


          I, Kurt C. Reid, certify that:

          1.   I  have   reviewed  this  annual  report  on  Form  10-K  of  Cox
               Technologies, Inc.;

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

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

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

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

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

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

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

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

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

          6.   The registrant's  other certifying  officers and I have indicated
               in this  annual  report  whether  or not there  were  significant
               changes  in  internal  controls  or in other  factors  that could
               significantly  affect internal controls subsequent to the date of
               our most recent evaluation, including any corrective actions with
               regard to significant deficiencies and material weaknesses.


Date:    7-29-03             /s/ Kurt C. Reid
         -----------         ------------------------------
                             Kurt C. Reid
                             Co-Chief Executive Officer


                                      A-3

<PAGE>


                                 Certifications

          I, John R. Stewart, certify that:

          1.   I  have   reviewed  this  annual  report  on  Form  10-K  of  Cox
               Technologies, Inc.;

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

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

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

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

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

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

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

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

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

          6.   The registrant's  other certifying  officers and I have indicated
               in this  annual  report  whether  or not there  were  significant
               changes  in  internal  controls  or in other  factors  that could
               significantly  affect internal controls subsequent to the date of
               our most recent evaluation, including any corrective actions with
               regard to significant deficiencies and material weaknesses.


Date:    7-29-03                      /s/ John R. Stewart
         -----------                  ------------------------
                                      John R. Stewart
                                      Chief Financial Officer
                                       and Secretary


                                      A-4