Cautionary Statement Concerning Forward-Looking Statements

This Prospectus contains forward-looking statements, including, without limitation, statements concerning possible or assumed future results of operations and those preceded by, followed by or that include the words "believes," "could," "expects," "intends" "anticipates," or similar expressions. Our actual results could differ materially from these anticipated in the forward-looking statements for many reasons including the risks described in the Risk Factor section and elsewhere in this report. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made, and our future results, levels of activity, performance or achievements may not meet these expectations. We do not intend to update any of the forward-looking

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statements after the date of this document to conform these statements to actual results or to changes in our expectations, except as required by law.

Overview

For the 6 months period ended June 30, 2005 we incurred a net loss of  (321,684) and for the year ended December 31, 2004, we incurred a net loss of ( $918,590) Thousand compared to net losses of ($1,244,761) in 2003 and ($1,513,846 ) in 2002. From 2001 to 2002, we experienced a severe contraction in our business where annual net sales declined from $17.9 million in 2001 to $6.8 million in  2002.  Our net sales stabilized and stayed flat from 2002 through 2004 and continues to remain flat through June 30, 2005.  However, we responded to the economic downturn by streamlining our processes and down sizing our operations from 225 employees in 2001 to 65 employees in 2004. The down sizing combined with other restructuring and cost containment initiatives resulted in a lower cost structure from 2002 through 2004. In the 4 ^th quarter 2004 we realized one time inventory revaluation adjustment of ($155,000), this was an accrual made for excess or obsolete inventory adjustments and or write-offs completed in 2005.  We also realized a one time warranty cost adjustment of ($50,000).   In 2005 we realized a net gain from the restructuring of debt in the amount of  ($89,000).

In 2004, we experienced a strong net sale in 1 ^st quarter due to increased sales from a major customer, one of our customers.  In the 1 ^st quarter 2004, the major customer accounted for 60% of our net sales at $1,400,000 .  In the second quarter, net sales from a major customer dropped by about $800,000  which explains the decreased net sales for 2 ^nd quarter 2004.  In the 3 ^rd and 4 ^th quarter 2004 net sales to the major customer dropped by another $500,000  which explains the additional reduction in our net sales for the third and the 4 ^th quarter of 2004.  Since 3 ^rd and 4 ^th quarter 2004 we started a sales campaign to add new customers.  Consequently, we have added some new customers and our net sales have grown by 33% in 1 ^st quarter and compared to 4 ^th quarter of 2004 and sales grew by 15% from the 1st qtr to the 2 ^nd qtr of 2005. We  anticipated additional sales growth in the, 3 ^rd and 4 ^th quarter of 2005,  however anticipated demand from a key customer failed to materialize, due to a down turn in the semiconductor – Chip industry, will result in missed sales opportunities of $500,000 for each of the 3 ^rd and 4 ^th qtr, therefore sales will remain flat for the remainder of 2005.   While we are constantly adjusting our operations to new sales forecast, we are anticipating profitability as our net sales grow and expenses are cut to match current revenue levels.

Plan of Operation

The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business.  The company incurred a net loss of $321,684 for the six months ended June 30, 2005 and stockholder deficit of ($762,122) and as of  June 30, 2005 and has a working capital deficit of approximately $348,364. The ability of the company to operate as a going concern is dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) cut operating costs such that the company can operate until such time that it resumes generating positive cash flow from operations.

Management is taking the following steps to address this situation: (a) reducing operating costs by: (i) re-negotiating direct material cost with all of our suppliers, (ii) reducing direct and indirect labor cost by streamlining production lines and other operations to create more efficiency and (iii) we are also evaluating the possibility of moving into a more feasible facility with lower rent and overhead, thus reducing the break even revenue level; (b) we are negotiating to replace our lines of credit with an agreement(s) that have more attractive terms and expand borrowing capacity; (c) increasing our revenue by making sure we bill for everything of value we do; acquiring new customers, and growing our existing customers.

 The future success of the company is likely dependent on its ability to attain additional capital to support growth and ultimately, upon its ability to attain future profitable operations.  There can be no assurance that the company will be successful in obtaining such financing, or that it will attain positive cash flow from operations.  The successful outcome of these or any future activities cannot be determined at this time and there is no assurance that if achieved, the company will have sufficient funds to execute their business

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plans or generate positive operating results. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the company be unable to continue as a going concern.

 Net cash used by operating activities was $971 thousand during the six months ended June 39, 2005. This was mainly due to an operating loss of  $321 thousand, an increase inventories of  $490 thousand, an increase in accounts receivable and a decrease in accounts payable.  The increase in inventory was a result of an anticipated ramp up in sales for the 3 ^rd and 4 ^th quarters.  The increase in receivables was caused by an increase in sales in the month of June.  The cash used in operating activities was funded by and increase in the borrowings under lines of credit of $560 thousand and the issuance of stock (under the Private Placement Memorandum)  of  $572 thousand.  

With the added reporting expense resulting from the filing on the SB2 the company has operating expense by $35 thousand per month effective October 1, 2005.  The cash flows from operations will be relatively flat in the 3 ^rd qtr., and slightly positive in the 4 ^th qtr.   

 Our working capital as of June 30, 2005 was ($338,281), compared to ($564,310) as of December 31, 2004 and ($2,892,000) as of December 31, 2003. This increase in working capital is attributable to a decrease in current liabilities of $2,000,000,  This was accomplished through the infusion of capital.  

We currently receive capital under six different revolving lines of credit from eFund Capital Partners, LLC, Ashford Capital, LLC, Edward Lassiter, Bill Duncan, Rufina Paniego and the Benner Exemption Trust that allows us to draw up $725,000 and anticipate we will continue to be able to have access to the money

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through the revolving lines of credit.  As of June 30, 2005 we have an outstanding balance of $580,000  and  $185,000 available to draw upon.

The company had a revolving line of credit (the “Line”) with a financial institution, Camel Financial, Inc., which allowed them to borrow a maximum of $1,100,000 based on 80% of eligible accounts receivable, as defined.  Borrowings under the Line, bore interest at prime (4.25% plus 10.5% per annum) were secured by substantially all of the company’s assets and are personally guaranteed by the stockholders.  In March 2004 the Line was restructured into a term loan in the amount of $500,000. Terms of the Note were: (1) monthly installment payments of $5,000, (2) interest at the rate of 4% plus the prime rate by the agent (3) secured by accounts receivable (4) with a discount provision of $200,000 after timely payments of the first $300,000.  In December 2004, the note was restructured into a new line of credit and discounted by $200,000. This new line of credit allows the company to borrow a maximum of $125,000 based on 80% of eligible accounts receivables, payable in monthly installments of $5,000 plus interest at the rate of 4% plus the prime-lending rate.  As of June 30, 2005, the company had borrowed $120,114.  The company has an additional unsecured line of credit in the amount of $775,000.  Borrowings under the Line of credit bear interest at the rate of 15% (10% paid in cash and 5% paid in common stock in the company) per annum.   As of June 30, 2005 the company had an outstanding balance against this line of credit in the amount of $580,000. The company has not been successful at replacing the existing line of credit.  The company has secured additional lines of credit, for a total of $725,000, as follows, with restructured terms as follows:

Efund Capital Partners -   $150,000  @ 15% interest, 10% paid in cash and 5% paid in the form of common stock @ .80 per share.

Rufina V. Paniego -   $75,000 @ 15% interest, 10% paid in cash and 5% paid in the form of common stock @ .80 per share.

Ashford Capital - $150,000 @ 15% interest, 10% paid in cash and 5% paid in the form of common stock @ .80 per share.

Benner Exemption Trust  - $200,000  @ 15% interest, 10% paid in cash and 5% paid in the form of common stock @ .80 per share.

Edward Lassiter  -  $100,000  @ 15% interest, 10% paid in cash and 5% paid in the form of common stock @ .80 per share.

William Duncan  - $50,000  @ 15% interest, 10% paid in cash and 5% paid in the form of common stock @ .80 per share.

The holders of the notes do not have discretion in deciding whether to accept interest in the form of cash or common stock.  None of the stock is being registered under this prospectus or being offered for resale.

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Capital Stock Transactions

During the year ended December 31, 2004, the company’s board of directors and shareholders approved the following capital stock transactions:

1. An amendment to the Articles of Incorporation of the company increasing the number of authorized common shares to 100,000,000 and designating $.001 par value per share.

2. An amendment to the Articles of Incorporation of the company authorizing 440 shares of Preferred A stock and designating a stated value of  $1,000 per share.

3. An amendment to the Articles of Incorporation of the company authorizing 20,000 share of Preferred B stock and designating a stated value of $100 per share.

4. Return and cancellation of 5,000,000 shares of common stock held by Mr. Mahdi (1,750,000 shares returned), Mr. Zarif (1,750,000 shares returned), eFund Capital Partners, LLC (750,000shares returned) and Ashford Capital, LLC(750,000 shares returned) in order to reduce the number of shares outstanding.

In May of 2004 we issued 2,000,000 each to our two founders, Kambiz Mahdi and Reza Zarif, for no cash consideration when converted the corporation from an S to a C corporation in order for the two founders to maintain ownership in the corporation going forward.

From June 16, 2004 to April 1, 2005 the company sold 222,125 common stock units pursuant to a Private Placement Memorandum at $8.00 per unit to 49 without individuals generating net proceeds of $1,777,000.

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Each Unit entitled the holder to purchase ten (10) shares of common stock.  In addition, each unit entitled the holder to purchase a total of 10 shares of Probe Common Stock through the exercise of Warrants as follows: Class A Warrants, 5 shares at a price of $2.00 per share for a period of 12 months from November 16, 2004, which shall be November 15, 2005; and, Class B Warrants, 5 shares at a price of $3.00 per share for a period of 18 months from November 16, 2004, which shall be May 15, 2006

The sales set forth above were undertaken under Rule 506 of Regulation D under the Securities Act of 1933, as amended ("Act"), by the fact that:

·

the sales were made to sophisticated or accredited investors, as defined in Rule 502;

·

the company gave each purchaser the opportunity to ask questions and receive answers concerning the terms and conditions of the offering and to obtain any additional information which the company possessed or could acquire without unreasonable effort or expense that is necessary to verify the accuracy of information furnished;

·

at a reasonable time prior to the sale of securities, the company advised each purchaser of the limitations on resale in the manner contained in Rule 502(d)2;

·

neither the company nor any person acting on its behalf sold the securities by any form of general solicitation or general advertising; and

·

the company exercised reasonable care to assure that each purchaser of the securities is not an underwriter within the meaning of Section 2(11) of the Securities Act of 1933 in compliance with Rule 502(d).

In May of 2004 we entered into an agreement with eFund Capital Partners, LLC whereby eFund invested $200,000 and agreed to provide strategic assistance to us which included helping the management team to restructure its business by, streamlining its business operations, introduction to partners, helping find other sources of capital and improving corporate governance.  In exchange, we gave eFund Capital partners, 2,000,000 shares of common stock and 200 shares of Series A Convertible Preferred Stock. The managing members of eFund Capital Partners, LLC are Barrett Evans and Jeffrey Conrad. Mr. Evans and Mr. Conrad jointly have authority regarding the portfolio management decisions with respect to the shares of common stock owned by the selling security holder.  Mr. Evans and Mr. Conrad may be deemed to have dispositive and voting power over the shares of the common stock owned by the selling security holder.  However, Mr. Evans and Mr. Conrad do not have the right to receive dividends from or the proceeds from the sale of such common stock by the selling shareholder and they disclaim any beneficial ownership of such shares of common stock.  Mr. Evans and Mr. Conrad have both been directors of ours since May 2004.

In September of 2004 we issued the Ashford Transition Fund, L.P 40 shares of our Series A Convertible Preferred Stock as consideration for a loan they gave the company in the amount of $456,000. Frank Kavanaugh is the managing partner of Ashford Transition Fund, L.P.

In December of 2004 we issued eFund Capital Partners, LLC 3,500 shares of Series B Convertible Preferred Stock pursuant to a Series B Convertible Preferred Stock Purchase Agreement.  The company received $350,000 as consideration. The managing members of eFund Capital Partners, LLC are Barrett Evans and Jeffrey Conrad. Mr. Evans and Mr. Conrad jointly have authority regarding the portfolio management decisions with respect to the shares of common stock owned by the selling security holder.  Mr. Evans and Mr. Conrad may be deemed to have dispositive and voting power over the shares of the common stock owned by the selling security holder.  However, Mr. Evans and Mr. Conrad do not have the right to receive dividends from or the proceeds from the sale of such common stock by the selling shareholder and they disclaim any beneficial ownership of such shares of common stock.  Mr. Evans and Mr. Conrad have both been directors of ours since May 2004.

In December of 2004 we issued Kambiz Mahdi 450,000 shares of Series B Convertible Preferred Stock pursuant to a Series B Convertible Preferred Stock Purchase Agreement.  The company received $450,000

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as consideration.   Kambiz Mahdi is one of our founders and a director of ours.  Mr. Mahdi has dispositive and voting power over his shares and claims beneficial ownership of them.  He is all the rights pursuant to such ownership.

In December of 2004 we issued Reza Zarif 450,000 shares of Series B Convertible Preferred Stock pursuant to a Series B Convertible Preferred Stock Purchase Agreement.  The company received $450,000 as consideration.  Reza Zarif is our chief executive officer and a director of ours.  Mr. Zarif has dispositive and voting power over his shares and claims beneficial ownership of them.  He is all the rights pursuant to such ownership.

In December of 2004 we issued Anthony Reed 6,875 shares of common stock pursuant to a Consulting Agreement.

In December of 2004 we issued Russell Miller 100,000 shares of common stock pursuant to an employee stock grant.

In April 21,2005 we re-domiciled in the State of Nevada whereby our authorized capital structure is as follows:

1.

200,000,000 shares of Common Stock par value $ .001

2.

440 shares of Series A Convertible Preferred Stock, with a stated value of $1,000 per share.

3.

20,000 shares of Series B Convertible Preferred Stock, with a stated value of $100 per share.

Results of Operations

Our results of operations are affected by several factors, primarily the level and timing of customer orders (especially orders from our major customers). The level and timing of orders placed by a customer vary due to the customer’s attempts to balance its inventory, changes in the customer’s manufacturing strategy, and variation in demand for its products due to, among other things, product life cycles, competitive conditions, and general economic conditions. In the past, changes in orders from customers have had a significant effect on our quarterly and annual results of operations.  

Net Sales. Net sales decreased from $6,400,000  for the year ended 2003 to $6,200,000  for the year ended December 31, 2004. The decrease in 2004 net sales was primarily attributable to a decrease in sales for customers in the telecommunications industry which was $2,000,000 in 2003 and $562,000 2004.   Although we experienced  this significant decrease in net sales from our telecommunication customers we experienced in net from the semiconductor and industrial sectors which increased from 3,300,000 in 2003 to 5,175,000 in 2004.  Sales decrease from $3,906,000 to $2,906,000 for the 6 months ended June 30, 2004 and 2005 respectively.  This decrease was due to a large decrease from the 1 ^st qtr to the 2 ^nd qtr in 2004 and the decrease in business from Celerity in the 1 ^st and 2 ^nd qtr of  2005.

Gross Profit (Loss). Our gross profit decreased by $154,000  from 1,370,000   for 2003 to 1,220,000 for 2004. Similarly, gross profit as a percentage of net sales decreased from 21.2% for 2003 19.7% for 2004. The decrease in gross profit for 2004 is primarily attributable to the decrease in net sales while fixed manufacturing costs remained relatively unchanged.  Our Gross profit as a percent of sales has decreased from 19.7%  in 2004 to 18.3% for the 6 months ended June 30, 2005, mainly as a result of pricing pressures from Newport corporation and Celerity.

In 2004, the company incurred a net loss of ($918,000) an improvement of $322,000 over the 2003 loss of ($1,240,000).  This was primarily due to a gain on restructuring of certain notes payable and capital leases, totaling 275,000.   As of April 5, 2004 the company had a line of credit in the amount of $1,078676, with Camel financial, Inc.  On April 6, 2004 the loan was paid down by $618,676 and the company entered into a new loan agreement in the amount of $460,000,  the provisions had a discount of $200,000 if paid in full by February 2006.  In December of  the company paid an additional $75,000 and Camel agreed to discount the note by the $200,000 at that time, which was recognized as a gain on settlement of debt.  The company entered into a new amortizing line of  credit in the amount of $140,000.

The company had negotiated various other settlements, with vendors that resulted in a net gain of $75,000, recognized as a gain on settlement of debt for the year ended 2004.

Also certain pieces of manufacturing equipment are nearing the end there useful lives, resulting in a decrease in depreciation expense of $58,000 from 2003 of $299,000 to 2004 of

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$241,000.  The company Incurred  a net loss of $321,684 and $543,211 for the 6 months ended June 30, 2005 and 2004 respectively.  The improvement is due to decreased operating costs, mainly derived from lowered interest cost a result of the restructuring of the lines of credit.

Selling, General, and Administrative Expenses . Selling, general, and administrative expenses (“SG & A”) decreased $112,000  or 5.4%, from $2,078,000  for 2003 to $1,965,000 for 2004. The decrease was a direct result of a decrease in net sales.   SG & A decreased from $955,307 to $856,924 from the 6 months ended June 30, 2004 to 2005 respectively.

Interest Expense. Interest expense decreased by approximately $270,000 from the 6 months ended June 30, 2004 to 2005 respectively.  Due to the restructuring of the lines of credit and the pay pay-down of outstanding debt.

Contractual Obligations . The following table summarizes our contractual obligations as of  June 30, 2005

1.     Cadence has a judgment against us for $98,000.  The judgment was due to lack of payment by Probe to Cadence after Probe purchased the license to use its Alegro software program.  Due to economic conditions after September 11 ^th the market for the use of this product disappeared and Probe was not able to resell the services.  Consequently, Probe was not able to generate any revenues from reselling of the software and could not pay Cadence.  On August 9 ^th 2004 we entered into a payment agreement with Cadence in which we pay them $2,500 a month until such time the debt is paid off.  The balance currently due to Cadence under the agreement is $53,553 as of  August 30, 2005.

2. IFC had a judgment against us for $144,403.00.  The judgment resulted from our failure to pay IFC under the purchase agreement for a piece of X-Ray equipment. In September 2004 we entered into a settlement agreement whereby we agreed to pay IFC $15,000 as an initial payment and $5,000 per month until settlement amount of $70,000.00 is paid in full.  The balance due as of August 30, 2005 is $5,000.00.

3. Canon Financial has a judgment against us for $15,000.00.  The judgment was entered because Probe did not pay the lease payments due on a copy machine which was not properly maintained by Canon and was not functional most of the time.  We have agreed to pay Canon $1000.00 per month until fully paid.  Our balance as of August 30, 2005 is $6,000.00.

4. Pro-Source has filed a civil case against us for $35,000 for breach of contract which was filed in the Superior court Orange county, California. Judgment filed March 9, 2005.  We have reached a settlement with Pro-Source on September 9, 2004 whereby we agreed to pay $20,000 in three payments.  The first payment was made on October 4, 2005 for $10,000, and then  $5,000 on October 1, 2005 and $5,000 on November 1, 2005.  

5. As of August 30, 2005 we owed the Internal Revenue Service $130,692,  for past tax liabilities which we are not currently able to pay in full.  We have negotiated a settlement with IRS and have entered into a payment plan with them in which we pay the IRS $2,500 per month.  

6. The company had a revolving line of credit (the “Line”) with a financial institution, which allowed them to borrow a maximum of $1,100,000 based on 80% of eligible accounts receivable, as defined.  Borrowings under the Line, bared interest at prime (4.25% plus 10.5% per annum) are secured by substantially all of the company’s assets and are personally guaranteed by the two founders Kambiz Mahdi and Reza Zarif.  In March 2004 the Line was restructured into a term loan in the amount of $500,000. Terms of the Note were 1) Monthly payments of $5,000 interest at the rate of 4% plus the prime rate by the agent, 2) Secured by Accounts Receivable, and 3)with a discount of $200,000 for timely payment of the first $300,000.  In December 2004 the note was restructured and discounted by $200,000. An amortizing Line of Credit which allows them to borrow a maximum of $140,000 based on 80% of Accounts Receivables, with monthly payments of  $5,000   plus interest at the rate of 4% plus the prime lending rate.  As of June 30, 2005, the outstanding balance was $120,114.    

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7. On January 1, 2005 we entered into a credit line agreement with eFund Capital Partners, LLC for $150,000 .  This is an interest only line of credit.  There are no scheduled principal payments due other than on March 22, 2007, when the entire outstanding balance plus any accrued and unpaid interest will be due and payable in full.  Interest will accrue at the rate of 15% per annum payable as follows: (a) 10% will be paid on a monthly basis in US dollars based on the average outstanding balance of the previous month and (b) 5% will be paid in common stock of the company at the end of each quarter based on the average outstanding balance for the previous quarter.  The Interest due will be converted to our common stock at the price of $0.80 per share. This transaction is no less favorable than if we had entered into  it  on  an  arms  length  basis  with an unrelated third party because the company  was  not  aware of any other creditors willing to provide a loan for 15% or less interest.  As of  June 30, 2005 the outstanding balance was $75,000. and we have issued 2,772 shares of common stock. The holders of the notes do not have discretion in deciding whether to accept interest in the form of cash or common stock.  None of the stock is being registered under this prospectus or being offered for resale.

8. On January 1, 2005  we entered into a credit line agreement with Ashford Capital, LLC for $150,000 .  This is an interest only line of credit.  There are no scheduled principal payments due other than on March 22, 2007, when the entire outstanding balance plus any accrued and unpaid interest will be due and payable in full.  Interest will accrue at the rate of 15% per annum payable as follows: (a) 10% will be paid on a monthly basis in US dollars based on the average outstanding balance of the previous month and (b) 5% will be paid in common stock of the company at the end of each quarter based on the average outstanding balance for the previous quarter.  The Interest due will be converted to our common stock at the price of $0.80 per share. This transaction is no less favorable than if we had entered into  it  on  an  arms  length  basis  with an unrelated third party because the company  was  not  aware of any other creditors willing to provide a loan for 20% or less interest.   As of June 30, 2005 the outstanding balance was $100,000 and has been issued 4,320. The holders of the notes do not have discretion in deciding weather to accept interest in the form of cash or common stock.  None of the stock is being registered under this prospectus or being offered for resale.

9. On March 8, 2005 we entered into a credit line agreement with Benner Exemption Trust for $200,000 .  This is an interest only line of credit.  There are no scheduled principal payments due other than on March 22, 2007, when the entire outstanding balance plus any accursed and unpaid interest will be due and payable in full.  Interest will accrue at the rate of 15% per annum payable as follows: (a) 10% will be paid on a monthly basis in US dollars based on the average outstanding balance of the previous month and (b) 5% will be paid in common stock of the company at the end of each quarter based on the average outstanding balance for the previous quarter.  The Interest due will be converted to our common stock at the price of $0.80 per share. This transaction is no less favorable than if we had entered into  it  on  an  arms  length  basis  with an unrelated third party because the company  was  not  aware of any other creditors willing to provide a loan for 20% or less interest. As of  June 30, 2005 the outstanding balance was  $140,000. Dennis Benner is a director of ours and controls the Benner Exemption Trust.  Mr. Benner has also been issued 3,192 shares of common stock. The holders of the notes do not have discretion in deciding weather to accept interest in the form of cash or common stock.  None of the stock is being registered under this prospectus or being offered for resale.

10. On March 22, 2005  we entered into a credit line agreement with Edward Lassiter for $100,000 .  This is an interest only line of credit.  There are no scheduled principal payments due other than on March 22, 2007, when the entire outstanding balance plus any accrued and unpaid interest will be due and payable in full.  Interest will accrue at the rate of 15% per annum payable as follows: (a) 10% will be paid on a monthly basis in US dollars based on the average outstanding balance of the previous month and (b) 5% will be paid in common stock of the company at the end of each quarter based on the average outstanding balance for the previous quarter.  The Interest due will be converted to our common stock at the price of $0.80 per share. This transaction is no less favorable than if we had entered into  it  on  an  arms  length  basis  with an unrelated third party because the company  was  not  aware of any other creditors willing to provide a loan for 20% or less interest. As of  June 30, 2005 the outstanding balance was $140,000.  

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Edward Lassiter is a shareholder of ours and holds his shares in The Edward & Mildred Lassiter Restated Family Trust and The Edward & Mildred Lassiter Restated Family Trust dated April 14, 2000.  Mr. Lassiter currently holds 312,500 shares of our common stock which is 9% of the outstanding shares of common stock.  Mr. Lassiter has received 2,102 shares of common stock.  The holders of the notes do not have discretion in deciding weather to accept interest in the form of cash or common stock.  None of the stock is being registered under this prospectus or being offered for resale.

11. On January 1, 2005 we entered into a credit line agreement with Rufina V. Paniego for $75,000 .  This is an interest only line of credit.  There are no scheduled principal payments due other than on March 22, 3007, when the entire outstanding balance plus any accrued and unpaid interest will be due and payable in full.  Interest will accrue at the rate of 15% per annum payable as follows: (a) 10% will be paid on a monthly basis in US dollars based on the average outstanding balance of the previous month and (b) 5% will be paid in common stock of the company at the end of each quarter based on the average outstanding balance for the previous quarter.  The Interest due will be converted to our common stock at the price of $0.80 per share. This transaction is no less favorable than if we had entered into  it  on  an  arms  length  basis  with an unrelated third party because the company  was  not  aware of any other creditors willing to provide a loan for 20% or less interest. T As of  June 30, 2005 the outstanding balance was  $75,000.  Rufina Paniego is the wife of Reza Zarif who is our founder, COO and director.  Mrs. Paniego has received 3,041 shares of common stock. The holders of the notes do not have discretion in deciding weather to accept interest in the form of cash or common stock.  None of the stock is being registered under this prospectus or being offered for resale.

12. We lease our 35,000 sq/ft facility for $19,790.40 per month from Kambiz Mahdi, Reza Zarif and Pacific Sail Bay Trust.   Our lease obligation is until 2022.  We believe the rental rate to be at or below market rate for similar properties in our area. Kambiz Mahdi is one of our founders and a director of ours.  Reza Zarif is our chief executive officer and a director of ours.   Pacific Sail Bay Trust is managed by Frank Kavanaugh.  Frank Kavanaugh is also the managing member of Ashford Capital, LLC, and Apt Leadership, LLC and the managing partner of Ashford Transition Fund, L.P.  Furthermore, Mr. Kavanaugh was a director of ours from July 2004 to December 2004.

13.  On September 29, 2004 we entered into a forbearance agreement for a capital lease for $1,014,528  CIT Financial, Inc. with monthly obligations of $5,000  for the first five months an $7,500 Thereafter .

14.  On March 22, 2005  we entered into a credit line agreement with William Duncan for $50,000 .  This is an interest only line of credit.  There are no scheduled principal payments due other than on March 22, 2007, when the entire outstanding balance plus any accrued and unpaid interest will be due and payable in full.  Interest will accrue at the rate of 15% per annum payable as follows: (a) 10% will be paid on a monthly basis in US dollars based on the average outstanding balance of the previous month and (b) 5% will be paid in common stock of the company at the end of each quarter based on the average outstanding balance for the previous quarter.  The Interest due will be converted to our common stock at the price of $0.80 per share. This transaction is no less favorable than if we had entered into  it  on  an  arms  length  basis  with an unrelated third party because the company  was  not  aware of any other creditors willing to provide a loan for 20% or less interest. As of June 30, 2005 the outstanding balance was $140,000.   Mr. Duncan has received 603 shares of common stock.  The holders of the notes do not have discretion in deciding weather to accept interest in the form of cash or common stock.  None of the stock is being registered under this prospectus or being offered for resale.

Critical Accounting Policies

Management is required to make judgments, assumptions and estimates that affect the amounts reported when we prepare financial statements and related disclosures in conformity with generally accepted accounting principles.  Estimates are used for, but not limited to, our accounting for contingencies, allowance for doubtful accounts, inventory valuation,  and income taxes. Actual results could differ from these estimates. The following critical accounting policies are impacted significantly by judgments, assumptions and estimates used in the preparation of our consolidated financial statements.

Inventory

The companies’ inventories are stated at the lower of weighted average cost or market. This industry, is characterized by rapid change in technology.  Customer commitments are generally short term in nature and their demands can fluctuate and change very rapidly.  We make provisions for estimated excess and obsolete inventories based on these factors as well as cost and market value fluctuations in pricing as well as regular reviews of inventory quantities on hand and the latest forecasts of product demand and production requirements from our customers. Our provisions for excess and obsolete inventory are also impacted by our contractual arrangements with our customers including our ability or inability to re-sell such inventory to them. If actual market conditions or our customers’ product demands are less favorable than those projected or if our customers are unwilling or unable to comply with any contractual arrangements related to excess and obsolete inventory, additional provisions may be required.

Allowance for doubtful accounts

The company grants credit to customers within the United States of America and does not require collateral. The company’s ability to collect receivables is affected by economic fluctuations in the geographic areas and industries served by the company.

Reserves for un-collectable amounts are provided, based on past experience and a specific analysis of the accounts, which management believes are sufficient. Although the company expects to collect amounts due, actual collections may differ from the estimated amounts.

Goodwill

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”.    At this time we have no amounts recorded under goodwill or intangible assets.

Loss per Share

We utilize SFAS No. 128, "Earnings per Share." Basic loss per share is computed by dividing loss available to common stockholders by the weighted-average number of common shares outstanding.

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Revenue and Expense recognition.

Net sales are recognized when title is transferred to our customers, which generally occurs upon shipment from our facilities. Net sales from design, engineering and other services are generally recognized as the services are performed. Our sales are recorded net of customer discounts and credits taken or expected to be.

Cost of goods sold includes materials, labor, and overhead expenses incurred in the manufacture of our products and are recognized and matched to the period when the revenue is recognized. Cost of goods sold also includes charges and credits related to manufacturing operations for lease exit costs, impairment of long-lived assets, and obsolete and slow moving inventories. Many factors affect our gross profit, including capacity utilization, product mix, and production volume.

Selling, general, and administrative expenses primarily include the salaries for executive, finance, accounting, IT personnel, program management and human resources personnel; salaries and commissions paid to our internal sales force and external sales representatives and marketing costs; insurance expenses; depreciation expense related to assets not used in manufacturing activities; bad debt charges and recoveries; professional fees for auditing and legal assistance; and general corporate expenses.  These expenses are accrued and recognized in the period that they are incurred.

Impairment of long-lived assets reflects charges related to property, equipment and intangible assets not used in manufacturing activities; impairment of manufacturing assets is included in cost of goods sold.

Interest expense relates to our credit facilities and other debt obligations. Interest expense also includes the amortization of debt issuance costs.  These are accrued and recognized at the time they are incurred.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates may be materially different from actual financial results. Significant estimates include the recoverability of long-lived assets and the collectability of accounts receivable.

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Federal Income Taxes

The company accounts for income taxes under SFAS No. 109, which requires the asset and liability approach to accounting for income taxes.  Under this method, deferred tax assets and liabilities are measured based on differences between financial reporting and tax bases of assets and liabilities measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.  During the year ended December 31, 2004, the company changed from a “S” corporation to a “C” corporation.

Segment Information

The Corporation operates primarily in a single operating segment, providing printed circuit board assemblies.

Stock Based Compensation

SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123’) allows an entity to elect to continue to measure compensation cost under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), but requires pro forma disclosures of net loss and loss per share as if the fair-valued-based method of accounting had been applied.  In accordance with SFAS 123, the company elected to continue to measure compensation cost under APB No. 25, and comply with the pro forma disclosure requirements.

The company has adopted for footnote disclosure purposes SFAS No. 123, which requires that companies disclose the cost of stock-based employee compensation at the grant date based on the value of the award (the fair value method) and disclose this cost over the service period.  The value of the stock-based award is determined using a pricing model whereby compensation cost is the excess of the fair value of the award as determined by the model at grant date or other measurement date over the amount an employee must pay to acquire the stock.

Transactions in which goods or services are received from non-employees for the issuance of equity securities or stock-based awards are accounted for based on the fair value of the consideration received.  Stock amounts of $5,500 were valued for services during the year ended December 31, 2004.

Inflation

We do not believe that inflation has had or is likely to have any significant impact on our revenues.

Subsidiaries

None.