Microphonics Reports Improved Product Sales and Pretax Income

    NASHVILLE, Tenn.--Jan. 15, 2003--Microphonics, a leader in sales and engineering of ultrasound detection equipment, announced today that revenue from product sales for the year 2002 was an increase of some 26% when compared to the prior year. This improvement was achieved during a period of time while the majority of the company's focus was on creating and/or solidifying customer relationships, working toward the completion of sales/marketing arrangements, and on developing new products. Microphonics gross margin improved from 53.7% in 2001 to 58.5% in 2002. Though the types of products sold influence this measurement, it is believed to be an important trend toward and, a vital ingredient in, the future success of the company.
    The most significant goal of Microphonics for the year 2002 was to achieve a profit. The company managed to realize a small pretax profit. According to James E. Gayle, Chairman and CEO, this was one of those "must" achieve objectives.
    Microphonics primary focus for improved sales revenue has been and is being conducted as a two pronged attack. The company believes that sales directly to national companies and through distributor networks are still very viable vehicles for revenue enhancement. At the same time, Microphonics is deeply involved in the development of new products to bring to the marketplace. During 2002 the company worked closely with Active Extreme, Inc. in the development of a noise-canceling helmet to market to the racing industry. Testing was conducted on the helmet in live situations in a racing environment with great results. Microphonics has the exclusive agreement to distribute this active noise reduction system. We are in the final stage of discussions with a very well known company in the racing industry to distribute this product.
    Microphonics is also very excited about the Ultraphonics Array Testing System. In December of 2001, the US Patent and Trademark Office granted a Non-Provisional Patent for this product, which Microphonics will distribute. The Provisional Patent was applied for in December of 2002. During 2002, this Array System went through several test sessions at auto plants and performed especially well and was received with a great of excitement. The future looks very bright for this "end of the production line" product.
    Terry Mimms, our Vice President of Sales and Marketing, resigned in December 2002 to pursue other endeavors. Even though he was with us for only some 7 months, the company benefited greatly from his fresh ideas and his sales acumen. He will be missed but the momentum that he was a part of will continue. Mr. Gayle said, "The challenge of today's corporations is to find good people that perform well even in spite of a slow economy so that shareholder value will not lose ground."
    "The year of 2003," stated Mr. Gayle, "will be challenging but should certainly be worth the efforts."

    Note: The figures used in this release are taken from the books of the corporation and have not been audited. However, Management believes that these figures are a fair representation of the company's position.