Note 11: Subsequent Events

On October 4, 2004, we terminated our Senior Credit Facility and entered into a new Revolving Credit Facility with our United States bank for secured borrowings to a maximum of $8,500,000. We entered into this new Revolving Credit Facility to provide us with increased borrowing capacity to help fund future acquisition opportunities, working capital requirements and capital expenditures, as well as eliminate certain covenant requirements that were imposed on us under the pre-existing Senior Credit Facility. Borrowings under the Revolving Credit Facility can be in an amount up to 80% of the outstanding eligible accounts receivable plus 50% of the aggregate value of eligible inventory. Advances against eligible inventory are limited to $4,250,000. We are required to pay a 0.20% fee on the average daily unused portion of the Revolving Credit Facility. Advances under the Revolving Credit Facility accrue interest at the Eurodollar rate plus 1.50% to 1.75%. The Revolving Credit Facility is collateralized primarily by accounts receivable and inventory levels in the United States. The Revolving Credit Facility contains certain covenants, which require us to maintain leverage ratios. The Revolving Credit Facility expires on September 30, 2007.

On November 1, 2004, we entered into a definitive merger agreement with Kelsan Technologies Corp. (Kelsan) whereby we will purchase 100% of the outstanding shares of Kelsan. The all cash acquisition price is $20.0 million (Canadian currency) or approximately $16.4 million U.S. and is subject to a working capital adjustment at closing. It is anticipated that the entire acquisition price will be funded through a term loan with a Canadian financial institution. The merger agreement has been approved by the Board of Directors of both companies and is subject to approval by the Kelsan shareholders. It is anticipated that the transaction will close in late November or early December.

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