<SEC-DOCUMENT>0000814676-12-000036.txt : 20121113
<SEC-HEADER>0000814676-12-000036.hdr.sgml : 20121112
<ACCEPTANCE-DATETIME>20121113110159
ACCESSION NUMBER:		0000814676-12-000036
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20120929
ITEM INFORMATION:		Results of Operations and Financial Condition
FILED AS OF DATE:		20121113
DATE AS OF CHANGE:		20121113

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CPS TECHNOLOGIES CORP/DE/
		CENTRAL INDEX KEY:			0000814676
		STANDARD INDUSTRIAL CLASSIFICATION:	POTTERY & RELATED PRODUCTS [3260]
		IRS NUMBER:				042832509
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-16088
		FILM NUMBER:		121196815

	BUSINESS ADDRESS:	
		STREET 1:		111 SOUTH WORCESTER STREET
		CITY:			NORTON
		STATE:			MA
		ZIP:			02766
		BUSINESS PHONE:		508-222-0614

	MAIL ADDRESS:	
		STREET 1:		111 SOUTH WORCESTER STREET
		CITY:			NORTON
		STATE:			MA
		ZIP:			02766

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	CERAMICS PROCESS SYSTEMS CORP/DE/
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>k8110812c.htm
<DESCRIPTION>FORM 8K FOR CONFERENCE CALL OF Q3 2012
<TEXT>
<HTML>
<HEAD>
     <TITLE></TITLE>
</HEAD>
<BODY STYLE="font: 10pt Times New Roman, Times, Serif">

<P STYLE="margin: 0"></P>

<P STYLE="font: 1pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>
Washington, D.C. 20549</B></P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center"><B>FORM 8-K<BR>
<BR>
<BR>
</B></P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center">Current Report<BR>
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center">Date of Report (Date of earliest event reported):
November 8, 2012</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 12pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center"><B>CPS TECHNOLOGIES CORPORATION</B><BR>
<FONT STYLE="font-size: 10pt">(Exact Name of Registrant as Specified in its Charter)</FONT></P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Arial, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 34%; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">Delaware</TD>
    <TD STYLE="width: 33%; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">0-16088</TD>
    <TD STYLE="width: 33%; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">04-2832409</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center">(State or other jurisdiction of incorporation)</P>
        <P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center">&nbsp;</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">(Commission File Number)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">(IRS Employer Identification No.)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">111 South Worcester Street, Norton, Massachusetts</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">02766</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">(Address of principal executive offices)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">(Zip Code)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Registrant&#8217;s telephone number, including area code</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">508-222-0614</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">(Former name or former address, if changed since last report.)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (<U>see</U> General Instruction
A.2. below):</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">[ ]&#9;Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">[ ]&#9;Soliciting material pursuant to Rule 14a-12 under the exchange
Act (17 CFR 240.14a-12)</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">[ ]&#9;Pre-commencement communications pursuant to rule 14d-2(b)
under the<BR>
Exchange Act (17CFR 240.14d-2(b))</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; border-bottom: black 0.75pt solid">[ ]&#9;Pre-commencement communications
pursuant to Rule 13e-4( c)) under the<BR>
Exchange Act (17 CFR 240.13e-4( c)).</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="margin: 0">&nbsp;</P>

<!-- Field: Page; Sequence: 1 -->
    <DIV STYLE="margin-bottom: 6pt">&nbsp;</DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt">&nbsp;</DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="margin: 0">Item 2.02.<FONT STYLE="font: 10pt Arial, Helvetica, Sans-Serif"> Results of Operations and Financial Condition.</FONT></P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">The Company hosted a conference call on November 8, 2012 to review
the Third Quarter results for 2012 and to answer questions from investors. A transcript of this conference call is attached hereto
as Exhibit 99.1 and is incorporated herein by reference. The information furnished under Item 2.02, including the Exhibit attached
hereto, shall not be deemed &#8216;filed&#8217; for any purpose, including for purposes of Section 18 of the Securities and Exchange
Act of 1934 (the &#8220;Exchange Act&#8221;) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated
by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language
in such filing.</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center"><B>SIGNATURE</B></P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-indent: 0.5in">Pursuant to the requirements 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.</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Arial, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><B><U>CPS Technologies Corporation</U></B><BR>
(Registrant)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 51%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Date:&nbsp; November 12, 2012</TD>
    <TD STYLE="width: 49%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">/s/ Grant C. Bennett<BR> Grant C. Bennett<BR> President and Treasurer<BR> (Principal Executive Officer)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">EXHIBIT INDEX</P>

<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Arial, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 20%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">EXHIBIT NUMBER</P>
        <P STYLE="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">&nbsp;</P></TD>
    <TD STYLE="width: 80%; padding-right: 5.4pt; padding-left: 5.4pt">DESCRIPTION</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">99.1</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Transcript of conference call held November 8, 2012.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Courier New, Courier, Monospace; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>



<P STYLE="margin: 0">&nbsp;</P>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>2
<FILENAME>confcall110812q3.htm
<DESCRIPTION>EXHIBIT 99.1 TRANSCRIPT OF CONFERENCE CALL HELD ON NOVEMBER 8, 2012
<TEXT>
<HTML>
<HEAD>
     <TITLE></TITLE>
</HEAD>
<BODY STYLE="font: 10pt Times New Roman, Times, Serif">

<P STYLE="margin: 0"></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>CPS TECHNOLOGIES CORP.</B></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Moderator:&#9;Ralph Norwood</B></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>November 8, 2012</B></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>5:00 p.m. ET</B></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/200% Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in">Operator:</TD><TD>Good afternoon. My name is Jacqueline. I will be your conference operator today. At this time, I would like to welcome everyone
to the CPS Technologies Corporation Third Quarter Conference Call with Grant Bennett, President and Ralph Norwood, CEO.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>All lines have been placed on mute to prevent any background noise. After the speaker&rsquo;s remarks, there will be a question
and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone
keypad. If you would like to withdraw your question, press the pound key.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Ralph Norwood, you may begin.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">Ralph Norwood:&#9;Thank you,
operator, and good afternoon everyone.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Before we begin the business portion of the call, I would like to point out to all of you that statements in this conference
call that are not strictly historical are forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995 and should be considered as subject to many uncertainties that exist in CPS&rsquo; operations and environment.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>These uncertainties include economic conditions, market demands and competitive factors. Such factors could cause actual results
to differ materially from those in any forward-looking statements.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Now to the results of the third quarter. Our revenues for the quarter totaled $2.7 million, down 44 percent from the $4.9 million
earned in the third quarter of 2011. This decline in demand, which was particularly pronounced in the traction business, was also
reflected in our lid products, and to a lesser degree, revenues generated from our contract with US Army Research Laboratory.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Our gross margin dropped from 19 percent in the third quarter last year to a negative 9 percent in the third quarter of 2012.
This drop in margin was due primarily to our fixed manufacturing cost being spread over a sharp reduction in revenues.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Our gross margin was also adversely affected by approximately $100,000 of obsolescent charges associated with slow-moving products.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Selling, general and administrative expenses were lower by 23 percent versus the third quarter last year. The suspension of
the 401(k) match in the first quarter, fewer sales commissions, and lower travel expenses and conference fees were the principal
factors in this reduction. Interest expense was down due to net paybacks of our capital leases. We also benefited from a tax credit
of approximately 40 percent of our pretax loss in the current quarter.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Turning now to the balance sheet, our days sales outstanding or DSOs, increased from 44 days at June 30, 2012 to 69 days at
September 29th 2012. The 69 days at the end of September were in line with historical DSOs while the low number at the end of June
was unusual, due to some one-time advanced payments.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Inventories were down slightly versus the June quarter to $3.3 million as we ratcheted back production levels to avoid building
inventories.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>On the liability side, payables increased versus the end of June, but in total, were similar to amounts of the levels recorded
in the fourth quarter of 2011 and the first quarter of 2012. We spend approximately $10,000 on capital expenditures in the third
quarter, well below the $160,000 of depreciation and amortization.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Finally, our cash balance decreased from $374,000 at the end of June 2012, with no bank borrowings, to $221,000 and $400,000
of bank borrowings at the end of September. This represented a $550,000 reduction in net cash i.e., cash less borrowings. This
reduction occurred as a result of operating losses incurred during the quarter, offset in part by a reduction in working capital.
Our current ratio at the end of the quarter was 2.3 down from the 3.4 at the end of June, but still a healthy number.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>At this point, I would like to turn the call over to Grant who will offer his comments on our results for the quarter and add
his perspective for the coming quarters.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Grant Bennett):&#9;Thank
you, Ralph. And thanks to all of you for joining us.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>We have had several quarters of declining demand for and revenue from our current products. As I mentioned, in our second quarter
conference call in August, around mid-year this year, we did a deep dive into our customers&rsquo; forecasts and carefully examine
their forecasts, where possible, probing beyond the forecasts that they&rsquo;ve given us into end-user demand in order to prepare
our own forecast to use as our base case for planning.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Again, in our second quarter conference call, we stated that we expected demand to remain low throughout the third quarter.
The bad news is that we were correct. Demand did remain low and, in fact, was just slightly lower in the third quarter than our
own internal forecast showed it would be. However, again, in the second quarter conference call, we indicated that we expected
demand to turn up within the fourth quarter. And the good news is that it has indeed turned upward thus far in Q4 and we believe
that this will continue throughout this quarter and into 2013.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Said another way, we forecast that we would hit bottom in Q3 and that revenues would return on the upswing in Q4, and that
is indeed the current situation.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Earlier in the year, as Ralph eluded to, after taking, again, a very deep look into demand, we made the decision to adjust
direct labor to current demand but to retain overhead personnel in excess of that required for current demand given our view that
demand would return and those personnel would be needed.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>We now have a little bit of hindsight and we firmly believe that we made the right decision. Demand is moving upward in this
quarter, our current assessment is that demand will be up in 2013, and we believe the level of overhead we have is appropriate
for the demand we see.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Let me comment briefly on each of our main product lines and on the near to intermediate term outlook. The largest portion
of our business is in the traction market &ndash; trains, subway cars, etc. We lump electricity-generating wind turbines in that
as well as it is a very similar product. This is the market that has declined the most significantly and it indeed, in this quarter,
is showing very positive signs of beginning to return to previous levels.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>In particular, in China, which accounts for between 35 and 40 percent of the worldwide end-use demand today for traction products,
the demand is returning. It will be at least another 10 years before the railway build-out in China begins to transition into a
replacement and upgrade market, which is the nature of the market in Europe and in Japan.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>The effects of the train crash a year ago in China, to which we have referred earlier, and some uncertainty relating to the
political transition in China, have absolutely suppressed demand this year, but these factors are attenuating.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>As we&rsquo;ve visited customers in Japan and Europe, they have all shared with us a very consistent story regarding reduced
demand in China but, as of this fourth quarter, that demand is starting to increase.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Looking at our business in the hybrid and electric vehicle area demand for specific hybrid and electric vehicles which use
our base plates has been below the forecast that we were given by our customer earlier in the year. Nonetheless, the sales of the
specific hybrid and electric vehicles that use our products are slowly accelerating on a month-to-month basis. And most importantly,
for us, the number of models that use our products is increasing as these models are being introduced into the marketplace. We
continue to believe that the hybrid and electric vehicle market will grow for many years in the future.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Moving to our hermetic packaging line, this has actually been one bright spot even in Q3. Orders and quoting activity in our
hermetic packaging line have been increasing for a few months and that we are booking new orders for hermetic packages that incorporate
our AlSiC bases. It is this specific products family that is the real reason we entered the business. In other words, there is
a traditional and somewhat mature hermetic packaging market that uses traditional materials. We saw an opportunity to displace
many of those traditional materials with our AlSiC. It has taken time for product development internally and for qualification
of these products at major customers. However, we are now qualified at several large customers; we are seeing increasing revenues
from hermetic packages with AlSiC bases in this quarter and we expect both the revenue dollars and the rate of growth to accelerate
in 2013.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>We continue to receive positive feedback from the work we are doing with the Army Research Laboratory in armor. We are at the
tail-end of the four-year contract, and there is uncertainty at all levels as it relates to defense spending. But, nonetheless,
we are optimistic based on feedback and based on proposals to which we&rsquo;re responding that we&rsquo;ll continue to receive
funding for development from the DOD in this area, and we are optimistic that production opportunities are getting closer and closer.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>We also remain very involved in providing quotations and qualification samples for certain spinoffs from our armor development
activities. In fact, we&rsquo;re exhibiting, even as we speak, yesterday, today, and tomorrow, at the largest composite show in
North America called JEC Composites, which happens to be in Boston this year.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>As we look specifically into 2013, we remained very encouraged by the opportunities for us in Japan. Our penetration into Japan
has not progressed as fast as we had hoped, due primarily to the slowdown of the traction market in China, which in turn, has some
of our potential Japanese customers moving a little more slowly than they would otherwise. Nonetheless, the key customers we&rsquo;ve
targeted in Japan continued to move forward on qualifying our products. For example, a team of purchasing and quality personnel
from one of the major Japanese manufacturers visited us in Q3 for production qualification. We thought we&rsquo;d be shipping production
quantities into Japan this quarter; that&rsquo;s not going to happen, but we are quite confident it will happen in 2013.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>And just lastly, although many of our customers are affected by the overall macro-economic environment, nonetheless, they&rsquo;ve
continued to move forward with product development efforts and we continue to achieve design wins for new products. Our design
wins year-to-date exceed the design wins for the same period a year ago and we think that bodes well for us as we look forward.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Those are my comments. Let me open it up to you for questions.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in">Operator:</TD><TD>At this time I would like to remind everyone in order to ask a question, please press star one.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Your first question comes from the line of (Irwin Gomberg).</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Irwin Gomberg):&#9;Hi, Grant.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Grant Bennett):&#9;Hi, Irwin.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Irwin Gomberg):&#9;In the
hybrid car market, just about every &ndash; a lot of companies are either talking or introducing cars into their market. Could
you give us some feedback on what kind of &ndash; you know, what companies are possibly winning design wins in that market?</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Grant Bennett):&#9;Sure.
We announced earlier in the year, a four-year contract with a major Tier 1 auto supplier. We subsequently received permission to
indicate who that is and we&rsquo;ve done that. That particular contract is with Continental Automotive and they have a subsystem
which is used in several Renault vehicles, that&rsquo;s Renault in France. And it&rsquo;s also used in the Audi Q5 hybrid and it
will be used in the Audi A6 hybrid, which is not yet available; It is in the Smart all-electric cars. Smart is now wholly owned
by Mercedes Benz.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Continental continues to market the subsystem that incorporates our parts to other automakers. For example, they certainly
are calling on, on a very frequent basis, among others, Land Rover and Jaguar.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>We, in addition, have a part that is found in the BMW Seven Series Active Hybrid and the Mercedes S-Class Hybrid. We do not
have any parts used today by US automakers, we nonetheless are very involved in selling marketing and evaluating future designs
with the Tier 1 suppliers</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>in the US markets. For example, Delphi and Magna E-Car are two important suppliers into the US auto industry and we are working
with both of those. I don&rsquo;t want to overstate this because we don&rsquo;t have the design wins with US Tier 1 suppliers today,
but we are indeed being evaluated by those companies for future applications.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Irwin Gomberg):&#9;Who are
these &ndash; like Ford, I know, is coming out with some models. I mean, who are they using?</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Grant Bennett):&#9;Yes. As
we&rsquo;ve tried to get our hands around demand here, we&rsquo;ve been looking very specifically at this. But to be specific,
the Chevy Volt, the motor-control module, and in fact, the entire electric propulsion subsystem, not only the electronics but the
motor itself, is made by Hitachi Limited in Japan. With the Ford Fusion, Ford&rsquo;s all-electric vehicle, Magna E-Car that supplies
the motor-control module.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Just listing a couple of others, one of our large customers in the traction market, is Infineon in Germany &ndash; they&rsquo;re
both a traction and an automobile supplier. They supply the motor control module for the Hyundai Sonata hybrid and we are working
closely with Infineon targeting some auto motor products for them.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Most US auto manufacturers have tended to buy the first generation motor-control modules from Japan. Japan simply had much
more mature power module suppliers. These power modules convert DC power in the battery to AC for the motor and that technology
is coming out of the traction industry and Japan was simply way, way ahead of the US.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>We are working with US Tier 1 suppliers; we&rsquo;re working with all of the European major Tier 1 suppliers and we also are
talking to the Japanese players.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Irwin Gomberg):&#9;All right.
BMW has come up with other model besides the Seven.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Grant Bennett):&#9;That&rsquo;s
true. And they &ndash; I don&rsquo;t want to be specific -- they source from more than one Tier 1 supplier. And we are in the Seven
Series but we are not today in their other products. We are certainly calling on them and we believe that we&rsquo;ll be in some
of their future models.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Irwin Gomberg):&#9;Are they
choosing like a cheaper model? I mean why did they switch?</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Grant Bennett):&#9;Well,
they&rsquo;re simply using a different Tier 1 supplier that for whatever reason, has chosen not to use AlSiC. We know the Tier
1 supplier they are working with and we&rsquo;re calling on them. Over time, we think that we&rsquo;ll be successful in penetrating
this Tier 1 supplier but we&rsquo;re not there yet.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Irwin Gomberg):&#9;All right.
In the armor, these options that you have, those are still far away, those applications?</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Grant Bennett):&#9;Well,
yes and no. We are very pleased that we have one specific product that we are making in a private label relationship. This is a
component that our customer purchases and sells under their name. We don&rsquo;t yet have permission from them to divulge the application,
and the volumes will be relatively</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>modest. But it&rsquo;s an important design win for us because it relates to the very light weight composite that we&rsquo;ve
developed by combining cenospheres with our aluminum and it&rsquo;s giving us the initial opportunity to gain manufacturing with
this composite.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>There&rsquo;s nothing from a revenue point-of-view which is real significant at the moment, but we remain very positive and
convinced that the effort we&rsquo;ve spent there will absolutely pay off.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Irwin Gomberg):&#9;Yes. And
the army is going ahead and put out the contracts for the new Humvee that they&rsquo;re eventually going to buy. Is there any hope
that your material might be using it in the next generation?</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Grant Bennett):&#9;I apologize
I am not up-to-speed on to Humvee specifically. But, we are actively being evaluated for use in an upgrade of a different army
vehicle. And there&rsquo;s a large contract out right now, on this particular system. They want to do a fundamental upgrade of
the armor and of the electronics at the same time so that the final decision on the armor is still a year or longer in the future.
But we&rsquo;re definitely very much in the running.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Irwin Gomberg):&#9;All right
and the hermetic packages, that&rsquo;s on military, mostly?</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Grant Bennett):&#9;It is
about 50 percent military and 50 percent commercial. The commercial, in turn, is about 80% avionics or satellite and then 20 percent,
simply, high reliability.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>For example, we&rsquo;re making one housing used in oil and gas drilling; in is used in a drilling apparatus which measures
and transmits information on the drilling operation.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Irwin Gomberg):&#9;All right.
OK. That&rsquo;s it. Thanks a lot.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Grant Bennett):&#9;Thank
you.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Irwin Gomberg):&#9;Sure.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in">Operator:</TD><TD>Again, if you would like to ask a question, please press star one.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Your next question comes from the line of Mike Hyde.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Mike Hyde):&#9;Hi, Grant.
Hi, Ralph.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Grant Bennett):&#9;Hi, Mike.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Mike Hyde):&#9;Just two questions
- one, very long term and two, short term.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>The long-term one first. In all the product lines, whether it is traction control, hybrid electric, hermetic, even armor, and
even older products like flip chip lids, what are you quoting, saying, marketing, pushing? What do you really believe you have
going forward for, really winning long-term business in a way of cost advantage versus copper or any other material?</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Grant Bennett):&#9;OK.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Mike Hyde):&#9;And is it
greater in, you know, say, hybrid than in the packages where, perhaps, cost isn&rsquo;t as much of an issue?</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Grant Bennett):&#9;We use
the word motor-control and IGBT module synonymously. IGBT is Insulated Gate Bipolar Transistors. IGBTs are a class of integrated
circuits where there has been breathtaking progress in improvements and efficiency. And many people who really look at the issue
believe that it&rsquo;s the development of the IGBT that is absolutely just as important as lithium ion battery in making hybrid
and electric car viable.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>IGBTs are a growth market and they are used now almost anywhere a medium or high voltage electric motor is used. When you get
down to real low voltage, there are some other alternatives but the use of IGBT is growing and we believe it will continue to grow
for some time.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Most of the modules are simply built on a copper baseplate so, for example, your dishwasher may have a IGBT module built on
a copper-base plate. Our products are used in high reliability applications and generally high voltage applications. We sell our
product for, anywhere from $30 to $50 and the corresponding part in copper is $10 so we are three to five times the cost of the
copper.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>But in the traction area, they go from a warranty of three years on copper to 30 years on AlSiC and every single train customer
and every single wind turbine customer is very happy to pay the price premium to get that kind of extended lifetime.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>We see the high voltage market growing. For example, IGBTs now are increasingly being used in electrical transmission to step
down the voltage from a high-voltage, long distance transmission line down to the voltage that can be distributed to households.
Instead of large transformers, increasingly IGBTs can be used for that purpose. Those are very high reliability. They&rsquo;ve
got to be constantly up and that market is growing.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>Secondly, as we bring our manufacturing cost down, we see growth we believe that will open up additional markets. For example
the market for</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>motor controllers in industrial equipment like CNC machining centers or welders, is very, very large. These folks are talking
to us, and they say, &ldquo;It&rsquo;s too expensive, but if you can get down to this price point, we&rsquo;d absolutely switch
in a minute.&rdquo;</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Mike Hyde):&#9;In the automobiles,
hybrid and electric, the cost issues right now are not that big a deal? It&rsquo;s just demand?</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Grant Bennett):&#9;Cost is
certainly an issue. In the automobile area almost every automaker today is using their own architecture. For example, even within
Toyota, there are three or four completely different motor-control designs, three or four approaches, to addressing the thermal
management issue. A single low-cost standard hasn&rsquo;t evolved. And we are doing our &#9;best to demonstrate that AlSiC can
be the low-cost, high reliability standard. But right now, it&rsquo;s a kind of a wild market where everyone is looking at different
approaches.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Mike Hyde):&#9;And now, the
short-term question. In Q4 here, as you see, demand returning in different product areas, which sounds terrific even from when
I visited a few weeks ago. How much do you think it might bounce back? Do you have any forecast that you can share? What, at least,
the target you&rsquo;re aiming for as far as, you know, returning to cash positive?</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Grant Bennett):&#9;I&rsquo;m
going to resist the temptation to give quarter-specific forecasts, but let me simply say that in round numbers and excluding working
capital changes, ( when revenue is increasing more money is tied up in accounts receivable) but today, in round numbers, we are
cash breakeven at about $4 million of quarterly revenue; and we are GAAP earnings positive at about $4.5 million in revenue given
our current costs.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in"></TD><TD>We have very carefully looked at our cash position and we feel completely comfortable that we&rsquo;ll move back into a cash
positive position soon. In Q4, if we&rsquo;re not at cash breakeven, we&rsquo;re pretty close. And as we go into next year, we
very much look forward to a profitable year in 2013.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in">Operator:</TD><TD>Your next question comes from the line of Wolf Scheck.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Wolf Scheck):&#9;Over a period
of time, the totality of your efforts, what type of revenues do you think you could be generating from this? You know, given you
built up your staff over there. You have a manufacturing capacity. You&rsquo;re working on some very interesting markets. So what
are &ndash; you know, you&rsquo;ve been locked in a range of say, $12 to $20 million approximately for the past year? What type
of reward do you think you&rsquo;ll see &ndash; you could see that in a few years from your total efforts here from this kind of
R&amp;D and work?</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Grant Bennett):&#9;Yes. Well,
being deliberately imprecise in terms of timing, referring to your range of $12 to $20 million, we believe that we absolutely could
double that high end; go to $40 million. Obviously, we would add direct labor but with virtually no or minimal additions in overhead
staffing. We have made wonderful improvements in productivity and in shrinking the floor space we need so that we really could,
even in the current facility, hit $40 million. And that the gross margins would be very attractive.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Wolf Scheck):&#9;OK. Thank
you.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in">Operator:</TD><TD>And there are no further questions at this time.</TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-indent: -1.25in">(Grant Bennett):&#9;We thank
you very much for joining us. And we thank you for your participation. We&rsquo;ll say goodbye and let you go home. Thank you.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 1.25in">Operator:</TD><TD>This thus concludes today&rsquo;s conference call. You may now disconnect.</TD></TR></TABLE>

<P STYLE="font: 12pt/200% Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 12pt/200% Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 12pt/18pt Times New Roman, Times, Serif; margin: 0 0 0 1.25in; text-align: center; text-indent: -1.25in">END</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>



<P STYLE="margin: 0">&nbsp;</P>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
