Industrial vehicles, such as forklifts and airport ground support equipment, are employed throughout the world to facilitate the movement of physical goods. As many businesses increase their reliance on supply chain efficiency as part of their competitive strategy, the operating efficiency of these vehicles, which are an integral part of many supply chains, becomes increasingly important to them. It is estimated that there are currently approximately 1.0 million electric industrial vehicles in North America, with over 100,000 new vehicles shipped in 2005. Over the past two decades, the market share for electric industrial vehicles has risen compared to internal combustion industrial vehicles as a result of their increased reliability and capability and lower operating cost, as well as the initiatives of more environmentally conscious companies and regulatory requirements for improved air quality in working environments.

Electric industrial vehicles are powered by large onboard batteries that can consume up to 17 cubic feet and weigh up to 3,500 pounds. Charging these batteries represents a significant cost and operational challenge to fleet operators because these batteries do not typically store enough energy to support continuous operation in a multiple shift environment. Depending on the type of battery, conventional battery chargers can require up to eight hours to recharge the battery, which then must cool for up to an additional eight hours before it is ready to be used again. Consequently, depending on vehicle usage and the number of shifts in an operation, a fleet may require more than one battery per vehicle, which necessitates additional storage space, chargers and maintenance time.

Fast charge technology, which charges a battery with a high electrical current while the battery remains in the vehicle, eliminates the need for battery changing and the dedicated battery room. The earliest adopters of fast charge technology include the automotive, air transportation and food distribution markets. Large food and retail industry customers have also begun to utilize fast charge technology. There are numerous companies in North America, many of which manage large multi-location electric industrial vehicle fleets both within these markets and in others, such as the manufacturing and logistics markets, that have yet to widely adopt fast charge technology and represent a significant growth opportunity.

Raven, Dragon Eye and Swift provide comparable flight durations, range, portability and payload capability. Dragon Eye, the first small UAS to win a U.S. military competitive bid program of record, was designed to meet the specifications of the U.S. Marine Corps, and led to the development of a SOCOM version called Swift. Raven, a lighter UAS with increased capability, was subsequently developed for, and selected by, the U.S. Army and SOCOM as their designated small UAS. Recently, the U.S. Marines announced their intention to transition to Raven from Dragon Eye. Wasp is the smallest of the Company’s products, providing maximum portability and the most rapid assembly and launch. Puma delivers the longest flight duration and greatest payload capacity in a larger configuration.

The Company’s PosiCharge solutions include dedicated fast charge systems that support a heavy-duty vehicle from a single port, as well as multi-port fast charge systems that support as many as 16 vehicles at a time. PosiCharge ELT, the Company’s original fast charge product, is designed to safely deliver the highest current (up to 600 amps) to electric forklifts, such as counterbalance or “sit-down” trucks, used in heavy-duty applications. PosiCharge DVS is capable of charging either one vehicle at a time at up to 500 amps or two vehicles simultaneously at up to 320 amps each, DVS is designed to deliver lower up-front installation and ongoing utility costs when compared to other single vehicle fast chargers. PosiCharge MVS, a multiple-port, multi-vehicle fast charge system, is designed for charging low-to-medium-duty electric industrial vehicles, such as pallet jacks, reach trucks and tow motors, in distribution, warehousing, and general manufacturing settings.

The Company’s Energy Technology Center provides contract engineering services to internal and external customers. The Company’s Energy Technology Center products include a line of advanced electric load and sink systems used to test batteries, electric motors and fuel cell systems.

Cost of sales for the three months ended July 29, 2006 was $19.6 million, as compared to $19.5 million for the three months ended July 30, 2005, representing an increase of $0.1 million, or less than 1%.

Gross margin for the three months ended July 29, 2006 was $12.0 million, as compared to $11.2 million for the three months ended July 30, 2005, representing an increase of $0.8 million, or 7%.

Research and development expense for the three months ended July 29, 2006 was $3.8 million (or 12% of revenue), compared to R&D expense of $3.5 million (or 11% of revenue) for the three months ended July 30, 2005.

Selling, general and administrative expense for the three months ended July 29, 2006 was $6.1 million (or 19% of revenue), compared to SG&A expense of $5.6 million (or 18% of revenue) in the three months ended July 30, 2005.