During the last decade, growth in the computer, telecommunications, consumer and industrial electronics markets has increased demand for ICs. According to The Gartner Group, worldwide semiconductor sales totaled $174 billion in 2003 and are expected to grow to $246 billion in 2005. To reduce the cost and increase the performance of electronic products, ICs have become smaller and faster and incorporate greater levels of functionality at a lower price. Advancements in manufacturing technologies, such as smaller IC elements, new materials, and larger wafer sizes, have permitted manufacturers to meet these requirements. However, these advancements in IC manufacturing technologies have led to increasing challenges in the design, manufacturing and testing of ICs.

ICs are measured and tested multiple times throughout the design and manufacturing process to ensure the integrity of the IC design and the quality of the manufacturing process. IC testing that occurs during design or in support of production is referred to as engineering test. IC testing that occurs during manufacturing is referred to as production test. Engineering test involves performing a wide variety of highly precise measurements during IC research and development activities on a low volume of ICs. Production test, in contrast, involves performing a targeted set of tests at a rapid rate on a high volume of ICs.

Engineering probe stations are highly configurable depending upon the size and type of wafer, the particular characteristics of the IC that the customer is testing, the required measurements, the temperatures at which the IC is tested and the test equipment that the customer is using. The Company’s engineering probe stations are available in either manual or semiautomatic versions. The Company also offers many accessories, including thermal control systems, special cables and connectors, microscopes, lasers, cameras and other items. The Company offers more than 10 distinct models of engineering probe stations in three relatively standardized product families. The Summit product family includes engineering probe stations used for a wide range of transistor and IC measurements, circuit element modeling, semiconductor process development and reliability tests on 150 mm and 200 mm wafers. The S300 product family is similar to the Summit product family in its functionality, features and accessories but is designed to test 300 mm wafers and contains many enhancements, such as a built-in anti-vibration base and ergonomic features to accomodate its larger scale. The Alessi product family is a versatile, general purpose engineering probe station used to test 150 mm or 200 mm wafers, modules containing multiple ICs, printed circuit boards, single ICs and optical devices.

In addition to its three product families, the Company also designs and builds custom and specialized engineering probe stations to meet its customers' unique or less common applications. Examples of these applications include testing printed circuit boards or display panels as large as 24 by 24 inches and multi-IC or optical modules. Custom-designed engineering probe stations occasionally result in new, standard product features or additional sales to other customers.

The Company offers over 50 different analytical probe models primarily for engineering test. The newer Infinity series probes are designed with unique probe tips derived from the Company’s proprietary lithographic manufacturing technology for exceptional electrical contact on aluminum and copper pads.

The Company’s proprietary Pyramid Probe cards use unique, custom designed and lithographically defined microscopic probe tips and electrical wiring. Electrical measurement features of Pyramid Probe cards include test speeds ranging from low speed digital to well above 20 GHz for high-volume production testing and repeatable, high quality electrical interconnections.

Cost of sales increased $3.1 million, or 13.8%, to $25.9 million in in the nine months ended September 30, 2004 compared to $22.7 million in the nine months ended September 30, 2003.

Gross profit increased $5.8 million, or 40.9%, to $20.1 million in the nine months ended September 30, 2004 compared to $14.2 million in the nine months ended September 30, 2003.

Research and development expense was flat at $4.0 million in the nine months ended September 30, 2004 and 2003.