Friends and Shareholders:
I am pleased to attach this morning's press release announcing Dynalyst Manufacturing Corporation's recent contract with Freescale Semiconductor (formerly Motorola).
As the third largest chip manufacturer in the U.S., the significance of Dynalyst's relationship with Freescale should be clear. Late last year, Dynalyst participated in a bidding procedure with its competitors, called a “reverse auction,” whereby Dynalyst, and its competitors, bid on open-ended Freescale contracts for the coming year to perform its test/load board work. Of the $5 - $8 million dollar business expected for the 2006 time-frame, Dynalyst currently expects to receive more than $1.5 million of that business.
Dynalyst was one of several “partners” who received these open-ended contracts. Freescale’s award letter states that Dynalyst was chosen because of its “competitiveness in pricing and continued efforts on quality, delivery, and technology on fabrication, as well as design.”
However, for you to really understand the significance of this contract, I’d like to take this opportunity to introduce Dynalyst, and briefly discuss its business.
As one of only a handful of companies worldwide that focuses on advanced design engineering for the automated test equipment (ATE) industry, Dynalyst produces test, probe, and load boards for semiconductor, or “chip,” manufacturers. Dynalyst’s engineers develop very special semiconductor test/prototype printed circuit board (PCB) solutions that test the performance of semiconductor manufacturer's devices (e.g., computer CPUs, cell phone microprocessors, etc.) widely used in consumer products such as desktop and laptop computers, cell phones, MP3 players, and digital cameras.
Before any chip is ever integrated into a product, it is first placed into its own customized test PCB. This specialized PCB is developed in conjunction with Dynalyst’s engineers and the customer’s design team. Dynalyst then creates a specially-designed PCB that runs all of the chip’s functions, and provides a real-world testing environment for the new semiconductor, to ensure the chip performs as was intended by the designers for its use in an end-product. You can now begin to see how essential this "behind-the-scenes” service is to every semiconductor-enabled product that is created.
Typical customers who outsource test and load board services include such prestigious companies as Freescale, AMD, SigmaTel, and Intel. For example, the Dell Inspiron® computer and the Apple iPod® both have an audio chip manufactured by SigmaTel; its design was likely tested initially on one of Dynalyst’s test boards.
The forthcoming proxy statement will have more in-depth information on all of Dynalyst’s services, but I believe this press release and this letter should give you a good idea of the nature of its core operation.
The latest Semiconductor Industry Association (SIA) chip sales report forecasts 2006 sales to be in excess of $245.5 billion. Looking ahead, the SIA predicts the next two years to experience double-digit growth rates, with 2008 chip sales forecasted at over $309 billion. We can infer from these data that the need for Dynalyst’s services will continue. This is a very healthy industry growth rate, and we believe Dynalyst’s niche in the semiconductor industry will grow accordingly.
With regard to the merger, we have the accountants, auditors, and attorneys engaged and in action, and we look forward to sending out the proxy statement as soon as is practicable, following which we will be allowed to "open up" and share with you the multiple reasons why we support the merger.
These are simply my personal comments, and should not be relied upon in your investment decisions. I strongly urge you to conduct your own due diligence with regard to any investment in VirTra Systems. I respectfully refer you to VirTra Systems' filings with the United States Securities and Exchange Commission.
--L. Kelly Jones, VirTra Systems CEO
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