The new facility includes financial covenants that require we maintain a consolidated net worth of not less than $45 million, and that our interest expense on the loan does not exceed 70,000 British pounds in any one fiscal quarter. Based upon the exchange rate as at September 30, 2003 this covenant does not restrict our ability to use this facility. The financial covenants on the existing facility continue but due to the scheduled repayment of this facility during the next six months any breach would not affect the repayment date.

In October 2003 the Company completed the sale of 1,400,000 shares of its common stock with 350,000 warrants to purchase common stock with an exercise price of $6.25 per share for net proceeds of approximately $6.5 million in cash. The securities were issued to an institutional investor and its affiliated funds in a private offering pursuant to regulation D of the Securities Act of 1933, as amended.

Our cash balance of $25.1 million combined with cash received from the sale of 1.4 million shares and our new facility will be the primary sources of liquidity for the company. We will use part of our cash balance to to repay our 7.5 million British pounds term loan during the next six months and we will also use our cash reserves to fund our operations until such time as we can increase our revenue or reduce our costs to achieve a profitable operation on an ongoing basis. This will depend upon how long the current continuing difficult market conditions in the semiconductor equipment industry lasts and our ability to grow revenue despite these conditions. However, we believe that our current cash balances, the proceeds from the sale of shares and our new facility will be sufficient to fund our operations for at least the next 12 months.

We sell our products to the semiconductor industry, which is subject to sudden variations in product supply and demand. The industry is experiencing a protracted and continuing downturn at this time, the length and severity of which is difficult to estimate, but the downturn has continued to date and may continue well into 2004. Management believes it is still unclear as to when conditions in the industry may improve. Our sales and revenues have been harmed significantly by the current downturn. Even after the current downturn ends there can be no assurance that orders and sales will return to historical levels.

Generally, the timing, length and severity of the cycles in the semiconductor industry are difficult to predict. Semiconductor manufacturers may contribute to these cycles by misinterpreting conditions in the industry and over- or under-investing in semiconductor manufacturing capacity and equipment. We have little ability to anticipate or respond effectively to these industry cycles.

Downturns in the semiconductor industry often occur in connection with, or anticipation of, maturing product cycles for both semiconductor companies and their customers and declines in general economic conditions. Industry downturns have been characterized by reduced demand for semiconductor devices and equipment, production over-capacity and accelerated declines in average selling prices. During a period of declining demand, to maintain our profitability, we must be able to quickly and effectively reduce expenses and motivate and retain key employees. Many of our expenses are fixed and our ability to reduce other expenses in response to any downturn in the semiconductor industry is limited by our need for continued investment in engineering and research and development and extensive ongoing customer service and support requirements. During fiscal 2001 and 2002 and continuing in fiscal 2003, we have reduced our expenses, but our ability to continue to cut costs without reducing the scope of our business is limited.

In addition, the long lead time for production and delivery of our products, and the possibility of customer order cancellations, creates a risk that we may incur expenditures or purchase inventories for products which we cannot sell.

At the time the current downturn ends, we may not be in a position to meet our customers’ needs. Industry upturns have been characterized by abrupt increases in demand for semiconductor devices and equipment and production under-capacity. During a period of increasing demand and rapid growth, we must be able to quickly hire, train and assimilate a sufficient number of qualified personnel, particularly engineers, and obtain sufficient components in order to increase production to meet customer demand. If we are unable to increase production on a timely basis in times of increased demand some of our existing or potential customers could place orders with our competitors and, as a result we may not be able to fully benefit from any industry upturn.