Good afternoon. My name is Bernard and I will be your operator today. At this time, I would like to welcome everyone to the CPS Technologies Corporation’s Third Quarter 2018 Investor Conference Call. [Operator Instructions] Thank you. Mr. Ralph Norwood. You may begin your conference.

Thank you, operator, and good afternoon to everyone. I’m joined on today’s call by Tom Breen, Our Senior Vice President for Sales and Marketing; and Grant Bennett, our CEO. 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 the many uncertainties that exist in CPS’ operations and environment. 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 statement. Now, I would turn the call over to Grant to offer his perspective on the results for the third quarter.

Thank you, Ralph and welcome to all of you. Thank you for joining us on this Halloween. We’re very pleased to report revenues in the third quarter of 2018 of $6.1 million, an increase of 44% versus the same quarter a year ago and an increase of 17% versus the second quarter of this year. Revenues for most product families increased in the quarter, the largest increase was in baseplates for power modules. These revenues of $6.1 million represent our highest quarterly revenues since the Company was founded. A year ago, we embarked on a strategy to become the dominant player for baseplates in high voltage power modules. This strategy involved some aggressive pricing, in many cases tow-year sourcing agreements, and in the case of a large European customer, assuming responsibility for providing a nickel plated rather than unplated baseplate. As a result of these actions, we’ve gained market share and revenues were up sharply. In addition to the gains in market share, some of the growth is the result of the market itself growing. Forecast by our major customers suggest that their demand will remain strong for the remainder of 2018 and throughout 2019. This strategy has resulted in increased revenues. It has also, as expected, had the immediate impact of reducing margins and increasing our investment in working capital, in particular in accounts receivable. Earlier in the year, we had some inefficiencies and incurred some nonrecurring costs associated with hiring and training a significant number of employees in our manufacturing operations. These are now behind us. Due to market and competitive dynamics, market prices in some parts of the world declined below what we believe are sustainable levels in the recent past. But this condition, we believe, is also temporary and is improving. We recently completed the second…

Thank you, Grant. Revenues for the quarter totaled $6.1 million. This was the third successive quarter for revenue increases, which has been due in large part to the sale of baseplates to our European customers. This reflects the success of our strategy to capture an increasing share of business from our key customers. Gross margin for the quarter amounted to 16% of revenues. This compares with 12% in the second quarter and 3% earned in the first quarter this year. Even at current prices, we add about $0.40 for every additional dollar of revenue. Selling, general and administrative cost totaled $983,000 for the quarter, up 32% compared with the same quarter last year. Recognize of course that revenues were up 45%. So, this is not surprising. And nearly half of this increase was due to sales commissions associated with the revenue increase. The Company incurred an operating loss of $19,000, which compares with an operating profit earned in the third quarter last year of $17,000. This swing was due to the fact that the increase in market [Technical Difficulty] reflected borrowing on the line of credit of $900,000 that we borrowed. And you will note, we also recorded a $14,000 gain in other income associated with the sale of used equipment. The effective tax rate for the quarter was 26%, down from the 35% last year, as a result of the Jobs Act. Turning to the balance sheet. We ended the quarter with cash of $88,000 and borrowings on our line of credit of $900,000. Although borrowings remained unchanged from the second quarter, our cash balance declined by $330,000. This was primarily because of the increase in receivables associated with the increase in revenues. Our receivables totaled $3.9 million at the end of the quarter, representing DSOs, day sales outstanding, of 57 which is consistent with historical trends. Our plant, property and equipment was down $35,000 compared with the end of the second quarter as depreciation exceeded capital expenditures by this amount. Finally, on the asset side. We ended September with $3.3 million of deferred taxes and asset which will shield us from paying taxes on the next $12 million to $15 million of pretax income. Turning to the liability side. Payables and accruals totaled $2.9 million, which is almost flat with the same totals at the end of the first quarter and at the end of the second quarter. At the end of the third quarter, our current ratio was 2.0, and we had no long-term liabilities. At this time, operator, we’re ready to take some questions.

[Operator Instructions] Excuse me. We have a question from Walter Schenker. Your line is now open.

Good afternoon. Having made the decision to effectively, materially cut price to buy a greater share of the baseplate business, there are a limited number of competitors that you have who can produce what you produce. What sort of competitive reaction, or is too soon to tell? Of course, sometimes cutting price is a pretty slippery slope. Have you seen so far about some reaction to this?

I’m anxious prices are -- in the most recent contracts, they did decline. But, but I’m very anxious to indicate that we are not in a price war in our opinion, and in fact really just the opposite, that there’s lots of the competitive dynamics that we can dissect here. But, fundamentally, we believe that -- and there is some evidence that prices are stabilizing in a more positive way. So, in short, we don’t believe we’re on a slippery slope.

And your ability to cut price have much or anything to do with currency? Because I would’ve thought that actually would have worked somewhat against you.

No, currency was really no factor. And interestingly, people think the relative currency is the euro, and it’s not the case. Since competitors is yen, it’s really the dollar relationship to the yen But we don’t think, in this particular time frame, that’s been an issue.

Okay. One other thing. You previously, for many years, talked about the competitive situation in Japan, and a lengthy period of litigation. That’s largely behind you. What have you or what success are you now having in increasing your sales in Asian markets?

Let me -- this is Grant speaking. Let me just link that question with the previous question and say that there was some -- some very interesting competitive dynamics where essentially we were kept out of Japan. And now that that’s no longer the case, I just want to comment that that’s another factor which is helping to return prices to a much more sustainable level on a worldwide basis. In other words, the competition has returned to a more level playing field. We are progressing in Japan. And although we hope things would move faster at almost every one of our customers, if you list the major price IGBT suppliers in Japan, we, as recently as this week, have been shipping prototypes qualification modules to several of those players. So, there’s not currently anything in serial production. But with all the major players, there are parts being qualified. I can say, in most cases, they are qualifying us on new products as opposed to qualifying us on existing products. And that means that our sales growth will be dependent upon how fast their new product gains acceptance in the marketplace. But, in short, we’re absolutely making progress and I simply wish it were faster. Do you want to say anything more about that, Tom?

Just to reiterate that for all of the key target accounts that we have been pursuing, there is activity in every one of them. And I think one thing we’re noticing comparatively is the business risk portfolio is a little bit different in Japan than it is with some of our existing European customer. So, as they weigh their options for having a reliable, viable second source versus the risk to ongoing production of bringing a new production part on board for existing products, we are seeing more willingness in Europe to do that than we are seeing in Japan presently. But, we remain bullish that Asia-Pacific in general and Japan in particular will be major growth area for us through the end of 2019 into 2020.

And lastly, given the multiyear contracts and the increased market share and some other progress you’re making toward new customers, should we expect in sort of a broad brush that $6 million quarter is sort of the new normal as a base? Stated differently, was there something very unusual in the quarter, so that $6 million isn’t…

No, this is not unusual. And as you know, Walter, we don’t give specific guidance. But, I think we are comfortable in saying that in all cases with our customers, the business is strong; we expect a strong fourth quarter. And as we look into 2019, we believe that year will be noticeably above 2018.

[Operator Instructions] We have a question from Warren Silver. Your line is open.

First question I would like to ask is, is there any adjudication of the plating litigation concerning the nickel-based plating that we had last year?

This was a claim from a customer relating to our plating vendor plated twice certain number of parts that were shipped to the customer. And the short answer is that our insurance provider is investigating this claim with the customer in a very positive and constructive way. And we -- they’ve made good progress on collecting data, and we’re very confident that this will be satisfactorily resolved through our insurance and will not have any impact on our financial statements.

And last thing, Ralph mentioned that we have utilized $900,000 of the Banco Santander credit line, I believe that was $1,500,000. It seems that our growth is being constrained by the lack of working capital to expand sales. Would you comment on that, please?

Yes. I’ll comment on it. We are not going to let a credit line limit the sales opportunity for growing. You’re right. We have borrowed $900,000. And in fact, from beginning of the year until the end of the third quarter, we added over $1 million to working capital in the form of receivables and inventory with a modest growth in payables. But, going forward, we are talking with our banks, very positive discussions. We expect to have the current line extended through the end of midyear 2019. It’s not over until it’s signed, but we expect to have that done within the next couple of weeks. And we don’t think this is going to limit our sales growth.

Next question is from Lenny Dunn from Mutual Trust Company. Your line is open.

I could tie up a couple of lessons from the last serious of questions I asked three months ago. You had mentioned that you expected to have more announcements but they still have been limited. Is your expectation that we will hear more announcements in the next few months from you?

Our philosophy is to only announce or make that type of press release on substitute and newsworthy events, which is not to say that there aren’t significant activities going. Due to proprietary relationships with our customers, we’re not allowed to comment on. But, we are not going to hold back on provide information. We’re constantly looking at and evaluating both internally and with the Board what the proper cadence would be for those types of releases. But, at this time we think that the cadence that we’re on is appropriate for the amount of substantive information that we can share outside of the existing relationships we have with our customers.

Yes. That was clearly the answer you gave me three months ago but you did indicate with your expectation that you’d have more announcements which got me maybe happy because that meant that there would be more substantive announcements. So, I guess, I’m asking the same question the second time.

This is Grant speaking. We appreciate the feedback that you and our other investors give us. And some investors have even been kind enough to send suggestions of kinds of press releases that could be made talking about while preserving confidentiality the customers require. And let me just reiterate that we would like to increase the number of announcements. We’re only going to announce, as Tom indicated, things that are substantial. But to be quite candid, we’re trying to gain skill, if I could use that word of being able to comment more frequently on important projects. So, the desire is here, we’re working on it. And again, we’re trying to walk that line of making sure that it’s substantive and of course, in all cases that it’s accurate.

I understand. And I have no desire to become your IR guy. So, that’s not the purpose of the call. But, I have to believe there are things you could think. And the second thing that you had mentioned on the last call, when referring -- and I’m doing this from memory, I don’t take notes on exactly what I asked. But, you indicated that this fall that you would start showing what you’re doing to Wall Street. So, is there -- do you have conferences set up now?

We actually were considering it the last call, going to the Sidoti conference in the fall. That was if you recall what we did say is we are considering it. Frankly due to travel of Grant and Tom in European and Asia, we decided to pass on that. The next Sidoti is in the first quarter, and as a good chance, we will be there. And I say Sidoti because we participated in there a few years ago, we found it to be quite helpful. We were quite impressed with the investor group. And we haven’t committed, but I think it’s more likely than not that we’ll participate in the first quarter in Sidoti and some similar conference.

Sidoti conference is good. But, you can’t go too many of these things, assuming that the legitimate conferences I don’t want you to go to ones where all they want you to do is pay a fee and pay for everybody’s food. So, that I’m not interest in saying you do. But there are legitimate conferences that go on a regular basis.

It’s interesting you say this, Lenny, because I’m singing along with you. We’ve had sophisticated investors say be careful which conferences you go to, not just because it could cost you fee but you might get associated with the kinds of companies you don’t want to be associated with. So, offline, I might give you a jingle to get some thoughts you have in mind of conferences that we should consider.

Okay. You still have my phone number?

I do. I know where your home is in Milwaukee.

Okay. I won’t hide under the desk. But, I don’t want to be the best kept secret on Wall Street. And that’s I’m afraid has been. I mean, we bought a big chunk of stock and we moved it up a little, we didn’t move it up to the peak and we’re holding and we’re long-term investors. But, it’s drifted back where we started and the volume has dried up also. So, it looked to me from the selling that I saw in it that you have one or two fairly large investors that just threw in the towel. So, I’m not asking who they were, but are you aware of who they were?

No. We get a list a couple of times a year just to compare those notes. And I’d be surprised that we had a significant block that went south. We probably have, let’s say, order of magnitude, a dozen investors that have about 200,000 or more shares. You know that we have three that have more than 5%. Those three haven’t changed. So…

My indication, it goes into more than one account. [Ph] We have a couple of hundred thousand shares, but it’s not all in one person’s name.

It could be -- we’re not aware of any, to answer your question.

Yes. We didn’t sell any, that I can tell you. But, we thought that they would have woken by now, and we’re frankly little disappointed they hadn’t, and I believe eventually it will but eventually it’s a long time. So, I appreciate -- we don’t want it go up so we sell, but we’d like it to go up, so people can smile when they own…

Sure. We’ll give you a call on some of those thoughts offline.

Okay. And then, -- but you don’t have any definite plans beyond the Sidoti conference, which is a legitimate conference, which doesn’t take place by three months because they just had it…

That’s right. It seems like there are a fair number in the first quarter and some in the second quarter. So, I’m quite confident we’ll do one and possibly two in the first half next year.

Again, if they are legitimate, I don’t think you can do too many. And…

It’s a balancing act. We’re a small company and every time we go for -- if you go to ROTH, you’re talking almost a week that’s out of your time schedule and you take the CFO and CEO out a week. It’s a big investment in time. So…

Yes. The problem with ROTH and I have nothing against ROTH is, they generally want [ph] to have people that are going to be doing investment banking. And I don’t see you guys as a candidate for that. So, that’s not an ideal conference.

Right. I just mentioned them in terms of the time commitment, but…

There’s one that takes place in Florida usually in early January. There’s a number of legitimate small cap or microcap I would characterize, conferences, but we need to be on somebody’s radar and that as part of the problem. And then, the other thing is, frankly little disappointed because I thought we would be in the black by now. And I know that you can’t indicate whether you are going to be in the black in the next quarter, but certainly with the $6 million run rate, we should be.

Listen, I’ll give you call and we’ll chat.

Next question is from Randall Sledback [ph]. Your line is open.

Could you give us an update on the traction market, especially how things are going with China rail?

Sure. Let me comment and then I’ll have Tom comment as well. The market itself and the traction market is not just trains but really all the high-end of the power module segment. Modules are used in the wind turbines, and they are increasingly used in the electrical grid, as well. The market is growing. And even though if we look back in time, there are occasional shocks, Brexit, and Brexit going back in time caused the market to kind of seize in Europe for a while. But, in total, the market is growing. And we’re very pleased that there are number of players worldwide that are seeking to either expand or get in that market. For example, Cree here in the U.S. through their Wolfspeed division, and they’re looking at silicon carbide die for that market. And we’re actively involved with them as well as many others. In China, we’ve had very good progress in completing the qualification process for our targeted customers. And in the clearest [ph] manifestation of the current political climate affecting us, just two weeks ago China slapped 25% retaliatory tariffs on our product going into China. And our targeted customer says that 25% added cost is a real issue. And we’re in discussion with them right now to understand what that really means. We certainly hope that those tariffs go away, but that’s become an issue just in the last two weeks. Do you want to comment, Tom, on any other aspects of the traction market?

Sure. I think sort of tying back to one of Lenny’s comments on prior announcements, we haven’t made several announcements about new orders in the last couple of quarters that are substantive and multiyear. But growth in those markets, particularly in traction, have not only met the announcement quantity and -- dollar value, excuse me. But these customers are already exercising some of the upside potential that’s built into those contracts in the second half of those contracts. So, in addition to seeing that uptick, also in early renewal discussions with several of these key customers and consistently across the board, they indicate that their businesses are continuing to grow at a very healthy rate, which represents additional growth for us heading into 2019 and 2020. As it relates to China, that is unfortunate. Hopefully, that is a short-term political speed bump. And we are investigating our options, as Grant said, with those customers to see if there are ways in which this particular material can be exempted. There is a process for that and we’re working in country to try and see if that can be come to fruition. In reality, in 2019, China revenue was not a major component of our growth. But, that transition from qualification, successful qualification to early production units was part of our plan. We want to make sure we find a way to keep that on track.

Great. And sort of a related question. It looks like the Massachusetts Bay Transport Authority has got some plans to be producing in the U.S. and some rail trends I guess that are from CRRC. How does that all play in, since that’s got U.S. production capabilities in it?

Let me take that on, because this has been going on for some time. The CRRC has a contract with the Commonwealth to supply subway cars. And that contract initially was $500 million. It’s since been expanded to almost $1 billion. And they are quite happy with the cars that have been delivered so far. When this was announced a few years ago, we realized that although subway cars don’t consume large numbers of modules, baseplates, we wanted to be sure CRRC in China knew that this company in the Commonwealth called CPS is a good company to do business with if you want to keep doing business with the Commonwealth. So, we made friends with our state representatives. We talked to the Chairman of the MBTA who supported that, provided a letter on our behalf and has been helpful in meetings that we have with CRRC in China. The subway cars, as I said, themselves are not going to consume a great number of baseplates, unlike a locomotive and high-speed train. But, the fact that they have a assembly plant in Springfield and it’s going to be kind of their home base in the U.S. to expand subway cars and trains, we’re taking advantage of that by making sure that we waive the Commonwealth flag in front of them every time we meet with them.

Your next question is from Greg Weaver. Your line is now open.

Nice job on the gross profit dollar flow through here. Last quarter, I asked you about what the incremental margin was. And Ralph, to your point, it was 40%, you are up 888,000 sequentially, revenue and gross profit dollar is up 359. So, very good. Do you think that’s sustainable to continue that or should we see another, whatever, $900,000 revenue increase, we’ll see the same kind of flow through?

Yes.

Okay.

There will come to a point where you have a step function but in terms of the next that -- if we had another $1 million, it would be pretty close to 40%.

Okay, excellent. And that’s why we need a good [Indiscernible] profitability scenario. And the cash consumption, any color there in terms of when you think that’s going to -- your cash needs are going be, because some of that is a function of revenue growth?

A big part of it is a function of revenue growth because it sets up working capital. But, if we were to increase -- when we increase sales, we will use working capital. But, now, some of that will be paid for by the extra margin because we’ll be will be in the black, not in the red. So, I’m happy to have, as a CFO, get those sales up, get those prices up and we’ll make sure you have funding, whether it’s from the banks or wherever we need to get it from. Right now, you can imagine the banks -- this past quarter, we were EBITDA positive for the first time in several quarters. And going forward, we expect to continue to be EBITDA positive.

And the bank -- is there some kind of an accordion feature that’s running off your receivables or how big, how much capacity have you got here broadly?

The current formula is based on receivables. And at the end of the quarter, we have the potential to be about $2 million, although the line is only $1.5 million. So, until the line is extended, those extra receivables don’t really help. But, let me expand a bit on this because there’s an important economic side of our business, which isn’t well-known. Our receivables -- our inventory is built to a specific purchase order and blueprint. So, our inventories are on the way to becoming a receivable roughly six-weeks down the road. So, unlike most companies’ inventory, it’s not on the shelf, it’s on the way to our receivable to a sale to cash. And we make that point with our bank, so that they have not only the collateral of receivables but they also have, if necessary, the inventory. And we’re going to leverage that fact as we have future discussions with our lenders.

Right. So, it’s a six weeks cycle time following your WIP? [Ph]

Yes. You can see our inventory turn six times a year. So, very fast.

Okay. Thanks.

Most of these -- if you look at our WIP as described in our SEC filings. The WIP is in most cases is a base plate without plating. So, the final step has not been -- has not occurred, but it is almost done and almost all the WIP is either at the customer or in route to the customer, it’s not sitting in our warehouse.

So adding a plating for your key client there that I you assume increase the cycle time then just a little bit out of your hand…

Yes, by about a month.

So, that’s part of this cash…

Because that particular client -- Greg, that particular client, previously when the baseplate left here, it was a sale. Today, the baseplate leaves here, it goes on a plane, on a way to a plater in Europe, we still own it. The plater puts in its inventory for a week or two, we still own it; it finally gets plated, we still own it. And then, when the customer then takes it from the plater, then the sale occurs. That extra 30 days adds to our inventory.

I understand.

But there’s a subtle benefit to this. The fact that that major European customer now expects us and relies on us to make sure that the plating gets done, work that they used to have to do, strengthens that bond and that relationship, so that when we come up for the next contract, we think that that extra bond is going to be helpful to us in a competitive discussions.

And why do you want to get rid of the plating aspect of it, it was yield problems, or hassle or do you any issues there?

Did I say get rid of it? No, I didn’t say get rid of it. Did I…

No. The client wanted you to handle it…

Yes. It’s a big help to them. They used to have to do that logistics and now we take care of that and assume that responsibility.

Yes. It’s essentially the broad trend of reducing your number of suppliers as part of what’s going on. And then, secondly, this really is a high-performance custom product. And they just prefer to have one company to deal with rather than two as they get the final product.

But it’s the same customers you’ve been dealing with before?

Yes.

The plater. Okay. And just moving on, I guess maybe Grant, if you could give us little color around where you guys are positioned for some of the growth areas like silicon carbide, beginning a lot of traction or EV space in general? You’ve been on a higher power generally with traction you just talked, but is there opportunity there for you and what’s the activity like?

Sure. We are excited about the penetration of the silicon carbide die into the power module business. And silicon carbide power die, it provides much higher performance, but it has to run at a hotter temperature. And that increases the need for a coefficient of thermal expansion matched material, which is what we do. So, we are tracking -- more than tracking, we’re engaged with every silicon carbide die user who may be making modules that - wherever around the world. So, here in the U.S. Cree, Wolfspeed is a company that that we’re doing business with. Another U.S. firm little fuse Littelfuse recently bought a British firm Ixys -- Ixys I should call. Excuse me, IXYS. There we go, Ixys. Here in the U.S., GE is also very active; International Rectifier which has been purchased by Infineon. We’re dealing with all of those companies. On the automotive side, it continues to be an environment where there are no standards and there continue to be many, many, many different architectures, cost -- as the EV business explodes in many ways, cost is critical. And so, customers in some cases -- many cases are using copper baseplates and in some cases even move on to use aluminum baseplates. But whenever you do that, they have to address the CTE mismatch through other means. And we’ve seen cases where customers who believe that aluminum silicon carbide was too expensive went with copper or in some cases even aluminum. And then when they look at the total system cost, t hey realize that the aluminum silicon carbide would’ve been lower cost because they could’ve avoided many other countervailing costs. So, we’re engaged in a number of different programs and we’re very confident that some of them will generate meaningful, significant revenue. And we think long-term this really is a very, very large opportunity for us.

We have another question from David Birnie. Your line is now open.

I have a comment and a question. I guess my comment is, in regards to the previous caller talking about the stock price, I have to say, I’m kind of dismayed by the action recently. He was right in terms of volume and price action has really been down at a time when the Company is really doing much better than they have in last couple years. So, I hope that something can be done to remedy that and get the exposure that I think the Company needs. My question really now is about if you could sort of update on the electric car business. We’ve seen here now in the last few months an uptick in oil prices. You read an awful a lot in newspapers about electric cars. And it seems to be a growing business. And I’m just curious as to whether is there any progress there or can you comment on what the status of that is?

Well, we are the provider of the baseplates for -- let me call them some specialty or niche electric and hybrid vehicles. Today, we’ve had a 8 or 9-year program that we’ve talked about several times with Continental Automotive, that’s coming to an end fairly shortly. But, we can’t predict who is going to succeed or not. I can make the comment. I’m a firm believer, we are firm believers that the electric vehicle and hybrid vehicle are here to stay and will be growing rapidly. It is interesting to us, though, that when we are asked to quote very high volume -- high volumes for customers if we do some the retroactive analysis, those high volumes in most cases haven’t actually yet come to fruition. In other words, I think everyone is counting on the market accelerating at a faster rate than it has. But anyway, having said that, just in the last 90 days, we’ve not only shipped qualification samples to a relatively long term customer for a program where they’re looking at 750,000 to 800,000 units a year in the 3, 4, 5 years but we’ve been providing the quotations that they’re building into their planning. So, we’re there. And some of these opportunities are going to come to pass and some are not. Any fiscal comments on that.

I guess I think you touched on all key components of the market space. But, I will offer that we are working with and delivering product to all of our key customers in Europe, U.S. and Asia Pacific regions that are broadly working with it for silicon carbide applications and generally looking at for entry into automotive applications as well. So, it is a unique set of market dynamics at play where in the automotive industry cost will always be king. But as the technology advances at the silicon die level and the requirements increase for power management, it makes us more competitive. But it’s not an easy market to project. And consequently, we don’t bank heavily on that in our projections. But it is central to our area of focus on the sales side with all of our key customers.

There are no further questions at this time. Please continue.

Operator, would you poll the investors one more time? Usually there’s another person in Peoria or El Paso that wants to talk. So, just give them 30 more seconds, another one more chance to come forth.

Yes, sir. Randall Sledback [ph] has a question.

Question about what’s new in Armor. And I know there was a trade show recently. Any color you can give there would be appreciated.

Thank you, Randle. So, the Armor generally, the U.S. Navy sea trials we talked about in the past are reaching their conclusion. And after a year at sea and all the indications are that our CPS HybridTech Armor performed flawlessly without the issues. During the fourth quarter, we continued to deliver additional panels to our customer as the Navy finalizes their preferred installation configuration. Although this funded Navy initiative today is not presently a program of record, this opportunity represents some significant potential production revenue stream to CPS, if it is fully funded by the U.S. Navy and that production revenue could begin as early as late 2019, again depending upon funding from the Navy. That progress, forward progress and good results there are mimicked or echoed by the significant demand that we believe exists for the capabilities that our HybridTech Armor provides, as evidenced by the leads and contacts we collected last week at the Euronaval Show in Paris that you mentioned. Interestingly, not just the Naval Armor but for other combat vehicles in a show that was really geared towards the naval application. And looking beyond just Naval Armor, we do have additional prototype orders for evaluation samples from existing and new customers that are continuing in Q3 and Q4. And we remain bullish based upon the broad feedback from both the end-user and international navies as well as the U.S. Navy, along with the integrators and manufacturers of vehicles, both ground and naval vehicles for the capabilities that we provide at the unique performance weight and cost points for high-end ballistic protection.

There are no further questions.

Thank you, operator. And again, thanks to each of you for joining the call. We appreciate your interest in CPS Technologies. We as we do each quarter, inviting you who are in the Boston or Providence Rhode Island area to come and visit; a couple of you have done that recently, Randall for example. And we appreciate that. As we indicated, we expect 2019 to be significantly up compared to 2018. And we think we’re on a trajectory, which is certainly very exciting to us internally. And we hope it can generate real value for you. And with that, we’ll say good night and enjoy Halloween.

Go Red Sox.

That’s right.

That’s for you, Warren.

Thanks very much.

Ladies and gentleman, this concludes today’s conference call. You may now disconnect.