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We’re pleased to report record product sales 26% higher than last year. The record product sales drove a 20% increase in total revenue and a 22% increase in net income to $0.70 per diluted share.Now, I’ll turn the call over to Curt to cover details of our financial results. Curt Reynders Thanks Dan, and good afternoon. As Dan mentioned, total revenue for the quarter increased 20% to $7.96 million. The increase was due to a 26% increase in product sales, which more than offset a 4% decrease in contract R&D revenue. Product sales were $6.69 million driven by strong sales into industrial markets. Record product sales were despite our history of the December quarter, our third fiscal quarter, being the weakest quarter of the fiscal year. Until last year, our product sales had been less in the third quarter than the second quarter every year since fiscal 2005. There was a sequential increase last year and a 4% sequential increase this year. The departure from seasonal weakness is encouraging and may be due to increased sales to existing customers, new customers, or improving economic environments, overcoming adverse seasonal patterns such as distributor ordering or customer shutdowns late in the calendar year. The slight decrease in quarterly contract R&D revenue from $1.33 million to $1.28 million was due to the completion of certain contracts and contact activities. Dan will talk more about contract activities in a few minutes. Gross margin increased to 69% of revenue, compared to 68% in the prior year quarter due to a more profitable revenue mix with a higher portion or product sales. Total expenses increased 21% for the third quarter of fiscal 2011, compared to the third quarter of fiscal 2010 due to a 16% increase in selling, general, and administrative expense and a 31% increase in research and development expense. The increase in selling, general, and administrative expense was due to an increase in performance-based compensation and commissions and the timing of professional services. The increase in research and development expense was due to increased product development activities. Operating income, which is gross profit less expenses, increased 22% compared to the third quarter of fiscal 2010 to $4.3 million to $4.53 million and operating margin was 57%.
Interest income increased 24% to $512,000 for the quarter due to an increase in interest-bearing securities. Income before taxes, which is operating income plus interest income, for the quarter increased 22% compared to the third quarter of fiscal 2010 to $5.05 million, and pre-tax margin was 63%. Taxes were 33% of income before taxes for the quarter, the same as last year. Net income from the last quarter increased 22% to $3.38 million, or $0.70 per diluted share compared to $0.57 last year, and that margin was 42%. For the first nine months of the fiscal year, total revenue increased 15% to $23 million. Diluted net income per share increased to $2 for the first nine months of this fiscal year compared to $1.73 for the same period last year.Operating cash flow strengthened our balance sheet primarily due to $8.95 million of cash flow from operations. Cash plus marketable securities was $58.3 million as of December 31, an increase of $8.77 million in nine months. A $2.89 million increase in short-term marketable securities in the first nine months of fiscal 2011 was due to marketable securities previously classified as long-term approaching maturity. We expect short-term securities to increase over the next several quarters as more securities approach maturity. Accounts receivable decreased $750,000 due to the timing of payments by our customers. Purchases of fixed assets stood at approximately $502,000 through three quarters of the fiscal year primarily for production equipment to expand our capacity. Now I'll turn it over to Dan for his perspective on our business. Read the rest of this transcript for free on seekingalpha.com