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November 2002 Monthly Update

ZTEST Electronics Monthly Corporate Update for November 2002

ZTEST Electronics Inc.'s (TSXVE: YZT) wholly-owned subsidiary, Permatech Electronics Corp., is an ISO 9002 certified Electronic Manufacturing Services (EMS) provider founded in 1982. Permatech's offerings include Materials Management, Printed Circuit Board (PCB) Assembly, Testing and Design services. Permatech operates from a 20,000 square foot facility in North York, Ontario, Canada.

Manufacturing Industry Activity and the EMS Sector

On November 1st, 2002 the Institute for Supply Management, www.ism.ws/ISMReport/ROB122002.cfm, reported that economic activity in the manufacturing sector declined for the third consecutive month while the overall economy grew for the 13th consecutive month. The Purchasing Managers' Index (PMI) was calculated at 49.2 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. "The manufacturing sector failed to grow in November. While the Production Index strengthened, the New Orders Index softened. The PMI has averaged 49.6 percent for the past five months. The sector continues to need drivers that will help end the stagnation," commented Norbert J. Ore, C.P.M. chair of the Institute for Supply Management™.

The worldwide printed circuit board market is forecast to decline slightly in 2002 as pricing pressures and soft demand in the second half of the year drag down regional sales except in Asia, according to market researcher iSuppli Corp.  http://www.ebnonline.com/showArticle.jhtml;jsessionid=25I4XCALYZIJQQSNDBCCKHSCJUMEKJVN?articleID=5400102.    iSuppli also reports that the market slump in the general electronic equipment sector and PCB assembly in particular is likely to end in 2003. Both the sector and the sub-sector are expected to rise by a minimum of 8% in 2003 although the long-term sales forecast is still for an average expansion rate of approximately 5% due to the likelihood of continued price erosion.

"Revenue growth from 2001 through 2006 will likely see a compounded annual growth rate of 5.55%," iSuppli analyst Andrew Rassweiler said in the report. iSuppli said it expects the global PCB market to contract to $32.46 billion in 2002, down slightly from $32.5 billion in 2001 but still far from the $42.5 billion recorded in 2000.
According to a recent report by Technology Forecasters Inc, outsourcing in the electronics industry continues to develop as a key strategy. As this trend gathers momentum, the types of companies to whom name-brand electronic-product companies outsource is shifting to include not only contract manufacturers who build products to the customer company's design but also to original design manufacturers (ODMs) who design the products as well as manufacture them. Technology Forecasters expects ODM revenue to increase at a faster rate than revenue growth for EMS companies, as shown below. This is of particular interest to ZTEST, as Permatech can conform to an ODM model as well as an EMS model, given that the Company markets its design services as well as procurement and assembly.

EMS and ODM Global Revenue and Forecasts  
Source: Technology Forecasters

Permatech Established Business

With Permatech's long operating history, it has built a core base of customers who provide a stream of consignment and turnkey assembly orders. This core customer base is well diversified in the Medical, Power, Computer, Telecommunication, Wireless, Industrial and Consumer Electronics markets, limiting therefore the company's exposure to any one industry. The charts below show on a rolling six-month basis:

The proportion of revenue generated by each market served

The proportion of revenue generated by each market served

The proportion of revenue attributed to turnkey vs. consignment business,

The proportion of revenue attributed to turnkey vs. consignment business

New Business Development

The company continued to work on a Strategic Manufacturing Alliance with a customer in the telecommunication industry, as announced in our October update. This work resulted in the receipt of first manufacturing turnkey order in November for two assemblies, with the first delivery scheduled for January 2003.

Permatech completed a pre-production run for a customer in the safety equipment industry by delivering the last of three boards ordered.

In November, ZTEST has begun the layout design of four PCBs for a new industrial customer. This project is scheduled for completion in late January 2003, including prototype assembly by Permatech. In addition, PCB layout design work for an instrumentation company commenced. This development is scheduled for completion in late December 2002 followed by prototype assembly by Permatech.

Holiday Schedule

Other than fulfilling orders scheduled for delivery during the first week of January 2003, the company will be closed from December 23, 2002. The regular work schedule will resume on January 2, 2003.

We would like to extend our best wishes of happy and safe Holiday Season to all our shareholders, customers, suppliers and other stakeholders. We wish you a happy and prosperous New Year as well.