Letter from the CEO

From:  Thomas J Lonsdale II
            President & CEO
            Cypress Industries
            13581 Pond Springs Road, Suite 315
            Austin, TX  78729

March 31, 2009

To Our Valued Customers,

Today’s dynamic business environment is creating more challenges than ever for many of our customers. Customers face an increase in competition, which has triggered a need for lower production costs, reduction of inventory and lead times, as well as a demand for more complex products with higher quality and longer lifetimes.

As the fluctuating economy continues to evolve, it’s now more important than ever for OEMs to choose the right vertically integrated manufacturing partner. Cypress’ range of industries and flexibility of manufacturing in the US or China enables us to maintain a low overhead. Therefore, Cypress Industries has been able to remain a strong and profitable business partner during this era that is proving to be difficult for most companies. Our banking and private equity relationships remain strong and willing to support new, large projects.

We are currently experiencing a large expansion in our OEM customer base. While many of our customers have reduced volumes, we are seeing a tremendous increase in requests from customers needing a true partner with whom they can rely on for more than just manufacturing. We believe there are four criteria driving these requests:

• Asian Factory Closings - Approximately 1 in 3 factories in the Dongguan /Shenzhen area have closed in the last nine months. Manufacturing facilities running extremely low margins in China were forced to close due to lack of demand. Companies are seeking stable, vertical US manufacturing companies with Chinese manufacturing facilities to prevent loss of their inventories and down payments. Additionally, they need to work with a US company so they may have recourse for warranties and ability to get financial terms.
  
  
• Mexican Drug Violence – Violence across the Mexican border has created an unprecedented move of business from border Maquiladoras back to vertical US manufacturing companies. The possibility of interrupted supply chains and the inability of US engineers and purchasing representatives to visit Mexican border manufacturing sites has prompted this move.
  
  
• Cost Reductions – Companies are seeking major cost reductions in order to boost their bottom lines. Utilizing our Chinese factories, we are transitioning large scale manufacturing projects quickly thus enabling our customers to benefit from our lower cost structures.
  
  
• Reduction in Supply Chain & Purchasing Groups – Large churn in our customers’ engineering and purchasing groups is unseating long term relationships and creating opportunities for vertically integrated manufacturing companies with superior service, quality and price.

Cypress Industries is committed to listening to and understanding your challenges in order to present the ideal outsourced design, manufacturing or fulfillment solution that suits your needs. At Cypress Industries, we are uniquely positioned drive innovative manufacturing, fulfillment and logistic approaches to ensure our customers’ success.

We wish you a successful 2009 and beyond.

Best Regards,

Thomas J. Lonsdale II
Chief Executive Officer

CONTACT:

Cypress Industries
214.550.1226
info@cypressindustries.com