Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Financial Condition, Liquidity and Capital Resources

Cash provided by operating activities during the quarter ended September 30, 2008 amounted to $2,184,033. This was a result of net income for the period adjusted for changes in operating assets and current liabilities.

Capital expenditures for new equipment (including production tooling) were $941,493 for the quarter. Capital expenditures for fiscal year 2009 are expected to be approximately $3.8 million. The Company expects to generate sufficient funds through operations to fund these expenditures.

Stockholders' investment increased to $23,915,766 at September 30, 2008, from $223,217,435 at June 30, 2008. The increase reflects net income offset by dividends declared.

The Company amended its existing credit facility in November 2008, extending the maturity date of the unsecured line of credit to November 1, 2009, and expects to extend it to November 1, 2009 in the current quarter. This credit facility provides for borrowings up to a maximum of $10,000,000. The Company can use this credit facility for working capital purposes or for the purchase of its own common stock pursuant to the Company's common stock repurchase program. Borrowings under this credit facility bear interest at the bank's prime rate, or LIBOR plus 1.75%. This credit facility includes financial covenants that require the Company to maintain a minimum tangible net worth and specified current interest coverage, and leverage ratios, with which the Company is currently in compliance. The Company uses its credit facility from time to time, although there was no utilization of this credit facility during the quarter ended September 30, 2008.

In April of 1995, the Board of Directors approved a stock repurchase program authorizing the Company to purchase from time to time up to $2,000,000 of its common stock for its own account. Subsequently, the Board of Directors periodically has approved increases in the stock repurchase program. The most recent increase was for an additional $2,000,000 in October 2006, for a maximum of $45,500,000. The Company intends to effectuate all stock purchases either on the open market or through privately negotiated transactions, and intends to finance all stock purchases through its own cash flow or by borrowing for such purchases.

The Company did not repurchase any shares of its common stock during the quarter ended September 30, 2008.

From the commencement of the Company's stock repurchase program through September 30, 2008, the Company has purchased a total of 5,470,104 shares for a total gross purchase price of $52,725,254 (representing an average gross purchase price of $9.64 per share) and a total net purchase price of $41,901,511 (representing an average net purchase price of $7.66 per share). The difference between the total gross purchase price and the total net purchase price is the result of the Company purchasing from certain employees shares of the Company's stock acquired by such employees pursuant to the Company's stock option program. In determining the dollar amount available for additional purchases under the stock repurchase program, the Company uses the total net purchase price paid by the Company for all stock purchases, as authorized by the Board of Directors.

The Company also has an Employee Stock Ownership Plan and Trust ("ESOP") pursuant to which shares of the Company's stock are purchased by the ESOP for allocation to the accounts of ESOP participants. There were no ESOP purchases for the quarter ended September 30, 2008.

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Results of Operations

Net sales for the first quarter ended September 30, 2008 decreased by 9% to $11,486,034 compared with $12,637,606 for the same period in 2007. The decrease is primarily attributable to the result of soft U.S. retail sales.

Gross profit as a percent of net sales was 38% for the quarter ended September 30, 2008 and 38% for the quarter ended September 30, 2007.

Selling, general and administrative expenses for the quarter ended September 30, 2008 were $2,998,527 or 26% of net sales, compared to $2,784,026 or 22% of net sales for the same period in 2007. This is a result of the Company's increased spending in research and development.

For the first quarter ended September 30, 2008, income from operations was $1,401,933 versus $2,007,954 for the same period in the prior year, a 30% decrease. Net income for the quarter fell by 32% to $913,764 from $1,335,674 for the same period in 2007. The decreases in income from operations and net income are primarily due to the result of soft U.S. retail sales.

Royalty income for the quarter ended September 30, 2008 was $58,333, compared with $131,250 for the quarter ended September 30, 2007.

Interest income for the quarter was $14,053 as compared to $50,440 for the same quarter in 2007. Interest income fluctuates in relation to cash balances on hand throughout the year and fluctuations in interest rates earned.

The provision for income taxes was $560,555 and $853,970 for the quarters ended September 30, 2008 and 2007, respectively. The effective tax rate was 39% for each quarter.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Recently Issued Financial Accounting Pronouncements

There are no new accounting pronouncements which would have a material impact on the Company.