FORWARD LOOKING STATEMENTS

Statements in this discussion and analysis about the Company's anticipated financial results and growth, as well as those about the development of its products and markets, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These include the risks discussed in Item 1A to this Annual Report, entitled 'Risk Factors', and others discussed in this report.

NEW ACCOUNTING PRONOUNCEMENTS

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" (SFAS 159), which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS No. 159 will be effective for the Company on October 1, 2008. The Company is currently evaluating the impact, if any, of adopting SFAS No. 159 on its financial position and results of operations.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations (SFAS No. 141R). SFAS No. 141R addresses financial accounting and reporting for business combinations, and supersedes APB Opinion No. 16, Business Combinations and FASB Statement No. 38, Accounting for Preacquisition Contingencies of Purchased Enterprises. The objective is to provide consistency to the accounting and financial reporting of business combinations by using only one method, the purchase method. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Any potential impact on the Company's financial position and results of operations will be dependent upon the terms and conditions of any acquisition.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (SFAS No. 160). SFAS No. 160 addresses consolidation rules for noncontrolling interests. The objective is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company is currently evaluating the impact, if any, of adopting SFAS No. 160 on its financial position and results of operations.

CRITICAL ACCOUNTING ESTIMATES

The Company's significant accounting policies are summarized in Note 1 of its Consolidated Financial Statements in this Annual Report. While these significant accounting policies impact the Company's financial condition and results of operations, certain of these policies require management to use a significant degree of judgment and/or make estimates, consistently with generally accepted accounting principles, that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the reporting periods. Since these are judgments and estimates, they are sensitive to changes in business and economic realities, and events may cause actual operating results to differ materially from the amounts derived from management's estimates and judgments.

The Company believes the following represent the most critical accounting judgments and estimates affecting its reported financial condition and results of operations:

Bad Debts

The Company estimates an allowance for doubtful accounts based on known factors related to the credit risk of each customer and management's judgment about the customer's business. Ten customers account for approximately 46% of the Company's sales. At September 30, 2008, the allowance for bad debts amounted to $86,000, which represented 1.2% of receivables.

Because of the Company's long term relationships with the majority of its customers, in most cases, the principal bad debt risk to the Company arises from the insolvency of a customer rather than its unwillingness to pay. In addition, in certain cases the Company maintains credit insurance covering up to 90% of the amount outstanding from specific customers. The Company also carries out some of its foreign trade, particularly in the Far East, using letters of credit.

The Company reviews all accounts receivable balances on a regular basis, concentrating on any balances that are more than 30 days overdue, or where there is an identified credit risk with a specific customer. A decision is taken on a customer-by-customer basis as to whether a bad debt reserve is considered necessary based on the specific facts and circumstances of each account. In general, the Company would reserve 100% of the receivable, net of any recoverable value added taxes or insurance coverages, for a customer that becomes insolvent or files for bankruptcy, and lesser amounts for less imminent defaults. To a lesser degree, the Company maintains a small bad debt reserve to cover the remaining balances based on historical default percentages.

If the financial condition of any of the Company's customers is worse than estimated or were to deteriorate, resulting in an impairment of its ability to make payments, the Company's results may be adversely affected and additional allowances may be required. With the exception of a significant loss of $562,000 in fiscal 2001 relating to one US customer, credit losses have not been significant in the past ten years.

Inventories

Inventories are valued at the lower of cost or market. Inventory costs include materials, direct labor and manufacturing overhead, and are relieved from inventory on a first-in, first-out basis. The Company carries out a significant amount of customization of standard products and also designs and manufactures special products to meet the unique requirements of its customers. This results in a significant proportion of the Company's inventory being customer specific. The Company's reported financial condition includes a provision for estimated slow-moving and obsolete inventory that is based on a comparison of inventory levels with forecast future demand. Such demand is estimated based on many factors, including management judgments, relating to each customer's business and to economic conditions. The Company reviews in detail all significant inventory items with holdings in excess of estimated normal requirements. It also considers the likely impact of changing technology. It makes an estimate of the provision for slow moving and obsolete stock on an item-by-item basis based on a combination of likely usage based on forecast customer demand, potential sale or scrap value and possible alternative use. This provision represents the difference between original cost and market value at the end of the financial period. In cases where there is no estimated future use for the inventory item and there is no estimated scrap or resale value, a 100% provision is recorded. Where the Company estimates that only part of the total holding of an inventory item will not be used, or there is an estimated scrap, resale or alternate use value, then a proportionate provision is recorded. Once an item has been written down, it is not subsequently revalued upwards. The provision for slow moving and obsolete inventories at September 30, 2008 was $582,000, or 10% of the original cost of gross inventory. At September 30, 2007, the reserve was $860,000, or 14% of gross inventory. If actual future demand or market conditions are less favorable than those projected by management, or if product designs change more quickly than forecast, additional inventory write-downs may be required, which may have a material adverse impact on reported results.

Warranty Costs

The Company provides for the estimated cost of product warranties at the time revenue is recognized. While the Company engages in product quality programs and processes, the Company's warranty obligation is affected by product failure rates and repair or replacement costs incurred in correcting a product failure. Accordingly, the provision for warranty costs is based upon anticipated in-warranty failure rates and estimated costs of repair or replacement. Anticipating product failure rates involves making difficult judgments about the likelihood of defects in materials, design and manufacturing errors, and other factors that are based in part on historical failure rates and trends, but also on management's expertise in engineering and manufacturing. Estimated repair and replacement costs are affected by varying component and labor costs. Should actual product failure rates and repair or replacement costs differ from estimates, revisions to the estimated warranty liability may be required and the Company's results may be materially adversely affected. In the event that the Company discovers a product defect that impacts the safety of its products, then a product recall may be necessary, which could involve the Company in substantial unanticipated expense significantly in excess of the reserve. There were no significant safety related product recalls during the past three fiscal years.

Goodwill Impairment

The Company carries out an annual assessment to determine if the goodwill relating to the controls business amounting to $1,435,000 has been impaired, in accordance with the requirements of Financial Accounting Standards Board Statement No.142 "Goodwill and Other Intangible Assets" (SFAS No. 142). In fiscal 2004 the Company retained an investment banking firm specializing in valuations to assist the Company in performing this impairment assessment. The assessment was based on three separate methods of valuing the controls business based on expected free cash flows, the market price of the Company's stock and an analysis of precedent transactions. These valuation methods require estimates of future revenues, profits, capital expenditures and working capital requirements which are based on evaluation of historical trends, current budgets, operating plans and industry data. Based on all of these valuation methods, management concluded that the goodwill had not been impaired. Management updated the analysis in 2008, 2007, 2006 and 2005 using similar methodologies and again concluded that the goodwill had not been impaired. If, in future periods, the Company's results of operations, cash flows or the market price of the Company's stock were to decrease significantly, then it may be necessary to record an impairment charge relating to goodwill of up to $1,435,000.

Pension Plan Assumptions

The Company makes a number of assumptions relating to its pension plans in order to measure the financial position of the plans and the net periodic benefit cost. The most significant assumptions relate to the discount rate, the expected long term return on plan assets and the rate of future compensation increase. If these assumptions prove to be incorrect then the Company may need to record additional expense or liabilities relating to the pension plans, which could have a material effect on the Company's financial position and results of operations. The company adopted Financial Accounting Standards Board Statement No. 158 "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans - An Amendment of FASB Statements No. 87, 88, 106, and
132(R)" (SFAS No. 158) in September 2006. At September 30, 2008 there was a pension liability in the Company's balance sheet of $378,000. The Company's pension plans are significant relative to the size of the Company. At September 30, 2008, pension plan assets were $18,162,000, plan liabilities were $18,540,000, and the total assets of the Company were $19,755,000. Under SFAS No. 158, changes in the funded status of the pension plans (plan assets less plan liabilities) are recorded in the Company's balance sheet and could have a material effect on the Company's financial position.

The table below sets out the approximate impact on the funded status of the Company's pension plans at September 30, 2008 that the Company estimates would arise from the following respective changes in significant plan assumptions:

                                                                            Impact on
                                                                               Funded
                                                                           Status (in
                                                            Change in       thousands         Change in
Plan Assumption                                            Assumption     of dollars)     funded status
Assumptions impacting accumulated benefit obligation:
Discount rate                                                    0.1%     $       450              119%
Inflation rate                                                   0.1%             300               79%
Salary Increase                                                  0.5%             775              205%
Mortality rate                                                 1 year             375               99%

† A) Results of Operations

2008 compared to 2007

The following table compares results, for both the controls and capacitor segments, for fiscal 2008 with the prior year, showing separately the percentage variances due to currency and volume / other.

                                                                                  (in thousands of dollars except percentages)
                                                                                     % change due to:
                                       2008          2007             Total                  Currency           Volume / other
Sales
Controls - to external
customers                         $  37,280     $  37,009                 1 %                       4 %                     -3 %
Capacitors- to external
customers                             1,939         2,204               -12 %                       0 %                    -12 %
Capacitors - inter-segment               45            52               -13 %                      -1 %                    -12 %
Capacitors - total                    1,984         2,256               -12 %                       0 %                    -12 %
Total sales to external
customers                            39,219        39,213                 0 %                       4 %                     -4 %
Gross Profit
Controls                             13,074        13,479                 3 %                       4 %                     -7 %
Capacitors                              700           869               -19 %                      -1 %                    -18 %
Total                                13,774        14,348                 4 %                       4 %                     -8 %
Selling research and
administrative expenses and
restructuring charge
Controls                             10,556        10,810                -2 %                       1 %                     -3 %
Capacitors                              884         1,158               -24 %                      -1 %                    -23 %
Restructuring charge                    700             -               100 %                       0 %                    100 %
Unallocated corporate expense           460           317                45 %                       0 %                     45 %
Total                                12,600        12,285                 3 %                       2 %                      1 %
Operating income
Controls                              1,818         2,669               -32 %                      14 %                    -46 %
Capacitors                             (184 )        (289 )              36 %                       0 %                     36 %
Unallocated corporate expense          (460 )        (317 )              45 %                       0 %                     45 %
Total                                 1,174         2,063               -43 %                      18 %                    -61 %
Other income and expense                 63           (75 )             184 %                     270 %                    -86 %
Income before income taxes            1,237         1,988               -38 %                      29 %                    -67 %
Income taxes                           (433 )        (685 )             -37 %                      29 %                    -66 %
Net Income                        $     804     $   1,303               -38 %                      28 %                    -66 %

In fiscal 2008 sales revenues were flat compared to fiscal 2007 at $39,219,000. In fiscal 2008 approximately 59% of the Company's sales were made outside the United States. As the majority of foreign sales were denominated in currencies other than the US Dollar, principally the Euro and the British Pound, they were subject to fluctuation when translated into US Dollars. In Fiscal 2008 the average dollar exchange rate strengthened compared to the British Pound by 1% although it weakened by 13% compared to the Euro. As a result, foreign currency sales denominated in British Pounds translated into fewer dollars and foreign sales denominated in Euros translated into more dollars; the overall impact to fiscal 2008 was that reported sales increased by $1,420,000, or 4%. Sales volume, net of foreign currency fluctuations, was 4% lower than the previous year, with the decrease due to lower volumes shipped in Europe and Asia.

In the controls business segment revenues were 1% higher than in fiscal 2007, reflecting a 4% increase due to foreign currency fluctuations and a reduction of 3% in volumes shipped. In the United States controller business, sales were $15,953,000 compared to $14,832,000 in 2007, an increase of 8%. Slightly lower volumes shipped in the United States in the fork lift truck and airport ground support markets were more than offset by higher volumes shipped to the aerial lift, mining and other electric vehicle markets. In the controller businesses, foreign sales decreased by 4% compared to last year, reflecting a 10% decrease in volumes shipped and a 6% increase due to foreign currency fluctuations. Volumes shipped in Europe and the Far East decreased largely due to lower demand in the European and Japanese aerial lift markets.

In the capacitor business segment, revenues decreased by $265,000, or 12%, which was almost entirely due to lower volumes shipped. This volume decrease was mainly due to lower demand in the signaling market.

Management anticipates that worsening worldwide economic conditions will continue to affect results, both by reducing orders and by affecting customers' ability to pay. In particular, management currently anticipates that European and Far East results will continue to suffer for the foreseeable future.

Cost of sales was $25,445,000 compared to $24,865,000 in fiscal 2007, an increase of $580,000, or 2%. This increase was caused by adverse currency fluctuations and higher warranty costs which were partially offset by lower cost of sales due to lower volumes shipped as compared to the prior year. Largely as a result of the weaker US Dollar compared with the Euro, foreign currency fluctuations caused material price increases for products manufactured by one of our subcontractors which increased cost of sales by $882,000, or 4% and warranty costs of $300,000 were incurred in fiscal 2008 to settle two separate and isolated issues during the year. A reduction in cost of sales of $602,000 was mainly due to the $1,414,000, or 4%, reduction in volumes shipped in 2008 compared to the prior year.

Gross profit was $13,774,000, or 35.1% of sales, compared to $14,348,000, or 36.6% of sales, in fiscal 2007. Foreign currency fluctuations had a favorable impact on gross profit of $88,000, but the currency impact on sales and cost of sales decreased the gross profit percentage by 0.2%. Excluding the foreign currency impact, there was a year-to-year decrease in the gross profit percentage of 1.3% of sales. In the controls segment, gross profit of $13,074,000 was 3% behind last year; this compared to a decrease in volumes shipped of 4.0%. In the capacitor segment gross profit was $700,000, a reduction of $169,000, or 19%, compared to fiscal 2007. Capacitor business gross profit was 35.3% of sales in fiscal 2008 compared to 38.5% of sales in fiscal 2007. The decline in the capacitor business gross profit percentage was mainly due to a decrease in sales to higher margin customers, offset by some sales growth at lower than average margins. The table below analyses the year-to-year change in sales, cost of sales and gross profit.

                                                                      (in thousands of dollars except percentages)
                                             Sales       Cost of sales         Gross Profit        Gross Profit %
Actual Fiscal 2007                         $  39,213     $       24,865       $       14,348                 36.6%
Change in fiscal 2008 due to:
Foreign Currency fluctuations                  1,420                960                  460                (0.2%)
Decreased volume, assuming 2007 gross
profit percentage                             (1,414 )             (896 )               (518 )
Other cost of sales changes, net                   -                516                 (516 )              (1.3%)
Actual Fiscal 2008                         $  39,219     $       25,445       $       13,774                 35.1%

Selling, research and administrative expenses before the restructuring charge (operating expenses) were $11,900,000, a decrease of $385,000, or 3%, compared to fiscal 2007. Adverse foreign currency fluctuations increased reported operating expenses by $170,000, or 1%. In fiscal 2008, expenditure on new product engineering and selling expenses were reduced by $23,000 and $198,000, respectively, before the impact of currency fluctuations. Administrative expenses, including corporate expense, increased by $54,000 before the impact of currency fluctuations. Included in administrative expense in 2007 in the capacitor business segment was a charge of $297,000 for management changes and in addition in 2007 there was a charge of $91,000 in respect of the retirement of the general manager of the controls business in France. An analysis of the year-to-year change in selling, research and administrative expenses is set out below:

                                                                         (in thousands
Selling, research and administrative expenses                             of dollars)
Reported expense in fiscal 2008                                          $      11,900
Reported expense in fiscal 2007                                                 12,285
Decrease in expense                                                               (385 )
Increase (decrease) due to:
Effect of exchange rate changes                                                    170
Lower research and sales and marketing expense, net of currency effect            (221 )
Increase in administrative expense, net of currency effect                          54
Management changes in the capacitor business and controls business in
fiscal 2007                                                                       (388 )
Total decrease in selling research and administrative expenses in
fiscal 2008                                                              $        (385 )

The Company incurred a restructuring charge of $700,000 in 2008 associated with the closure of the residual manufacturing operations in the UK controls business and a reduction in staff in the capacitor business segment. The restructuring charge, taken in the third quarter of fiscal 2008, comprised employee severance costs and associated professional fees relating to this program. These actions followed a review of the controls business segment which identified an opportunity to significantly reduce ongoing manufacturing costs through further reliance on subcontractors to manufacture the Company's products. The program, which was completed in June 2008, resulted in the termination of 36 employees in the controls business and 5 employees in the capacitor business.

Operating income was $1,174,000 compared to $2,063,000 in fiscal 2007, a decrease of $889,000, or 43%. Foreign currency fluctuations increased reported operating income by $367,000 in fiscal 2008. Excluding the currency effect, operating income decreased by $1,256,000, or 60% compared to fiscal 2007, mainly due to the restructuring charge, warranty costs and lower volumes shipped. In the controller business, and excluding the favorable currency impact of $367,000, operating income was $1,218,000, or 46% lower than the prior year. The capacitor business incurred an operating loss of $184,000 in fiscal 2008 compared to an operating loss of $289,000 in fiscal 2007 when there was a charge of $297,000 for management changes in the year. The operating loss in fiscal 2008 in the capacitor business was due to a reduction in volumes shipped to high margin customers.

Other income and expense was a net income of $63,000 in fiscal 2008 compared to an expense of $75,000 in the previous year. Interest expense was higher by $63,000 at $108,000 and interest income in 2008 was $8,000 compared to $10,000 in fiscal 2007. The net interest expense of $100,000 in fiscal 2008 was offset by a foreign currency exchange gain of $163,000, compared to a foreign currency exchange loss of $40,000 in 2007.

Income before income taxes was $1,237,000 compared to $1,988,000 in 2007, a decrease of $751,000, or 38%. Foreign currency fluctuations increased pretax income by $570,000 in fiscal 2008. Pre-tax income, before the effect of currency fluctuations, was $1,321,000, or 66% lower than the prior year. Income taxes were 35% of pre-tax income compared to 34.5% in fiscal 2007. The higher tax rate was mainly due to permanent timing differences arising from the tax treatment of inter-group dividends received in the US.

Net income was $804,000, a reduction of $499,000, or 38%, compared to $1,303,000 last year. Basic income per share was $.25 per share in 2008 compared to $.41 in fiscal 2007, a decrease of 39%. Diluted income per share was $.25 per share in fiscal 2008, a decrease of $.16 per share compared to last year.

† B) Liquidity and Capital Resources

The Company's cash flow from operating activities for fiscal 2008 was $2,333,000 compared to $849,000 in the prior fiscal year. Acquisitions of property, plant and equipment amounted to $931,000 compared to $909,000 in fiscal 2007. Quarterly dividend payments were at the rate of $.03 per share throughout both fiscal 2008 and 2007. In fiscal 2008 dividend payments amounted to $391,000 compared to $386,000 in 2007. Exchange rate changes decreased cash by $440,000 in fiscal 2008 compared to an increase of $164,000 last year. As a result, in fiscal 2008, reported cash balances increased by $616,000, compared to a decrease of $276,000 in 2007. The main changes in operating assets and liabilities in fiscal 2008 were a decrease in accounts receivable of $1,459,000 and higher accounts payable of $778,000 due to improvements in working capital management during the year. Inventories decreased by $26,000, accrued expenses decreased by $742,000, principally due to lower accrued bonus provisions at September 30, 2008 compared to the prior year, and prepaid expenses and other current assets were $75,000 lower than last year.

. . .