The following discussion provides an analysis of the Company's financial condition and results of operations and should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Item 1 of Part I of this Quarterly Report on Form 10-Q and the Company's Annual Report on Form 10-K filed for the fiscal year ended August 31, 2008.

Overview

The first quarter of fiscal 2009 proved challenging. Sales and profits across most of the Company's product lines were down from the prior year, reflecting the impact of the poor economy and global recession that has led to decreased demand and uncertainty for consumer and industrial products. Additionally, the financial results of the Company's European Operations continue to be negatively impacted by the weakening pound sterling whose value against the dollar decreased 26% from November 2007 to November 2008. Revenues from the Specialized Manufacturing segment were below those of the same period in the prior year primarily due to decreased demand from key customers in many markets including the transportation, digital & print media, electronic coatings and construction product lines. This segment's revenues in the current quarter were also lower as compared to the prior year quarter due to a reduction in pipeline sales as a large, non-recurring construction project that was several years in the making was realized in the first quarter of the prior year. For the remainder of the fiscal year, the Company's key brands which include HumiSeal®, PaperTyger®, Chase & Sons®, Royston®, Tapecoat® and Chase BlH2Ock® will remain a primary focus in this segment's effort to grow sales organically. Streamlining and consolidating operations to maximize production efficiencies across all product lines will remain a priority of management.

The Chase Electronic Manufacturing Services segment is also facing softness in some key market segments which led to a reduced order backlog during the latter portion of fiscal 2008 that resulted in lower sales and profits in the current quarter as compared to the prior year period. The demand for products and services in this segment is expected to be fluid as many of the Company's key customers assess inventory levels and their own customer demand as we enter 2009. Although the Company's operating results from this segment should continue to be positive, they may not be at the same level as the prior fiscal year.

Management will remain proactive in addressing the uncertainties presented by the current global economy by recognizing competitive threats and quickly seizing opportunities as they arise, especially in the Company's second quarter ending in February which is traditionally a slower time of year for many of its product lines. Positioning its brands and eight core product lines for success both domestically and internationally, the Company will continue its emphasis of maintaining a diversified product mix. Reduced demand for consumer and industrial products due to the current economic conditions, along with continued pressure on gross margins, will be the biggest challenges for the remainder of the current fiscal year. Management will continue its ongoing efforts to reduce costs through strategic consolidation within its own organization while at the same time providing capacity for growth. The Company is essentially debt-free with substantial borrowing capacity for any acquisition opportunities and facility reorganization needs.

The Company has two reportable segments summarized below:

Segment                       Product Lines        Manufacturing Focus and Products
Specialized                †  Wire and Cable       Produces protective coatings and
Manufacturing Segment      †  Electronic           tape products including
                           Coatings                insulating and conducting
                           †  Transportation       materials for wire and cable
                           †  Pipeline             manufacturers, protective
                           †  Construction         coatings for pipeline
                           †  Packaging and        applications, moisture
                           Industrial              protective coatings for
                           †  Digital and Print    electronics, high performance
                           Media                   polymeric asphalt additives,
                                                   expansion and control joint
                                                   systems for use in the
                                                   transportation and architectural
                                                   markets, and custom pressure
                        †                          sensitive labels.
                        †  †
Electronic                 ††† Contract            Provides assembly and turnkey
Manufacturing Services     Electronic              contract manufacturing services
Segment                    Manufacturing           including printed circuit board
                           Services                and electromechanical assembly
                                                   services to the electronics
                                                   industry operating principally
                        †                          in the United States.

Results of Operations



Revenues and Operating Profit by Segment are as follows (dollars in thousands)



                                        Three Months Ended November 30,
                                        2008                   2007
Revenues from external customers
Specialized Manufacturing           $     26,708     86%     $ 29,591   85%
Electronic Manufacturing Services          4,361     14%        5,045   15%
Total                               $     31,069             $ 34,636

Income before income taxes
Specialized Manufacturing           $      4,923     18%     $  6,448   22%
Electronic Manufacturing Services            325      7%          576   11%
Total for reportable segments              5,248     17%        7,024   20%
Corporate and Common Costs                (1,661 )             (1,509 )
Total                               $      3,587     12%     $  5,515   16%

Total Revenues

Total revenues decreased $3,567,000 or 10% to $31,069,000 for the quarter ended November 30, 2008 compared to $34,636,000 in the prior year quarter. Revenues from the Company's Specialized Manufacturing segment decreased $2,883,000 or 10% to $26,708,000 for the quarter ended November 30, 2008 compared to $29,591,000 in the prior year quarter. The decrease in revenues is primarily due to the following: (a) decreased sales of $1,834,000 in the Transportation (primarily a result of the strike at Boeing which negatively impacted sales of our Insulfab brand) and Digital & Print Media product lines; (b) decreased sales of $850,000 in the Electronic Coatings product lines; (c) decreased sales of $436,000 in the Construction product lines; and (d) decreased sales of $942,000 in the Pipeline product line due to a large, non-recurring construction project completed in the prior year quarter. The decreases in revenues were partially offset by increased sales of $928,000 from Chase Protective Coatings Ltd which was formed by the Company in September 2007 and is beginning to experience stronger results in fiscal 2009.

Revenues from the Company's Electronic Manufacturing Services segment decreased $684,000 or 14% to $4,361,000 in the current quarter compared to $5,045,000 in the same period last year. The decline in revenues in the current quarter is primarily a result of decreased customer orders as certain existing customers continue to reassess their order activity due to higher current inventory levels as the overall

economic downturn has negatively impacted their sales. Additionally, the softness in anticipated demand from new customers and projects has affected sales in this segment.

Cost of Products and Services Sold

Cost of products and services sold decreased $1,405,000 or 6% to $21,559,000 in the quarter ended November 30, 2008 compared to $22,964,000 in the same period in fiscal 2008. Cost of products and services sold in the Company's Specialized Manufacturing segment was $17,838,000 for the first three months of fiscal 2009 compared to $18,806,000 for the same period in the prior year. Cost of products and services sold in the Company's Electronic Manufacturing Services segment was $3,721,000 compared to $4,158,000 for the same period last year.

The following table summarizes the relative percentages of revenues for cost of products and services sold for both of the Company's reporting segments:

                                     Three Months Ended November 30,
                                         2008                2007
        Specialized Manufacturing        67%                 64%
Electronic Manufacturing Services        85%                 82%
                            Total        69%                 66%

The dollar value decrease in the Specialized Manufacturing segment's cost of products and services sold was a direct result of lower revenues during the first three months of fiscal 2009. As a percentage of revenues, cost of products and services sold in this segment increased primarily due to increased sales of lower margin products and the impact of fixed manufacturing overhead costs on a lower revenue base. Additionally, margin pressures across many of the Company's key product lines remain a challenge as management works to hold selling prices in light of the decrease in the cost of petroleum based raw materials.

The decrease in dollar value of cost of products and services sold in the Company's Electronic Manufacturing segment was also a direct result of lower revenues in the first three months of fiscal 2009. As a percentage of revenues, cost of products and services sold in this segment increased due to continued competitive pricing pressures and overall decreased demand in this segment. Additionally, recent additional costs related to facility and production improvements were incurred as a result of this segment's focus on new customer acquisition.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $169,000 or 3% to $6,034,000 in the quarter ended November 30, 2008 compared to $6,203,000 in the same period in fiscal 2008. The decrease in the current quarter over the prior year period is primarily attributable to decreased sales commissions and other selling related expenses. This was partially offset by increased stock based compensation of $276,000 related to the Company's long term incentive plan which resulted in increased amortization expense on prior year restricted stock grants due to the fiscal 2008 financial results.

Interest Expense

Interest expense decreased $78,000 or 94% to $5,000 in the quarter ended November 30, 2008 compared to $83,000 in the same period in fiscal 2008. The decrease in interest expense is a direct result of a reduction in the Company's overall debt balances through principal payments from operating cash flow and an overall decrease in interest rates.

Other Income (Expense)

Other income decreased $12,000 or 9% to $117,000 in the quarter ended November 30, 2008 compared to $129,000 in the same period in the prior year. Other income includes bank interest earned by the Company's Humiseal Europe division and monthly rental income of $14,875 on property (building and land) owned by the Company and leased to Sunburst Electronic Manufacturing Solutions, Inc. under a thirty-six month rental agreement commencing on December 1, 2006 and expiring on November 30, 2009. The decrease in other income from the prior year is primarily due to lower interest rates on cash and cash equivalents.

Net Income

Net income decreased $1,214,000 or 35% to $2,260,000 in the quarter ended November 30, 2008 compared to $3,474,000 in the same period in the prior year. The decrease in the current quarter is a direct result of decreased revenue across the Company's core product lines coupled with increased sales of lower margin products and the impact of fixed manufacturing overhead costs on a lower revenue base as compared to the prior year period.

Liquidity and Sources of Capital

The Company's cash balance increased $403,000 to $4,320,000 at November 30, 2008 from $3,917,000 at August 31, 2008. Generally, the Company manages its borrowings and payments under its revolving line of credit in order to maintain a low cash balance. The high cash balance at November 30, 2008 was a result of cash flow generated during the quarter of which a large portion was subsequently used in December 2008 to pay the Company's annual dividend. Management continues to review its current cash balances denominated in foreign currency in light of current tax guidelines and potential acquisitions.

Cash flow provided by operations was $1,471,000 in the first quarter of fiscal year 2009 compared to $4,085,000 in the prior year's first quarter. Cash provided by operations during the first three months of fiscal year 2009 was primarily due to operating income and decreased accounts receivable balances offset by increased inventory balances due to a decrease in sales volume and increased accrued expenses mainly due to the annual cash dividend declared.

The ratio of current assets to current liabilities was 2.4 as of November 30, 2008 compared to 2.3 as of August 31, 2008. The increase in the Company's current ratio at November 30, 2008 was primarily attributable to increases in cash and inventory along with decreases in accrued payroll and accrued income taxes which were partially offset by a decrease in accounts receivable coupled with an increase in accrued expenses.

Cash flow used in investing activities of $588,000 was primarily due to $579,000 paid for purchases related to the build out of the Company's manufacturing facility in greater Pittsburgh, PA.

Cash flow used in financing activities of $22,000 was minimal due to the Company's ability to use cash flow from operations in the prior year to repay all outstanding debt balances. Additionally, the annual dividend payment was accrued for but not paid until December 2008.

On October 14, 2008, the Company announced a cash dividend of $0.35 per share (totaling approximately $2,986,000) to shareholders of record on October 31, 2008, and payable on December 3, 2008.

The Company continues to have long-term unsecured credit available up to $10 million at the bank's base lending rate or, at the option of the Company, at the effective 30-Day London Interbank Offered Rate (LIBOR) plus 1.25 percent. As of November 30, 2008, the entire amount of $10 million was available for use under this credit facility. The Company plans to use this availability to help finance its cash needs, including acquisitions, in fiscal 2009 and future periods.

As of December 31, 2008, the Company had $8.0 million in available credit under this credit facility.

Under the terms of the Company's credit facility, the Company must comply with certain debt covenants related to (a) the ratio of total liabilities to tangible net worth and (b) the ratio of operating cash flow to debt service on a rolling twelve month basis. The Company was in compliance with its debt covenants as of November 30, 2008. The credit facility currently has a maturity date of March 31, 2011.

The Company currently has an ongoing capital project that is related to the build out of its manufacturing facility in greater Pittsburgh, PA. It also plans on adding additional machinery and equipment as needed to increase capacity or to enhance operating efficiencies in its other manufacturing plants. Additionally, the Company may consider the acquisitions of companies or other assets in fiscal 2009 which are complementary to its business. The Company believes that its existing resources, including its primary credit facility, together with cash generated from operations and additional bank borrowings, will be sufficient to fund its cash flow requirements through at least the next twelve months. However, there can be no assurances that additional financing will be available at favorable terms, if at all.

To the extent that interest rates increase in future periods, the Company will assess the impact of these higher interest rates on the financial and cash flow projections of its potential acquisitions.

The Company does not have any significant off balance sheet arrangements.

Contractual Obligations

Please refer to Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" section in the Company's Form 10-K for the fiscal year ended August 31, 2008 for a complete discussion of the Company's contractual obligations. There were no material changes to the Company's contractual obligations for the quarter ended November 30, 2008.

Recently Issued Accounting Standards

In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("FAS 141R"), which replaces FAS 141. FAS 141R establishes principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any controlling interest; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. FAS 141R is to be applied prospectively to business combinations with an acquisition date in fiscal years beginning after December 15, 2008. Earlier adoption is prohibited. The Company expects that FAS 141R will have an impact on accounting for future business combinations once adopted, but the effect is dependent upon acquisitions at that time.

In February 2008, the FASB issued SFAS 157-2, "Effective Date of FASB Statement No. 157" ("FAS 157-2"), which provides a one-year deferral of the effective date of FAS 157 for nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. The implementation of FAS 157 for financial assets and financial liabilities, effective September 1, 2008, did not have a material impact on the Company's consolidated financial position and results of operations. The Company is currently assessing the impact of FAS 157-2 for nonfinancial assets and nonfinancial liabilities on its consolidated financial position and results of operations.

Critical Accounting Policies and Estimates

The Company's financial statements are prepared in accordance with accounting principles generally accepted in the United States. To apply these principles, it must make estimates and judgments that affect its reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. In many instances, the Company reasonably could have used different accounting estimates and, in other instances, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from its estimates. To the extent that there are material differences between these estimates and actual results, the Company's financial condition or results of operations will be affected. The Company bases its estimates and judgments on historical experience and other assumptions that it believes to be reasonable at the time and under the circumstances, and it evaluates these estimates and judgments on an ongoing basis. The Company refers to accounting estimates and judgments of this type as critical accounting policies, judgments, and estimates. Management believes there have been no material changes during the three months ended November 30, 2008 to the critical accounting policies reported in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" section in the Company's Form 10-K for the fiscal year ended August 31, 2008.

Forward Looking Information

The part of this Quarterly Report on Form 10-Q captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains certain forward-looking statements, which involve risks and uncertainties. These statements are based on current expectations, estimates and projections about the industries in which we operate, management's beliefs and assumptions made by management. Readers should refer to the discussions under "Forward Looking Information" and "Risk Factors" contained in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2008 concerning certain factors that could cause the Company's actual results to differ materially from the results anticipated in such forward-looking statements. These discussions and Risk Factors are hereby incorporated by reference into this Quarterly Report.