Cautionary Statement

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Information in this Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this 10-Q that does not consist of historical facts, are "forward-looking statements." Statements accompanied or qualified by, or containing, words such as "may," "will," "should," "believes," "expects," "intends," "plans," "projects," "estimates," "predicts," "potential," "outlook," "forecast," "anticipates," "presume," and "assume" constitute forward-looking statements and, as such, are not a guarantee of future performance. The statements involve factors, risks and uncertainties, the impact or occurrence of which can cause actual results to differ materially from the expected results described in such statements. Risks and uncertainties can include, among others, uncertainty regarding how long the worldwide economic recession will continue and whether the recession will deepen; reductions in capital budgets by our customers and potential customers; changing product demand and industry capacity; increased competition and pricing pressures; advances in technology that can reduce the demand for the Company's products; and other factors, many or all of which are beyond the Company's control. Consequently, investors should not place undue reliance on forward-looking statements as predictive of future results. The Company disclaims any obligation to release publicly any updates or revisions to the forward-looking statements herein to reflect any change in the Company's expectations with regard thereto, or any changes in events, conditions or circumstances on which any such statement is based.

Results of Operations

A summary of the period to period changes in the principal items included in the
condensed consolidated statements of income is shown below:

Summary comparison of the nine months ended February 28, 2009 and February 29, 2008
                                                                                                   Increase /
                                                                                                   (Decrease)
                                                                           Sales, net    $  (1,331,000)
                                                                   Cost of goods sold   $    268,000
                                         Selling, general and administrative expenses   $   (548,000)
                                                                   Other expense, net   $    (44,000)
      Income before provision for income taxes, equity in net income of affiliate and
                                                      minority stockholder's interest   $ (1,007,000)
                                                           Provision for income taxes   $   (394,000)
                                                                           Net income   $   (591,000)


Sales under certain fixed-price contracts, requiring substantial performance
over several periods prior to commencement of deliveries, are accounted for
under the percentage-of-completion method of accounting whereby revenues are
recognized based on estimates of completion prepared on a ratio of cost to total
estimated cost basis.  Costs include all material and direct and indirect
charges related to specific contracts.

Adjustments to cost estimates are made periodically and any losses expected to
be incurred on contracts in progress are charged to operations in the period
such losses are determined.  However, any profits expected on contracts in
progress are recognized over the life of the contract.

For the nine months ended February 28, 2009 (All figures discussed are for the nine months ended February 28, 2009 as compared to the nine months ended

February 29, 2008.)

                                          Nine months ended                Change
                                     February 28,   February 29,    Increase /    Percent
                                        2009           2008        (Decrease)     Change
                       Net Revenue   $12,280,000  $13,611,000      $(1,331,000)    -10%
                     Cost of sales     9,168,000     8,900,000        268,000       3%
                      Gross profit   $  3,112,000   $ 4,711,000    $(1,599,000)       -34%
†††as a percentage of net revenues      25%            35%

The Company's consolidated results of operations showed a 10% decrease in net revenues and a decrease in net income of 72%. Revenues recorded in the current period for long-term construction projects were 34% less than the level recorded in the prior year. Revenues recorded in the current period for other-than long-term construction projects (non-projects) were up 15% over the level recorded in the prior year. The gross profit as a percentage of net revenues for the current and prior year periods was 25% and 35%. This fluctuation is attributable to a.) two large, domestic current year projects that have a very low margin and b.) a few of the bigger non-project shipments in the current period had low margins.

Management attributes a large portion of the decrease in revenue to the current economic recession and its effect on the construction markets throughout the world. Several construction projects in the United States and in Asia that had been in the planning stages during the past year or more have been placed "on-hold" by their owners, citing the decline in demand for their buildings or an inability to secure the necessary financing to complete their projects. We maintain contact with these owners / contractors so that we will be in a position to work with them should their project resume activity. It is not possible to determine the amount of contracts which we may have been awarded had the construction projects not been placed "on-hold". A small number of customers have cancelled outstanding purchase orders with the Company. We include provisions in our contracts for the building projects that allow us to collect from the customer a pro-rata amount for work completed on a contract at the time of cancellation. These cancelled purchase orders are not expected to have a material impact on our operating results or cash flow. At February 29, 2008, we had 121 open sales orders in our backlog with a total sales value of $11.6 million. At February 28, 2009, we have 14% fewer open sales orders in our backlog (104 orders) but the total sales value is $12.4 million or approximately 7% higher than the prior year. In order to remain profitable during this down-turn in the economy, we are carefully watching our expenses to reduce them wherever possible.

The Company's revenues and net income fluctuate from period to period. The fluctuations in comparing the current period to the prior period are not necessarily representative of future results.

Selling, General and Administrative Expenses

                                          Nine months ended                Change
                                     February 28,   February 29,    Increase /    Percent
                                        2009           2008        (Decrease)    Change
               Outside Commissions    $  527,000   $  904,000      $  (377,000)   -42%
                        Other SG&A     2,183,000    2,354,000        (171,000)     -7%
                        Total SG&A    $2,710,000   $3,258,000      $  (548,000)      -17%
...as a percentage of net revenues      22%            24%

Selling, general and administrative expenses decreased by 17% from the prior
year.  Outside commission expense decreased by 42% from last year's level.  As a
percentage of sales, outside commissions were 4.3% compared with 6.6% last
year.  This fluctuation was primarily due to higher than normal commissions on
some export orders last year.  This year's commissions are slightly lower than
historical averages.  Other selling, general and administrative expenses
remained relatively constant from last year to this.

The above factors resulted in operating income of $402,000 for the nine months
ended February 28, 2009, down 72% from the $1,453,000 in the same period of the
prior year.

Other expense, net, of $32,000 is primarily interest expense and is $44,000 less
than in the prior year.  The average level of use of the Company's operating
line of credit during the period decreased by about $225,000 from the prior year
period.  The line of credit is used primarily to fund the production of larger
projects that do not allow for advance payments or progress payments.  Long-term
debt is just under half of what it was as of February 29, 2008.  Interest rates
on the line of credit and most of the long-term debt is 2.75 percentage points
lower than the rates in effect at February 29, 2008.  These factors combined to
lower our interest expense for the quarter.

Summary comparison of the three months ended February 28, 2009 and February 29, 2008
                                                                                                          Increase /
                                                                                                          (Decrease)
                                                                                Sales, net   $ (1,208,000)
                                                                        Cost of goods sold   $   (329,000)
                                              Selling, general and administrative expenses   $   (311,000)
                                                                        Other expense, net   $    (12,000)
           Income before provision for income taxes, equity in net income of affiliate and
                                                           minority stockholder's interest   $   (556,000)
                                                                Provision for income taxes   $   (216,000)
                                                                                Net income               $   (334,000)


For the three months ended February 28, 2009  (All figures discussed are for the
three months ended February 28, 2009 as compared to the three months ended
February 29, 2008.)

                                            Three months ended                Change
                                        February 28,   February 29,    Increase /    Percent
                                           2009           2008        (Decrease)    Change
                          Net Revenue   $  3,719,000   $ 4,927,000    $(1,208,000)   -25%
                        Cost of sales     2,841,000      3,170,000       (329,000)   -10%
                         Gross profit   $   878,000    $ 1,757,000    $  (879,000)    -50%
   ...as a percentage of net revenues      24%            36%

The Company's consolidated results of operations showed a 25% decrease in net revenues and a decrease in net income of 91%. Revenues recorded in the current period for long-term construction projects were 22% less than the level recorded in the prior year. Revenues recorded in the current period for other-than long-term construction projects (non-projects) were lower by 3% over the level recorded in the prior year. Gross profit decreased by 25%. The gross profit as a percentage of net revenues for the current and prior year periods was 24% and 36%. This fluctuation is attributable to a.) two large, domestic projects that have a very low margin in the current period, b.) a few of the bigger projects in the same period last year had higher than normal margins and c.) a few of the bigger non-project shipments in the quarter had low margins.

Discussions, above, related to the impact from the recent economic conditions, apply to the quarter ended February 28, 2009 as well.

The Company's revenues and net income fluctuate from period to period. The fluctuations in comparing the current period to the prior period are not necessarily representative of future results.

Selling, General and Administrative Expenses

                                         Three months ended                Change
                                     February 28,   February 29,    Increase /    Percent
                                        2009           2008        (Decrease)    Change
               Outside Commissions     $  163,000  $  311,000      $  (148,000)   -48%
                        Other SG&A       659,000      822,000        (163,000)     -20%
                        Total SG&A    $  822,000   $1,133,000      $  (311,000)     -27%
...as a percentage of net revenues      22%            23%

Selling, general and administrative expenses decreased by 27% from the prior year. Outside commission expense decreased by 48% from last year's level primarily due to a decreased sales volume. Other selling, general and administrative expenses are 20% lower from last year to this mainly due to the collection of receivables previously reserved for as potentially uncollectible.

The above factors resulted in operating income of $56,000 for the three months ended February 28, 2009, down 91% from the $624,000 in the same period of the prior year.

Other expense, net, of $9,000 is primarily interest expense and is $12,000 less than in the prior year.

Stock Options

The Company has a stock option plan which provides for the granting of nonqualified or incentive stock options to officers, key employees and non-employee directors. Options granted under the plan are exercisable over a ten year term. Options not exercised at the end of the term expire.

The Company applies the stock option expensing rules of Statement of Financial Accounting Standards (SFAS) No. 123R, "Share Based Payment," using the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." The Company recognized $28,000 and $38,000 of compensation cost for the nine month periods ended February 28, 2009 and February 29, 2008.

The fair value of each stock option grant has been determined using the Black-Scholes model. The model considers assumptions related to exercise price, expected volatility, risk-free interest rate, and the weighted average expected term of the stock option grants. Expected volatility assumptions utilized in the model were based on volatility of the Company's stock price for the thirty month period ending on the date of grant. The risk-free interest rate is derived from the U.S. treasury yield. The Company used a weighted average expected term. The following assumptions were used in the Black-Scholes model in estimating the fair market value of the Company's stock option grants:

                                                         2008
2007
                             Risk-free interest rate:        5.000%
3.625%
                        Expected life of the options:       2.5 years
2.5 years
                      Expected share price volatility:        44.62%
61.47%
                               Expected dividends:         zero
zero

These assumptions resulted in:

The ultimate value of the options will depend on the future price of the Company's common stock, which cannot be forecast with reasonable accuracy.

Weighted-
                                                                Number of
Average
                                                                 Options
Exercise Price
             Options outstanding and exercisable at May 31, 2008:
120,500            $ 5.30
                                               Options granted:
14,500            $ 6.04
                                            Options exercised:
none                -
                                              Options expired:
none                -

Closing value per share on NASDAQ at February 28, 2009: $2.40

Capital Resources, Line of Credit and Long-Term Debt

The Company's primary liquidity is dependent upon the working capital needs. These are mainly inventory, accounts receivable, costs and estimated earnings in excess of billings, accounts payable, accrued commissions, billings in excess of costs and estimated earnings, and debt service. The Company's primary sources of liquidity have been operations and bank financing.

Capital expenditures for the nine months ended February 28, 2009 were $589,000 compared to $432,000 in the same period of the prior year. As of February 28, 2009, the Company has commitments for capital expenditures totaling $50,000 during the next twelve months.

The Company has a $5,000,000 line of credit with a bank. There is a $34,000 principal balance outstanding as of February 28, 2009, compared to the $879,000 balance outstanding as of May 31, 2008. The outstanding balance on the line of credit will fluctuate as the Company's various long-term projects progress. The Company is in compliance with restrictive covenants under the line of credit and other financing arrangements, including Niagara County Industrial Development Agency Bond financing. In these covenants, the Company agrees to maintain the following minimum or maximum levels of the stated item:

Covenant Minimum / Maximum Current Actual Minimum level working capital $2,000,000 $8,422,000 Minimum tangible net worth $6,000,000 $12,822,000 Maximum annual capital expenditures $800,000 $589,000 Minimum debt service ratio 1:1 3.8:1

The covenants also require the Company to advise the bank of any litigation where the claim amount is $100,000 or greater. Please refer to Part II, Item 1 of this report - Legal Proceedings, for more discussion regarding litigation.

All of the $4,966,000 unused portion of our line of credit is available without violating any of our debt covenants.

Principal maturities of long-term debt for the remainder of the current fiscal year and the subsequent five years are as follows: 2009 - $8,000; 2010 - $77,000; 2011 - $32,000; 2012 - $32,000; and 2013 - $24,000.

Inventory and Maintenance Inventory

    February 28, 2009   May 31, 2008 Increase / (Decrease)


           Raw Materials   $  576,000          $  436,000         $   140,000     32%
         Work in process    5,655,000           5,811,000           (156,000)      -3%
          Finished goods     556,000              378,000             178,000      47%
               Inventory    6,787,000   89%     6,625,000   88%      162,000       2%
   Maintenance and other     834,000    11%       888,000   12%      (54,000)     -6%
               inventory
                   Total   $7,621,000 100%     $7,513,000 100%    $   108,000      1%
               Inventory     1.6                 1.9
                turnover

NOTE: Inventory turnover is annualized for the nine month period ended February 28, 2009.

Inventory, at $6,787,000 as of February 28, 2009, is 2% higher than the prior year-end. Of this, approximately 83% is work in process, 8% is finished goods, and 9% is raw materials. Current inventory increased by $162,000 or two percent over the May 31, 2008 level of $6,625,000. While this increase is not significant, it is one factor in the decrease in the inventory turnover rate. The inventory turnover is calculated by dividing the annualized cost of sales by the average inventory level. The average level of inventory for the nine months ended February 28, 2009 was $7,567,000. This is $887,000 higher than the average level for the fiscal year ended May 31, 2008. This increase is primarily due to the following: a.)We have increased the amount of machined components sourced from foreign vendors. There is a longer lead time to receive these products from the vendors so we maintain a higher level of inventory to meet our requirements. The cost of maintaining this higher level of inventory is offset by the lower landed cost to purchase the components with the same high level of quality demanded from domestic suppliers. b.) In an attempt to reduce the lead time to our customers, we have increased the level of inventory of certain seismic components in standard sizes. While the level of inventory will fluctuate from time to time due to the stage of completion of the non-project sales orders in progress at the time, we do not expect that the inventory level will increase significantly from current levels for a sustained period of time.

Maintenance and other inventory represent stock that is estimated to have a product life cycle in excess of twelve months. This stock represents certain items the Company is required to maintain for service of products sold and items that are generally subject to spontaneous ordering. This inventory is particularly sensitive to technological obsolescence in the near term due to its use in industries characterized by the continuous introduction of new product lines, rapid technological advances and product obsolescence. The maintenance inventory decreased slightly since May 31, 2008. Management of the Company has recorded an allowance for potential inventory obsolescence. The provision for potential inventory obsolescence was $135,000 for each of the nine month periods ended February 28, 2009 and February 29, 2008. The Company continues to rework slow-moving inventory, where applicable, to convert it to product to be used on customer orders.

Accounts Receivable, Costs and Estimated Earnings in Excess of Billings ("CIEB"),

and Billings in Excess of Costs and Estimated Earnings ("BIEC")

  Accounts receivable $  1,249,000      $  2,109,000      $   (860,000)   -41%
                 CIEB    1,972,000         1,756,000          216,000    12%
           Less: BIEC      319,000                 -          319,000

Net $ 2,902,000 $ 3,865,000 $ (963,000) -25%

Number of an average day's sales
outstanding in accounts receivable 30 38

The Company combines the totals of accounts receivable, the current asset CIEB, and the current liability, BIEC, to determine how much cash the Company will eventually realize from revenue recorded to date. As the accounts receivable figure rises in relation to the other two figures, the Company can anticipate increased cash receipts within the ensuing 30-60 days.

Accounts receivable of $1,249,000 as of February 28, 2009 includes approximately $137,000 of amounts retained by customers on long-term construction projects ("Project(s)"). It also includes $42,000 of an allowance for doubtful accounts ("Allowance"). The accounts receivable balance as of May 31, 2008 of $2,109,000 included an Allowance of $72,000. The Allowance increased by $180,000 from May 31, 2008 to November 30, 2008 due to increasing uncertainty regarding the collectibility of amounts past due from a foreign customer. Subsequent to November 30, 2008, the Company has received full payment for these past due amounts from this customer and, as a consequence, has reduced the amount of the Allowance by $210,000 to reflect management's assessment of the current risk of uncollectible accounts receivable. 'The Company expects to collect the net accounts receivable balance of $1,249,000, including the retainage, during the next twelve months. The number of an average day's sales outstanding in accounts receivable decreased from 38 days at May 31, 2008 to 30 at February 28, 2009. This is primarily due to the collection during the current period of one old, large receivable that was outstanding at May 31, 2008.

As noted above, CIEB represents revenues recognized in excess of amounts billed. Whenever possible, the Company negotiates a provision in sales contracts to allow the Company to bill, and collect from the customer, payments in advance of shipments. Unfortunately, provisions such as this are often not possible. The $1,972,000 balance in this account at February 28, 2009 is 12% more than the prior year-end. Generally, if progress billings are permitted under the terms of a Project sales agreement, the more complete the Project is, the more progress billings will be permitted. The Company expects to bill the entire amount during the next twelve months. 41% of the CIEB balance as of the end of the last fiscal quarter, November 30, 2008, was billed to those customers in the current fiscal quarter ended February 28, 2009. The remainder will be billed as the projects progress, in accordance with the terms specified in the various contracts.

The balances in this account are comprised of the following components:

                               February 28, 2009 November 30, 2008 May 31, 2008
                         Costs       $ 3,274,000       $ 3,076,000  $ 1,711,000
            Estimated earnings           490,000           494,000      372,000
   Less: Billings to customers         1,792,000         1,419,000      327,000
                          CIEB       $ 1,972,000       $ 2,151,000  $ 1,756,000
Number of Projects in progress           9                   9             7

Summary of factors affecting the balances in CIEB and BIEC:

                                      February 28,     November 30,   May 31, 2008
                                          2009             2008
     Number of Projects in progress        10               9              7
         Aggregate percent complete       69%              77%            45%
       Average total sales value of     $589,000         $538,000       $667,000
               Projects in progress
 Percentage of total value invoiced       38%              29%             7%
                        to customer

Other Balance Sheet Items

The Company's backlog of sales orders at February 28, 2009 is $12.4 million, up from the $11.4 million backlog value at the end of the prior year. $2.0 million of the current backlog is on long-term construction projects already in progress.

Other current assets, which is primarily comprised of deferred taxes and prepaid . . .