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


The Company's consolidated statements of operations for the three-month periods
ended March 31, 2009 and 2008 reflect the operations of the Company consolidated
with the operations of its subsidiaries.



                                           For the three months ended March 31,
   ($'s in millions)                           2009                     2008
   Net sales                             $           39.8         $           46.9
   Cost of sales                                     31.1                     40.6

   Gross profit                          $            8.7         $            6.3
   Percent of sales                                  21.9 %                   13.4 %

   Selling and administrative expenses   $            7.5         $            6.8
   Percent of sales                                  18.8 %                   14.5 %

   Operating income (loss)               $            0.8         $           (0.7 )
   Percent of sales                                   2.0 %                   (1.5 )%

Consolidated net sales for the first quarter were $39.8 million, a decrease of 15.1% or $7.1 million compared to the same quarter in 2008. The decline in first quarter net sales was attributable in part to a drop in our contracting group sales and a modest decline in our parts group sales both of which were offset by an increase in our equipment group sales. Contracting and parts group sales have been negatively impacted by a slowing economy.

Additionally, H.M. White, which is a unit in our contracting group, has seen a significant reduction in revenues in conjunction with the recent decline in the automotive industry and the workforce at that location has been scaled back. We do not anticipate any write offs or impairment of assets.

Orders booked in the first quarter of 2009 were $35.0 million as compared to $52.8 million (including $14.0 million of acquired backlog of FKI) during the first quarter of 2008, a decrease of $17.8 million or 33.7%.

First quarter 2009 gross profit was $8.7 million compared to gross profit of $6.3 million during the same period in 2008. Gross profit, as a percentage of sales, increased to 21.9% in the first quarter 2009 from 13.4% in the comparable prior year quarter. This $2.4 million increase was the result of a change in product mix with a larger percentage of our sales coming from the equipment group which typically has higher margins. Equipment group revenues, before intercompany eliminations, comprised 55% of our current quarterly revenues compared to 34% for the same period last year. Additionally, the first quarter of 2008 was negatively affected by lower margins in our contracting group due to the impact of significant costs incurred on a large project.

Selling and administrative expenses increased by $0.7 million or 10.7% to $7.5 million during the first quarter of 2009 from $6.8 million in the same period of 2008. This was due primarily to an additional two months of FKI expenses in 2009 (acquired March 1, 2008) as well as an additional three months of Flextor expenses in 2009 (acquired August 1, 2008) which together amounted to a $1.3 million increase. These increases were partially offset by reductions in wages and fringes of $0.4 million and professional services of $0.3 million. We have reduced staffing levels and various selling and administrative costs throughout the Company in response to the slowing economy and will continue to monitor these costs as we move forward.

Amortization expense increased to $313,000 for the three months ended March 31, 2009 compared to $214,000 for the three months ended March 31, 2008. This increase was due to additional amortization of certain definite life intangibles related to our recent acquisitions.

Operating income increased by $1.5 million to $0.8 million in the first quarter of 2009 compared to an operating loss of $0.7 million during the same quarter of 2008. This increase was due to the factors previously mentioned.

Interest expense for the three months ended March 31, 2009 increased by $153,000 to $362,000 from $209,000 during the first quarter of 2008. This increase was due to a higher level of outstanding borrowings during the current quarter. This higher level of borrowing was the result of two acquisitions in 2008. FKI was acquired on March 1, 2008 and Flextor was acquired on August 1, 2008.

Federal and state income tax expense totaled $199,000 during the first quarter of 2009 compared to an income tax benefit of $369,000 during the first quarter of 2008. The estimated federal and state income tax rate in the first quarter of 2009 was 35% compared to 39% in 2008. Our statutory income tax rate is affected by certain permanent differences including foreign income, expenses for stock based compensation and domestic manufacturing deductions.

Net income for the quarter ended March 31, 2009 was $369,000 compared to a net loss of $575,000 for the same period in 2008.

Backlog

Our backlog consists of the amount of revenue we expect from complete performance of uncompleted, signed, firm fixed price contracts that have not been completed for products and services we expect to substantially deliver within the next 12 months. Our backlog, as of March 31, 2009, was $63.2 million compared to $68.0 million as of December 31, 2008. There can be no assurances that backlog will be replicated, increased or translated into higher revenues in the future. The success of our business depends on a multitude of factors related to our backlog and the orders secured during the subsequent period(s). Certain contracts are highly dependent on the work of contractors and other subcontractors participating in a project, over which we have no or limited control, and their performance on such project could have an adverse effect on the profitability of our contracts. Delays resulting from these contractors and subcontractors, changes in the scope of the project, weather, and labor availability also can have an effect on a contract's profitability.

New Accounting Pronouncements

For information regarding recent accounting pronouncements, see Note 2 to the unaudited consolidated financial statements within Item 1 of this report.

Financial Condition, Liquidity and Capital Resources

Our principal sources of liquidity are cash flow from operations and available borrowings under our revolving credit facility. Our principal uses of cash are operating costs, debt service, working capital and other general corporate requirements.

At March 31, 2009 and December 31, 2008, cash and cash equivalents totaled $1.1 million and $1.2 million respectively. Generally, we do not carry significant cash and cash equivalent balances because excess amounts are used to pay down our revolving line of credit.

Total bank debt at March 31, 2009 was $17.5 million and $22.6 million at December 31, 2008. The bank debt at March 31, 2009 consists of $13.5 million due on the revolving line of credit and a term note totaling $4.0 million. Unused credit availability under our $30.0 million revolving line of credit at March 31, 2009 was $3.1 million. Availability is limited as determined by a borrowing base formula contained in the credit agreement.

We entered into a new credit facility (the "Bank Facility") on December 29, 2005 with Fifth Third Bank. The Bank Facility was amended on June 8, 2006, February 28, 2007, February 29, 2008, August 1, 2008 and December 31, 2008. Fees paid for these amendments were deferred and are being amortized over the remaining term of the Bank Facility.

On May 1, 2009, the Company entered into a Sixth Amendment to Credit Agreement effective as of March 31, 2009. The Amendment amends the Credit Agreement to extend the termination date of the line of credit from January 31, 2010 to April 1, 2011, make certain changes to the interest rates applicable to the obligations under the Credit Agreement, including the implementation of a daily reset, one-month LIBOR-based rate and the unavailability of a prime-based rate except in certain circumstances, which results in an increase of the borrowing rates by one percent, consent to a one-time payment of principal on the Subordinated Convertible Promissory Note of Icarus Investment Corp. in an amount not to exceed U.S. $3,000,000, and consent to an extension fee of CAD $38,220 payable to Icarus.

As of March 31, 2009, the Bank Facility, as amended, includes a revolving line of credit of up to $30 million, including letters of credit, limited to a borrowing base amount computed as 70% of eligible accounts receivable plus 50% of eligible inventories. The loan covenants currently require a ratio of funded debt to adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA") of not greater than 3.2 to 1.0, a ratio of fixed charges to adjusted EBITDA of not less than 1.25 to 1.0 and a requirement to attain $5.0 million of loan availability on or before June 1, 2009. As of March 31, 2009 the Company is in compliance with all covenants.

Interest on the outstanding borrowings is charged at the daily LIBOR rate plus 3.5% or the tranche LIBOR rate plus 3.0% for the revolver and the daily LIBOR rate plus 3.75% or the tranche LIBOR rate plus 3.25% on the term note. The weighted average interest rate under the Bank Facility was 2.74% as of March 31, 2009.

On August 14, 2008, the Company issued a Subordinated Convertible Promissory Note (the "Subdebt Note") in the amount of Canadian $5,000,000 to Icarus Investment Corp., a company which is controlled by Phillip DeZwirek, our Chairman and CEO, and Jason DeZwirek, our Secretary and one of our Directors. The Subdebt Note provides for interest to accrue at the rate of 10% per annum in 2008, 11% per annum in 2009, and 12% per annum commencing January 1, 2010. The Subdebt Note was amended in February 2009 to provide for interest payments to be payable monthly, instead of semi-annually, subject to the Subordination Agreement between Fifth Third Bank and Icarus Investment Corp. The Subdebt Note was further amended on May 1, 2009 to extend its maturity date to October 1, 2011 from July 31, 2010. Fees of Canadian $38,000 were paid for this amendment and will be deferred and amortized over the remaining term of the Subdebt. The Subdebt Note also matures in the event of a merger or reorganization of the Company that results in a change of control, upon the sale of 50% of the assets of the Company, or any sale of any division of the Company in excess of $5 million. To the extent that the Company completes an equity financing in excess of $10 million, 25% of the

amounts in excess of the $10 million are required to be used to repay the Subdebt Note, provided that the Company is not in default under the Bank Facility. We repaid Canadian $3,726,000 (U.S. $3.0 million) under the Subdebt Note on March 31, 2009. The outstanding balance of the Subdebt Note at March 31, 2009, as translated into U.S. dollars was $1.0 million.

Overview of Cash Flows and Liquidity



                                                            For the three months ended March 31,
($'s in thousands)                                            2009                       2008
Net cash provided by (used in) operating activities     $           8,548         $            (1,779 )

Net cash used in investing activities                                (517 )                   (15,921 )

Net cash (used in) provided by financing activities                (8,123 )                    17,760


Net (decrease) increase in cash                         $             (92 )       $                60

Net cash provided by operating activities increased by $10.3 million to $8.5 million in 2009 compared to cash used in operations of $1.8 million in 2008. Cash was provided by a decrease in accounts receivable of $17.1 million, a decrease in costs in excess of billings on uncompleted contracts of $3.0 million, an increase in billings in excess of cost of $0.2 million and a decrease in inventories of $0.2 million. Cash was used in payment of accrued income taxes of $1.9 million and accounts payable and expenses of 11.4 million. Our net investment in working capital (excluding cash and cash equivalents and current portion of debt) at March 31, 2009 and December 31, 2008 was $17.8 million and $25.1 million, respectively.

Net cash used in investing activities related to the acquisition of property and equipment was $0.5 million for the first three months of 2009 compared with $0.6 million for the same period in 2008. We manage our capital expenditures by evaluating the needs of our divisions to provide the necessary equipment needed to function at the current level of sales. Net cash used to acquire the assets of FKI totaled $15.3 million for the first three months of 2008.

Financing activities used cash of $8.1 million during the first three months of 2009 compared with cash provided of $17.8 million during the same period of 2008. Cash was used for net payments on the bank credit facility of $4.9 million and a payment on the subordinated debt of $3.0 million for the three-month period ended March 31, 2009 compared to borrowings of $17.7 million for the prior year's quarter. The payment of bank borrowings and a portion of our subordinated debt in 2009 was made using cash provided by operating activities.

Forward-Looking Statements

This Form 10-Q includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding industry prospects or future results of operations or financial position made in this Form 10-Q are forward-looking. We use words such as "believe," "expect," "anticipate," "intends," "estimate," "forecast," "project," "will," "plan," "should" and similar expressions to identify forward-looking statements. Forward-looking statements are based on management's current expectations and assumptions that are subject to risks and uncertainties, many of which are beyond our control, which may cause actual results, performance or trends to differ materially from those expressed in

the forward-looking statements. Potential risks, among others, that could cause actual results to differ materially are discussed under "Item 1A Risk Factors" of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and include, but are not limited to: our dependence on fixed price contracts and the risks associated therewith, including actual costs exceeding our estimates and our method of accounting for contract revenue; our history of losses and possibility of further losses; fluctuations in operating results from period to period due to seasonality of our business; the effect of growth on our infrastructure, resources, and existing sales; our ability to expand our operations in both new and existing markets; the potential for contract delay or cancellation; the potential for fluctuations in prices for manufactured components and raw materials; our ability to raise capital and the availability of capital resources; our ability to fully utilize and retain executives; the impact of federal, state or local government regulations; labor shortages or increases in labor costs; economic and political conditions generally; and the effect of competition in the air pollution control and industrial ventilation industry.

We caution investors that other factors might, in the future, prove to be important in affecting our results of operations. New factors emerge from time to time and it is not possible for management to predict all such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or a combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Investors are further cautioned not to place undue reliance on such forward-looking statements as they speak only to our views as of the date the statement is made. We undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise.