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 nine months of fiscal 2009 have proven to be extremely challenging for the Company. Sales and profits for the quarter and year to date periods remain well below the prior year periods as many of the Company's product offerings continue to be negatively influenced by the global recession. In recent years, the third fiscal quarter has been one of the Company's strongest. However, the results seen in the current year third quarter demonstrate the continued decreased customer demand and uncertainty that has affected most consumer and industrial businesses over the past year. Comparisons to the Company's prior year record results remain a challenge as current and future expectations are reset given the unprecedented economic downturn.

In the Specialized Manufacturing segment, revenues in the current quarter and year to date periods were below those of the prior year periods in many markets including the electronic coatings, wire and cable, digital & print media, transportation and construction product lines. Also, although the strength of the pound sterling improved during the current quarter, the financial results of the Company's European Operations continue to be negatively impacted in fiscal 2009 by the weakened pound sterling and euro whose values against the dollar have decreased 18% and 9%, respectively, from May 2008 to May 2009. Unfavorable product mix and fixed overhead costs on a lower revenue base continue to have a negative impact on overall profit margins in this segment. In an effort to improve profitability, the Company has initiated a number of cost control initiatives in order to stabilize profit margins.

The Chase Electronic Manufacturing Services segment is also facing softness in some key market segments which has led to a reduced order backlog during fiscal 2009. Lower sales and profits in both the current quarter and year to date periods compared to the prior year periods reflect the reduced order backlog experienced by this segment as many of the Company's key customers continue to assess their inventory levels and their own customer demand. This segment's operating results should continue to be profitable, but not at the same level observed in the prior fiscal year. For the remainder of fiscal 2009, management's attention will be focused on maximizing production efficiencies and new customer acquisition.

For the remainder of the fiscal year, the Company will continue to focus on strategic acquisition opportunities, new product development, supply chain management, consolidation as well as other cost reduction efforts. Cost savings initiatives have been intensified, but are balanced with strategic investment to increase capabilities and productivity. The Company has a strong balance sheet, including $5.3 million cash on hand, and is debt-free with substantial borrowing capacity for acquisition opportunities and facility reorganization needs.

The Company has two reportable segments summarized below:

 Segment                 Product Lines          Manufacturing Focus and Products
 Specialized             ·                      Produces protective coatings and
 Manufacturing           Wire and Cable         tape products including
                         ·                      insulating and conducting
                         Electronic Coatings    materials for wire and cable
                         ·                      manufacturers, protective
                         Transportation         coatings for pipeline
                         ·                      applications, moisture protective
                         Pipeline               coatings for electronics, high
                         ·                      performance polymeric asphalt
                         Construction           additives, expansion and control
                         ·                      joint systems for use in the
                         Packaging and          transportation and architectural
                         Industrial             markets, and custom pressure
                         ·                      sensitive labels.
                         Digital and Print
                         Media

 Electronic              ·                      Provides assembly and turnkey
 Manufacturing Services  Contract Electronic    contract manufacturing services

Results of Operations

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

                                            Three Months Ended May 31,                         Nine Months Ended May 31,
                                           2009                       2008                    2009                    2008
Revenues from external
customers
Specialized Manufacturing       $    21,165          84%      $   28,596       84%    $  66,836        84%    $  82,392       85%
Electronic Manufacturing
Services                              3,924          16%           5,330       16%       12,326        16%       14,416       15%
Total                           $    25,089                   $   33,926              $  79,162               $  96,808

Income before income taxes
Specialized Manufacturing       $     2,528    (a)   12%      $    5,675       20%    $   8,880   (a)  13%    $  15,875       19%
Electronic Manufacturing
Services                                444          11%             680       13%        1,166        9%         1,726       12%
Total for reportable segments         2,972          12%           6,355       19%       10,046        13%       17,601       18%
Corporate and Common Costs           (1,603 )  (b)                (1,247 )               (4,369 ) (b)            (4,018 )
Total                           $     1,369           5%      $    5,108       15%    $   5,677        7%     $  13,583       14%

Note: Percentages listed represent % of Revenues from External Customers (for each respective segment and period)
(a)
Includes loss on impairment of goodwill of $237,000. (see Note 6)
(b)
Includes loss on impairment of fixed assets of $262,322. (see Note 11)

Total Revenues

Total revenues decreased $8,837,000 or 26% to $25,089,000 for the quarter ended May 31, 2009 compared to $33,926,000 in the same quarter of the prior year. Total revenues decreased $17,646,000 or 18% to $79,162,000 in the fiscal year to date period compared to $96,808,000 in the same period in fiscal 2008.

Revenues from the Company's Specialized Manufacturing segment decreased $7,431,000 and $15,556,000, in the current quarter and year to date periods, respectively. The decrease in revenues as compared to the prior year periods is primarily due to the following for the current quarter and year to date periods, respectively: (a) decreased sales of $1,924,000 and $4,468,000 in the Electronic Coatings product lines due to decreased demand in the electronic and automotive markets; (b) decreased sales of $2,829,000 and $4,388,000 in the Wire & Cable market primarily due to decreased demand in the energy and communications markets; (c) decreased sales of $1,487,000 and $3,922,000 in the Pipeline and Construction product lines; (d) decreased sales of $428,000 and $1,686,000 in the Transportation product line; and (e) decreased sales of $376,000 and $1,334,000 in the Digital & Print Media product line. The decreases in revenues above were partially offset by increased year to date sales of $1,095,000 from Chase Protective Coatings Ltd., which was formed by the Company in September 2007.

Revenues from the Company's Electronic Manufacturing Services segment decreased $1,406,000 and $2,091,000 in the current quarter and year to date periods, respectively, compared to the prior year periods. The reduced sales in both the current quarter and year to date period is primarily a result of decreased customer orders and projects as many of the Company's key customers continue to assess their inventory levels and closely monitor their own customers' demand during this economic downturn.

Cost of Products and Services Sold

Cost of products and services sold decreased $5,285,000 or 23% to $17,637,000 for the quarter ended May 31, 2009 compared to $22,922,000 in the prior year quarter. Cost of products and services sold decreased $8,759,000 or 13% to $56,836,000 in the fiscal year to date period compared to $65,595,000 in the same period in fiscal 2008.

Cost of products and services sold in the Company's Specialized Manufacturing segment were $14,437,000 and $46,554,000 in the current quarter and year to date periods compared to $18,611,000 and $53,853,000 in the comparable periods in the prior year. Cost of products and services sold in the Company's Electronic Manufacturing Services segment were $3,200,000 and $10,282,000 in the current quarter and year to date periods compared to $4,311,000 and $11,742,000 in the comparable periods in the prior year.

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

                            Three Months Ended May 31,        Nine Months Ended May 31,
                               2009             2008            2009             2008
 Specialized Manufacturing     68%              65%             70%              65%
  Electronic Manufacturing
                  Services     82%              81%             83%              81%
                     Total     70%              68%             72%              68%

As a percentage of revenues, cost of products and services sold in the Specialized Manufacturing segment increased due to decreased sales of higher margin products and the larger share of total sales that were made up of lower margin products, coupled with the impact of fixed manufacturing overhead costs on a lower revenue base. These increases were partially offset by the favorable impact of ongoing cost reduction efforts and continued focus on raw material costs through supply chain management. Margin pressures across many of the Company's key product lines remain a challenge. Management continues to focus on maximizing margins in light of the volatility in the cost of certain commodity and petroleum based raw materials compared to last year.

As a percentage of revenues, cost of products and services sold in the Electronic Manufacturing Services segment increased due to the impact of fixed overhead costs on a lower revenue base. In addition, increased costs related to facility and production improvements were incurred earlier in the current fiscal year as a result of this segment's focus on generating new customer orders.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $395,000 or 7% to $5,582,000 for the quarter ended May 31, 2009 compared to $5,977,000 in the prior year quarter. Selling, general and administrative expenses decreased $1,378,000 or 8% to $16,462,000 in the fiscal year to date period compared to $17,840,000 in the same period in fiscal 2008.

The decrease in the current quarter and year to date period over the prior year periods is primarily attributable to the Company's continued emphasis on controlling costs, including reduced annual incentive compensation and external consulting costs. Additionally, lower revenues for the current quarter and year to date periods compared to the prior year periods have led to decreased sales commissions and other selling related expenses. The year to date decrease was partially offset by increased stock based compensation of $219,000 in fiscal 2009 primarily related to additional shares of restricted stock issued in September 2008 based on the Company's financial results for the fiscal year ending August 31, 2008. In accordance with the Company's long term incentive plan, compensation expense related to these shares is being recognized on a ratable basis over the three year vesting period ending August 31, 2010.

Loss on Impairment of Goodwill

In the quarter ended May 31, 2009, based on the decrease in sales activity in the current year and the completion of the fiscal year 2010 budget, management determined that the carrying value of goodwill associated with the Company's Northeast Quality Products (NEQP) division may not be recoverable. Accordingly, the Company performed a goodwill impairment analysis. Based on the present value of future cash flows utilizing projected results for the balance of fiscal year 2009 and projections for future years based on the fiscal year 2010 budgeting process, the goodwill impairment analysis yielded results that would not support the current book value of the goodwill associated with this division. As a result, the Company concluded the carrying amount of goodwill for the NEQP division was not fully recoverable and an impairment charge of $237,000 was recorded as of May 31, 2009. Goodwill related to NEQP, having a pre-impairment book value of $349,000, was written down to its fair value of $112,000 in accordance with generally accepted accounting principles.

Loss on Impairment of Fixed Assets

During the fiscal quarter ending May 31, 2009, the Company recorded a $262,000 charge related to the impairment of real property (land and building) located in West Bridgewater, MA which was being leased to Sunburst Electronics Manufacturing Solutions, Inc. The real property, having a pre-impairment book value of $1,632,000, was written down to its fair value of $1,370,000, which was realized upon the June 24, 2009 sale of the property.

Interest Expense

Interest expense decreased $32,000 or 91% to $3,000 for the quarter ended May 31, 2009 compared to $35,000 in the prior year quarter. Interest expense decreased $168,000 or 93% to $13,000 for the fiscal year to date period ended May 31, 2009 compared to $181,000 in the same period in fiscal 2008. The decrease in interest expense in both the current quarter and year to date period 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 $115,000 or 99% to $1,000 for the quarter ended May 31, 2009 compared to $116,000 in the prior year quarter. Other income decreased $64,000 or 16% to $326,000 for the fiscal year to date period ended May 31, 2009 compared to $390,000 in the same period in fiscal 2008. Other income includes bank interest earned by the Company's Humiseal Europe division and monthly rental income of $14,875 on real property (building and land) owned by the Company and leased to Sunburst Electronic Manufacturing Solutions, Inc. (subsequently sold in June 2009 as discussed previously).

Net Income

Net income decreased $2,356,000 or 73% to $862,000 in the quarter ended May 31, 2009 compared to $3,218,000 in the prior year quarter. Net income decreased $4,980,000 or 58% to $3,577,000 for the fiscal year to date period ended May 31, 2009 compared to $8,557,000 in the same period in fiscal 2008. The decrease in net income in both the current quarter and year to date periods compared to the prior year periods is a direct result of decreased revenue across the Company's core product lines as discussed previously.

Liquidity and Sources of Capital

The Company's cash balance increased $1,413,000 to $5,330,000 at May 31, 2009 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 utilize cash flows to pay down outstanding bank debt. The increased cash balance at May 31, 2009 was primarily a result of cash flow generated during the year. 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 $9,527,000 in the first nine months of fiscal year 2009 compared to $10,979,000 in the prior year period. Cash provided by operations during fiscal 2009 was primarily due to operating income and increased collection of accounts receivable offset by decreased accounts payable and accrued expenses.

The ratio of current assets to current liabilities was 3.0 as of May 31, 2009 compared to 2.3 as of August 31, 2008. The increase in the Company's current ratio at May 31, 2009 was primarily attributable to increased cash and a decrease in accounts payable and accrued liabilities partially offset by decreases in accounts receivable and inventory.

Cash flow used in investing activities of $4,703,000 was primarily due to $2,351,000 paid for the purchase of real property in Oxford, MA; $918,000 paid for purchases related to the build out of the Company's manufacturing facility in greater Pittsburgh, PA, and purchases of machinery and equipment at the Company's other manufacturing locations.

On October 14, 2008, the Company announced a cash dividend of $0.35 per share (totaling $2,986,212) to shareholders of record on October 31, 2008, which was paid on December 3, 2008. Cash flow used in financing activities of $2,964,000 primarily reflects the payment of this annual dividend.

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 May 31, 2009 and June 30, 2009, 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.

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 May 31, 2009. 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. In December 2008, it also acquired real property (land and building) in Oxford, MA in order to reduce off-site storage expenses and provide capacity for future growth. Machinery and equipment will also be added as needed to increase capacity or enhance operating efficiencies in the Company's other manufacturing plants. Furthermore, the Company may consider the acquisition of companies or other assets in fiscal 2009 or future periods 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 May 31, 2009.

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 noncontrolling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; expensing acquisition related costs as incurred; 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 will be 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.

In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" ("FAS 165"), which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. FAS 165 also requires entities to disclose the date through which subsequent events were evaluated as well as the rationale for why that date was selected. This disclosure should alert all users of financial statements that an entity has not evaluated subsequent events after that date in the set of financial statements being presented. FAS 165 is effective for interim and annual periods ending after June 15, 2009 and will be effective for the Company beginning with its annual period ending August 31, 2009. Since FAS 165 at most requires additional disclosures, the Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.

In June 2009, the FASB approved the "FASB Accounting Standards Codification" (the "Codification") as the single source of authoritative nongovernmental U.S. GAAP to be launched on July 1, 2009. The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. All existing accounting standard documents will be superseded and all other accounting literature not included in the Codification will be considered nonauthoritative. The Codification is effective for interim and annual periods ending after September 15, 2009. The Codification is effective for the Company in the interim period ending November 30, 2009 and it does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.

Critical Accounting Policies

The Company's financial statements are prepared in accordance with accounting principles generally accepted in the United States. To apply these principles, management 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 nine months ended May 31, 2009 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.