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


Our consolidated statements of operations for the three-month and six-month
periods ended June 30, 2009 and 2008 reflect our operations consolidated with
the operations of our subsidiaries.



                                          Three Months Ended           Six Months Ended
                                               June 30,                    June 30,
  ($'s in millions)                       2009            2008         2009         2008
  Net sales                             $    33.5        $ 57.4      $   73.3      $ 104.3
  Cost of sales                              26.0          46.9          57.0         87.5

  Gross profit                          $     7.6        $ 10.5      $   16.3      $  16.8
  Percent of sales                           22.7 %        18.3 %        22.2 %       16.1 %

  Selling and administrative expenses   $     7.8        $  8.0      $   15.3      $  14.8
  Percent of sales                           23.3 %        13.9 %        20.9 %       14.2 %

  Operating (loss) income               $    (0.4 )      $  2.1      $    0.5      $   1.3
  Percent of sales                           (1.2 )%        3.7 %         0.7 %        1.2 %

Consolidated net sales for the second quarter decreased 41.6% or $23.9 million to $33.5 million in 2009 compared to $57.4 million in 2008. Consolidated net sales for the first six months of 2009 were $73.3 million, a decrease of $31.0 million or 29.7% compared to $104.3 million in 2008. The decrease in revenues for the three months ended June 30, 2009 was due to the weak economy which resulted in a 57% decrease in contracting revenues, a 34% decrease in equipment revenues and a 27% decrease in parts sales. The comparative six month decrease in net sales was also attributable to significant decreases in all groups although to a lesser degree because of an increase in equipment sales in the first quarter of 2009 as compared to the same quarter in 2008. Equipment group customers in power and refining have not been as adversely affected by the weak economy.

Orders booked were $32.7 million during the second quarter of 2009 and $67.7 million for the first six months of 2009, as compared to $54.1 million during the second quarter of 2008 and $106.9 million in the first half of 2008.

Second quarter 2009 gross profit was $7.6 million. This compares to gross profit of $10.5 million during the same period in 2008. Gross profit as a percentage of revenues for the three-month period ended June 30, 2009, increased by 4.4 percentage points to 22.7% compared with 18.3% for the comparable period in 2008. This anticipated increase was primarily the result of an increase in the proportion of sales of higher margin equipment and component parts to total sales. The equipment group sales, before intercompany eliminations, were 57.5% of total sales for the second quarter of 2009 compared to 49.2% of total sales for the second quarter of 2008 and the component parts sales, before intercompany eliminations, were 9.2% of total sales for the second quarter of 2009 compared to 7.1% sales for the second quarter of 2008. Additionally, gross margin percentages in equipment sales, contracting and parts sales also increased in the second quarter of 2009 compared to the second quarter of 2008.

Gross profit was $16.3 million for the first six months of 2009, a decrease of $.5 million compared to $16.8 million for the same period in 2008. Gross profit as a percentage of revenues for the first six months of 2009 increased to 22.2% compared to 16.1% for the same period in 2008. This increase was the result of the same factors described for the second quarter as well as the fact that the six month 2008 gross profit percentage was lower due to the impact of significant ongoing costs incurred on a large project caused by customer scope changes and site conditions.

Selling and administrative expenses decreased by $0.2 million, or 2.5%, from $8.0 million to $7.8 million during the second quarter and increased by $0.5 million, or 3.3%, from $14.8 million to $15.3 million during the first six months of 2009 compared to 2008. The three and six month periods ended June 30, 2009 reflect additional selling and administrative expenses of entities acquired during 2008, approximating $0.4 million and $1.8 million, respectively, and a $300,000 non-cash charge to increase the allowance for bad debts during the second quarter of 2009. These increases were offset by significant reductions in selling and administrative wages and fringes due to staff reductions of $0.7 million for the second quarter of 2009 and $1.0 million for the six months ended June 30, 2009 as compared to the same periods in 2008. The addition to the allowance for bad debts was due to an increase in the percentage of past due accounts as a percentage of the total receivables. None of these past due accounts relate to the automotive industry and our outstanding receivables related to the auto industry have been significantly reduced through collection.

Selling and administrative expense as a percentage of sales increased from 13.9% to 23.3% for the quarter ended June 30, 2009 and increased from 14.2% to 20.9% for the six months ended June 30, 2009. The increase in selling and administrative expenses as a percentage of sales is primarily due to the overall decline in sales volume as well as the increase to the allowance for bad debts during the second quarter of 2009.

Amortization expense decreased by $226,000 to $166,000 during the second quarter of 2009 from $392,000 in the same period of 2008 and decreased by $127,000 to $479,000 in the first six months of 2009 from $606,000 in the same period of 2008. These decreases were the result of certain definite life intangibles related to earlier acquisitions becoming fully amortized.

Operating loss was $(0.4) million in the second quarter of 2009, a decrease of $2.5 million compared to operating income of $2.1 million during the same quarter of 2008. Operating loss as a percent of sales in the second quarter of 2009 was (1.2%) compared to operating income of 3.7% for the same period in 2008.

Operating income for the first six months of 2009 was $0.5 million, a decrease of $0.8 million compared to operating income of $1.3 million during the same period of 2008. Operating income as a percent of sales for the six months ended June 30, 2009 was 0.7% compared to 1.2% for the same period in 2008.

Low sales volume was the primary factor for the decreases in operating income and operating margin percentages.

Other expense of $261,000 for the three months ended June 30, 2009 consists of losses on foreign currency translations and revaluation of the embedded derivative on the subordinated debt. For the six months ended June 30, 2009, other expense of $172,000 consisted of foreign currency translation losses and revaluation of the embedded derivative on the subordinated debt.

Interest expense decreased by $0.1 million from $0.4 million in the second quarter of 2008 to $0.3 million during the second quarter of 2009. Interest expense increased slightly to $0.7 million during the first six months of 2009 compared to $0.6 million during the first six months of 2008. The decrease for the quarter was due primarily to lower borrowings on the Company's credit facility offset by higher interest rates on the facility which was amended effective March 31, 2009 and an additional $0.1million charge to interest expense resulting from a state sales tax audit. The six month period was affected by the same factors.

Federal and state income tax benefit was $0.3 million during the second quarter of 2009 compared to expense of $0.7 million during the second quarter of 2008. Federal and state income tax benefit was $0.1 million for the first six months of 2009 compared to a tax expense of $0.3 million in 2008. The federal and state income tax provision for the first six months of 2009 was 35%, which reflects the estimated effective tax rate for 2009. Our statutory income tax rate is affected by certain permanent differences including income or expense for market valuation of warrants, non-deductible interest expense related to the subordinated debt and non-deductible expense related to incentive stock options.

Net loss for the quarter ended June 30, 2009 was $0.6 million compared with net income of $1.0 million for the same period in 2008. Net loss for the six months ended June 30, 2009 was $0.3 million compared with a net income of $0.5 million for the same period in 2008.

Backlog

Our backlog consists of the amount of revenues we expect from full performance of open, 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 June 30, 2009, was $62.4 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.

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, payment of interest on our outstanding senior debt, working capital and other general corporate requirements.

At June 30, 2009 and December 31, 2008, cash and cash equivalents totaled $1.1million 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 June 30, 2009 was $9.6 million versus $22.6 million at December 31, 2008. The bank debt at June 30, 2009 includes $6.8 million due on the revolving line of credit. Unused credit availability under our $30.0 million revolving line of credit at June 30, 2009 was $1.6 million. Availability is limited as determined by a borrowing base formula contained in the credit agreement.

On May 1, 2009, the Company entered into a Sixth Amendment to Credit Agreement effective as of March 31, 2009. The Amendment amends the Bank Facility 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 Bank Facility, 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 $3,000,000, and consent to an extension fee of CAD $38,000 payable to Icarus.

As of June 30, 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 June 30, 2009, we are 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 revolving credit line and the daily LIBOR rate plus 3.75% or the tranche LIBOR rate plus 3.25% for the term note. The weighted average interest rate under the Bank Facility as of June 30, 2009 was 3.95%.

On August 14, 2008, the Company issued the Convertible Subdebt Note in the amount of Canadian $5,000,000 to Icarus. The Convertible 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 until paid. The holder of the Convertible Subdebt Note may convert at any time, the outstanding principal and accrued interest under the Note into common stock of the Company at a per share price of $4.75, which was the closing consolidated bid price immediately preceding the entering into of the Convertible Subdebt Note. The Convertible 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 Convertible 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 are being deferred and amortized over the remaining term of the subdebt. The Convertible 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 Convertible Subdebt Note, provided that the Company is not in default under the Bank Facility. The outstanding balance of the Convertible Subdebt Note at June 30, 2009, as translated into U.S. dollars, was $1.1 million.

On May 15, 2009, the Company issued a Promissory Note ("Note") to Icarus in the amount of $3,000,000. The Note, which is subordinated to the Company's Bank Facility with Fifth Third, bears interest at 12% per annum with interest payable monthly. The maturity date of the note is the earlier of May 15, 2012 or six months after repayment of the facility. The 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 amount in excess of the $10 million is required to be used to repay the Note, provided that the Company is not in default under its Bank Facility with its senior lender. At the option of Icarus, the note is repayable in Canadian funds with a stated conversion rate of 1.1789, or CAD $3,536,700, representing the conversion rate at the issuance date of the Note. In accordance with SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", this option has been bifurcated and recorded at fair value. The liability of $0.1 million is included in the corresponding debt balance in the Company's

condensed consolidated balance sheet as of June 30, 2009. Gains and losses resulting from the revaluation of this liability are included in other income (expense) in the condensed consolidated statements of operations.

The Company may repay the note at any time with no prepayment penalty. The outstanding balance of the Note at June 30, 2009, was $3.1 million in U.S. dollars and the total subordinated debt was $4.2 million in U.S. dollars.

Overview of Cash Flows and Liquidity



                                                            For the six months ended June 30,
($'s in thousands)                                            2009                      2008
Net cash provided by operating activities               $         13,757          $          1,657

Net cash used in investing activities                               (807 )                 (16,621 )

Net cash (used in) provided by financing activities              (12,998 )                  15,171


Net (decrease) increase                                 $            (48 )        $            207

Net cash provided by operating activities was $13.8 million in 2009 compared to cash provided by operating activities in 2008 of $1.7 million. Cash provided by operating activities for the first six months of 2009 was primarily the result of a net loss of $0.3 million, non cash depreciation and amortization expense of $1.3 million, non cash compensation expense for stock awards of $0.5 million, non cash bad debt expense of $0.3 million, a decrease of $29.0 million in accounts receivable, decrease in costs and estimated earnings in excess of billings and estimated earnings of $2.9 million and a decrease in inventories of $0.6 million offset by an decrease in accounts payable of $17.5 million, a decrease in accrued income taxes of $2.2 million and a decrease in billings in excess of costs and estimated earnings of $1.1 million. Other changes in working capital items provided cash of $0.1 million. Our net investment in working capital (excluding cash and cash equivalents and current portion of debt) at June 30, 2009 and December 31, 2008 was $13.3 million and $25.1 million, respectively.

Net cash used in investing activities was $0.8 million for the first six months of 2009 compared with $16.6 million for the same period in 2008. For the six months ended June 30, 2008, net cash used for the acquisition of FKI, which was financed by additional borrowings on the Company's credit facility, amounted to $15.3 million. We are managing our capital expenditure spending in light of the current level of sales. We anticipate lower capital spending in 2009, which will be funded with cash provided by operating activities and additional borrowings on our revolving credit facility.

Financing activities used cash of $13.0 million during the first six months of 2009 compared with cash provided by financing activities of $15.2 million during the same period of 2008. This consisted of repayments on the credit facility of $11.5 million and payments on term debt of $1.5 million.

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.