During the three months ended June 30, 2009 and 2008 approximately 56% and 37%, respectively and 50% and 43%, for the six months ended June 30, 2009 and 2008 respectively, of the Company's revenues were derived from contracts with agencies of the U.S. Government or their prime contractors and their subcontractors. The Company believes that government involvement in military operations overseas will continue to have an impact on the Company's revenues. While the Company remains optimistic in relation to these opportunities, it recognizes that sales to the Government are affected by defense budgets, the foreign policies of the U.S. and other nations, the level of military operations and other factors and, as such, it is difficult to predict the impact on future financial results. The Company's commercial business is affected by such factors as uncertainties in today's global economy, global competition, the vitality and ability of the commercial aviation industry to purchase new aircraft, the effects of terrorism and the threat of terrorism, market demand and acceptance both for the Company's products and its customers' products which incorporate Company-made components.

The Company's Advanced Technology Group's revenue decreased approximately $801,000 and $935,000 for the three and six months ended June 30, 2009, respectively, compared to the same periods in 2008 due to stretch-outs of customer orders across various product lines and, to a lesser extent, cancellations. The ATG continues its aggressive business development efforts in its primary markets and is broadening its focus to include new domestic and foreign markets that are consistent with its core competencies. There are substantial uncertainties in the current Global Economy that are compounded with certain Airliner delivery stretch-outs being implemented which in turn are adversely affecting the Company's sales revenues in 2009. Although the ATG backlog continues to be significant, actual scheduled shipments may be delayed as a function of the Company's customers' delivery determinations that are affected by changes in the Global Economy and other factors.

The Company's Consumer Products Group's (CPG) revenue increased approximately $2,175,000 and $862,000 for the three and six months ended June 30, 2009, respectively, compared to the same periods in 2008 primarily because of shipments under several significant government contracts. The Company's Consumer Products Group (CPG) develops new commercial products and products for Government and Military applications. Included in the significant uncertainties in the near and long term are the effects of the current recession and the difficulty to accurately project the net effect of the change in the U.S. Administration on the government's procurement programs. Approximately 69% and 62% of the CPG's revenues are derived from contracts with agencies of the U.S. Government or their prime contractors for the three and six months ended June 30, 2009, respectively.

See also Note 10, Business Segments, of the accompanying consolidated financial statements for information concerning business segment operating results.

                               Results of Operations



  The following tables compare the Company's statements of operations data for
  the six and three months ended June 30, 2009 and 2008 ($000's omitted).



                                                          Six Months Ended June 30,

                                                                                               2009 vs. 2008
                           2009                            2008                           Dollar         % Increase
                         Dollars        % of Sales        Dollars       % of Sales        Change         (Decrease)
Revenue:
  Advanced Technology   $    8,959             53.8 %    $   9,894             59.2 %    $    (935 )             (9.5 %)
  Consumer Products          7,685             46.2 %        6,823             40.8 %          862               12.6 %
                            16,644            100.0 %       16,717            100.0 %          (73 )             (0.4 %)
Cost of sale,
exclusive of
depreciation
  and amortization          12,756             76.6 %       12,085             72.3 %          671                5.6 %
Gross profit                 3,888             23.4 %        4,632             27.7 %         (744 )            (16.1 %)
Selling, general and
administration               2,350             14.1 %        2,044             12.2 %          306               15.0 %
Depreciation and
amortization                   282              1.7 %          281              1.7 %            1                0.4 %
Total costs and
expenses                    15,388             92.4 %       14,410             86.2 %          978                6.8 %
Operating income             1,256              7.6 %        2,307             13.8 %       (1,051 )            (45.6 %)
Interest expense                43              0.3 %           87              0.5 %          (44 )            (50.6 %)
Other income, net              (40 )           (0.2 %)         (53 )           (0.3 %)          13              (24.5 %)
Income tax provision           418              2.5 %          832              5.0 %         (414 )            (49.8 %)
Net income              $      835              5.0 %    $   1,441              8.6 %    $    (606 )            (42.1 %)


                                                         Three Months Ended June 30,
                                                                                                2009 vs. 2008
                           2009                            2008                           Dollar         % Increase
                         Dollars        % of Sales        Dollars       % of Sales        Change         (Decrease)
Revenue:
  Advanced Technology   $ 4,446.00             48.8 %    $   5,247             67.9 %    $    (801 )            (15.3 %)
  Consumer Products          4,660             51.2 %        2,485             32.1 %        2,175               87.5 %
                             9,106            100.0 %        7,732            100.0 %        1,374               17.8 %
Cost of sale,
exclusive of
depreciation
  and amortization           6,617             72.7 %        5,617             72.6 %        1,000               17.8 %
Gross profit                 2,489             27.3 %        2,115             27.4 %          374               17.7 %
Selling, general and
administration               1,271             14.0 %        1,021             13.2 %          250               24.5 %
Depreciation and
amortization                   143              1.6 %          141              1.8 %            2                1.4 %
Total costs and
expenses                     8,031             88.3 %        6,779             87.6 %        1,252               18.5 %
Operating income             1,075             11.7 %          953             12.4 %          122               12.8 %
Interest expense                19              0.2 %           40              0.5 %          (21 )            (52.5 %)
Other income, net              (11 )           (0.1 %)         (15 )           (0.2 %)           4              (26.7 %)
Income tax provision           357              3.9 %          340              4.4 %           17                5.0 %
Net income              $      710              7.7 %    $     588              7.7 %    $     122               20.7 %

Sales

The Company's consolidated revenues increased approximately $1,374,000 or 17.8% for the three month period ended June 30, 2009 and remained relatively consistent for the six month period ended June 30, 2009 when compared to the same three and six month periods in 2008. Such results are due to increased shipments at the CPG under several significant government contracts off-set by decreased shipments at the ATG due to customer stretch-outs of existing orders and, to a lesser extent, order cancellations. Procurement and time of shipments under Government contracts at the CPG significantly impact operating results from period to period.

Gross Profit

As shown in the above table, gross profit for the three month period ended June 30, 2009 increased while gross profit for the six month period ended June 30, 2009 decreased as compared to the same three and six month periods in 2008. The primary reason for the variations in gross profit was the mix of products sold at the CPG. The current mix of products sold in the period within the ATG and CPG segments as well as the composition of ATG and CPG sales to the total consolidated sales directly attributed to dollar value and percentage variations in gross profit.

Selling, general and administrative (SG&A) expenses that include variable costs increased for the three and six month periods ended June 30, 2009 as compared to the same three and six month periods in 2008. The increase in SG&A includes increased expenses relative to contract/ product administration/negotiations, product protection (i.e., trademarks, patents) and other costs associated with the expansion of the ATG and CPG foreign and domestic markets. The trend is for SG&A expenses to increase as a function of increased regulations, market expansion, company growth and the continued implementation of the Sarbanes-Oxley Act.

Interest expense decreased for the three and six month periods ended June 30, 2009 compared to the same periods in 2008 due to the decrease in average outstanding debt and interest rates. Average debt outstanding will continue to decline as the Company repays its scheduled debt obligations and assuming the Company does not incur additional debt. See also Note 5, Long-Term Debt, of the accompanying consolidated financial statements for information on long-term debt.

Depreciation and amortization expense remained consistent for the three and six month periods ended June 30, 2009 compared to the same periods in 2008. Depreciation expense fluctuates due to variable estimated useful lives of depreciable property (as identified in Note 2, Summary of Significant Accounting Policies, of the accompanying consolidated financial statements) as well as the amount and nature of capital expenditures in current and previous periods. It is anticipated that the Company's future capital expenditures will, at a minimum, follow the Company's requirements to support its delivery commitments and to meet the information technology related capital expenditure requirements that are associated with Sarbanes-Oxley and other new regulatory requirements.

Components of other income include interest income on cash and cash equivalents, and other amounts not directly related to the sale of the Company's products. The decrease in other income for the three and six month periods ended June 30, 2009 when compared to the same three and six month periods in 2008 is due to the decline in market driven interest rates on cash and cash equivalents.

The Company's effective tax rate was 33.4% for the six months ended June 30, 2009 as compared to 36.6% for the six month period ended June 30, 2008. The effective tax rate in both periods reflects state income taxes, permanent non-deductible expenditures and the tax benefit for the domestic manufacturing deduction allowable under the American Jobs Creation Act of 2004 as well as a reduction in New York State's statutory tax rate and apportioned income. See also Note 6, Income Taxes, of the consolidated financial statements for information concerning income tax.

Net income for the three month period ended June 30, 2009 increased $122,000 or 20.7% and decreased $606,000 or 42.1% for the six month period ended June 30, 2009 when compared to net income for the same two periods ended June 30, 2008. These period to period differences in net income are primarily attributable to decreased sales at ATG offset by increased sales at the CPG in the second quarter of 2009. Also, affecting net income were increases in selling, general and administrative expenses and changes in gross margin as the result of product mix in the respective periods.

The Company's primary liquidity and capital requirements relate to working capital needs; primarily inventory, accounts receivable, capital expenditures for property, plant and equipment, tax payments and principal and interest payments on debt.

At June 30, 2009, the Company had working capital of approximately $16,757,000 of which approximately $3,136,000 was comprised of cash and cash equivalents. The Company used approximately $904,000 in cash from operations during the six months ended June 30, 2009 as compared to generating $487,000 during the six months ended June 30, 2008. The primary uses of cash for the Company's operating activities for the six months ended June 30, 2009 were for increases in inventory and accounts receivable and payments to vendors aggregating $2,353,000.

The Company's primary use of cash in its financing and investing activities in the first six months of 2009 related to capital expenditures for equipment and principal payments on long-term debt as well as approximately $336,000 for a cash dividend paid on May 15, 2009 to shareholders of record on April 20, 2009.

At June 30, 2009, there are no material commitments for capital expenditures.

The Company also has a $1,000,000 line of credit on which there is no balance outstanding at June 30, 2009. If needed, this can be used to fund cash flow requirements.