The following discussion of financial condition and results of operations of the Company should be read in conjunction with the consolidated condensed financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the Company's Annual Report on Form 10-K for the year ended December 31, 2008. This discussion and analysis includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), regarding, among other things, the Company's plans, strategies and prospects, both business and financial. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Many of the forward looking statements contained in this Quarterly Report may be identified by the use of forward-looking words such as "believe," "expect," "anticipate," "should," "planned," "will," "may," and "estimated," among others. Important factors that could cause actual results to differ materially from the forward-looking statements that the Company makes in this Quarterly Report are set forth below, are set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2008 and are set forth in other reports or documents that the Company files from time to time with the SEC. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

In May 2009, the FASB issued SFAS 165, which establishes accounting and reporting standards for events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 became effective for fiscal years and interim periods ending after June 15, 2009. The Company adopted SFAS 165 during the second quarter of 2009. See Note 14 of the Notes to Consolidated Condensed Financial Statements. In June 2009, the FASB issued SFAS No. 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles" ("SFAS 168"). SFAS 168 establishes the FASB Accounting Standards Codification ("Codification") as the authoritative source of accounting principles to be used in the preparation of financial statements by nongovernmental entities. SFAS 168 is effective for fiscal years and interim periods ending after September 15, 2009. The Company plans to adopt SFAS 168 during the third quarter of 2009.

Discontinued operations
In late 2007, the Company entered into letters of intent with two companies to sell its SkyTel division in two separate transactions. The Company completed the sale of the SkyGuard and FleetHawk product lines in February 2008 and the sale of the remainder of the SkyTel business in June 2008. Accordingly, the results of the SkyTel business have been classified as discontinued operations in the accompanying financial statements. For the three months ended June 30, 2009 and 2008, the SkyTel division had revenues of $0 and $15.0 million, respectively, and a loss before income taxes of $0 and $2.9 million, respectively. For the three and six months ended June 30, 2008, the Company recognized an additional $500,000 loss on the sale of the SkyTel business resulting from a reduction in the total consideration as reflected in the Consolidated Condensed Statements of Operations.
Business Segment Results
The Company operates two reportable business segments: Bell Techlogix, a provider of integrated technology product and service solutions and the Recreational Products Group, a wholesale distributor of aftermarket parts and accessories for the recreational vehicles, boats, snowmobiles, motorcycles and ATVs. The Company also separately records expenses related to corporate overhead which supports the business lines. The Company's former segment, SkyTel, has been reflected as a discontinued operation and, therefore, is not presented. Bell Techlogix
Bell Techlogix's revenues of $16.5 million for the second quarter of 2009 represented a 16.1% increase from the $14.2 million of revenues for the second quarter of 2008. Product revenues of $10.2 million for the second quarter of 2009 represented a 33.3% increase from the $7.6 million of product revenues for the second quarter of 2008, which was primarily the result of increased hardware and software sales into the K-12 and higher education markets. Service revenues of $6.3 million for the second quarter of 2009 represented a 3.8% decrease from the $6.6 million of service revenues for the second quarter of 2008 due to the expiration of certain services contracts during 2008.
Bell Techlogix's operating income of $438,000 for the second quarter of 2009 represented a $404,000 increase from the operating income of $34,000 for the second quarter of 2008. This increase was due to an increase of $258,000 in gross profit primarily related to the higher product revenues and a $150,000 contract termination fee and a decrease of $146,000 in SG&A expenses due primarily to reductions in salaries and wages and shipping costs. Recreational Products Group
Recreational Products Group ("RPG") revenues of $11.0 million for the second quarter of 2009 represented a 7.7% decrease from the $11.9 million of revenues for the second quarter of 2008. This decrease was primarily related to lower sales in the marine and recreational vehicle product lines which can be attributed primarily to a continued decline in consumer spending at dealers. RPG operating income of $1.0 million for the second quarter of 2009 represented a $0.3 million increase from the operating income of $0.7 million for the second quarter of 2008. This increase was primarily due to a $0.3 million decrease in SG&A expenses as a result of reductions in headcount, freight and facility costs and an increase in gross profit margins from 27.8% in the second quarter of 2008 to 30.1% in the second quarter of 2009, partially offset by the lower revenues discussed above.
Corporate
Corporate overhead costs of $939,000 for the second quarter of 2009 represented a 21.2% increase from $775,000 for the second quarter of 2008. The increase in costs of $164,000 was primarily the result of a reduction to expenses in 2008 by $200,000 due to a favorable legal settlement. The cost increase was offset slightly by headcount reductions and the related decrease in travel and benefits costs, and reductions in insurance and telecommunications expenses.

Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008 The Company has provided a summary of its consolidated operating results for the six months ended June 30, 2009, compared to the six months ended June 30, 2008, followed by an overview of its business segment performance below:
Net revenues
Net revenues were $45.9 million for the six months ended June 30, 2009 as compared to $49.3 million for the six months ended June 30, 2008, representing a decrease of $3.4 million or 6.9%. The decrease was the result of a $3.4 million decrease in net revenues in the Recreational Products Group. Gross profit
Gross profit was $9.9 million, or 21.5% of net revenues, for the six months ended June 30, 2009, compared to $11.3 million, or 22.9% of net revenues, for the six months ended June 30, 2008. The decrease in gross profit of $1.4 million was the result of a $0.8 million decrease in gross profit in Bell Techlogix and a $0.6 million decrease in gross profit in the Recreational Product Group. Selling, general and administrative expenses SG&A expenses were $11.0 million, or 24.0% of net revenues, for the six months ended June 30, 2009, compared to $11.9 million, or 24.2% of net revenues, for the six months ended June 30, 2008. The decrease in SG&A expenses of $0.9 million consisted of reductions in SG&A expenses of $0.6 million in the Recreational Products Group, $0.2 million in Bell Techlogix and $0.1 million in the Corporate segment for the six months ended June 30, 2009. Interest and other, net
Net interest expense was $498,000 for the six months ended June 30, 2009, compared to $446,000 for the six months ended June 30, 2008. The increase in net interest expense was the result of the allocation, during the six months ended June 30, 2008 of $592,000 of interest expense to discontinued operations offset by the decrease in the interest rate on the Amended Convertible Note from 8.0% to 4.0%. The net interest expense was primarily the result of the outstanding balances under the Revolving Credit Facility and Amended Convertible Note. Income taxes
The benefit from income taxes was $7,000 for the six months ended June 30, 2009 compared to a provision for income taxes of $33,000 for the six months ended June 30, 2008, which were primarily related to state taxes.

Discontinued operations
For the six months ended June 30 2008, the SkyTel division had revenues of $35.1 million and a loss before income taxes of $1.9 million. During the six months ended June 30, 2009, no revenue or operating income was attributable to discontinued operations.
Business Segment Results
Bell Techlogix
Bell Techlogix's revenues of $27.5 million for the six months ended June 30, 2009 were flat compared to the six months ended June 30, 2008. Product revenues of $15.3 million for the six months ended June 30, 2009 represented a 13.8% increase from the $13.5 million of product revenues for the six months ended June 30, 2008, which was primarily the result of increased hardware and software sales into the K-12 and higher education markets. Service revenues of $12.2 million for the six months ended June 30, 2009 represented a 12.8% decrease from the $13.9 million of service revenues for the six months ended June 30, 2008. The service revenue decrease was primarily the result of a significant non-recurring project in the first quarter of 2008 and the expiration of certain services contracts during 2008.
Bell Techlogix's operating loss of $151,000 for the six months ended June 30, 2009 represented a $0.6 million decrease from the operating income of $0.5 million for the six months ended June 30, 2008. The decline in operating income was the result of the expiration of certain service contracts during 2008, a significant non-recurring services project in the first quarter of 2008 and increases in sales and marketing costs in an attempt to grow the commercial segment of the Bell Techlogix business.
Recreational Products Group
RPG revenues of $18.4 million for the six months ended June 30, 2009 represented a 15.9% decrease from the $21.8 million for the six months ended June 30, 2008. This decrease was primarily related to lower sales in the recreational vehicle and marine product lines attributed primarily to lower out of season purchases by dealers and a continued decline in consumer spending at dealers. As a result of the current economic uncertainty, many dealers have made strategic changes in buying habits to stock less product and order product from distributors as they need parts for repairs or as customers place orders.
RPG operating income of $0.8 million for the six months ended June 30, 2009 represented a $46,000 decrease from the operating income of $0.9 million for the six months ended June 30, 2008. This decrease was primarily attributed to the lower revenues discussed above, mostly offset by an increase in gross profit margins from 26.1% during the six months ended June 30, 2008 to 27.7% during the six months ended June 30, 2009 and a $0.6 million decrease in SG&A expenses due to reductions in headcount, freight and facility costs. Corporate
Corporate overhead costs of $1.8 million for the six months ended June 30, 2009 represented a 3.5% decease from $1.9 million for the six months ended June 30, 2008. The decrease in costs of $67,000 was primarily the result of headcount reductions and the related decrease in travel and benefits costs and reductions in insurance and telecommunications expenses, partially offset by the $0.2 million reduction to expenses in 2008 due to a favorable legal settlement.

                         Changes in Financial Condition
Liquidity and Capital Resources
Selected financial data are set forth in the following tables (dollars in
thousands, except per share amounts):

                                                     June 30       December 31
                                                       2009           2008
       Cash and cash equivalents                     $     39     $       3,233
       Net working capital                           $ 10,755     $      12,305
       Current ratio                                     1.91              1.98
       Long-term liabilities to capitalization (1)      114.6 %           101.7 %
       Shareholders' deficit per share               $  (4.33 )   $       (0.59 )
       Days' sales in receivables                          48                50

(1) Capitalization represents the sum of long-term liabilities and shareholders' deficit.

For the six months ended June 30, 2009, net cash used in operating activities totaled $5.9 million, consisting of a net loss of $1.7 million, an increase in accounts receivable of $4.7 million, related primarily to the Recreational Products Group selling products with extended payment terms and a decrease in accounts payable and accrued liabilities of $1.7 million, partially offset by non-cash expenses of $1.0 million and a decrease in inventory of $1.2 million. Net cash provided by investing activities totaled $2.7 million, consisting of $2.8 million in cash provided by investing activities for discontinued operations (the Company's former SkyTel division) from payments received during the first half of 2009 on notes receivable related to the various SkyTel sale transactions, offset by $59,000 in cash used in investing activities for continuing operations related to purchases of fixed assets. Net cash used in financing activities totaled $70,000, consisting of $0.3 million in payments of floor plan payables, $0.2 millions in payments of debt acquisition costs and $0.1 million in capital lease payments, partially offset by $0.5 million in borrowings on the Revolving Credit Facility.
For the six months ended June 30, 2008, net cash used in operating activities totaled $3.9 million, consisting of $2.0 million used in operating activities for continuing operations and $1.9 million used in operating activities for discontinued operations. The net cash used in operating activities for continuing operations was primarily the result of a loss of $2.1 million, a decrease in accounts payable and accrued liabilities of $3.0 million and an increase in accounts receivable of $1.0 million, related primarily to the Recreational Products Group selling products with extended payment terms, partially offset by non-cash expenses of $2.3 million and a decrease in inventory of $1.8 million. Net cash provided by investing activities totaled $8.8 million, consisting of $0.2 million used in investing activities for continuing operations related to $0.7 million in purchases of fixed assets, partially offset by $0.5 million in proceeds from a life insurance policy and $9.0 million provided by investing activities for discontinued operations. The $9.0 million in cash provided by investing activities for discontinued operations represented $10.0 million in proceeds, including $7.0 million from the sale of the SkyGuard and FleetHawk products lines to SkyGuard, LLC in February 2008 and $3.0 million from the sale of the remainder of the SkyTel business to Velocita in June 2008, partially offset by $1.0 million in purchases of fixed assets (primarily pagers which were rented to customers.) Net cash used in financing activities totaled $3.9 million, consisting of $3.6 million used in financing activities for continuing operations, including $2.8 million to pay down the Revolving Credit Facility, $0.6 million in payments of floor plan payables and $0.1 million in debt acquisition costs, and $0.3 million used in financing activities for discontinued operations related to payments of capital lease obligations.

Revolving Credit Facility with Wells Fargo Foothill As of June 30, 2009, the Company had $461,000 outstanding under its Revolving Credit Facility with WFF. The Company anticipates utilizing the Revolving Credit Facility periodically during 2009 to fund working capital needs. The Revolving Credit Facility is secured by a lien on substantially all of the Company's assets.
Additional Advances under the Revolving Credit Facility will be available to the Company, up to the aggregate $10 million credit limit, subject to restrictions based on the borrowing base. The Advances may be used to finance ongoing working capital, capital expenditures and general corporate needs of the Company. Advances made under the Revolving Credit Facility bear interest, in the case of base rate loans, at a rate equal to the "base rate," which is the greater of 3.5% or the rate of interest per annum announced from time to time by WFF as its prime rate, plus a margin. In the case of LIBOR rate loans, amounts borrowed bear interest at a rate equal to the greater of 3.0% or the LIBOR Rate (as defined in the Credit Agreement) plus a margin. The Advances made under the Credit Agreement are repayable in full on March 31, 2010. The Company may prepay the Advances (unless in connection with the prepayment in full of all of the outstanding Advances) at any time without premium or penalty. If the Company prepays all of the outstanding Advances and terminates all commitments, the Company is obligated to pay a prepayment premium.
On March 12, 2009, the Company entered into the Fifth Amendment with WFF. The Fifth Amendment added the Company's newly formed subsidiary, Bell Techlogix, Inc., as a party to the Revolving Credit Facility and made immaterial conforming and updating amendments.
On March 25, 2009, the Company entered into the Sixth Amendment with WFF. The Sixth Amendment modified the block on the amount of the Revolving Credit Facility available during 2009 to amounts ranging from $3.5 million to $6.0 million, revised the expiration date of the Revolving Credit Facility to March 31, 2010, established a minimum prime rate of 3.5% and a minimum LIBOR rate of 3.0%, increased the margin on both prime rate and LIBOR rate loans to percentages ranging from 4.0% to 4.5% and revised the financial profitability and capital expenditure covenants for the year ended December 31, 2009. Convertible Note Held By Newcastle
On January 31, 2007, the Company issued to Newcastle the Convertible Note, a convertible subordinated pay-in-kind promissory note with a principal amount of $10.0 million, in order to complete the financing of the Company's acquisition of SkyTel. The Convertible Note was amended and restated on June 13, 2008. The Amended Convertible Note is secured by a second priority lien on substantially all of the Company's assets. The outstanding principal balance and/or accrued but unpaid interest on the Amended Convertible Note is convertible at any time by Newcastle into shares of the Company's common stock at a conversion price of $4.00 per share (the "Conversion Price"), subject to adjustment. The Amended Convertible Note accrues interest at 4% per annum, subject to adjustment in certain circumstances, which interest accretes as principal on the Amended Convertible Note as of each quarterly interest payment date. In connection with execution of the Amended Convertible Note, and subject to certain conditions, the Company has agreed to appoint such number of director designees of Newcastle such that Newcastle's designees constitute 50% of the then outstanding current members of the Company's board of directors (or, if the number of members of the board of directors is an odd integer, such number of Newcastle designees equal to the lowest integer that is greater than 50% of the then outstanding members). The Company also has the option (subject to the consent of WFF) to pay interest on the outstanding principal balance of the Amended Convertible Note in cash at a higher interest rate (8%) following January 31, 2009 if the weighted average market price of the Company's common stock is greater than 200% of the Conversion Price ($8.00 per share). The Amended Convertible Note matures on January 31, 2017. The Company has the right to prepay the Amended Convertible . . .