The following discussion provides an analysis of our financial condition and results of operations and should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Item 8 of this Annual Report on Form 10-K.

Selected Relationships within the Consolidated Statements of Operations

                                                             Years Ended August 31,
                                                         2009         2008        2007
                                                             (Dollars in thousands)
Revenues                                               $ 107,606    $ 132,478   $ 127,460
Net income                                             $   6,385    $  12,374   $  10,193
Increase/(Decrease) in revenue from prior year
   Amount                                              $ (24,872 )  $   5,018   $  19,018
   Percentage                                                (19 )%         4 %        18 %
Increase/(Decrease) in net income from prior year
   Amount                                              $  (5,989 )  $   2,181   $   4,079
   Percentage                                                (48 )%        21 %        67 %
Percentage of revenue:
   Revenues                                                  100 %        100 %       100 %
   Expenses:
      Cost of products and services sold                      70 %         68 %        69 %
      Selling, general and administrative expenses            20           18          17
      Loss on impairment of assets                             1            0           1

   Income before income taxes                                  9           14          13
   Income taxes                                                3            5           5

   Net income                                                  6 %          9 %         8 %

Recent Developments

On September 4, 2009, we acquired all of the outstanding capital stock of C.I.M. Industries Inc. ("C.I.M."), which is based in Peterborough, NH and has a manufacturing facility in Texas. C.I.M. is a specialized manufacturer of high performance coating and lining systems used worldwide in the liquid storage and containment industry. With a primary focus on the water and wastewater industry, C.I.M. has the preferred products that complement our product line of high performance tapes and coatings. In its most recently completed twelve month period ending August 31, 2009, C.I.M. revenues were approximately $9,790,000.

The total purchase price, net of cash received, was $18,894,000, subject to certain adjustments relating to the closing date working capital. The purchase was funded through a combination of available cash on hand, a term loan in the amount of $10,000,000 from Bank of America, and a $3,000,000 note payable to C.I.M. shareholders. The net assets acquired by us include cash, inventories, trade receivables, property, plant & equipment, trade payables and certain other current assets and liabilities. The effective date for this acquisition was September 4, 2009. The results of this acquisition have been included in our financial statements since that date, and consequently are not reflected in our results of operations for the fiscal year ended August 31, 2009 or any prior period.

Overview

Following a record year in 2008 for both sales and profits, we were faced with numerous challenges during the 2009 fiscal year as the global recession negatively impacted most of our core product offerings and led to sales and profits in the current fiscal year well below the levels observed in the prior year. The continued declines in two of the larger industries we service, the housing market and worldwide automotive sector, have caused us to reset our expectations and refocus our priorities. We emphasized our efforts to review and consolidate costs where possible, achieved production efficiencies via continuous improvement plans, and identify new business opportunities through sales, marketing and product development teams. Additionally, we are focused on continuing

to support our long term consolidation plans, facility and process improvements and R&D for new and improved product offerings.

Revenues from our Specialized Manufacturing segment were below those of the prior year primarily due to lower demand for pipeline and wire and cable products. Additionally, as previously mentioned, the downturn in the automotive and housing market has negatively impacted sales of our HumiSeal conformal coatings which is used to protect electronic circuitry in automobiles and home appliances. The financial results of our European operations were negatively impacted in fiscal 2009 by the weakened pound sterling whose value against the dollar decreased 11% from August 2008 to August 2009. While fiscal 2009 results were disappointing for this segment, some new business opportunities have been achieved to offset some of the automotive and housing loss, and we experienced increased activity in some sectors during the later stages of the fiscal year.

The Chase Electronic Manufacturing Services segment also faced softness in some key market segments which led to decreased customer demand during fiscal 2009. Lower sales and profits in fiscal 2009 compared to the prior year period reflect the reduced order backlog experienced by this segment as many of our key customers continue to assess their inventory levels and their own customer demand. We continue to have strong relationships with our customers in this segment, even though overall volume is down from what was experienced in fiscal 2008.

In the upcoming fiscal year, our key strategies will include continuous improvement, long term consolidation, product and market development and a targeted acquisition effort. We maintained strong positive cash flows throughout fiscal 2009 and ended the fiscal year with our healthiest balance sheet ever. Despite the uncertainty of the current economic climate, we will continue to focus on our long terms strategic goals. This was evidenced by our acquisition of C.I.M. in the first quarter of fiscal 2010. Additionally, we have recently announced the planned December 2009 closing of the Paterson, NJ plant whose manufacturing will be redistributed to other Chase facilities, and we will be starting up a new coatings plant in Pittsburgh during the same timeframe.

The Company has two reportable segments summarized below:

Segment                   Product Lines           Manufacturing Focus and Products
Specialized            •    Wire and Cable      Produces protective coatings and tape
Manufacturing          •    Electronic          products including insulating and
                       Coatings                 conducting materials for wire and
                       •    Pipeline &          cable manufacturers, protective
                       Construction             coatings for pipeline applications,
                       •    Specialty           moisture protective coatings for
                       Products                 electronics, high performance
                                                polymeric asphalt additives, and
                                                expansion and control joint systems
                                                for use in the transportation and
                                                architectural markets.
Electronic             •    Contract            Provides assembly and turnkey
Manufacturing          Electronic               contract manufacturing services
Services               Manufacturing Services   including printed circuit board and
                                                electromechanical assembly services
                                                to the electronics industry operating
                                                principally in the United States.

Results of Operations

Revenues and Operating Profit by Segment are as follows

                                                      Income Before
                                         Revenues     Income Taxes         % of Revenues
                                           (Dollars in thousands)
 Fiscal 2009
 Specialized Manufacturing               $  91,236    $       13,899 (a)               15 %
 Electronic Manufacturing Services          16,370             1,718                   10

                                         $ 107,606            15,617                   15

    Less corporate and common costs                           (5,796 )(b)

       Income before income taxes                     $        9,821

 Fiscal 2008
 Specialized Manufacturing               $ 113,177    $       22,434                   20 %
 Electronic Manufacturing Services          19,301             2,138                   11

                                         $ 132,478            24,572                   19

    Less corporate and common costs                           (5,288 )

       Income before income taxes                     $       19,284

 Fiscal 2007
 Specialized Manufacturing               $ 109,195    $       20,094 (a)               18 %
 Electronic Manufacturing Services          18,265             2,040                   11

                                         $ 127,460            22,134                   17

    Less corporate and common costs                           (5,955 )

       Income before income taxes                     $       16,179

º (b)
º Includes loss on impairment of assets of $262

Total Revenues

Total revenues for fiscal 2009 decreased $24,872,000 or 19% to $107,606,000 from $132,478,000 in the prior year. Revenues in our Specialized Manufacturing segment decreased $21,941,000 or 19% to $91,236,000 for the year ended August 31, 2009 compared to $113,177,000 in fiscal 2008. The decrease in revenues from our Specialized Manufacturing segment in fiscal 2009 was primarily due to the following: (a) decreased sales of $6,263,000 in the Electronic Coatings product lines due to reduced demand in the electronic and automotive markets; (b) decreased sales of $7,546,000 in the Wire & Cable market primarily due to less demand in the energy and communications markets; (c) decreased sales of $2,392,000 in the Pipeline and Construction product lines; and (d) decreased sales of $5,014,000 in Specialty products.

Revenues from our Electronic Manufacturing Services segment decreased $2,931,000 or 15% to $16,370,000 for the year ended August 31, 2009 compared to $19,301,000 for fiscal 2008. The reduced sales in fiscal 2009 is primarily a result of decreased customer orders and projects as many of our key customers continue to assess their inventory levels and closely monitor their own customers' demand during this economic downturn. The backlog for this segment as of August 31, 2009 was $6,500,000 compared to $8,500,000 at August 31, 2008.

Royalties and commissions in the Specialized Manufacturing segment were $1,077,000, $1,775,000 and $1,792,000 for the years ended August 31, 2009, 2008 and 2007, respectively. The decrease in royalties and commissions in fiscal 2009 from the prior two fiscal years was due to decreased sales of conformal coatings from our licensed manufacturer in Asia.

Export sales from domestic operations to unaffiliated third parties were $14,611,000, $15,818,000 and $14,126,000 for the years ended August 31, 2009, 2008 and 2007, respectively. We anticipate future growth in our export sales due to the C.I.M. acquisition that was recently completed in September 2009.

Total revenues for fiscal 2008 increased $5,018,000 or 4% to $132,478,000 from $127,460,000 in fiscal 2007. Revenues in our Specialized Manufacturing segment increased $3,982,000 or 4% to $113,177,000 for the year ended August 31, 2008 compared to $109,195,000 in fiscal 2007. The increase in revenues from this segment in fiscal 2008 was primarily due to increased sales related to the following: (a) the operations acquired by HumiSeal Europe SARL in March 2007 and Chase Protective Coatings Ltd. in September 2007 which combined accounted for the majority of the $5,546,000 increased revenue from European operations;
(b) increased sales of $1,578,000 from the Pipeline product line; (c) increased sales of $1,616,000 from the Electronic Coatings product line; and (d) increased sales of $926,000 from a large, nonrecurring construction project that was completed in fiscal 2008 year. These increases were partially offset by the following: (a) decreased sales of $2,477,000 in the Wire & Cable market primarily due to decreased demand for building wire, insulation and identification tapes during fiscal 2008; (b) decreased sales of $1,549,000 in the Transportation and Packaging & Industrial product lines; and (c) decreased sales of $945,000 in the Construction product line primarily due to the reduction in Rosphalt 50® project sales which had experienced record levels in fiscal 2007.

The Electronic Manufacturing Services segment achieved record revenues in fiscal 2008 which increased $1,036,000 or 6% to $19,301,000 compared to $18,265,000 in fiscal 2007. This was primarily due to increased order activity from existing customers as well as several new customers added during fiscal year 2008.

Cost of Products and Services Sold

    Cost of products and services sold decreased $13,938,000 or 16% to
$75,742,000 for the fiscal year ended August 31, 2009 compared to $89,680,000 in
fiscal 2008. As a percentage of revenues, cost of products and services sold
increased to 70% in fiscal 2009 compared to 68% for fiscal 2008.

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

                                                       Fiscal Years Ended
                                                           August 31,
            Cost of products and services sold      2009       2008     2007
            Specialized Manufacturing                   68 %       65 %    67 %
            Electronic Manufacturing Services           82 %       82 %    82 %
                   Total                                70 %       68 %    69 %

Cost of products and services sold in our Specialized Manufacturing segment were $62,261,000 for the fiscal year ended August 31, 2009 compared to $73,768,000 in fiscal 2008. As a percentage of revenues, cost of products and services sold in the Specialized Manufacturing segment increased due to decreased sales of our higher margin products and the resulting 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. We continue to face challenges with margin pressures across many of our key product lines.

Cost of products and services sold in our Electronic Manufacturing Services segment were $13,481,000 for the fiscal year ended August 31, 2009 compared to $15,912,000 in fiscal 2008. As a percentage of revenues, cost of products and services sold in the Electronic Manufacturing Services segment remained relatively flat as cost savings initiatives were able to offset our fixed costs on a lower revenue base and some increased costs related to facility and production improvements that were incurred earlier in the current fiscal year as a result of this segment's focus on generating new customer orders.

In fiscal 2008, cost of products and services sold increased $1,790,000 or 2% to $89,680,000 compared to $87,890,000 in the prior fiscal year. As a percentage of revenues, cost of products and services sold decreased to 68% in fiscal 2008 compared to 69% for fiscal 2007. Cost of products and services sold in our Specialized Manufacturing segment were $73,768,000 for the fiscal year ended August 31, 2008 compared to $72,896,000 in fiscal 2007. The dollar value increase in cost of products and services sold in this segment during fiscal 2008 was primarily attributable to increased revenues offset by our emphasis on leveraging fixed costs and improving

manufacturing efficiencies. The decrease in cost of products and services sold as a percentage of revenues in this segment during fiscal 2008 was a direct result of a favorable product mix coupled with continued focus and scrutiny on material purchases that helped stabilize margins on many of our key product lines.

Cost of products and services sold in our Electronic Manufacturing Services segment were $15,912,000 for the fiscal year ended August 31, 2008 compared to $14,994,000 in fiscal 2007. As a percentage of revenues, cost of products and services sold in this segment remained flat in fiscal 2008 compared to 2007. This reflects increased manufacturing costs and competitive pricing pressures placed on this segment by many of its key customers in fiscal 2008, offset by our ability to leverage fixed overhead costs on a higher revenue base.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $1,966,000 or 8% to $21,985,000 during fiscal 2009 compared to $23,951,000 in fiscal 2008. As a percentage of revenues, selling, general and administrative expenses increased to 20% in fiscal 2009 compared to 18% for fiscal 2008. The dollar decrease in fiscal 2009 relates primarily to our continued emphasis on controlling costs, including reduced annual incentive compensation, travel and external consulting costs. Additionally, lower revenues in fiscal 2009 compared to the prior year have led to decreased sales commissions and other selling related expenses.

Selling, general and administrative expenses increased $1,530,000 or 7% to $23,951,000 during fiscal 2008 compared to $22,421,000 in fiscal 2007. As a percentage of revenues, selling, general and administrative expenses remained flat at 18% for the years ended August 31, 2008 and 2007. The dollar increase in fiscal 2008 related primarily to increased employee head count due to acquisitions along with rising employee-related benefits, including health care costs, and increased stock based compensation costs of approximately $778,000 related to our long term incentive plan. The increases in fiscal 2008 were partially offset by a decrease of approximately $300,000 in costs related to professional services required for compliance with the internal control reporting requirements of Section 404 of the Sarbanes-Oxley Act compared to fiscal 2007, which was our initial year of compliance.

In fiscal 2009, we had recoveries of previously identified bad debt that exceeded additions to bad debt expense for the year, resulting in a net gain of $41,000. This gain of $41,000 in fiscal 2009 compared to bad debt expense of $53,000 and $268,000 in fiscal 2008 and 2007, respectively. The improvements in both fiscal 2009 and 2008 as compared to fiscal 2007 were the direct result of management's strict adherence to its established credit policies as well as closely monitoring the accounts receivable function and taking a proactive approach to the collections process.

Loss on Impairment of Goodwill

In fiscal 2009, based on the decrease in sales activity in the current year and the completion of the fiscal 2010 budget, we determined that the carrying value of goodwill associated with our Northeast Quality Products ("NEQP") division may not be recoverable. Accordingly, we 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, we concluded that 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. The NEQP division was sold on August 14, 2009, and the adjusted fair value of $112,000 was realized upon the sale.

Loss on Impairment of Fixed Assets

In fiscal 2009, we 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 was $17,000 in fiscal 2009 compared to $40,000 and $900,000 in fiscal 2008 and 2007, respectively. The decrease in interest expense during the past two fiscal years is a direct result of a reduction in our overall debt balances through principal payments from operating cash flow. We anticipate an increase to interest expense in fiscal 2010 due to our $10 million term loan agreement and $3 million promissory notes related to the acquisition of C.I.M. in September 2009.

Other Income

Other income decreased $19,000 to $458,000 in fiscal 2009 compared to $477,000 and $241,000 in fiscal 2008 and 2007, respectively. Other income includes bank interest and foreign exchange gains in Europe earned by our Humiseal Europe division and rental income of $149,000 on real property (building and land) that we owned and leased to Sunburst Electronic Manufacturing Solutions, Inc. (and subsequently sold in June 2009 as discussed previously). The increase in fiscal 2008 compared to 2007 consists primarily of bank interest and exchange gains earned by our HumiSeal Europe division.

Income Taxes

The effective tax rate for fiscal 2009 was 34.9% compared to 35.8% and 37.0% in fiscal 2008 and 2007, respectively. In all three years, we have received the benefit of the domestic production deduction and foreign rate differential. The decrease in the effective tax rate in fiscal 2009 as compared to fiscal 2008 is primarily due to a more favorable effective state income tax rate in 2009. The effective tax rate of 35.8% for fiscal 2008 compares favorably to 2007 due to an increase in the applicable domestic production deduction for the year.

Net Income

Net income in fiscal 2009 decreased $5,989,000 or 48% to $6,385,000 compared to $12,374,000 in fiscal 2008. The decrease in net income in the current year is a direct result of decreased revenue across all of our core product lines as discussed previously. Additionally, net income was negatively impacted in the current year by the impairment of our West Bridgewater, MA real property and the impairment of goodwill from NEQP.

Net income in fiscal 2008 increased $2,181,000 or 21% to $12,374,000 compared to $10,193,000 in fiscal 2007. The increase in net income in 2008 was primarily due to increased revenue growth in our core product lines coupled with favorable product mix and our ability to leverage our fixed costs and properly manage increasing raw material costs. In fiscal 2007, net income was negatively impacted by higher expenses incurred related to our first year of compliance with Section 404 of the Sarbanes-Oxley Act and the loss on impairment of goodwill from NEQP.

Liquidity and Sources of Capital

Our overall cash balance increased $7,726,000 to $11,643,000 at August 31, 2009 from $3,917,000 at August 31, 2008. The increased cash balance at August 31, 2009 was a result of cash flow generated from operations during the year as well as the sale of the West Bridgewater property. We continue to review our current cash balances denominated in foreign currency in light of current tax guidelines and potential acquisitions. The higher cash balance of $3,917,000 at August 31, 2008 compared to $2,444,000 at August 31, 2007 was primarily the result of cash flow generated during the year, after a portion was used to repay all outstanding balances on our existing debt.

Cash flow provided by operations was $16,907,000 for the year ended August 31, 2009 compared to $15,562,000 in fiscal 2008 and $14,498,000 in fiscal 2007. Cash provided by operations during fiscal 2009 was primarily due to operating income and decreased accounts receivable and inventory balances, offset by reduced accounts payable balances. Cash provided by operations during fiscal 2008 was primarily due to operating income and increased accounts payable and accrued expenses, offset by purchases of raw materials. Cash provided by operations during fiscal 2007 was primarily due to operating income and decreased inventory balances offset by increased accounts receivable balances.

The ratio of current assets to current liabilities was 3.2 as of August 31, 2009 compared to 2.3 as of August 31, 2008. The increase in our current ratio at August 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 was $5,234,000 for the year ended August 31, 2009 compared to $5,796,000 in fiscal 2008 and $7,542,000 in fiscal 2007. During fiscal 2009, cash flow used in investing activities was primarily due to $2,509,000 used to pay for the purchase of real property in Oxford, MA, $1,280,000 paid for purchases related to the build out of our manufacturing facility in Pittsburgh, PA, and purchases of machinery and equipment at our other manufacturing locations. During fiscal 2008, cash flow used in investing activities was primarily due to $1,490,000 paid for the assets acquired by Chase Protective Coatings Ltd., purchases related to the build out of our manufacturing facility in Pittsburgh of $934,000, contingent payments related to previous acquisitions of $1,041,000, and cash paid for purchases of machinery and equipment at our other manufacturing locations. During fiscal 2007, cash flow used in investing activities was primarily due to the acquisition of Capital Services, the acquisition of certain assets from Metronelec SARL, and cash paid for purchases of property, plant and equipment.

Cash flow used in financing activities was $3,856,000 for the year ended August 31, 2009 compared to $7,909,000 in fiscal 2008 and $7,049,000 in fiscal 2007. During fiscal 2009, cash flow used in financing activities reflects the payment of the annual dividend and payments of statutory minimum taxes on restricted stock. During fiscal 2008, cash flow used in financing activities reflected the annual dividend payment and our ability to use excess cash generated from operating results to pay off existing long-term debt, including $4,033,000 to pay the total outstanding balances of the term notes used to . . .