Net Income

The Company had net income of $770,000 or $0.06 per share (basic and diluted), during the first quarter of fiscal 2010 compared to a net loss of $(1,491,000), or $(0.19) per share (basic and diluted), for the first quarter of fiscal 2009, representing an improvement of $2,261,000. The improvement reflected a significant increase in gross profit (despite slightly reduced sales performance) coupled with lower selling, general and administrative as well as research and development expenses. Acting as partial offsets were higher interest and other expenses.

The company also had earnings before interest, taxes, depreciation and amortization expense ("EBITDA") of $1,853,000 for the first quarter of fiscal 2010 versus a negative EBITDA of $(499,000) for the first quarter of fiscal 2009.

Sales

Sales for the first quarter of fiscal 2010 were $9,581,000 as compared to $9,975,000 for the first quarter of fiscal 2009, a slight decrease of $394,000 or 3.9%. As the table below indicates, significant increases were realized in the U.S. Government and International categories but were offset by a decline in domestic sales.

Domestic Sales

Domestic sales in the first quarter of fiscal 2010 were $1,959,000 as compared to $5,322,000 in the first quarter of fiscal 2009, a decrease of $3,363,000 or 63.2%, reflecting significant decreases in all Control Systems Group product areas. Environmental products (down $1,502,000, 80.1%), hyperbaric products (down $631,000, 50.1%) and sterilizer products (down $1,485,000, 87.2%) all reflected the impact of the economic downturn. Environmental products, whose domestic commercial market is primarily automotive, suffered from the severe contraction of the three major U.S. car manufacturers. Hyperbaric and sterilizer performance reflected the restriction of liquidity in the economy for new projects or capital expansion. Domestic sales represented 20.4% of the Company's total sales in the first quarter of fiscal 2010, as compared to 53.4% for the first quarter of fiscal 2009.

U.S. Government sales in the first quarter of fiscal 2010 were $1,836,000 as compared to $991,000 in the first quarter of fiscal 2009, an increase of $845,000, 85.3%, and represented 19.2% of total sales in the first quarter of fiscal 2010 versus 9.9% for the first quarter of fiscal 2009. Significant increases were evidenced in the environmental line on a chamber contract with the U.S. Army and aircrew training system sales primarily due to a large U.S. Navy disorientation device contract.

International Sales

International sales for the first quarter of fiscal 2010, which include sales in the Company's Polish subsidiary, were $5,786,000 as compared to $3,662,000 in the first quarter of fiscal 2009, an increase of $2,124,000 or 58.0%, and represented 60.4% of total sales, as compared to 36.7% in the first quarter of fiscal 2009. Favorable international performance reflected higher simulation sales (up $1,136,000), and higher aircrew training systems sales (up $747,000, 26.8%), both primarily for contracts in the Middle East.

Gross Profit

Gross profit for the first quarter of fiscal 2010 was $4,427,000 as compared to $2,495,000 in the first quarter of fiscal 2009, an increase of $1,932,000 or 77.4%, despite slightly reduced sales. As a percentage of revenues, gross profit for the first quarter of fiscal 2010 was 46.2% compared to 25.0% for the same period a year ago. The gross margin dollar increase followed the sales increase in both governmental and international sales partially offset by the reduction in domestic sales. Higher gross margin tracked with the higher sales performance in U.S.