Aerospace sales of CAD9.2 million for the quarter were CAD48.2% ahead of prior year’s sales for the comparable period due to an increase in sales volume and about CAD1.7 million due to the higher US dollar compared to exchange rates in effect 2008.

Fabricated Products sales of CAD0.6 million were about 44.7% less than prior year’s sales of CAD1.1 million for the same period. This was primarily due to a decline in sales to the automotive and sporting goods markets.

N.A. Silicone sales of CAD2.2 million decreased by CAD2.1 million or about 48.5% compared to sales of CAD4.3 million for the three months ended March 31, 2008. The decrease is primarily due to the continued decline in the North American automotive market and was offset by CAD0.4 million as a result of the higher US dollar compared to exchange rates in effect in 2008.

Leewood sales of CAD0.09 million for the three months ended March 31, 2009 were behind last year’s sales of CAD0.17 million for the comparable period due to a decrease in volume.

Sterne sales of CAD1.4 million for the three months ended March 31, 2009 were CAD0.2 million higher than last year’s sales of CAD1.2 million for the comparable period due to increased sales across all revenue sources, including clean room manufacturing, general manufacturing and distribution sales. This includes an increase of about CAD0.1 million due to the increase in the Euro.

MTI Polyfab’s income before non-controlling interest for the three months ended March 31, 2009 of CAD1.3 million was CAD1.3 million ahead of last year’s income. The increase in the US dollar contributed about CAD0.2 million to the increase in income. The remaining improvement is due to reduced costs associated with the outsourcing of its Aerospace manufacturing to Mexico, elimination of redundant costs associated with maintaining operations in Canada, and elimination of additional labour charges to reduce backlog. These costs were largely eliminated in the fourth quarter of 2008.

The CAD0.97 million loss before non-controlling interest in N.A. Silicone for the quarter represents an increase of CAD0.95 million from prior year primarily due to lower sales as a result of the continued decline in the North American automotive market and a long-lived asset impairment charge of CAD0.4 million.

Leewood posted an income before non-controlling interest for the three months ended March 31, 2009 of CAD0.02 million compared to income in prior year of CAD0.08 million. The decrease is due to a reduction in sales volume.

Sterne posted income before non-controlling interest for the quarter of CAD0.03 million compared to income in prior year of CAD0.01 million. The increase is a result of an increase in sales and an increase in gross margin due to a change in product mix.

Loss from Continuing Operations:

The loss from continuing operations for the quarter was CAD1.0 million or CAD0.03 per share compared to a loss in prior year of CAD0.6 million or CAD0.02 per share.

Loss from Discontinued Operations Held for Sale:

The loss from discontinued operations held for sale for the quarter was CAD3.8 million or CAD0.14 per share compared to a loss in prior year of CAD0.4 million or CAD0.01 per share.

Financial Covenant Update:

The company is in breach of financial and general covenants under the credit facilities with its principal Canadian bank (the Bank) and it mezzanine lender (the Lender). In particular, the company did not achieve its December 31, 2008 earnings before interest, taxes and depreciation, fixed charge coverage and funded debt to earnings before interest, taxes and depreciation covenants or its March 31, 2009 fixed charge coverage covenant. Furthermore, the company is in breach of certain general covenants it was obligated to satisfy pursuant to waiver agreements entered into by the company with its Bank and Lender based on its June 30, 2008 and subsequent interim monthly results. The covenant violation provides the Bank and Lender with the right to demand repayment of its indebtedness. Subsequent to March 31, 2009, the company is in continuing discussions with the Bank and the Lender to obtain a waiver of the breaches including amended covenants.

Outlook:

Based on the sale of the majority of its Leewood and Richmond, Virginia silicone assets, operational changes completed to date, and preliminary indications in the aerospace market, the company remains cautiously optimistic that it will report improving results through the balance of 2009. In view of the Canadian dollar value against the US dollar, the company is increasingly confident about achieving improved results with most of its aerospace programs relocated to Mexico and the sale of the majority of the assets of Leewood and N.A. Silicone’s Richmond, Virginia plant. In addition, the company is making satisfactory progress on the disposition of the remaining silicone assets, although the current economic climate is slowing the process. The company has engaged an investment bank to assist in these transactions.

The results for the first quarter of 2009 were better than prior year but below expectations. Revenues and gross margin improved primarily through increased volume in Aerospace at Polyfab and favorable exchange rates compared to prior year. However, the company continued to incur lower than expected revenues at N.A. Silicone due to the continued decline in the North American automotive market.

At Polyfab, management realized on expected sales growth in Aerospace during the first quarter. Sales for the quarter were ahead of target and ahead of the prior year. Margins were also higher than prior year as the company reduced costs associated with the outsourcing of most of its Aerospace manufacturing to Mexico, redundant costs associated with maintaining operations in Canada, and additional labor charges to reduce backlog. The company expects the strong sales volumes and gross margins to continue through the balance of 2009 although there will be some changes in the mix of products. Despite recent pullbacks in the broader aerospace market, the company remains well positioned to capitalize on opportunities in the regional jet, the resurgent turboprop markets, and the retrofit market.

In Fabricated Products, the company perceives potential opportunities to leverage its capabilities into the aerospace market as it seeks an expansion in the range of business services being offered to customers.

In N.A. Silicone, results deteriorated as a direct result of the downturn in the automotive industry. N.A. Silicone operates primarily in the automotive sector with unique reinforced silicone hose and sunroof sealing products. As such it is subject to the impact of the current downturn in auto manufacturing. The N.A. Silicone division also continues to experience the pressure of higher raw material prices and has yet to fully realize on synergies from the plant consolidation that occurred in 2008.

At Sterne, management expects sales to continue to grow through 2009. Success will be primarily dependent on Sterne’s ability to grow clean room manufacturing sales and to expand its distribution sales for Leewood’s products.