The following discussion of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the related notes included in Item 8, "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K. This discussion contains forward-looking statements, which involve risk and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors including, but not limited to, those discussed in "Risk Factors" and elsewhere in this Annual Report on Form 10-K.

Management's Discussion and Analysis ("MD&A") is intended to facilitate an understanding of our business and results of operations. MD&A consists of the following sections:

º Overview: a summary of our business.

º Results of Operations: a discussion of operating results.

º Liquidity and Capital Resources: an analysis of cash flows, sources and uses of cash and financial position.

º Contractual Obligations and Commercial Commitments

º Critical Accounting Policies: a discussion of critical accounting policies that require the exercise of judgments and estimates.

º Impact of Recently Issued Accounting Pronouncements: a discussion of how we are affected by recent pronouncements.

Overview

We operate in two segments: the solar and semiconductor equipment segment and the polishing supplies segment. Our solar and semiconductor equipment segment is a leading supplier of thermal processing systems, including related automation, parts and services, to the solar/photovoltaic, semiconductor, silicon wafer and MEMS industries.

Our polishing supplies segment is a leading supplier of wafer carriers to manufacturers of silicon wafers. The polishing segment also manufacturers polishing templates, steel carriers and double-sided polishing and lapping machines to fabricators of optics, quartz, ceramics and metal parts, and to manufacturers of medical equipment components.

Our customers are primarily manufacturers of solar cells and integrated circuits. The solar cell and semiconductor industries are cyclical and historically have experienced significant fluctuations. Our revenue is impacted by these broad industry trends.

In October 2007, we acquired 100% of the equity of R2D Automation (R2D), a solar cell and semiconductor automation equipment manufacturing company. The purpose of the acquisition was to expand our automation products which are used in solar diffusion and semiconductor manufacturing processes. The acquisition of the technology and business of R2D enhances the growth strategy by allowing us to increase revenue by offering to the solar industry an integrated system under the Tempress® brand.

In the third quarter of fiscal 2008, we reorganized the Bruce Technologies® operations to better position the company for profitability in light of lower plant utilization resulting from a slowdown in the semiconductor industry. As a result of this reorganization, we reduced the number of personnel and recorded a charge of $0.4 million in the third quarter of fiscal 2008.

In the second quarter of fiscal 2009, the Bruce Technologies® operations were further restructured to focus on the parts supply business. The restructuring included a reduction in the number of employees and a reduction in the amount of space required to operate the business. The restructuring resulted in a charge of $0.6 million. Also, due to the downturn in the semiconductor industry and deterioration in forecasted revenue and earnings at Bruce Technologies®, an impairment charge of $1.1 million was recorded in the second quarter of fiscal 2009.

Results of Operations

The following table sets forth certain operational data as a percentage of net revenue for the periods indicated:

                                             Years Ended September 30,
                                           2009        2008         2007
Net revenue                              100.0 %      100.0 %     100.0 %
Cost of sales                             71.6 %       71.4 %      72.1 %
    Gross margin                          28.4 %       28.6 %      27.9 %
Selling, general and administrative       27.9 %       22.1 %      22.9 %
Restructuring charge                       3.2 %        0.4 %       0.0 %
Research and development                   1.0 %        1.4 %       1.2 %
    Operating income (loss)               (3.7 %)       4.7 %       3.8 %

Interest and other income (expense), net  (0.1 %)       1.0 %       0.7 %
Income before income (loss) taxes         (3.8 %)       5.7 %       4.5 %
Income tax provision (benefit)            (0.8 %)       2.1 %      (0.8 %)
Net income (loss)                         (3.0 %)       3.6 %       5.3 %

Fiscal 2009 compared to Fiscal 2008

Net Revenue

Net revenue consists of revenue recognized upon shipment or installation of products using proven technology and upon acceptance of products using new technology. In addition, spare parts sales are recognized upon shipment. Service revenue is recognized upon completion of the service activity or ratably over the term of the service contract. The majority of our revenue is generated from large furnace systems sales which, depending on the timing of shipment and installation, can have a significant impact on our revenue, gross margins and earnings in any given period. See Critical Accounting Policies - Revenue Recognition.

                                                Years Ended September 30,
Segment                                           2009             2008           Inc (Dec)          %
                                                                (dollars in thousands)
Solar and Semiconductor Equipment Segment     $      47,307          72,029          (24,722 )     (34 %)
Polishing Supplies Segment                            5,666           8,267           (2,601 )     (31 %)
    Total Net Revenue                         $      52,973     $    80,296     $    (27,323 )     (34 %)

Net revenue for the year ended September 30, 2009 decreased $27.3 million or 34% compared to the year ended September 30, 2008. Revenue from the Solar and Semiconductor Equipment Segment decreased $24.7 million or 34% due to significantly lower shipments to both the solar and the semiconductor industries, partially offset by a decrease in the amount of revenue deferred. The decrease in shipments was caused by lower sales volumes driven primarily by over-supply in the solar market and the global economic downturn and credit crisis. Within the solar and semiconductor equipment segment, net revenue from the solar market was $34.8 million and $50.1 million in fiscal 2009 and 2008, respectively. Net revenue from the semiconductor market was $12.5 million in fiscal 2009 compared to $21.9 million in fiscal 2008, a decrease of 43% due primarily to the downturn in the semiconductor industry. Revenue in the polishing supplies segment was $5.7 million and $8.3 million for the fiscal years ended September 30, 2009 and 2008, respectively. The decrease of $2.6 million, or 31%, in net revenue from the Polishing Supplies Segment is also due to the economic downturn and the downturn in the semiconductor industry as described above.

The supply-demand imbalance within the solar market, the downturn in the global economy, and the related credit crisis have caused some of our customers to delay or suspend their capacity expansion plans, which has resulted in lower orders. In addition, some of our customers have, and others may, request delays or cancellations in the shipment of their orders. A continuation of the global credit crisis and related downturn in the global economy is likely to negatively impact future revenues from both solar and semiconductor markets and could have a significant adverse affect on our results of operations and financial condition.

Our backlog as of September 30, 2009 and 2008 was $32.4 million and $46.7 million, respectively, a 31% decrease. Our backlog as of September 30, 2009 included approximately $27.9 million of orders from our solar industry customers compared to $36.7 million of orders from solar industry customers as of September 30, 2008. The orders included in our backlog are generally credit approved customer purchase orders expected to ship within the next twelve months. Because our orders are typically subject to cancellation or delay by the customer, our backlog at any particular point in time is not necessarily representative of actual sales for succeeding periods, nor is backlog any assurance that we will realize revenue or profit from completing these orders. The recent global credit crisis and related downturn in the global economy has caused many of our customers to delay or suspend their capacity expansion plans. As a result, the delivery times of many of the orders in our backlog may be delayed or even cancelled by our customers. Our backlog also includes revenue deferred pursuant to our revenue recognition policy, derived from orders that have already been shipped but which have not met the criteria for revenue recognition. The backlog as of September 30, 2009 and 2008 includes $1.2 million and $1.3 million, respectively, of open orders or deferred revenue on which we anticipate no gross margin. At the end of fiscal 2009 and 2008, 31% and 40% of our backlog consisted of open sales orders and deferred revenue from one customer, E-Ton Solar Tech, respectively.

Gross Profit

Gross profit is the difference between net revenue and cost of goods sold. Cost of goods sold consists of purchased material, labor and overhead to manufacture equipment or spare parts and the cost of service and support to customers for warranty, installation and paid service calls. Gross margin is gross profit as a percentage of net revenue.

The timing of revenue recognition can have a particularly significant effect on gross margin when the equipment revenue of an order is recognized in one period and the remainder of the revenue attributed to holdbacks is recognized in a later period. The portion of revenue attributed to the holdbacks generally comprises 10-20% of an order and has a significantly higher gross margin percentage.

                                                 Years Ended September 30,
Segment                                           2009              2008            Inc (Dec)         %
                                                                 (dollars in thousands)
Solar and Semiconductor Equipment Segment     $    13,748            20,500            (6,752 )     (33 %)
Polishing Supplies Segment                          1,271             2,461            (1,190 )     (48 %)
    Total Gross Profit                        $    15,019       $    22,961       $    (7,942 )     (35 %)

    Gross Margin                                       28 %              29 %

Gross profit for fiscal 2009 decreased $7.9 million, or 35%, to $15.0 million in fiscal 2009 from $23.0 million in fiscal 2008. Gross margin decreased slightly to 28% in fiscal 2009 from 29% in fiscal 2008. We recognized $0.6 million of previously deferred profit in fiscal 2009, net of deferrals, compared to a net deferral of $2.9 million of profit in fiscal 2008. Excluding the impact of the change in deferred profit, gross margin in the solar and semiconductor equipment segment decreased due primarily to lower sales volumes resulting in underutilization of existing plant capacity. Gross profit and gross margin in the polishing supplies segment were lower in fiscal 2009 as compared to fiscal 2008 due to lower sales volumes of polishing machines, carriers and templates.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of the cost of employees,
consultants and contractors, as well as facility costs, sales commissions, legal
and accounting fees and promotional marketing expenses.

                                       30

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                                                 Years Ended September 30,
Segment                                           2009              2008            Inc (Dec)         %
                                                                 (dollars in thousands)
Solar and Semiconductor Equipment Segment     $    13,523       $    16,267       $    (2,744 )     (17 %)
Polishing Supplies Segment                          1,243             1,442              (199 )     (14 %)
    Total SG&A                                $    14,766       $    17,709       $    (2,943 )     (17 %)

    Percent of net revenue                             28 %              22 %

Total selling, general and administrative (SG&A) expenses decreased $2.9 million or 17% in fiscal 2009 from fiscal 2008. SG&A expenses include $0.7 million and $0.5 million of stock-based compensation expense for fiscal 2009 and 2008, respectively. SG&A expenses for fiscal 2009 and 2008 include $0.2 million and $0.3 million, respectively, of costs related to compliance with the provisions of the Sarbanes-Oxley Act. The decrease in SG&A expenses was primarily due to decreased commissions on sales due to lower revenue generated in geographic regions where third-party sales representatives are utilized; primarily Asia. Additionally, other SG&A costs decreased in fiscal 2009 due to decreased shipping volumes and reduced costs related to reductions in workforce, mainly at our Bruce Technologies operation. Also, a $0.5 million provision was recorded in fiscal 2008 as an allowance for doubtful accounts for which there were no comparable expenses in fiscal 2009.

Impairment and Restructuring Charges

                                                    Years Ended September 30,
Segment                                                2009              2008        Inc (Dec)        %
                                                                  (dollars in thousands)
Solar and Semiconductor Equipment Segment         $        1,682      $      356     $    1,326     372 %
Polishing Supplies Segment                                     -               -              -       0 %
    Total Impairment and Restructuring Charge     $        1,682      $      356     $    1,326     372 %

The Bruce Technologies operations are primarily dependent upon a mature segment of the semiconductor industry which is experiencing a significant downturn. The industry downturn resulted in recent operating losses and deterioration in forecasted revenue and earnings at Bruce Technologies. It is uncertain when, and to what extent, the markets served by Bruce Technologies will recover. Therefore, the Bruce Technologies operations were restructured in the second quarter of fiscal 2009 to focus on the parts supply business. The restructuring included a reduction in the number of employees and a reduction in the amount of space required to operate the business. The restructuring resulted in a charge of $0.6 million in the second quarter of fiscal 2009, which includes a $0.3 million charge for unutilized leased space, a $0.2 million write-off of furnace-related inventory parts that are not expected to be utilized in the future and $0.1 million of severance and outplacement costs. Our Bruce Technologies operations were also reorganized in the third quarter of fiscal 2008, which resulted in a restructuring charge of $0.4 million, consisting mainly of severance and outplacement costs for affected personnel.

Due to the circumstances related to the Bruce Technologies operations discussed above, the Company determined it was necessary to conduct an assessment of the ability to recover the carrying amount of long-lived assets of the Bruce Technologies operations. The amount estimated to be recoverable is based upon the Company's judgments and estimates of undiscounted cash flows during the estimated remaining useful life of the assets. It was determined that the carrying value of the net assets was not fully recoverable; therefore, an impairment charge of $0.4 million was recorded in the second quarter of fiscal 2009 for the excess of carrying value over the fair value of the customer list and non-compete agreement. Future adverse changes could be caused by, among other factors, a downturn in the industries served, a general economic slowdown, reduced demand for our products in the marketplace, poor operating results, the inability to protect intellectual property or changing technologies and product obsolescence.

The total amount of the impairment charge was $1.1 million. Details of the impairment charge are as follows:

                            Gross                             Net
                          Carrying       Accumulated       Carrying
                           Amount       Amortization        Amount
Goodwill                  $      89     $           -     $        89
Trademark                       592     $           -             592
Customer List                   276                87             189
Non-compete agreement           350               166             184
    Impairment Charge                                     $     1,054

Research and Development

Research and development expenses consist of the cost of employees, consultants
and contractors who design, engineer and develop new products and processes and
the materials used in those processes and producing prototypes. Reimbursements
of research and development costs in the form of governmental research and
development grants are netted against these expenses.

                                                 Years Ended September 30,
Segment                                           2009              2008           Inc (Dec)           %
                                                           (dollars in thousands)
Semiconductor and Solar Equipment Segment     $       509       $     1,094       $     (585 )         (53 %)
Polishing Supplies Segment                              -                 -                -             0 %
    Total Research and Development            $       509       $     1,094       $     (585 )         (53 %)

    Percent of net revenue                              1 %               1 %

Research and development expenses decreased primarily due to increases in the amount of reimbursement of research and development costs. In fiscal 2009 and 2008, we recognized $0.5 million and $0.1 million of reimbursements of our research and development costs from governmental grants. The remainder of the decrease in research and development expenses relate to a specific customer development program in fiscal 2008 that did not repeat in fiscal 2009.

Income Tax Provision

Our effective tax rate was 20.9% in fiscal 2009 and 37.1% in 2008. In fiscal 2009, we incurred operating losses which resulted in the recording of a tax benefit equal to 20.9% of our pretax loss. The effective tax rate was negatively impacted by higher permanent book-to-tax differences as a percentage of our pretax loss and recording of additional valuation allowance on certain state deferred tax assets, including state net operating losses.

Fiscal 2008 compared to Fiscal 2007

Net Revenue

Net revenue consists of revenue recognized upon shipment or installation of products using proven technology and upon acceptance of products using new technology. In addition, spare parts sales are recognized upon shipment. Service revenue is recognized upon completion of the service activity or ratably over the term of the service contract. The majority of our revenue is generated from large furnace systems sales which, depending on the timing of shipment and installation, can have a significant impact on our revenue, gross margins and earnings in any given period. See Critical Accounting Policies - Revenue Recognition.

                                                Years Ended September 30,
Segment                                           2008             2007           Inc (Dec)            %
                                                           (dollars in thousands)
Solar and Semiconductor Equipment Segment           72,029           37,657           34,372           91 %
Polishing Supplies Segment                           8,267            8,327              (60 )         (1 %)
    Total Net Revenue                         $     80,296     $     45,984     $     34,312           75 %

Net revenue for the year ended September 30, 2008 increased $34.3 million or 75% compared to the year ended September 30, 2007. Overall growth in net revenue in fiscal 2008 was driven primarily by our continued penetration of the solar market where revenue increased $37.6 million or more than 300% compared to fiscal 2007. Within the solar and semiconductor equipment segment, net revenue from the solar market was $50.1 million and $12.5 million in fiscal 2008 and 2007, respectively, while net revenue from the semiconductor market was $21.9 million in fiscal 2008 compared to $25.2 million in fiscal 2007 a decrease of 13% due primarily to the downturn in the semiconductor industry. R2D generated $3.2 million of semiconductor equipment revenue in fiscal 2008 for which there were no comparable revenues in fiscal 2007. Revenue in the polishing supplies segment was $8.3 million for the fiscal years ended September 30, 2008 and 2007. Increased demand for our polishing machines was offset by lower shipments of insert carriers caused by increased competition in the insert carrier market as well as the downturn in the semiconductor industry. The recent global credit crisis and related downturn in the global economy have caused many of our customers to delay or suspend their capacity expansion plans. Some customers have and other may request delays in the shipment of their orders. As a result, future revenues from both the solar and semiconductor markets are likely to be negatively impacted by these recent events.

Backlog

Our backlog as of September 30, 2008 and 2007 was $46.7 million and $22.9 million, respectively, a 104% increase. Our backlog as of September 30, 2008 included approximately $36.7 million of orders from our solar industry customers compared to $17.4 million of orders from solar industry customers as of September 30, 2007. The orders included in our backlog are generally credit approved customer purchase orders expected to ship within the next twelve months. Because our orders are typically subject to cancellation or delay by the customer, our backlog at any particular point in time is not necessarily representative of actual sales for succeeding periods, nor is backlog any assurance that we will realize revenue or profit from completing these orders. The recent global credit crisis and related downturn in the global economy has caused many of our customers to delay or suspend their capacity expansion plans. As a result, the delivery times of many of the orders in our backlog may be delayed or even cancelled by our customers. Our backlog also includes revenue deferred pursuant to our revenue recognition policy, derived from orders that have already been shipped but which have not met the criteria for revenue recognition. The backlog as of September 30, 2008 and 2007 includes $1.3 million and $0.9 million, respectively, of open orders or deferred revenue on which we anticipate no gross margin.

Gross Profit

Gross profit is the difference between net revenue and cost of goods sold. Cost
of goods sold consists of purchased material, labor and overhead to manufacture
equipment or spare parts and the cost of service and support to customers for
warranty, installation and paid service calls. Gross margin is gross profit as a
percentage of net revenue.

                                                  Years Ended September 30,
Segment                                            2008               2007            Inc (Dec)            %
                                                             (dollars in thousands)
Solar and Semiconductor Equipment Segment           20,500              9,995             10,505           105 %
Polishing Supplies Segment                           2,461              2,815               (354 )         (13 %)
    Total Gross Profit                        $     22,961       $     12,810       $     10,151            79 %

    Gross Margin                                        29 %               28 %

Gross profit increased in fiscal 2008 by $10.2 million, or 79%, over fiscal 2007. The increase was driven by higher shipments during the year as well as improved margin percentage. Gross margin improved to 29% in fiscal 2008 from 28% in fiscal 2007. Gross margin in the solar and semiconductor equipment segment improved primarily due to realizing economies of scale. Increased volume resulted in improved capacity utilization, increased purchasing power and improved labor efficiencies in the solar and semiconductor equipment segment. Increases in gross margin were partially offset by higher warranty costs and higher deferred profit. We deferred $2.9 million of profit in fiscal 2008, net of acceptances, compared to a net deferral of $1.0 million in fiscal 2007. Gross profit and gross margin in the polishing supplies segment were lower in fiscal 2008 as compared to fiscal 2007 due mainly to changes in product mix. We sold higher volumes of polishing machines at a relatively low margin as compared to margins on insert carriers. Increased competition in the insert carrier market resulted in lower volumes in this market.

The timing of revenue recognition can have a particularly significant effect on gross margin when the equipment revenue of an order is recognized in one period and the remainder of the revenue attributed to holdbacks is recognized in a later period. The portion of revenue attributed to the holdbacks generally comprises 10-20% of an order and has a significantly higher gross margin percentage.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of the cost of employees,
consultants and contractors, as well as facility costs, sales commissions, legal
and accounting fees and promotional marketing expenses.
. . .