Item 1. Financial Statements.

See Notes to Consolidated Financial Statements

Note: Amounts derived from audited financial statements previously filed with the Securities and Exchange Commission

See Notes to Consolidated Financial Statements

1. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month and six month periods ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ended September 30, 2016. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended September 30, 2015.

2. Inventories

Inventories are valued at the lower of cost or market and consist of the following:

The above amounts are net of reserve for obsolete inventory in the amount of $219,292, $251,500 and $368,564 for the periods ended March 31, 2016, September 30, 2015 and March 31, 2015 respectively.

3. Notes receivable

The Company has a note receivable with a current employee at an interest rate of three percent per annum. The Company does not anticipate repayment within the next twelve months.

4. Convertible Notes Payable

5. Warrant Agreement

6. Capital Leases

7. Capital Stock, Treasury Stock, Contributed Capital and Stock Options

Unissued shares of Class A common stock (832,233 shares) are reserved for the share-for-share conversion rights of the Class B common stock, stock options under the Directors Plans, conversion rights of the Convertible Promissory Note and available warrants.

The Company's 2013 Omnibus Equity Plan was approved and adopted by an affirmative vote of a majority of the Company's Class A and Class B Shareholders and provides for the grant of the following types of incentive awards: stock options, stock appreciation rights, restricted shares, restricted share units, performance shares and Class A Common Shares. Those who will be eligible for awards under the 2013 Omnibus Plan include employees who provide services to the Company and its affiliates, executive officers, non-employee Directors and consultants designated by the Compensation Committee. The Plan has 150,000 Class A Common Shares reserved for issuance. The Class A Common Shares may be either authorized, but unissued, common shares or treasury shares. No share-based awards have been granted under the 2013 Omnibus Equity Plan as of March 31, 2016.

The Company's expired Outside Directors Stock Option Plans (collectively the "Directors Plans"), have provided for the automatic grant of options to purchase up to 5,000 shares of Class A Common Stock to members of the Board of Directors who are not employees of the Company, at the fair market value on the date of grant. The options are exercisable for up to 10 years. Options for 5,000 Class A shares were outstanding at March 31, 2016 (6,000 shares at September 30, 2015 and 20,000 shares at March 31, 2015) at prices ranging from $2.925 to $11.00 per share. Options for 1,000 shares expired during the three month period ended March 31, 2016 at $2.925 per share. In addition, options for 2,000 shares expired during the three month period ended March 31, 2015 at $6.45 per share. All outstanding options under the expired Directors Plans became fully exercisable on March 8, 2015.

The following is a summary of the range of exercise prices for stock options outstanding and exercisable under the expired Directors Plans at March 31, 2016:

The Company accounts for Share-Based Payments under the modified prospective method for its stock options for both employees and non-employee Directors. Compensation cost for fixed based awards are measured at the grant date, and the Company uses the Black-Scholes option pricing model to determine the fair value estimates for recognizing the cost of employee and director services received in exchange for an award of equity instruments. The Black-Scholes option pricing model requires the use of subjective assumptions which can materially affect the fair value estimates. Employee stock options are immediately exercisable while Director's stock options are exercisable over a three year period. The fair value of stock option grants to Directors is amortized over the three year vesting period. During the three and the six month periods ended March 31, 2016 and 2015 respectively $0 and $0; $0 and $543 was expensed as share-based compensation. The following weighted-average assumptions were used in the option pricing model for the three and six month periods ended March 31, 2016 and 2015 respectively: a risk free interest rate of 5.0% and 5.0%; an expected life of 10 and 10 years; an expected dividend yield of 0.0% and 0.0%; and a volatility factor of .87 and .87.

8. Recently Issued Accounting Pronouncements

The Company did not incur any material impact to its financial condition or results of operations due to the adoption of any new accounting standards during the periods reported.

In March 2016, the Financial Accounting Standards Board (FASB) issued a new standard that changes the accounting for certain aspects of share-based payments to employees.  The new guidance requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled.  In addition, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from the other income tax cash flows.  The standard also allows us to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on our cash flow statements, and provides an accounting policy election to account for forfeitures as they occur.  The new standard is effective for us beginning October 1, 2017, with early adoption permitted.  This new standard is not expected to have a significant impact on the Company’s financial statements.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ("ASU 2014-15") requires that an entity's management evaluate whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued. ASU 2014-15 is effective for annual periods beginning after December 15, 2016 and for interim periods thereafter. The Company is evaluating the potential impacts of this new standard on its quarterly reporting process.

9. Earnings per Common Share

Earnings per common share information is computed on the weighted average number of shares outstanding during each period based on the provisions of FASB Codification ASC Topic 260, "Earnings per Share." The required reconciliations are as follows:

Options and warrants to purchase 5,000 and 100,000 shares of common stock respectively during the second quarter and the first six months of fiscal 2016 at prices ranging from $2.50 to $11.00 per share were outstanding but were not included in the computation of diluted earnings per share because the option's and warrant's effect was antidilutive or the exercise price was greater than the average market price of the common share.

In addition, conversion rights to purchase 252,367 shares of common stock during the second quarter and the first six months of fiscal 2016 at a price of $1.85 per share were not included in the computation of diluted earnings per share because the conversion rights of the Convertible Promissory Notes effect was antidilutive or the exercise price was greater than the average market price of the common share.

Options and warrants to purchase 20,000 and 200,000 shares of common stock respectively during the second quarter and the first six months of fiscal 2015 at prices ranging from $2.50 to $11.00 per share were outstanding but were not included in the computation of diluted earnings per share because the option's and warrant's effect was antidilutive or the exercise price was greater than the average market price of the common share.

In addition, conversion rights to purchase 252,367 shares of common stock during the second quarter and the first six months of fiscal 2015 at a price of $1.85 per share were not included in the computation of diluted earnings per share because the conversion rights of the Convertible Promissory Notes effect was antidilutive or the exercise price was greater than the average market price of the common share.

10. Segment and Related Information

The Company's four business units have a common management team and infrastructure that offer different products and services. The business units have been aggregated into two reportable segments: 1.) indicators and gauges and 2.) automotive related diagnostic tools and equipment.

Indicators and Gauges
This segment consists of products manufactured and sold primarily to companies in the aircraft and locomotive industry. Within the aircraft market, the primary customers are those companies that manufacture or service business, military and pleasure aircraft. Within the locomotive market, indicators and gauges are sold to both original equipment manufacturers and to operators of railroad equipment.

Automotive Diagnostic Tools and Equipment
This segment consists primarily of products designed and manufactured to support the testing or servicing of automotive systems using electronic means to measure vehicle parameters. These products are sold to OEM's and to the aftermarket using several brand names and a variety of distribution methods. Included in this segment are products used for state required testing of vehicle emissions.

Information by industry segment is set forth below:

All export sales to Australia, Canada, England, Mexico and other foreign countries are made in United States of America Dollars.

12. Subsequent Events

13. Business Condition and Management Plan

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The ability of the Company to continue as a going concern is dependent on improving the Company's profitability and cash flow and securing additional financing if needed. Management continues to review and revise its strategic plan and believes in the viability of its strategy to increase revenues and profitability through increased sales of existing products and the introduction of new products to the market place. Management believes that the actions presently being taken by the Company will provide the stimulus for it to continue as a going concern, however, because of the inherent uncertainties there can be no assurances to that effect. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In addition, on December 30, 2015, management entered into an amended unsecured convertible loan agreement which may provide approximately $467,000 of liquidity to meet on going working capital requirements. The unsecured convertible loan agreement is with a major shareholder who is also an affiliate of two Directors extending the due date of the loan agreement and continues to allow $250,000 of borrowing on the agreement at the Company's discretion. This facility is available through December 2016. The Company had previously borrowed $200,000 and it is outstanding at March 31, 2016.

On December 30, 2015, management entered into Amendment No. 1 of the Warrant Agreement with Roundball. The amended Warrant Agreement is by and between the Company and a major shareholder who is also an affiliate of two Directors extending the due date of the agreement from December 30, 2015 to December 30, 2016.

Management’s strategic plan to increase revenues and profitability through increased sales of existing products, the introduction of new products to the market place and the cash generated from the completion of the large orders from a Tier 1 Supplier during the prior fiscal year, and other additional short-term or long-term financing is expected to provide the Company with the needed working capital for the next twelve months.

The Company has determined that it has two reportable segments: 1) indicators and gauges and 2) automotive related diagnostic tools and equipment. The indicators and gauges segment consists of products manufactured and sold primarily to companies in the aircraft and locomotive industry. Within the aircraft market, the primary customers are those companies that manufacture or service business, military and pleasure aircraft. Within the locomotive market, indicators and gauges are sold to original equipment manufacturers, servicers of locomotives and operators of railroad equipment. Revenue in this segment was $271,937 and $355,267 for the second quarter of fiscal 2016 and fiscal 2015, respectively and $514,060 and $600,936 for the first six months of fiscal 2016 and fiscal 2015, respectively.

The automotive diagnostic tools and equipment segment consists primarily of products designed and manufactured to support the testing or servicing of automotive systems using electronic means to measure vehicle parameters. These products are sold to OEM's and to the aftermarket using several brand names and a variety of distribution methods. Included in this segment are products used for state required testing of vehicle emissions. Revenue in this segment was $774,687 and $735,915 for the second quarter of fiscal 2016 and fiscal 2015, respectively, and $1,909,436 and $1,652,464 for the first six months of fiscal 2016 and fiscal 2015, respectively.

Product sales for the six months ended March 31, 2016 were $2,291,407 versus $2,139,097 for the same period in fiscal 2015. The increase in product sales during the first six months of the current fiscal year was volume related due primarily to increased sales of automotive diagnostic testing products, primarily, automotive diagnostic testing products to OEM's of approximately $314,000 and emission products of approximately $13,000. Sales of automotive diagnostic testing products to the aftermarket decreased by approximately $64,000. In addition, sales of indicator products decreased by approximately $111,000. Management anticipates product sales for the third and fourth quarter will increase significantly due to the large orders received in February, new product introductions and to anticipated improvement in other markets the Company serves.

Service sales for the six months ended March 31, 2016 were $132,089 compared with $114,303 for the same period in fiscal 2015. The increase was volume related and due primarily to a higher sales volume for chargeable repairs. The current level of service sales related to product repair sales is expected to continue for the balance of the fiscal year.

Cost of product sold was $1,335,347 or (58.3% of product sales) compared to $1,433,356 (67.0% of product sales) for the six months ended March 31, 2015. The dollar and percentage decrease in the cost of product sold was due primarily to higher plant utilization and a change in product mix during the current six month period. The current cost of product sold percentage is expected to decrease significantly for the balance of the fiscal year due to both increased plant utilization and an improved product mix.

Cost of service sold was $99,718 (75.5% of service sales) compared with $75,948 (66.4% of service sales) for the six months ended March 31, 2015. The dollar and percentage increase was due primarily to lower plant utilization and product specifics of chargeable repairs. The cost of services sold percentage is expected to decrease slightly for the balance of the fiscal year.

Product development expenses were $519,483 (22.7% of product sales) compared to $496,445 (23.2% of product sales) for the six months ended March 31, 2015. The percentage decrease was due primarily to higher product sales during the current six months of fiscal 2016. The dollar increase was due primarily to an increase in labor costs, telephone expense and depreciation of approximately $15,000, $7,000 and $5,000 respectively, offset in part by a decrease in travel expense, and research and experimental material of approximately $3,000 and $1,000 respectively. The current level of product development expenses is expected to continue for the balance of the fiscal year. Management believes the existing and planned resources will be sufficient to continue to develop identified new products for both OEM and Aftermarket customers.

Marketing and administrative expenses were $981,135 for the six months ended March 31, 2016 (40.5% of total sales) versus $799,969 (35.5% of total sales) for the six months ended March 31, 2015. The percentage and dollar increase was due primarily to the higher level of expenses for the current six months of fiscal 2016. Marketing expenses were approximately $368,000 during the first six months of the current fiscal year as compared to $306,000 for the same period a year ago. Within marketing expenses, increases were primarily in royalties, advertising expenses, labor costs, credit and collection expense, telephone expense, commission expense, travel expenses and promotion expenses of approximately $20,000, $18,000, $9,000, $6,000, $3,000, $3,000, $2,000 and $1,000 respectively. Administrative expenses were approximately $613,000 during the first six months of the current fiscal year as compared to $494,000 for the same period a year ago. The dollar increase was due primarily to increases in professional fees, depreciation, telephone expense, data processing expenses and labor costs of approximately $100,000, $13,000, $2,000, $1,000 and $1,000 respectively. The current level of marketing and administrative expenses are expected to decrease slightly for the remainder of the fiscal year unless professional fees beyond management's expectations are incurred related to the potential acquisition. See Discussions Regarding Potential Acquisition section below.

Interest expense was $3,336 for the six months ended March 31, 2016, and $299 for the same period in 2015. The interest charges in the current six month period were due to recording interest expense on the lease payable borrowing and the convertible note payable. The prior year interest was recorded on the convertible note payable only. The current level of interest expense is expected to increase significantly for the remainder of the fiscal year due to the lease payable borrowing payments to be made during the balance of the year.

Other income of $3,890 for the six months ended March 31, 2016 compares with other income of $5,298 in the same period last year. Other income consists primarily of interest income on cash and cash equivalents invested and the proceeds from the sale of scrap metal shavings. The decrease is due primarily to a lower level of scrap metal sales of approximately $1,400 during the current year six month period. The current level of other income is expected to continue for the remainder of fiscal 2016.

Income taxes during the first six months of fiscal 2016 were $0 which compares with income taxes of $0 in the first six months of fiscal 2015. In the first six months of fiscal 2016 recovery of income taxes was calculated at an effective tax rate of 37% offset by an increase in the valuation allowance netting to $0. In the first six months of fiscal 2015 income taxes were recorded at an effective tax rate of 37% offset by an increase in the valuation allowance netting to $0.

The net loss for the six months ended March 31, 2016 was $511,633 compared with a net loss of $547,319 for the six months ended March 31, 2015. The net loss for the first half of fiscal 2016 and 2015 was primarily the result of a low sales volume.

Total current assets were $2,828,226, $3,486,491 and $2,722,723 at March 31, 2016, September 30, 2015 and March 31, 2015, respectively. The increase of approximately $106,000 from March to March was due primarily to the increase in cash and cash equivalents, inventory and prepaid expenses of approximately $99,000, $197,000 and $5,000 respectively, offset by a decrease in accounts receivable of approximately $195,000. The increase in cash and cash equivalents, and inventory was due primarily to the increase in the sales volume during the period. The decrease in accounts receivable was due to the collection orders shipped in the third and fourth quarter of fiscal 2015. The decrease from September to March of approximately $658,000 was due primarily to the decrease in accounts receivable and prepaid expenses of approximately $704,000 and $39,000 respectively, offset in part by an increase in inventory and cash and cash equivalents of approximately $49,000 and $35,000 respectively. The decrease in accounts receivable was due primarily to the collection of sales during the period. The increase in inventory was due to the purchase of inventory for OEM orders to be shipped in the third quarter of fiscal 2016.

Working capital as of March 31, 2016 amounted to $1,724,059 as compared with $1,834,677 a year earlier. Current assets were 2.6 times current liabilities compared to 3.1 a year ago. The quick ratio was .7 compared to 1.0 a year ago.

Internally generated funds during the six months ended March 31, 2016 were $65,225 and were not adequate to fund the Company's primary non-operating cash requirements consisting of capital expenditures of $247,822. The primary reason for the cash flow from operations was the decrease in accounts receivable and prepaid expenses of approximately $703,583 and $38,979, offset in part by the net loss during the period of $511,633 and an increase in inventory, a decrease in accounts payable and accrued expenses of $48,859, $37,012 and $142,833 respectively. The Company does anticipate additional capital expenditures during fiscal 2016 of approximately $50,000 primarily to complete the upgrade and replacement of the Company's IT infrastructure. The Company believes that cash and cash equivalents, together with funds anticipated to be generated by operations in addition to available short-term or long-term financing will provide adequate funding of the Company's working capital needs.

Shareholders' equity during the six months ended March 31, 2016 decreased by $511,633 which was the net loss during the period.

Our critical accounting policies are as presented in Notes to Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the year ended September 30, 2015.

The foregoing discussion includes forward-looking statements relating to the business of the Company. These forward-looking statements, or other statements made by the Company, are made based on management's expectations and beliefs concerning future events impacting the Company and are subject to uncertainties and factors (including, but not limited to, those specified below) which are difficult to predict and, in many instances, are beyond the control of the Company. As a result, actual results of the Company could differ materially from those expressed in or implied by any such forward-looking statements. These uncertainties and factors include (a) the Company's dependence upon a limited number of customers, (b) the highly competitive industry in which the company operates, which includes several competitors with greater financial resources and larger sales organizations, (c) the acceptance in the marketplace of new products and/or services developed or under development by the Company including automotive diagnostic products, fastening systems products and indicating instrument products, (d) the ability of the Company to further establish distribution and a customer base in the automotive aftermarket, (e) the Company's ability to capitalize on market opportunities including state automotive emissions programs and OEM tool programs and (f) the Company's ability to obtain cost effective financing.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market Risk

The Company is exposed to certain market risks from transactions that are entered into during the normal course of business. The Company has not entered into derivative financial instruments for trading purposes. The Company's primary market risks are exposure related to interest rate risk and equity market fluctuations. The Company's funds available from the convertible note and leases payable were the only debt subject to interest rates during the current quarter. The Company currently has available under the convertible note agreement a credit facility subject to a nominal fixed rate of interest and the leases payable are at fixed rates. As a result, the Company believes that the market risk related to interest rate movements is minimal. The Company had $200,000 of outstanding borrowings under this credit facility at March 31, 2016. In addition, the Company had $218,035 of outstanding borrowing under the leases at March 31, 2016.

Item 4. Controls and Procedures.

As of March 31, 2016, an evaluation was performed, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer along with the Company's Vice President, Finance and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based upon that evaluation, the Company's management, including the Chief Executive Officer along with the Company's Vice President, Finance and Chief Financial Officer, concluded that the Company's disclosure controls and procedures were effective as of March 31, 2016 in ensuring that information required to be disclosed by the Company in the reports it files and submits under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms, and (2) is accumulated and communicated to the Company's management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. There were no changes in the Company's internal controls over financial reporting during the second fiscal quarter ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

The Company is the plaintiff in a suit pursuing patent infringement against a competitor in the emissions market. There have been several legal developments in this legal proceeding since the filing of Form 10-K for fiscal 2015 including the scheduling of a jury trial date of June 13, 2016 however it is still difficult to access the status of the proceedings or probable outcomes. Management believes that it is not currently possible to estimate the impact, if any, that the ultimate resolution of the patent infringement matter will have on the Company's results of operations, financial position or cash flows.

Item 6. Exhibits.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.