10QSB

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 for the quarterly period ended July 31, 2006.

( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 for the transition period from _____________ to ______________.

Commission file number  0-22760

                               ELECSYS CORPORATION
        (Exact name of small business issuer as specified in its charter)

                Kansas                                 48-1099142
   (State or other jurisdiction of        (I.R.S. Employer Identification No.)
    incorporation or organization)

                              846 N. Mart-Way Court
                              Olathe, Kansas 66061
                    (address of principal executive offices)

                                 (913) 647-0158
                           (Issuer's telephone number)

Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the previous
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes (X) No ( )

Indicate by check mark whether registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ( ) No (X)

State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: Common stock, $0.01 par value -
3,239,937 shares outstanding as of September 6, 2006.

Transitional Small Business Disclosure format (check one): Yes ( ) No (X)

                      ELECSYS CORPORATION AND SUBSIDIARIES
                                   FORM 10-QSB
                           Quarter Ended July 31, 2006

                                      INDEX
                                                                            Page
PART I - FINANCIAL INFORMATION

ITEM 1.  Consolidated Financial Statements

Condensed Consolidated Statements of Operations -
     Three months ended July 31, 2006 and 2005 (Unaudited)                     3

Condensed Consolidated Balance Sheets -
     July 31, 2006 (Unaudited) and April 30, 2006                              4

Condensed Consolidated Statements of Stockholders' Equity -
     Three months ended July 31, 2006 (Unaudited) and the year
     ended April 30, 2006                                                      5

Condensed Consolidated Statements of Cash Flows -
     Three months ended July 31, 2006 and 2005 (Unaudited)                     6

Notes to Condensed Consolidated Financial Statements (Unaudited)               7

ITEM 2.  Management's Discussion and Analysis or Plan of Operation            18

ITEM 3.  Controls and Procedures                                              25

PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings                                                    27

ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds          27

ITEM 3.  Defaults Upon Senior Securities                                      27

ITEM 4.  Submission of Matters to a vote of Security Holders                  27

ITEM 5.  Other Information                                                    27

ITEM 6.  Exhibits                                                             27

Signatures                                                                    28

Exhibit Index                                                                 29

                         PART I - FINANCIAL INFORMATION

ITEM 1.  Consolidated Financial Statements.

                      Elecsys Corporation and Subsidiaries
                      Consolidated Statements of Operations
                      (In thousands, except per share data)
                                   (Unaudited)

                                                               Three months ended
                                                    -----------------------------------------
                                                         July 31, 2006         July 31, 2005
                                                    -------------------    ------------------
  Sales                                                         $3,862                $3,480
  Cost of products sold                                          2,548                 2,456
                                                    -------------------    ------------------
  Gross margin                                                   1,314                 1,024

  Selling, general and administrative expenses                     981                   887
                                                    -------------------    ------------------

  Operating income                                                 333                   137

  Financial income (expense):
    Interest expense                                              (31)                  (24)
    Other income, net                                                4                     1
                                                    -------------------    ------------------
                                                                  (27)                  (23)
                                                    -------------------    ------------------

  Income before income taxes                                       306                   114

  Income tax expense                                               137                    --
                                                    -------------------    ------------------

  Net income                                                      $169                  $114
                                                    ===================    ==================

  Net income per share information:
    Basic                                                        $0.05                 $0.04
    Diluted                                                      $0.05                 $0.03

  Weighted average common shares outstanding:
    Basic                                                        3,240                 3,240
    Diluted                                                      3,402                 3,389


     See Notes to Consolidated Financial Statements.

                                     Page 2

                      Elecsys Corporation and Subsidiaries
                           Consolidated Balance Sheets
                        (In thousands, except share data)

                                                                           July 31, 2006        April 30, 2006
                                                                      -------------------     -----------------
                                                                          (Unaudited)
ASSETS
   Current assets:
      Cash and cash equivalents                                                     $513                  $688
      Accounts receivable, less allowances of $147                                 1,868                 1,906
        and $150, respectively
      Inventories, net                                                             4,174                 3,383
      Prepaid expenses                                                               179                    71
      Deferred taxes                                                                 807                   930
                                                                      -------------------     -----------------
   Total current assets                                                            7,541                 6,978

   Property and equipment, at cost:
      Land                                                                           637                   637
      Building and improvements                                                    1,114                 1,114
      Equipment                                                                    2,674                 2,487
                                                                      -------------------     -----------------
                                                                                   4,425                 4,238
      Accumulated depreciation                                                   (1,850)               (1,768)
                                                                      -------------------     -----------------
                                                                                   2,575                 2,470

   Goodwill                                                                           56                    49
   Intangible assets, net                                                            294                   303
   Other assets, net                                                                  11                    11
                                                                      -------------------     -----------------
Total assets                                                                     $10,477                $9,811
                                                                      ===================     =================

LIABILITIES AND STOCKHOLDERS' EQUITY
   Current liabilities:
      Accounts payable                                                            $1,977                $1,325
      Accrued expenses                                                               669                   826
      Note payable to bank                                                         1,462                 1,471
                                                                      -------------------     -----------------
   Total current liabilities                                                       4,108                 3,622

   Stockholders' equity:
      Preferred stock, $.01 par value, 5,000,000 shares                               --                    --
         authorized; issued and outstanding - none
      Common stock, $.01 par value, 10,000,000 shares                                 32                    32
         authorized; issued and outstanding -  3,239,937
      Additional paid-in capital                                                   8,937                 8,926
      Accumulated deficit                                                        (2,600)               (2,769)
                                                                      -------------------     -----------------
   Total stockholders' equity                                                      6,369                 6,189
                                                                      -------------------     -----------------
Total liabilities and stockholders' equity                                       $10,477                $9,811
                                                                      ===================     =================

         See Notes to Consolidated Financial Statements.

                                     Page 4

                      Elecsys Corporation and Subsidiaries
            Condensed Consolidated Statements of Stockholders' Equity
                                 (In thousands)

                                                   Common           Common        Additional                              Total
                                                    Stock            Stock          Paid-In        Accumulated         Stockholders'
                                                (# of shares)         ($)           Capital          Deficit              Equity
Balance at April 30, 2005                               3,240             $32          $8,926           $(4,436)             $4,522
 Net income                                                --              --              --              1,667              1,667
                                                --------------    ------------    ------------    ---------------    ---------------
Balance at April 30, 2006                               3,240              32           8,926            (2,769)              6,189
 Net income                                                --              --              --                169                169
 Share-based compensation expense                          --              --              11                 --                 11
                                                --------------    ------------    ------------    ---------------    ---------------
Balance at July 31, 2006 (unaudited)                    3,240             $32          $8,937           $(2,600)             $6,369
                                                ==============    ============    ============    ===============    ===============


See Notes to Consolidated Financial Statements.

                                     Page 5

                      Elecsys Corporation and Subsidiaries
                      Consolidated Statements of Cash Flows
                                 (In thousands)
                                   (Unaudited)
                                                                         Three months ended July 31,
                                                                      ----------------------------------
                                                                           2006               2005
                                                                      ---------------    ---------------
Cash Flows from Operating Activities:
Net income                                                                      $169               $114
Adjustments to reconcile net income to net cash
 provided by (used in) operating activities:
   Share-based compensation expense                                               11                 --
   Depreciation                                                                   86                 95
   Amortization                                                                    9                 11
   Provision for doubtful accounts                                                 5                 18
   Gain on disposal of property and equipment                                    (1)                 --
   Deferred income taxes                                                         123                 --
   Changes in operating assets and liabilities:
      Accounts receivable                                                         33              (833)
      Inventories                                                              (791)              (495)
      Accounts payable                                                           652                464
      Accrued expenses                                                         (157)               (12)
      Other                                                                    (108)               (66)
                                                                      ---------------    ---------------
Net cash provided by (used in) operating activities                               31              (704)
                                                                      ---------------    ---------------

Cash Flows from Investing Activities:
Purchases of property and equipment                                            (191)               (71)
Proceeds from sale of property and equipment                                       1                 --
Goodwill increase related to acquisition costs                                   (7)                 --
                                                                      ---------------    ---------------
Net cash used in investing activities                                          (197)               (71)
                                                                      ---------------    ---------------

Cash Flows from Financing Activities:
Borrowings on note payable to bank                                                --              1,480
Principal payments on note payable to bank                                       (9)              (830)
                                                                      ---------------    ---------------
Net cash (used in) provided by financing activities                              (9)                650
                                                                      ---------------    ---------------
Net decrease in cash and cash equivalents                                      (175)              (126)
Cash and cash equivalents at beginning of period                                 688                264
                                                                      ---------------    ---------------
Cash and cash equivalents at end of period                                      $513               $138
                                                                      ===============    ===============

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest                                         $31                $16
Cash paid during the period for income taxes                                      14                 --


See Notes to Consolidated Financial Statements.

                                     Page 6

                      Elecsys Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                                  July 31, 2006
                                   (Unaudited)

1.       NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
         ACCOUNTING POLICIES

Nature of Operations
         Elecsys Corporation (the "Company") is a publicly traded holding
company with two wholly owned subsidiaries, DCI, Inc.("DCI") and NTG, Inc
("NTG"). DCI designs, manufactures, and integrates custom electronic interface
solutions for original equipment manufacturers ("OEMs") in the medical,
aerospace, communications, industrial product, and other industries. DCI has
specialized capabilities to design and efficiently manufacture custom electronic
assemblies which integrate a variety of interface technologies, such as custom
liquid crystal displays, light emitting diode displays, and keypads, with
circuit boards and other electronic components. NTG designs, markets, and
provides remote monitoring solutions for the gas and oil pipeline industry as
well as other industries that require remote monitoring.

Comprehensive Income
         The Company has no components of other comprehensive income, therefore
comprehensive income equals net income.

Recent Accounting Pronouncements
         In November 2004, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 151 ("SFAS 151"),
Inventory Costs. SFAS 151 amends the guidance in ARB No. 43, Chapter 4,
Inventory Pricing, to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material (spoilage). The
Company adopted this statement effective May 1, 2006 and there was no impact on
the Company's financial position or results of operations for the three-month
period ended July 31, 2006.

         Effective May 1, 2006, the Company adopted FASB issued Statement No.
154 ("SFAS No. 154"), Accounting Changes and Error Corrections. This new
standard replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No.
3, Reporting Accounting Changes in Interim Financial Statements. Among other
changes, SFAS 154 requires retrospective application of a voluntary change in
accounting principle with all prior period financial statements presented on the
new accounting principle, unless it is impracticable to do so. SFAS 154 also
requires accounting for a change in method of depreciating or amortizing a
long-lived non-financial asset as a change in estimate (prospectively) affected
by a change in accounting principle. Further, the statement requires that
correction of errors in previously issued financial statements be termed a
"restatement." The adoption of this statement had no impact on the Company's
financial statements for the three-month period ended July 31, 2006.

                                     Page 7

         In July 2006, the FASB issued FASB Interpretation No. 48, Accounting
for Uncertainty in Income Taxes--an Interpretation of FASB Statement 109 ("FIN
48"), which clarifies the accounting for uncertainty in tax positions. This
interpretation provides that the tax effects from an uncertain tax position can
be recognized in the financial statements, only if the position is more likely
than not of being sustained on audit, based on the technical merits of the
position. The provisions of FIN 48 are effective as of May 1, 2007, with the
cumulative effect of the change in accounting principle recorded as an
adjustment to opening retained earnings. The Company is currently evaluating the
impact of adopting FIN 48, but do not currently expect it to have a material
adverse effect on our financial statements.

Shipping and Handling Costs
         Shipping and handling costs that are billed to our customers are
recognized as revenues in the period that the product is shipped. Shipping and
handling costs that are incurred by the Company are recognized as cost of sales.

Goodwill
         Goodwill is initially measured as the excess of the cost of an acquired
business over the fair value of the identifiable net assets acquired. The
Company does not amortize goodwill, but rather reviews its carrying value for
impairment annually, and whenever an impairment indicator is identified. The
goodwill impairment test involves a two-step approach. The first step is to
identify if potential impairment of goodwill exists. If impairment of goodwill
is determined to exist, the second step of the goodwill impairment test measures
the amount of the impairment using a fair value-based approach.

Intangible assets
         Intangible assets consist of patents, trademarks, copyrights and
capitalized software. Intangible assets are amortized over their estimated 10
year useful lives using the straight-line method.

Impairment of Long-Lived Intangible Assets
         Long-lived assets, including amortizable intangible assets, are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset or group of assets may not be fully
recoverable. These events or changes in circumstances may include a significant
deterioration of operating results, changes in business plans, or changes in
anticipated future cash flows. If an impairment indicator is present, the
Company evaluates recoverability by a comparison of the carrying amount of the
assets to future undiscounted cash flows expected to be generated by the assets.
If the sum of the expected future cash flows is less than the carrying amount,
the Company would recognize an impairment loss. An impairment loss would be
measured by comparing the amount by which the carrying value exceeds the fair
value of the long-lived assets and intangibles.

Revenue Recognition
         The Company derives revenue from the manufacture of production units of
electronic assemblies, liquid crystal displays and remote monitoring equipment.
We also derive revenue

                                     Page 8

from repairs and non-warranty services, engineering design services and remote
monitoring services. Production and repaired units are billed to the customer
and revenue is recognized after they are shipped and title has transferred to
the customer. Remote monitoring services are billed and the revenue recognized
at the end of the month after the services are completed. For customers that
utilize the Company's engineering design services, the customer is billed and
revenue is recognized after the design services or tooling have been completed.

Accounts Receivable
         Accounts receivable are carried at original invoice amount less an
estimate made for doubtful receivables based on a review of all outstanding
amounts on a monthly basis. Management determines the allowance for doubtful
accounts by regularly evaluating individual customer receivables and considering
a customer's financial condition and credit history, and current economic
conditions. Receivables are written off when deemed uncollectible. Recoveries of
receivables previously written off are recorded when received. The majority of
the customer accounts are considered past due after 30 days. Interest is not
charged on past due accounts for the majority of our customers.

Inventory Valuation
         Inventories are stated at the lower of cost, using the first-in,
first-out (FIFO) method, or market value. The Company's industry is
characterized by technological change, short-term customer commitments and
changes in demand, as well as other market considerations. Provisions for
estimated excess and obsolete inventory are based on quarterly reviews of
inventory quantities on hand and the latest forecasts of product demand and
production requirements from our customers. Inventories are reviewed in detail
on a quarterly basis utilizing a 24-month time horizon. Individual part numbers
that have not had any usage in a 24-month time period are examined by
manufacturing personnel for obsolescence, excess and fair value. Parts that are
not identified for common use or are unique to a former customer or application
are categorized as obsolete and are discarded as part of our quarterly inventory
write-down. If actual market conditions or our customers' product demands are
less favorable than those projected, additional inventory write-downs may be
required. The reserve balance is analyzed for adequacy along with the inventory
review each quarter.

Warranty Reserve
         The Company has established a warranty reserve for rework, product
warranties and customer refunds. The Company provides a limited warranty for a
period of one year from the date of receipt of products by customers and
standard warranties require the Company to repair or replace defective products
at no cost to the customer or refund the customer's purchase price. The warranty
reserve is based on historical experience and analysis of specific known and
potential warranty issues. The product warranty liability reflects management's
best estimate of probable liability under the product warranties.

                                     Page 9

2.       BASIS OF PRESENTATION

         The accompanying unaudited condensed consolidated financial statements
of the Company include the accounts of the Company and its wholly owned
subsidiaries, DCI, Inc. and NTG, Inc. All significant intercompany balances and
transactions have been eliminated. The condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles in the United States for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles in the United States 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 period ended July 31, 2006 are
not necessarily indicative of the results that may be expected for the year
ending April 30, 2007.

         The balance sheet at April 30, 2006 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles in the United
States for complete financial statements.

         For further information, refer to the consolidated financial statements
and footnotes included in the Company' annual report on Form 10-KSB for the year
ended April 30, 2006.

3.       INVENTORY

         Inventories are stated at the lower of cost or market, using the
first-in, first-out (FIFO) method. Inventories, net of reserves of approximately
$251,000 and $248,000, for the periods ended July 31, 2006 and April 30, 2006,
respectively, are summarized by major classification as follows (in thousands):

                                     July 31, 2006           April 30, 2006
                             ----------------------    ---------------------
          Raw material                      $2,641                   $2,169
          Work-in-process                      864                      582
          Finished goods                       669                      632
                             ----------------------    ---------------------
                                            $4,174                   $3,383
                             ======================    =====================


4.       STOCK OPTION PLAN

         At July 31, 2006, the Company had an equity-based compensation plan
from which stock-based compensation awards are granted to eligible employees and
consultants of the Company. According to the terms of the Company's 1991 stock
option plan (the "Plan") for which the Company originally reserved 675,000
shares of common stock, both incentive stock options and non-qualified stock
options to purchase common stock of the Company may be granted to key employees,
directors and consultants to the Company, at the discretion of the

                                    Page 10

Board of Directors. Incentive stock options may not be granted at prices that
are less than the fair market value on the date of grant. Non-qualified options
may be granted at prices determined appropriate by the Board of Directors of the
Company, but have not been granted at less than market value on the date of
grant. Generally, these options become exercisable and vest over one to five
years and expire within 10 years of the date of grant. The Plan also provides
for accelerated vesting if there is a change in control of the Company. As of
July 31, 2006, options to purchase approximately 325,750 shares were outstanding
of which 245,750 are vested and exercisable.

          Prior to May 1, 2006, the Company accounted for its equity-based
compensation plan under the recognition and measurement provision of APB Opinion
No. 25, Accounting for Stock Issued to Employees (APB 25), and related
Interpretations, as permitted by Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation (SFAS 123). The Company did not
recognize the value of stock-based compensation issued to employees and
directors in its Consolidated Statements of Operations prior to May 1, 2006, as
all options granted under its equity-based compensation plan had an exercise
price equal to the market value of the underlying common stock on the date of
the grant. Effective May 1, 2006, the Company adopted the fair value recognition
provisions of Statement of Financial Accounting Standard No. 123 (revised 2004),
Share-Based Payment (SFAS 123R), using the modified-prospective-transition
method. Under this transition method, compensation cost recognized in the first
quarter of fiscal year 2007 includes compensation costs for all share-based
payments granted prior to May 1, 2006, but not yet vested as of May 1, 2006,
based on the grant-date fair value estimated in accordance with the original
provisions of SFAS 123, and compensation cost for all share-based payments
granted subsequent to April 30, 2006 based on the grant date fair value
estimated in accordance with the provisions of SFAS 123R. Results from prior
periods have not been restated to reflect the impact of adopting the new
standard.

         The fair value of each option award is estimated on the date of grant
using the Black-Scholes option pricing model, which uses the following
weighted-average assumptions for the three-month period ended July 31, 2006.
There were no options granted for the three-month period ended July 31, 2005.

                                                  Three Months Ended
                                                    July 31, 2006
                                              ---------------------------
            Risk-free interest rate                                5.00%
            Expected life, in years                                    6
            Expected volatility                                   56.23%
            Dividend yield                                          0.0%
            Forfeiture rate                                        5.00%

         The Company uses historical data to estimate option exercises and
employee terminations used in the model. Expected volatility is based on monthly
historical fluctuations of the Company's common stock using the closing market
value for the number of months of the expected term immediately preceding the
grant. The risk-free interest rate is based on the U.S.

                                    Page 11

Treasury yield curve in effect at the time of the grant for a bond with a
similar term.

         As a result of adopting SFAS 123R, the Company's income before taxes
and net income for the three-month period ended July 31, 2006, were each
approximately $11,000 lower than if the Company had continued to account for the
share-based compensation under APB 25.

         We receive a tax deduction for certain stock option exercises and
disqualifying stock dispositions during the period the options are exercised of
the stock is sold, generally for the excess of the price at which the options
are sold over the exercise prices of the options. Prior to the adoption of SFAS
123R, we reported all tax benefits resulting from the exercise of stock options
as operating cash flows in our Consolidated Statement of Cash Flows. In
accordance with SFAS 123R, we will revise our Consolidated Statement of Cash
Flows presentation to report any tax benefit from the exercise of stock options
as financing cash flows. For the three-month period ended July 31, 2006, there
were no exercises of stock options which triggered tax benefits, therefore net
cash flow used in financing activities was unchanged as a result of the adoption
of SFAS 123R.

         The following table illustrates the effect on net income and earnings
per share if the Company had accounted for stock-based compensation in
accordance with SFAS 123R for the three-month period ended July 31, 2005 (in
thousands):

                                                                               Three Months
                                                                                   Ended
                                                                               July 31, 2005
                                                                            -------------------
    Net income, as reported                                                               $114
    Deduct:  Total stock-based employee compensation expense                                 4
     determined under fair value based method for all options, net of
     tax
                                                                            -------------------
    Pro forma net income                                                                  $110
                                                                            ===================

    Net income per share:
         Basic - as reported                                                             $0.04
         Basic - pro forma                                                               $0.03

         Diluted - as reported                                                           $0.03
         Diluted - pro forma                                                             $0.03

         At July 31, 2006, there was approximately $150,000 of unrecognized
compensation cost related to share-based payments which is expected to be
recognized over a weighted-average period of 2.7 years.

                                    Page 12

         The following table represents stock option activity for the
three-month period ended July 31, 2006:
                                                                     Weighted-            Weighted-
                                                    Number            Average              Average
                                                      of             Exercise             Remaining
                                                    Shares             Price            Contract Life
                                                 ------------    ---------------    --------------------
    Outstanding options at April 30, 2006            255,750              $1.41              5.69 Years
       Granted                                        70,000               3.66
       Exercised                                          --                 --
       Forfeited                                          --                 --
    Outstanding options at July 31, 2006             325,750              $1.89              6.40 Years
                                                 ============    ===============    ====================

    Outstanding exercisable at July 31, 2006         245,750              $1.30              5.28 Years
                                                 ============    ===============    ====================

         Shares available for future stock option grants to employees, officers,
directors and consultants of the Company under the existing Plan were 78,000 at
July 31, 2006. At July 31, 2006 the aggregate intrinsic value of shares
outstanding was approximately $941,000, and the aggregate intrinsic value of
options exercisable was approximately $854,000. There were no options exercised
in the three-month period ended July 31, 2006.

         The following table summarizes the non-vested stock option activity for
the three-month period ended July 31, 2006:

                                                                            Weighted-
                                                       Number                Average
                                                         of                 Grant-Date
                                                       Shares               Fair Value
                                                  ----------------      ------------------
    Non-vested options at April 30, 2006                   10,000                   $2.18
       Granted                                             70,000                    2.02
       Vested                                                  --                      --
       Forfeited                                               --                      --
                                                  ----------------
    Non-vested options at July 31, 2006                    80,000                   $2.04
                                                  ================      ==================

                                    Page 13

5.       NET INCOME PER SHARE

         The following table presents the calculation of basic and diluted
income per share (in thousands):

                                                                      Three Months Ended
                                                          -------------------------------------------
                                                            July 31, 2006           July 31, 2005
                                                          -------------------    --------------------
Numerator:
Net income                                                              $169                    $114
                                                          ===================    ====================

Denominator:
Weighted average common shares outstanding - basic                     3,240                   3,240
  Effect of dilutive options outstanding                                 162                     149
                                                          -------------------    --------------------
Weighted average common shares outstanding - diluted                   3,402                   3,389
                                                          ===================    ====================

         Options to purchase 80,000 shares of common stock were not included in
the computation of diluted net income per share for the three-month period ended
July 31, 2006 because they were anti-dilutive.

6.       CREDIT AGREEMENTS AND COMMITTMENTS

         As of July 31, 2006, the Company has two credit agreements with a
regional lender based in Kansas City, Missouri. These credit agreements include
an operating line of credit and a one-year note payable that were entered into
on December 30, 2005 as part of a new banking relationship made in conjunction
with the financing of the Company's new building and an operating line of
credit.

         The Company's $2,000,000 line of credit facility provides the Company
and its subsidiaries with short-term financing for their working capital
requirements. It is secured by accounts receivable and inventory and expires on
December 29, 2006. Its borrowing capacity is calculated as a specified
percentage of accounts receivable and inventory. The line of credit accrues
interest at the prime rate plus .25% (8.5% at July 31, 2006) and contains
various covenants, including certain financial performance covenants pertaining
to the maintenance of debt to net worth and minimum net worth ratios. As of July
31, 2006, there were no borrowings outstanding on the credit facility.

         The proceeds from the Company's short-term one-year note payable for
approximately $1,480,000 were used to retire the Industrial Revenue Bonds
("IRBs") on the Company's current facility. The one-year note payable is
short-term financing on which the Company makes monthly principal and interest
payments. It is secured by the Company's current land and building and accrues
interest at 6.85%. The agreement also contains certain financial performance
covenants regarding the maintenance of debt to net worth and minimum net worth
ratios that are monitored quarterly. As of July 31, 2006, the Company was in
compliance with all of the covenants. The note payable will be paid in full upon
the sale of the Company's current land and building that is expected

                                    Page 14

to close in the second quarter of fiscal 2007. The balance of this note payable
as of July 31, 2006 was approximately $1,462,000.

         As a result of the Company's agreement to build a new production and
headquarters facility in Olathe, Kansas, the Company has guaranteed the
$4,500,000 construction loan, including accrued interest, between the
construction company and the Company's financial institution. The Company has
not recorded a liability for this guarantee. The new facility is planned to
contain both of the Company's operating subsidiaries and will allow for
increases in production capacity and efficiency. The Company has been approved
for both Industrial Revenue Bonds and a tax abatement. The Company's financial
institution will purchase the IRBs and will then provide long-term financing for
the Company's purchase of its new facility. The new building and financing will
be completed in the second quarter of fiscal 2007.

7.       SEGMENT REPORTING

         The Company operates two reportable business segments: Electronic
Interface Solutions and Remote Monitoring Solutions. Electronic Interface
Solutions ("EIS") produces custom electronic assemblies which integrate a
variety of interface technologies, such as custom liquid crystal displays, light
emitting diode displays, and keypads, and also provides repair services and
engineering design services. The Remote Monitoring Solutions ("RMS") segment
designs, markets, and provides remote monitoring services. The following table
presents business segment revenues, income (loss), and total assets for the
three-month periods ended July 31, 2006 and 2005 (in thousands).

                                                           Three Months Ended July 31, 2006
                                      ---------------------------------------------------------------------------
                                         EIS          RMS        Unallocated       Eliminations         Total
                                      ----------    --------    --------------    ---------------    ------------
Sales:
  External customers                     $3,694        $168               $--               $ --          $3,862
  Intersegment                               99          --                --               (99)              --
                                      ----------    --------    --------------    ---------------    ------------
Total sales                              $3,793        $168               $--              $(99)          $3,862
                                      ==========    ========    ==============    ===============    ============

Segment income (loss) before               $585      $(150)            $(135)                 $6            $306
 income tax expense
                                      ==========    ========    ==============    ===============    ============

Total assets                            $10,014        $615            $4,896           $(5,048)         $10,477
                                      ==========    ========    ==============    ===============    ============

                                    Page 15

                                                           Three Months Ended July 31, 2005
                                       --------------------------------------------------------------------------
                                         EIS          RMS         Unallocated      Eliminations         Total
                                       ---------    ---------    --------------    --------------    ------------
Sales:
  External customers                     $3,277         $203             $  --             $  --          $3,480
  Intersegment                              118           --                --             (118)              --
                                       ---------    ---------    --------------    --------------    ------------
Total sales                              $3,395         $203             $  --            $(118)          $3,480
                                       =========    =========    ==============    ==============    ============

Segment income (loss) before               $365       $(146)            $(100)              $(5)            $114
 income tax expense
                                       =========    =========    ==============    ==============    ============

Total assets                             $8,470         $169            $4,067          $(3,758)          $8,948
                                       =========    =========    ==============    ==============    ============

         The following table reconciles total revenues to the products and
services offered by the Company (in thousands).

                                                        Three Months Ended
                                                             July 31,
                                                  -------------------------------
                                                          2006              2005
                                                  -------------    --------------
            Products and services:
              Electronic interface assemblies           $3,633            $3,199
              Remote monitoring solutions                  168               203
              Engineering services                          22                29
              Other                                         39                49
                                                  -------------    --------------
            Total sales                                 $3,862            $3,480
                                                  =============    ==============


8.       WARRANTY

         The Company provides a limited warranty for a period of one year from
the date of a customer's receipt of its products. The Company's standard
warranties require the Company to repair or replace defective products at no
cost to the customer or refund the customer's purchase price. The Company's
product warranty liability reflects management's best estimate of probable
liability under product warranties. Management determines the liability based on
known product failures (if any), historical experience, and other currently
available evidence.

         The following table presents changes in the Company's warranty
liability, which is included in accrued expenses on the balance sheets (in
thousands):

                                                                Three Months Ended
                                                                     July 31,
                                                           ------------------------------
                                                                  2006              2005
                                                           ------------     -------------
       Warranty reserve balance at beginning of period             $82               $59
       Expense accrued                                              19                26
       Warranty costs incurred                                    (14)              (15)
                                                           ------------     -------------
       Warranty reserve balance at end of period                   $87               $70
                                                           ============     =============

                                    Page 16

9.       SUBSEQUENT EVENT

         On September 5, 2006 the Company completed the purchase of its new
headquarters and production facility that was built at 846 N. Mart-Way Court in
Olathe, Kansas in the K.C. Road Business Park. The Company entered into
financing arrangements with its financial institution and the City of Olathe,
Kansas, which issued $5,000,000 of Industrial Revenue Bonds ("IRBs") for the
development of the project. The Company's financial institution has provided the
long-term financing for the project by purchasing the IRBs. Total financing for
the project is as follows (in thousands):

         Industrial  revenue bonds,  Series 2006A,  5-year adjustable  interest       $3,680
         rate based on the yield on 5-year United States Treasury  Notes,  plus
         .45% (5.50% as of September 5, 2006),   due in monthly  principal  and
         interest  payments  beginning  October  1, 2006  through  maturity  on
         September 1, 2026, secured by real estate.

         Industrial revenue bonds,  Series 2006B, fixed interest rate of 6.06%,          400
         due in monthly  principal and interest  payments  beginning October 1,
         2006 through maturity on September 1, 2009, secured by equipment.

         Industrial revenue bonds,  Series 2006C, fixed interest rate of 7.88%,          100
         due in monthly  principal and interest  payments  beginning October 1,
         2006 through maturity on September 1, 2009, secured by equipment.

         Industrial revenue bonds,  Series 2006D, fixed interest rate of 8.00%,          820
         due in semi-annual  interest  installments on March 1 and September 1,
         commencing on March 1, 2007 with principal due at maturity on March 1,
         2017.
                                                                                 -------------
         Total amount of financing                                                     $5,000
                                                                                 =============

         In addition to the financing of our new production and headquarters
facility, and much of the new equipment located therein, the Company renewed and
increased its operating line of credit to $3,000,000 on August 30, 2006. The
line of credit is secured by accounts receivable and inventory and is available
for working capital. The new line of credit expires on August 29, 2007 and its
borrowing capacity is calculated as a specified percentage of accounts
receivable and inventory. The line of credit accrues interest at the prime rate
plus .25% (8.5% at August 30, 2006) and contains various covenants, including
certain financial performance covenants pertaining to the maintenance of debt to
net worth and minimum net worth ratios. As of August 30, 2006, the Company was
in compliance with all of the covenants under the line of credit.

                                    Page 17

ITEM 2.  Management's Discussion and Analysis or Plan of Operation.

Overview

         We are a publicly traded holding company with two wholly owned
subsidiaries, DCI, Inc. ("DCI") and NTG, Inc. ("NTG"). DCI designs,
manufactures, and integrates custom electronic interface solutions for original
equipment manufacturers ("OEMs") in the medical, aerospace, communications,
safety systems, industrial product, and other industries. DCI has specialized
capabilities to design and efficiently manufacture custom electronic assemblies
which integrate a variety of interface technologies, such as custom liquid
crystal displays ("LCDs"), light emitting diode ("LED") displays, and keypads
with circuit boards and other electronic components. DCI seeks to become an
extension of the OEM's organization by providing key expertise that enables
rapid development and manufacture of electronic products from product conception
through volume production. NTG designs, markets, and provides remote monitoring
solutions for the gas and oil pipeline industry as well as other industries
requiring remote monitoring. NTG is an innovator of Internet-based, wireless
remote monitoring using the existing cellular infrastructure. NTG's remote
monitoring devices and its ScadaNET(TM) Network provide full time, wireless
status monitoring and alarm notification regarding the performance of multiple
types of systems over the internet. This low cost, highly reliable network
provides prompt notification of power outages, rectifier problems, and
pipe-to-soil potentials at test points, using the Internet, email, and pager
back-end networks. When combined with its Internet-based front end, NTG's
customers can directly access and control a large population of field deployed
remote monitoring devices at an attractive cost.

         On October 6, 2005, the Company announced that it had signed an
agreement with Rose Construction Company, Inc. to build a new production and
headquarters facility in Olathe, Kansas. This new facility is planned to contain
both of our operating subsidiaries and will allow for increases in production
capacity and efficiency. The building is located at 846 N. Mart-Way Court in
Olathe, Kansas in the K.C. Road Business Park, a short distance from our current
facilities, and is approximately 60,100 sq ft in size. The Company worked with
the City of Olathe, Kansas, and has been approved for both Industrial Revenue
Bonds and a tax abatement to develop the project. We believe that the facility
will provide room for our projected growth and anticipate moving to the new
facility in September 2006. We have planned the move of our operations to the
new facility in order to minimize the interruption of production and business
activity on our operations and financial position.

                                    Page 18

Results of Operations

Three Months Ended July 31, 2006 Compared With Three Months Ended July 31, 2005.

         The following table sets forth, for the periods presented, certain
statement of operations data (in thousands) of the Company:

                                                                  Three Months Ended
                                         ---------------------------------------------------------------------
                                                   July 31, 2006                       July 31, 2005
                                                   -------------                       -------------
   Sales                                          $3,862            100.0%              $3,480         100.0%
   Cost of products sold                           2,548             66.0%               2,456          70.6%
                                         ---------------- -----------------    ---------------- --------------
   Gross margin                                    1,314             34.0%               1,024          29.4%
   Selling, general and
     administrative expenses                         981             25.4%                 887          25.5%
                                         ---------------- -----------------    ---------------- --------------
   Operating income                                  333              8.6%                 137           3.9%
   Interest expense                                 (31)            (0.8%)                (24)         (0.7%)
   Other income, net                                   4              0.1%                   1           0.0%
                                         ---------------- -----------------    ---------------- --------------
   Income before income taxes                        306              7.9%                 114           3.3%
   Income tax expense                                137              3.2%                  --           0.0%
                                         ---------------- -----------------    ---------------- --------------
   Net income                                       $169              4.7%                $114           3.3%
   Net income per share - basic                    $0.05                                 $0.04
                                         ================                      ================
   Net income per share - diluted                  $0.05                                 $0.03
                                         ================                      ================

         Sales for the three months ended July 31, 2006 were approximately
$3,862,000, an increase of $382,000 or 11.0% from $3,480,000 for the comparable
period of fiscal 2006. Sales at DCI increased approximately $398,000, or 11.7%,
from the prior year period. The increase was primarily the result of an increase
in existing and new customer orders at DCI. We expect sales volumes at DCI to
increase in the next few quarters as a result of scheduled shipments to
customers currently recorded in our backlog. Sales volumes at NTG were $168,000,
a decrease of $35,000, or 17.2%, from the first quarter of fiscal 2006. This
decrease in sales at NTG was the result of fewer unit shipments during the
period, slightly offset by an increase in recurring network messaging services
revenue which grew by 43.9% over the comparable period. The decrease in the
number of units sold during the current period was partially due to a
substantial number of units shipped in July 2005 as a result of the introduction
of a new product. Sales at NTG are expected to be slightly higher over the next
few quarters. Thereafter, NTG sales are expected to show steady growth as new
products are brought to the market and our increased marketing efforts are
anticipated to show increases in backlog and product sales. Total consolidated
backlog at July 31, 2006 was approximately $12,311,000, an increase of
approximately $5,278,000, or 75.1%, from a total backlog of $7,033,000 on July
31, 2005 and an increase of $1,768,000 from a total backlog of $10,543,000 on
April 30, 2006. Backlog

                                    Page 19

represents purchase orders in place from our customers that are scheduled for
shipment in future periods.

         Gross margin can fluctuate from period to period due to a variety of
factors including, but not limited to, sales volume, product mix, and plant
efficiency. Gross margin for the three-month period ended July 31, 2006, was
34.0% of sales, or $1,314,000, compared to 29.4% of sales, or $1,024,000, for
the three-month period ended July 31, 2005. DCI's gross margin was approximately
$1,256,000, or 33.1%, for the period as compared to approximately $979,000, or
28.8%, for the comparable period of the prior year. The increase in gross margin
at DCI of $277,000 is primarily the result of product mix, increased sales
volumes in each of DCI's product lines, especially sales increases in LCD
Production, LCD Resale and Hybrids, and improvements in productivity. Total
gross margin at NTG was approximately $53,000, or 31.6%, for the three-month
period ended July 31, 2006 as compared to approximately $51,000, or 25.1%, for
the three-month period ended July 31, 2005. The increase in gross margin at NTG
was due to lower costs of production of NTG's RMUvi product, which is
manufactured at DCI, as well as overall lower indirect costs of goods sold
during the period. We expect that gross margins over the next few quarters will
continue at or near our historical margins of 27% - 32%.

         Selling, general and administrative ("SG&A") expenses increased
$94,000, or 10.6%, to $981,000 in the three-month period ended July 31, 2006
from $887,000 in the three-month period ended July 31, 2005. SG&A expenses were
25.4% of sales for the three-month period ended July 31, 2006 as compared to
25.5% of sales for the three-month period ended July 31, 2005. SG&A expenses at
DCI increased $56,000 from the prior year period as a result of increases in
commissions due to higher sales and an increase in personnel and
personnel-related expenses in the engineering and administration departments
which was driven by our growth. NTG SG&A expenses increased $6,000 from the
comparable prior year period as a result of increased marketing and travel
expenses. Corporate expenses were also $31,000 higher than the prior year period
in fiscal 2006 as a result of higher personnel-related costs including $11,000
for share-based compensation expenses as a result of the adoption of Statement
of Financial Accounting Standards No. 123R. We anticipate that our SG&A expenses
will grow slightly over the near term as a result of our continuing growth at
DCI and our efforts to invest in NTG marketing and sales and additional product
development.

         Interest expense was $31,000 and $24,000 for the three-month periods
ended July 31, 2006 and 2005, respectively. This increase of $7,000 was the
direct result of interest expense and the amortization of loan fees from the
one-year mortgage on our current land and building. As of July 31, 2006, there
were no borrowings outstanding on the line of credit. We expect to utilize the
operating line of credit periodically in the next few quarters and anticipate
that the amount of outstanding borrowings will grow as our business continues to
grow and debt financing is needed to meet operating requirements and finance our
capital investments.

         As a result of a change in our banking relationship made in conjunction
with the long-term financing of our new building and a new operating line of
credit, we retired the Industrial Revenue Bonds ("IRBs") on DCI's current
facility and replaced them with a short-term one year

                                    Page 20

note payable. The bonds were retired on December 30, 2005 and we closed on a
one-year note payable totaling approximately $1,480,000 with our new financial
institution at that time. The one-year note payable is short-term financing that
we will pay in full with the sale of our current land and building that is
expected to close at the end of September 2006. The anticipated gain of
approximately $300,000 from the sale of our current land and building will be
used toward the down payment on the financing for our new facility. The
remaining down payment will be generated from operating cash, our line of credit
and a loan on our existing equipment which is available from the Company's
financial institution.

         Income tax expense totaled $137,000 for the three-month period ended
July 31, 2006. The Company did not record any income tax expense for the
three-month period ended July 31, 2005. During the fourth quarter of fiscal
2006, the Company reduced the deferred tax valuation allowance due to the
utilization of the net operating loss carryforward in the fiscal years ended
2006 and 2005, the anticipated usage of the remaining net operating loss
carryforwards based on the projected profitability of the Company and the
reversal of other deferred tax assets. Prior to 2006, management recorded a 100%
valuation allowance offsetting this tax benefit due to uncertainty regarding the
Company's likelihood of realizing a material portion of the benefit. In view of
the Company's recent profitability and projected earnings from operations,
management concluded during the fourth quarter of 2006 that the Company is more
likely than not to utilize the tax benefits. Based on this conclusion, the
Company reduced the valuation allowance to zero and recorded its net deferred
tax asset. On subsequent earnings, including the current three-month period
ended July 31, 2006 the Company will record income tax expense at normal rates,
estimated at 40% for federal and state taxes.

         As a result of the above factors, net income was $169,000 for the
three-month period ended July 31, 2006 as compared to net income of $114,000
reported for the three-month period ended July 31, 2005.

Liquidity and Capital Resources

         Cash and cash equivalents decreased $175,000 to $513,000 as of July 31,
2006 compared to $688,000 at April 30, 2006. This decrease was primarily the
result of cash used for purchases of inventory and equipment during the period
that were slightly offset by increases in accounts payable.

         Operating activities. Our consolidated working capital increased
approximately $92,000 for the three-month period ended July 31, 2006 due to
increasing levels of inventory which was slightly offset by increases in current
liabilities. The increases in inventory and accounts payable are the result of
increasing sales and bookings that have allowed our backlog to grow to over
$12,311,000. Operating cash receipts totaled approximately $3,900,000 and
$2,666,000 during the three-month periods ended July 31, 2006 and 2005,
respectively. Total cash disbursements for operations which include purchases of
inventory and operating expenses, were over $3,869,000 and $3,370,000 for the
three-month periods ended July 31, 2006 and 2005, respectively. The Company
utilizes its line of credit when necessary in order to pay suppliers and

                                    Page 21

meet operating cash requirements.

         Investing activities. Cash used in investing activities of $197,000
during the three-month period ended July 31, 2006 was $126,000 higher than the
cash used during the three-month period ended July 31, 2005 which totaled
$71,000. Approximately $120,000 of the increase was the direct result of
purchases of equipment that are intended to increase production capacity and
improve productivity in our new production facility and as a result of the
increase in sales and total backlog.

         Financing activities. Cash used in financing activities of
approximately $9,000 for the three-month period ended July 31, 2006 was due to
principal payments on the one-year note payable to the bank. For the three-month
period ended July 31, 2005, there was a net increase in outstanding borrowings
on our operating line of credit of $650,000 which was primarily utilized to
finance the operations of DCI and NTG during the period. Total borrowings on the
operating line of credit for the three-month period ended July 31, 2005 totaled
$1,480,000 while total payments on the operating line of credit for the
three-month period ended July 31, 2005 totaled $830,000. There were no
borrowings or payments made on the operating line of credit for the three-month
period ended July 31, 2006.

         As a result of a change in the Company's banking relationship made in
conjunction with the long-term financing of the new building and a new operating
line of credit, the Company retired the IRBs on the current facility and
replaced them with a short-term one year note payable. The bonds were retired on
December 30, 2005 and the Company closed on a one-year note payable totaling
approximately $1,480,000 with its new financial institution at that time. The
one-year note payable is short-term financing that will be paid in full with the
sale of the Company's current land and building that is expected to close at the
end of September 2006.

         The Company increased its operating line of credit to $3,000,000 on
August 30, 2006. The line of credit is secured by accounts receivable and
inventory and is available for working capital. It expires on August 29, 2007
and its borrowing capacity is calculated as a specified percentage of accounts
receivable and inventory. The line of credit accrues interest at the prime rate
plus .25% (8.5% at August 30, 2006) and contains various covenants, including
certain financial performance covenants pertaining to the maintenance of debt to
net worth and minimum net worth ratios.

         Although there can be no assurances, we believe that existing cash, the
cash expected to be generated from the operations of DCI and NTG, amounts
available under our line of credit, and amounts available from trade credit,
will be sufficient to finance our anticipated working capital needs, our capital
expenditures for the foreseeable future, and our scheduled debt repayment.

                                    Page 22

         The following table summarizes our contractual obligations as of July
31, 2006 (in thousands):

                                                               For the fiscal years ending April 30
                                        Total        2007         2008        2009        2010      Thereafter
                                      ----------    --------     --------    --------    -------    ------------
         Contractual obligations:
           Note payable to bank          $1,462      $1,462         $ --        $ --       $ --           $  --
           Operating leases                  11           9            2          --         --              --
           New building                   4,500       4,500           --          --         --              --
                                      ----------    --------     --------    --------    -------    ------------
         Total                           $5,973      $5,971          $ 2        $ --       $ --           $  --
                                      ==========    ========     ========    ========    =======    ============



          Other obligations:          Amount available at         Amount owed at
                                          July 31, 2006           July 31, 2006              Expiration
                                     -----------------------    -------------------    -----------------------
            Line of credit                       $2,000,000                $    --          December 29, 2006


         The Company announced on October 6, 2005 that we had signed an
agreement with Rose Construction Company, Inc. to build our new production and
headquarters facility in Olathe, Kansas. This new 60,100 sq ft facility will
contain both of our operating subsidiaries and will allow for increases in
production capacity and efficiency. The Company guaranteed the $4,500,000
construction loan, including accrued interest, between Rose Construction
Company, Inc. and our financial institution. The Company did not record a
liability for this guarantee. On September 5, 2006, the Company completed its
purchase of the new facility with long-term financing provided by our financial
institution which purchased the IRBs for the project that were issued through
the City of Olathe. The total amount of the bonds issued for property and
equipment totaled $5,000,000. The Company also received a tax abatement to
develop the project. Our current land and building has been sold and is under a
contract that is expected to close at the end of September 2006 resulting in a
gain of approximately $300,000. The anticipated proceeds from the sale of the
current land and building will be used as a partial down payment on the
long-term financing for the new facility. The remaining down payment was
generated from operating cash, our renewed line of credit and a loan on the
Company's existing equipment which was provided by the Company's financial
institution.

Critical Accounting Policies

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and related disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. We cannot assure you that actual results
will not differ from those estimates. We believe the following critical
accounting policies affect our more significant judgments and estimates used in
the preparation of our consolidated financial statements.

         Revenue Recognition. We derive revenue from the manufacture of

                                    Page 23

production units of electronic assemblies, liquid crystal displays and remote
monitoring equipment. We also derive revenue from repairs and non-warranty
services, engineering design services and remote monitoring services. Production
and repaired units are billed to the customer after they are shipped. Remote
monitoring services are billed and the revenue recognized at the end of the
month after the services are completed. For customers that utilize our
engineering design services, we bill the customer and recognize revenue after
the design services or tooling have been completed. We require our customers to
provide a binding purchase order to verify the manufacturing services to be
provided. Typically, we do not have any post-shipment obligations that would
include customer acceptance requirements, training, installation or other
services.

         Inventory Valuation. Our inventories are stated at the lower of cost,
using the first-in, first-out (FIFO) method, or market value. Our industry is
characterized by rapid technological change, short-term customer commitments and
rapid changes in demand, as well as other market considerations. We make
provisions for estimated excess and obsolete inventory based on our quarterly
reviews of inventory quantities on hand and the latest forecasts of product
demand and production requirements from our customers. We review our inventory
in detail on a quarterly basis utilizing a 24-month time horizon. Individual
part numbers that have not had any usage in a 24-month time period are examined
by manufacturing personnel for obsolescence, excess and fair value. Parts that
are not identified for common use or are unique to a former customer or
application are categorized as obsolete and are discarded as part of our
quarterly inventory write-down. If actual market conditions or our customers'
product demands are less favorable than those projected, additional inventory
write-downs may be required. The reserve balance is analyzed for adequacy along
with the inventory review each quarter.

         Allowance for Doubtful Accounts. Accounts receivable are carried at
original invoice amount less an estimate made for doubtful receivables based on
a review of all outstanding amounts on a monthly basis. We determine the
allowance for doubtful accounts by regularly evaluating individual customer
receivables and considering a customer's financial condition and credit history,
and current economic conditions. Receivables are written off when deemed
uncollectible. Recoveries of receivables previously written off are recorded
when received. The majority of the customer accounts are considered past due
after 30 days. Interest is not charged on past due accounts for the majority of
our customers.

         Warranty Reserve. We have established a warranty reserve for rework,
product warranties and customer refunds. We provide a limited warranty for a
period of one year from the date of receipt of our products by our customers and
our standard warranties require us to repair or replace defective products at no
cost to the customer or refund the customer's purchase price. The warranty
reserve is based on historical experience and analysis of specific known and
potential warranty issues. The product warranty liability reflects management's
best estimate of probable liability under our product warranties.

                                    Page 24

Forward Looking Statements

         This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, including, but not limited to,
statements on strategy, operating forecasts, and our working capital
requirements and availability. In addition, from time to time, the Company or
its representatives have made or may make forward-looking statements, orally or
in writing. Such forward-looking statements may be included in, but are not
limited to, various filings made by the Company with the Securities and Exchange
Commission, press releases or oral statements made by or with the approval of an
authorized executive officer of the Company. Forward-looking statements consist
of any statement other than a recitation of historical fact and can be
identified by the use of forward-looking terminology such as "may," "expect,"
"anticipate," "estimate," or "continue" or the negative thereof or other
variations thereon or comparable terminology. Actual results could differ
materially from those projected or suggested in any forward-looking statements
as a result of a wide variety of factors and conditions, including, but not
limited to, any interruptions in our business related to the move of our
corporate headquarters and production facilities, an inability on the part of
the Company to successfully market and grow NTG, Inc., the Company's dependence
on its top five customers, reliance on certain key management personnel, an
inability to grow the Company's customer base, potential growth in costs and
expenses, an inability to refinance the Company's existing debt on terms
comparable to those now in existence, potential deterioration of business or
economic conditions for the Company's customers' products, price competition
from larger and better financed competitors, and the factors and conditions
described in the discussion of "Results of Operations" and "Liquidity and
Capital Resources" as contained in Management's Discussion and Analysis or Plan
of Operation of this report, as well as those included in other documents the
Company files from time to time with the Securities and Exchange Commission,
including the Company's quarterly reports on Form 10-QSB, the annual report on
Form 10-KSB, and current reports on Form 8-K. Holders of the Company's
securities are specifically referred to these documents with regard to the
factors and conditions that may affect future results. The reader is cautioned
that the Company does not have a policy of updating or revising forward-looking
statements and thus he or she should not assume that silence by management of
the Company over time means that actual events are bearing out as estimated in
such forward-looking statements.

ITEM 3.  Controls and Procedures

         (a) Evaluation of disclosure controls and procedures. The Company's
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of the Company's disclosure
controls and procedures, as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as of the end of the period covered by this report. Based on such
evaluation, these officers have concluded that the Company's disclosure controls
and procedures are effective to provide reasonable assurance that information
required to be disclosed in our periodic filings under the Exchange Act is
accumulated and communicated to our management,

                                    Page 25

including those officers, to allow timely decisions regarding required
disclosure. It should be noted that a control system, no matter how well
designed and operated, can provide only reasonable, not absolute, assurance that
it will detect or uncover failures within our company to disclose material
information otherwise required to be set forth in our periodic reports.

         (b) Changes in internal controls. There were no significant changes in
the Company's internal controls over financial reporting or in other factors
that in management's estimates are reasonably likely to materially affect the
Company's internal controls over financial reporting subsequent to the date of
the evaluation.

                                    Page 26

                           PART II - OTHER INFORMATION


ITEM 1.  Legal Proceedings.

                  None.

ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds

                  Not Applicable.

ITEM 3.  Defaults Upon Senior Securities

                  Not Applicable.

ITEM 4.  Submission of Matters to a vote of Security Holders

                  Not Applicable

ITEM 5.  Other Information

                  Not Applicable.

ITEM 6.  Exhibits

               31.1 Rule 13a-14(a)/15d-14(a) Certification of President and
               Chief Executive Officer (Principal Executive Officer).
               31.2 Rule 13a-14(a)/15d-14(a) Certification of Vice President and
               Chief Financial Officer (Principal Financial and Accounting
               Officer).
               32.1 Section 1350 Certification of President and Chief Executive
               Officer (Principal Executive Officer).
               32.2 Section 1350 Certification of Vice President and Chief
               Financial Officer (Principal Financial and Accounting Officer).

                                    Page 27

                                   SIGNATURES



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

                                    ELECSYS CORPORATION


September 8, 2006                   /s/ Karl B. Gemperli
- -----------------------             --------------------------------------------
Date                                Karl B. Gemperli
                                    President and Chief Executive Officer
                                    (Principal Executive Officer)


September 8, 2006                   /s/ Todd A. Daniels
- -----------------------             --------------------------------------------
Date                                Todd A. Daniels
                                    Vice President and Chief Financial Officer
                                    (Principal Financial and Accounting Officer)

                                    Page 28

                                  EXHIBIT INDEX

Item           Description

31.1           Rule 13a-14(a)/15d-14(a) Certification of President and Chief
               Executive Officer (Principal Executive Officer).

31.2           Rule 13a-14(a)/15d-14(a) Certification of Vice President and
               Chief Financial Officer (Principal Financial and Accounting
               Officer).

32.1           Section 1350 Certification of President and Chief Executive
               Officer (Principal Executive Officer).

32.2           Section 1350 Certification of Vice President and Chief Financial
               Officer (Principal Financial and Accounting Officer).

                                    Page 29

EX-31

                                                                    EXHIBIT 31.1

CERTIFICATIONS
I, Karl B. Gemperli, certify that:
1)   I have reviewed this quarterly report on Form 10-QSB of Elecsys
     Corporation;
2)   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;
3)   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;
4)   The small business issuer's other certifying officers and I are responsible
     for establishing and maintaining disclosure controls and procedures (as
     defined in Exchange Act Rules 13a-14 and 15d-14) for the small business
     issuer and have:
     a)   Designed such disclosure controls and procedures to ensure that
          material information relating to the small business issuer, including
          its consolidated subsidiaries, is made known to us by others within
          those entities, particularly during the period in which this quarterly
          report is being prepared;
     b)   [omitted];
     c)   Evaluated the effectiveness of the small business issuer's disclosure
          controls and procedures and presented in this report our conclusion
          about the effectiveness of the disclosure controls and procedures, as
          of the end of the period covered by this report based on such
          evaluation; and
     d)   Disclosed in this report any change in the small business issuer's
          internal control over financial reporting that occurred during the
          small business issuer's most recent fiscal quarter (the small business
          issuer's fourth fiscal quarter in the case of an annual report) that
          has materially affected, or is reasonably likely to materially affect,
          the small business issuer's internal control over financial reporting;
          and
5)   The small business issuer's other certifying officer(s) and I have
     disclosed, based on our most recent evaluation of internal control over
     financial reporting, to the small business issuer's auditors and the audit
     committee of small business issuer's board of directors (or persons
     performing the equivalent functions):
     a)   All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the small business issuer's
          ability to record, process, summarize and report financial
          information; and
     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the small business issuer's
          internal control over financial reporting.

Date:  September 8, 2006               /s/ Karl B. Gemperli
                                       -----------------------------------------
                                       Karl B. Gemperli
                                       President and Chief Executive Officer

EX-31

                                                                    EXHIBIT 31.2
CERTIFICATIONS
I, Todd A. Daniels, certify that:
1)   I have reviewed this quarterly report on Form 10-QSB of Elecsys
     Corporation;
2)   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;
3)   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;
4)   The small business issuer's other certifying officers and I are responsible
     for establishing and maintaining disclosure controls and procedures (as
     defined in Exchange Act Rules 13a-14 and 15d-14) for the small business
     issuer and have:
     a)   Designed such disclosure controls and procedures to ensure that
          material information relating to the small business issuer, including
          its consolidated subsidiaries, is made known to us by others within
          those entities, particularly during the period in which this quarterly
          report is being prepared;
     b)   [omitted];
     c)   Evaluated the effectiveness of the small business issuer's disclosure
          controls and procedures and presented in this report our conclusions
          about the effectiveness of the disclosure controls and procedures, as
          of the end of the period covered by this report based on such
          evaluation; and
     d)   Disclosed in this report any change in the small business issuer's
          internal control over financial reporting that occurred during the
          small business issuer's most recent fiscal quarter (the small business
          issuer's fourth fiscal quarter in the case of an annual report) that
          has materially affected, or is reasonably likely to materially affect,
          the small business issuer's internal control over financial reporting;
          and
5)   The small business issuer's other certifying officer(s) and I have
     disclosed, based on our most recent evaluation of internal control over
     financial reporting, to the small business issuer's auditors and the audit
     committee of small business issuer's board of directors (or persons
     performing the equivalent functions):
     a)   All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the small business issuer's
          ability to record, process, summarize and report financial
          information; and
     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the small business issuer's
          internal control over financial reporting.

Date:  September 8, 2006               /s/ Todd A. Daniels
                                       -----------------------------------------
                                       Todd A. Daniels
                                       Vice President and Chief Financial Officer

EX-32

                                                                    EXHIBIT 32.1

                      CERTIFICATION PURSUANT TO SECTION 906
                        OF THE SARBANES-OXLEY ACT OF 2002

         I, Karl B. Gemperli, Chief Executive Officer of Elecsys Corporation
(the "Company"), do hereby certify in accordance with 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my
knowledge:

         a) The Company's Quarterly Report on Form 10-QSB for the quarterly
         period ended July 31, 2006, which this certification accompanies, fully
         complies with the requirements of Section 13(a) or 15(d) of the
         Securities Exchange Act of 1934, as amended; and

         b) The information contained in the Company's Quarterly Report on Form
         10-QSB for the quarterly period ended July 31, 2006, which this
         certification accompanies, fairly presents, in all material aspects,
         the financial condition and results of operations of the Company.

Date:  September 8, 2006               /s/ Karl B. Gemperli
                                       -----------------------------------------
                                       Karl B. Gemperli
                                       Chief Executive Officer
                                       (Principal Executive Officer)

EX-32

                                                                    EXHIBIT 32.2

                      CERTIFICATION PURSUANT TO SECTION 906
                        OF THE SARBANES-OXLEY ACT OF 2002

         I, Todd A. Daniels, Chief Financial Officer of Elecsys Corporation (the
"Company"), do hereby certify in accordance with 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my
knowledge:

         a) The Company's Quarterly Report on Form 10-QSB for the quarterly
         period ended July 31, 2006, which this certification accompanies, fully
         complies with the requirements of Section 13(a) or 15(d) of the
         Securities Exchange Act of 1934, as amended; and

         b) The information contained in the Company's Quarterly Report on Form
         10-QSB for the quarterly period ended July 31, 2006, which this
         certification accompanies, fairly presents, in all material aspects,
         the financial condition and results of operations of the Company.

Date:  September 8, 2006               /s/ Todd A. Daniels
                                       -----------------------------------------
                                       Todd A. Daniels
                                       Chief Financial Officer (Principal
                                       Financial  and Accounting Officer)