10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED June 30, 2009

¨ TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM              TO             

Commission File No. 000-24575

AMERICAN ELECTRIC TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Florida	59-3410234
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

6410 Long Drive, Houston, TX 77087

(Address of principal executive offices)

(713) 644-8182

(Registrant’s telephone number)

Indicate by check mark 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 preceding 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 the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(S. 232.405 of this chapter) during the preceding 12 months(or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

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

As of August 11, 2009, the registrant had 7,695,494 shares of its Common Stock outstanding.

AMERICAN ELECTRIC TECHNOLOGIES, INC. AND SUBSIDIARIES

FORM 10-Q Index

For the Quarterly Period Ended June 30, 2009

		Page
Part I. Financial Information
Item 1.	Financial Statements
	Condensed Unaudited Consolidated Balance Sheets at June 30, 2009 and December 31, 2008	3
	Condensed Unaudited Consolidated Statements of Operations for the Six Months and Three Months ended June 30, 2009 and 2008	4
	Condensed Unaudited Consolidated Statements of Cash Flows for the Six Months ended June 30, 2009 and 2008	5
	Notes to Condensed Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis Of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	20
Item 4T.	Controls and Procedures	21
Part II. Other Information
Item 6.	Exhibits	22
Signatures		22
Certifications		23

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN ELECTRIC TECHNOLOGIES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

	Unaudited June 30, 2009		December 31, 2008
Assets
Current assets:
Cash and cash equivalents	$	1,802,078	$	148,598
Accounts receivable-trade, net of allowance of $505,496 and $535,433, respectively		11,243,664		16,290,406
Accounts receivable-other		427,679		343,644
Income taxes receivable		242,922		59,754
Inventories, net		3,784,052		4,387,672
Costs and estimated earnings in excess of billings on uncompleted contracts		4,363,510		3,481,270
Prepaid expenses and other current assets		339,383		289,073
Due from employees		51,790		49,437
Deferred income taxes		724,923		724,923
Total current assets		22,980,001		25,774,777
Property, plant and equipment, net		5,573,650		5,604,108
Other assets, net		152,702		155,340
Advances to and investments in joint ventures		5,807,002		5,984,236
Deferred tax asset		979,330		1,179,051
Total assets	$	35,492,685	$	38,697,512
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	4,138,921	$	6,077,050
Accrued payroll and benefits		1,091,235		1,546,726
Other accrued expenses		343,413		368,134
Billings in excess of costs and estimated earnings on uncompleted contracts		1,584,840		2,887,561
Short-term notes payable		126,588		126,588
Total current liabilities		7,284,997		11,006,059
Notes payable		4,453,926		4,521,502
Deferred compensation		269,516		241,482
Total liabilities		12,008,439		15,769,043
Commitments and contingencies
Stockholders’ equity:
Common stock; $0.001 par value, 50,000,000 shares authorized, 7,689,232 and 7,665,635 shares issued and outstanding June 30, 2009 and December 31, 2008, respectively		7,689		7,665
Additional paid-in capital		7,506,350		7,316,593
Accumulated other comprehensive income		213,353		207,991
Retained earnings		15,756,854		15,396,220
Total stockholders’ equity		23,484,246		22,928,469
Total liabilities and stockholders’ equity	$	35,492,685	$	38,697,512

See the accompanying notes to the condensed unaudited consolidated financial statements.

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AMERICAN ELECTRIC TECHNOLOGIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

Unaudited

	Six Months Ended June 30,						Three Months Ended June 30,
	2009			2008			2009			2008
Net sales	$	28,152,333		$	33,550,049		$	12,174,167		$	16,572,273
Cost of sales		25,210,540			29,078,682			11,460,457			14,330,735
Gross profit		2,941,793			4,471,367			713,710			2,241,538
Operating expenses:
General and administrative		2,437,513			2,998,675			1,153,940			1,386,712
Selling		1,101,250			1,194,823			573,999			654,710
Total operating expenses		3,538,763			4,193,498			1,727,939			2,041,422
Income (loss) from operations		(596,970	)		277,869			(1,014,229	)		200,116
Other income (expense):
Equity in income of joint ventures		1,307,692			1,008,997			603,294			681,143
Interest expense		(68,320	)		(148,163	)		(33,695	)		(64,881	)
Other, net		(83,988	)		2,202			(10,247	)		3,568
Total other income		1,155,384			863,036			559,352			619,830
Income before income tax expense		558,414			1,140,905			(454,877	)		819,946
Income tax expense		197,780			422,153			(163,925	)		303,399
Net income	$	360,634		$	718,752		$	(290,952	)	$	516,547
Net income per common share:
Basic	$	0.05		$	0.09		$	(0.04	)	$	0.07
Diluted	$	0.05		$	0.09		$	(0.04	)	$	0.07
Weighted-average shares:
Basic		7,681,671			7,658,241			7,688,856			7,658,241
Diluted		7,801,290			7,666,825			7,844,176			7,666,825

See the accompanying notes to the condensed unaudited consolidated financial statements.

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AMERICAN ELECTRIC TECHNOLOGIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

Unaudited

	For the Six Months Ended June 30,
	2009			2008
Cash flows from operating activities:
Net income	$	360,634		$	718,752
Adjustments to reconcile net income to net cash provided by operating activities, net of assets and liabilities acquired:
Provisions for bad debt		(29,937	)		38,717
Depreciation and amortization		521,193			545,302
Gain on sale of property and equipment		(9,144	)		(5,675	)
Deferred compensation		73,698			—
Stock option grants		—			10,110
Equity income from joint venture		(1,307,692	)		(1,008,997	)
Deferred federal income tax expense		—			425,317
Change in operating assets and liabilities:
Accounts receivable (including other)		4,990,291			(644,530	)
Income taxes receivable/payable		168,705			547,935
Inventories		603,620			(727,194	)
Costs and estimated earnings in excess of billings on uncompleted contracts		(882,240	)		(1,104,910	)
Prepaid expenses and other assets		(50,310	)		24,950
Accounts payable and accrued liabilities		(2,348,566	)		959,392
Billings in excess of costs and estimated earnings on uncompleted contracts		(1,302,721	)		171,269
Net cash provided by (used in) operating activities		787,531			(49,562	)
Cash flows from investing activities:
Purchases of property, plant and equipment		(488,097	)		(282,275	)
Proceeds from disposal of property, plant and equipment		9,144			7,570
Dividends received from joint ventures		1,388,160			178,843
Net cash provided by (used in) investing activities		909,207			(95,862	)
Cash flows from financing activities:
Proceeds from sale of common stock		24,318			—
Capital lease obligation payment		(67,576	)		—
Net cash used in financing activities		(43,258	)		—
Net increase in cash and cash equivalents		1,653,480			(145,424	)
Cash and cash equivalents, beginning of period		148,598			593,494
Cash and cash equivalents, end of period	$	1,802,078		$	448,070
Supplemental disclosures of cash flow information:
Interest paid	$	66,380		$	148,163
Income taxes paid	$	190,240		$	30,000
Supplemental disclosures of non-cash activities:
Assets acquired with direct financing lease	$	—		$	724,520
Reclassification of deferred compensation to paid-in-capital	$	115,766		$	—

See the accompanying notes to the condensed unaudited consolidated financial statements

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AMERICAN ELECTRIC TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Condensed Unaudited Consolidated Financial Statements

June 30, 2009

1. Basis of Presentation

The accompanying condensed unaudited consolidated financial statements of American Electric Technologies, Inc. and Subsidiaries (“AETI”, “the Company”, “our”, “we”, “us”) as of June 30, 2009 and for the six months and three months then ended have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and include all adjustments which, in the opinion of management, are necessary for a fair presentation of financial position as of June 30, 2009 and results of operations for the six months and three months ending June 30, 2009 and 2008. All adjustments are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of the results to be expected for a full year. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The statements should be read in conjunction with the Company’s financial statements filed on our Annual Report on Form 10-K for the year ended December 31, 2008 which was filed on March 27, 2009.

The accompanying interim consolidated financial statements include the accounts of American Electric Technologies, Inc. and its Subsidiaries. We have eliminated all significant inter-company balances and transactions in consolidation.

Effective January 1, 2008 the Company formed a new wholly owned subsidiary, American Access Technologies, Inc. (“American Access” or “AAT”), through which the AAT segment’s business is conducted.

2. Merger

American Electric Technologies, Inc. is the surviving financial reporting entity from a reverse acquisition of an 80% interest in American Access Technologies, Inc. by the shareholders of M&I Electric Industries, Inc. (“M&I”) on May 15, 2007. Immediately upon the completion of the reverse acquisition, American Access Technologies, Inc. changed its name to American Electric Technologies, Inc.

3. Net Income per Common Share

The Company follows Statement of Financial Accounting Standards (“SFAS”) No. 128, Earnings per Share, which requires the presentation of both basic and diluted income per share. In accordance with SFAS Statement No. 128, basic earnings per common share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on

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the weighted average number of common shares outstanding, plus the incremental shares that would have been outstanding upon the assumed exercise of all potentially dilutive stock options and other stock units subject to anti-dilution limitations.

Basic net income per common share has been computed based upon the weighted average number of shares of common stock outstanding for the six months and three months ended June 30, 2009 and 2008.

4. Stock-Based Compensation

On February 7, 2009, the Board of Directors approved the grant of 145,000 restricted stock units to members of management and key employees. The valuation date of these grants was February 27, 2009 when the stock had a value of $1.66. The grants will vest 25% on each of the next four anniversary dates. The grants are subject to the substantial achievement of 2009 budgeted performance and other individual metrics. The ultimate number of restricted stock units will be determined based on the attainment of certain company and individual performance targets during the 2009 fiscal year.

The annual pretax cost for these grants will approximate $60,000 for each of the next four years based on the assumption that 2009 performance measurements are achieved.

The Company instituted an Employee Stock Purchase Plan in April, 2008 that is non compensatory under the guidelines of SFAS 123R. During the six months ended June 30, 2009, 9,525 shares were issued under this plan. Paid-in capital increased during the period by $189,757 primarily due to the Company’s stock based compensation program grants in 2009 and 2008.

5. Recent Accounting Pronouncements

There are no recent financial pronouncements that management expects to have a material impact on the Company’s financial position or results of operations.

6. Segment Information

The Company follows the guidance of SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, in reporting operating segment information.

Management has organized the Company around products and services and has three reportable segments: Technical Products and Services (“TP&S”), Electrical and Instrumentation Construction (“E&I”) and American Access Technologies (“AAT”). TP&S develops, manufactures, provides and markets switchgear and variable speed drives. The service component of this segment includes retrofitting equipment upgrades, startups, testing and troubleshooting electrical substations, switchgear, drives and control systems. Additionally, joint venture equity income is included in TP&S income before income taxes because their operations are exclusively involved in TP&S activities. The E&I segment installs electrical equipment for the energy, water, industrial, marine, data center and commercial markets. The AAT segment manufacturers and markets zone cabling products and manufactures formed metal products of varying designs.

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Following are selected financial details regarding the Company’s reportable segments:

	Six Months Ended June 30,						Three Months Ended June 30,
	2009			2008			2009			2008
Revenue
Technical Products and Services	$	17,807,386		$	17,021,946		$	8,149,982		$	7,755,575
Electrical and Instrumentation Const.		7,029,303			12,457,328			2,043,621			6,720,131
American Access Technologies		3,315,644			4,070,775			1,980,564			2,096,567
Total	$	28,152,333		$	33,550,049		$	12,174,167		$	16,572,273
Gross Profit
Technical Products and Services	$	3,763,934		$	2,475,423		$	1,526,584		$	1,286,778
Electrical and Instrumentation Const.		(1,284,478	)		1,001,560			(1,196,100	)		451,828
American Access Technologies		462,337			994,384			383,226			502,932
Total	$	2,941,793		$	4,471,367		$	713,710		$	2,241,538
Income (loss) before Income taxes:
Technical Products and Services	$	3,470,165		$	1,796,148		$	1,341,571		$	1,174,022
Electrical and Instrumentation Const.		(1,870,525	)		(59,302	)		(1,397,805	)		(137,096	)
American Access Technologies		(324,787	)		164,570			(16,768	)		86,707
Corporate and Other Unallocated		(716,439	)		(760,511	)		(381,875	)		(303,687	)
Total	$	558,414		$	1,140,905		$	(454,877	)	$	819,946

The Company’s management does not separately review and analyze its assets on a segment basis for TP&S and E&I and all assets for the segments are recorded within the corporate segment’s records. Depreciation expense is apportioned to the segments based on management’s best estimate. Corporate unallocated expenses include compensation costs and other expenses that cannot be meaningfully associated with the individual segments, i.e. except for equity in joint venture income attributable to TP&S, all other costs, expenses and other income have been allocated to the segments based on sales, which management believes is the best available basis to apportion these elements of income and expense to the segments.

Approximately 20% to 25% of TP&S sales are sold into international markets. These sales are made in US dollars and are generally settled prior to shipment or are collateralized by irrevocable letters of credit; all E&I sales are made in the United States although some services are performed internationally; and all of AAT’s sales are made in the United States.

7. Advances to and Investment in Joint Ventures

Assets held by the Company outside of the United States consist of two joint ventures:

• a 49% interest in M&I Electric Far East, Ltd. (“MIEFE”), a joint venture with Oakwell Engineering, Ltd., in Singapore, and;

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• BOMAY Electric Industries Company, Ltd. (“BOMAY”), in which M&I holds a 40% interest with Baoji Oilfield Machinery Co., Ltd. (a subsidiary of China National Petroleum Corporation), holds 51%, and AA Energies, Inc., holds 9%;

The functional currencies of MIEFE and BOMAY are the Singapore dollar and the Chinese Yuan, respectively.

Equity in income of joint ventures includes $950,470 and $981,771 for the six months ending June 30, 2009 and 2008, respectively, from BOMAY. Net income from MIEFE resulted in $357,222 and $27,226 in equity income for the six months ending June 30, 2009 and 2008, respectively.

The Company reported Comprehensive Income of $5,362 and $172,026 for the six months ending June 30, 2009 and 2008, respectively arising from the translation of the aforementioned investee company balance sheets presented in their functional currencies.

AETI received a dividend from BOMAY of approximately $1.39 million (net of tax withheld) during the second quarter.

8. Costs, Estimated Earnings, and Related Billings on Uncompleted Contracts

The Company reports earnings from firm-price and modified firm price long-term contracts on the percentage-of-completion method. Earnings are recorded based on the ratio of costs incurred to total estimated costs except that the Company has determined that labor incurred provides an improved measure of percentage of completion for its TP&S segment projects. Costs include direct material, direct labor, and job related overhead. Losses expected to be incurred on contracts are charged to operations in the period such losses are determined. A contract is considered complete when all costs except insignificant items have been incurred and the customer has accepted the product or project. Revenue from non-time and material jobs that will be completed within approximately one month is recognized on the completed-contract method. This method is used because these contracts are typically completed in a short period and the financial position and results of operations do not vary materially from those that would result from use of the percentage-of-completion method.

The TP&S segment records revenue from its field and technical service and repair operations on a completed service basis after customer acknowledgement that the service has been completed and accepted. Approximately 10 % of the Company’s consolidated revenue is recorded on this basis. In addition, the TP&S segment sells certain purchased parts and products. This revenue is recorded when the product is shipped and title passes to the customer. Less than 2% of the Company’s consolidated revenue is recorded on this basis. The Company’s AAT segment recognizes revenue when ownership of the manufactured product passes to their customer which generally occurs upon product shipment.

The asset, “Work-in-process,” which is included in inventories, represents the cost of labor, material, and overhead on jobs for which no revenue has been recognized. For contracts accounted for under the percentage-of-completion method, the asset, “Costs and estimated earnings in excess of billing on uncompleted contracts,” represents revenue recognized in excess of amounts billed and the liability, “Billings in excess of costs and estimated earnings on uncompleted contracts,” represents billings in excess of revenue recognized.

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Contract revenue recognition inherently involves estimation, including the contemplated level of effort to accomplish the tasks under the contract, the cost of the effort, and an ongoing assessment of progress toward completing the contract. From time to time, as part of the normal management processes, facts develop that require revisions to estimated total costs or revenue. The cumulative impact of any revisions to estimates and the full impact of anticipated losses on contracts accounted for under SOP 81-1 are recognized in the period in which they become known. Projected losses on all other contracts are recognized as the services and materials are provided.

9. Revolving Credit Agreement

Effective June 30, 2009, the Company amended its revolving credit agreement with JP Morgan Chase Bank, N.A. As amended, the bank provides us with a revolving credit line not to exceed $10,000,000 or the sum of 80% of eligible accounts receivable plus 40% of the aggregate amount of eligible inventory, whichever is less. As of June 30, 2009, $4,000,000 was borrowed under this line of credit. A commitment fee of 0.30% is payable on the unused portion of the credit line.

Borrowings under the agreement bear interest at the 30 day LIBOR rate (0.32% at June 30, 2009) plus 2.25% per year. The agreement is collateralized by trade accounts receivable, inventories, and work-in-process. Our M&I and AAT subsidiaries are guarantors of the loan. Loans under the agreement must be repaid no later than July 1, 2011.

The terms of the agreement contain covenants which provide for customary restrictions and limitations, the maintenance of certain financial ratios and a restriction from paying dividends without prior written consent of the bank. At June 30, 2009, we were in compliance with all covenants.

10. Taxes on Income

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to be reported to the taxing authorities. Deferred tax assets are evaluated annually and a valuation allowance is provided if it is more likely than not that, the deferred tax assets will not give rise to future benefits in the Company’s tax returns. The change that arose in the Company’s deferred tax assets and liabilities in the current quarter was due to the receipt of a foreign dividend, net of equity income.

The effective tax rate was 36% and 37% for the six months June 30, 2009 and 2008, respectively, reflecting the Federal statutory rate of 34% and the effect of state and foreign income taxes.

We are subject to income tax in jurisdictions outside the United States, none of which are individually material to our financial position, cash flows, or results of operations.

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11. Finance Lease Arrangement

In March, 2008, AAT entered into a capital lease in order to finance shop equipment and related training expenses. The lease term commenced when the equipment was installed and operational in June, 2008. The lease obligation and capitalized amount at inception were $724,520, the lease term is 60 months and the monthly payments are approximately $14,000 per month. Depreciation expense related to the capitalized lease approximates $75,000 per year and $37,468 is included in the 2009 results to date.

12. Inventories

Inventories consisted of the following at June 30, 2009 and December 31, 2008:

	June 30, 2009			December 31, 2008
Raw materials	$	1,180,921		$	1,143,816
Work-in-process		2,302,197			3,020,633
Finished goods		833,412			770,733
Allowance		(532,478	)		(547,510	)
Total inventories	$	3,784,052		$	4,387,672

13. Commitments and Contingencies

The Company is party to a number of lawsuits in the normal course of business that upon resolution are not estimated to have a material impact on its financial position. During the latter part of 2008, the Company performed electrical system repair and refurbishment work at a chemical plant as a result of damage caused by Hurricane Ike. As of June 30, 2009, $1.3 million was owing from the customer, not including reserves. When collection efforts were not successful, in early 2009, the Company filed a mechanic’s lien and a lawsuit to collect the amount owing. Recently, the customer filed a counterclaim in an amount in excess of the account receivable on allegations of defective workmanship and consequential damages. Based on preliminary analysis, the Company believes that it has made adequate provision in its financial statements for this contingency

The Company has substantially completed its last new school construction project. It incurred a loss on this project (before income taxes) of $1.5 million and $1.2 million for the six months and quarter ending June 30, 2009, respectively. In connection with the completion of this project, a significant subcontractor was terminated prior to the completion of their work. The losses on this contract primarily arose from redoing work performed by this subcontractor as well the costs to complete their work subsequent to termination. The Company expects to make claims against the subcontractor, contractor and owner of this project but no recognition of any recovery has been included in the financial statements. The contractor has made claims against the Company in the amount of approximately $400,000 for which no loss provision has been made because no additional loss is ultimately expected to be realized arising from these claims.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the financial statements and notes thereto included elsewhere in this Form 10-Q and the financial statements in the 2008 Annual Report on Form 10-K filed on March 27, 2009. Historical results and percentage relationships set forth in the statement of operations, including trends that might appear, are not necessarily indicative of future operations.

FORWARD-LOOKING STATEMENTS

Except for historical and factual information, this document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, such as predictions of future financial performance. All forward-looking statements are based on assumptions made by us based on our experience and perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances.

These statements, including statements regarding our capital needs, business strategy, expectations and intentions, are subject to numerous risks and uncertainties, many of which are beyond our control, including our ability to maintain key products’ sales or effectively react to other risks including those discussed in Part I, Item 1A, Risk Factors, of our 2008 Annual Report on Form 10-K filed on March 27, 2009. We urge you to consider that statements that use the terms “believe,” “do not believe,” “anticipate,” “expect,” “plan,” “estimate,” “intend” and similar expressions are intended to identify forward-looking statements. No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

BUSINESS

American Electric Technologies, Inc. is comprised of three segments: Technical Products and Services (“TP&S”), Electrical and Instrumentation Construction (“E&I”) and American Access Technologies (“AAT”). The TP&S segment designs, manufactures, markets and provides products designed to distribute the flow of electricity and protect electrical equipment such as motors, transformers and cables, and also provides variable speed drives to both AC (“alternating current”) and DC (“direct current”) motors. Products offered by this segment include low and medium voltage switchgear, generator control and distribution switchgear, motor control centers, powerhouses, bus duct, variable frequency AC drives, variable speed DC drives, program logic control (“PLC”) based automation systems, human machine interface (“HMI”) and specialty panels. The products are built for application voltages from 480 volts to 38,000 volts and are used in a wide variety of industries. Services provided by TP&S include electrical equipment retrofits, upgrades, startups, testing and troubleshooting of substations, switchgear, drives and control systems.

The E&I segment provides a full range of electrical and instrumentation construction and installation services to both land and marine based markets of the oil and gas industry, the water

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and wastewater facilities industry and other commercial and industrial markets. The E&I segment provides services on both a fixed-price and a time-and-materials basis. The segment’s services include electrical and instrumentation turnarounds, maintenance, renovation and new construction. Applications include installation of switchgear, AC and DC motors, drives, motor controls, lighting systems and high voltage cable. Marine based oil and gas services include complete electrical system rig-ups, modifications, start-ups and testing for vessels, drilling rigs, and production modules. These services can be manufactured and installed utilizing NEMA (“National Electrical Manufacturers Association”) and ANSI (“American National Standards Institute”) or IEC (“International Electrotechnical Commission”) equipment to meet ABS (“American Bureau of Shipping”), USCG (“United States Coast Guard”), Lloyd’s Register, a provider of marine certification services, and DNV (a leading certification body/registrar for management systems certification services) standards.

The AAT segment manufactures and markets zone cabling enclosures and manufactures formed metals products. The zone cabling product line develops and manufactures patented “zone cabling” and wireless telecommunication enclosures. These enclosures mount in ceilings, walls, raised floors, and certain modular furniture to facilitate the routing of telecommunications network cabling, fiber optics and wireless solutions to the workspace environment. AAT also operates a precision sheet metal fabrication and assembly operation and provides services such as precision “CNC” (“Computer Numerical Controlled”) stamping, bending, assembling, painting, powder coating and silk screening to a diverse client base including, but not limited to, engineering, technology and electronics companies, primarily in the Southeast.

The Company has facilities, sales offices and repair depots in Texas, Mississippi and Florida. We have minority interests in joint ventures which have facilities in Singapore and Xian, China.

The Company owns the Texas facility, which is twelve acres with a 101,000 square foot building; the Florida facility, which is eight and one-half acres with two buildings totaling 67,500 square feet; and the Mississippi facility which is three acres with an 11,000 square foot building.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States of America in the preparation of our financial statements. 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 amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results.

Our significant accounting policies are more fully described in the financial statements filed in our 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission March 27, 2009. Certain accounting policies involve significant judgments and assumptions by us that have a material impact on the carrying value of certain assets and liabilities. Management believes the following critical accounting policies reflect its most significant estimates and assumptions used in the presentation of our financial statements. We do not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (“SPE”s), nor do we have any “variable interest entities” (“VIE”s), as defined by FASB’s Interpretation No. 46(R), Consolidation of Variable Interest Entities—an interpretation of ARB No. 51.

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Inventory Valuation - Inventories are stated at the lower of cost or market, with material value determined using an average cost method. Inventory costs for finished goods and work-in-process include direct material, direct labor, production overhead and outside services. TP&S indirect overhead is apportioned to work in process based on direct cost incurred. AAT production overhead, including indirect labor, is allocated to finished goods and work-in-process based on material consumption which is an estimate that could be subject to change in the near term as additional information is obtained and as our operating environment changes.

Reserve for Obsolete and Slow-Moving Inventory - We regularly review the value of inventory on hand, using specific aging categories, and record a provision for obsolete and slow-moving inventory based on historical usage and estimated future usage. As actual future demand or market conditions may vary from those projected, adjustments to our inventory reserve may be required.

Allowance for Doubtful Accounts - The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. The estimate is based on management’s assessment of the collectability of specific customer accounts and includes consideration for credit worthiness and financial condition of those specific customers. We also will review historical experience with the customer, the general economic environment and the aging of our receivables. We record an allowance to reduce receivables to the amount that we reasonably believe to be collectible. Based on our historical collection experience, we currently feel our allowance for doubtful accounts is adequate.

Revenue Recognition - The Company recognizes earnings from both fixed price and modified fixed price contracts. Earnings on certain contracts are recognized on the percentage-of-completion method following the guidelines in the AICPA’s Statement of Position (“SOP”) No. 81-1, Accounting for Performance of Construction Type and Certain Production Type Contracts. The Company recognizes revenue from product sales at the time the product is shipped and title passes to the customer. The Company believes that recognizing revenue at time of shipment is appropriate because the Company’s sales policies meet the four criteria of FASB’s Staff Accounting Bulletin No. 104, Revenue Recognition, which are: (i) persuasive evidence that an arrangement exists, (ii) delivery has occurred, (iii) the seller’s price to the buyer is fixed and determinable, and (iv) collectability is reasonably assured.

Foreign Currency Gains and Losses - Foreign currency translations are included as a separate component of comprehensive income. We have determined the local currency of our foreign joint ventures to be the functional currency. In accordance with Statement of Financial Accounting Standard No. 52, Foreign Currency Translation, the assets and liabilities of our foreign equity investees, denominated in foreign currency, are translated into United States dollars at exchange rates in effect at the consolidated balance sheet date; revenue and expenses are translated at the average exchange rate for the period. Related translation adjustments are reported as comprehensive income which is a separate component of stockholders’ equity, whereas gains and losses resulting from foreign currency transactions are included in results of operations.

Federal Income Taxes - The asset and liability method is used in accounting for federal income taxes (see Note 10). Under this method, deferred tax assets and liabilities are determined based on

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differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The estimated value of deferred tax assets are reviewed annually and a valuation allowance is provided if it is more likely than not that the deferred tax assets will not give rise to future benefits in our tax returns.

Contingencies(See Note 13) - In accordance with SFAS No. 5, Accounting for Contingencies, we record an estimated loss from a loss contingency when information indicates that it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. Contingencies are often resolved over long time periods, are based on unique facts and circumstances, and are inherently uncertain. We regularly evaluate current information available to us to determine whether such accruals should be adjusted or other disclosures related to contingencies are required. We are a party to a number of legal proceedings in the normal course of our business for which we have made appropriate provisions where we believe an ultimate loss is probable. The ultimate resolution of these matters, individually or in the aggregate is not likely to have a material impact on the company’s financial position.

Equity in Joint Venture Income - The Company accounts for its investments in the joint ventures using the equity method. Under the equity method, the Company records its pro-rata share of joint venture income or losses and adjusts the basis of its investment accordingly. Dividends received from the joint ventures, if any, are recorded as reductions to the investment balance.

THE SIX AND THREE MONTHS ENDED JUNE 30, 2009 AS COMPARED WITH THE SIX AND THREE MONTHS ENDED JUNE 30, 2008

OVERALL RESULTS OF OPERATIONS

Consolidated comparison of the six months ended June 30, 2009 and 2008 (in thousands of dollars).

Revenues and Gross Profit. Total consolidated net sales decreased $5,397.7 or 16.1%, to $28,152.3 for the six months ended June 30, 2009 over the comparable period in 2008. The decrease occurred primarily in the E&I Construction segment (“E&I”) in the amount of $5,428.0. A decline of $755.1 in American Access Technologies (“AAT) was more than offset by a $785.4 increase in Technical Products and Services (“TP&S”). The decline in E&I was largely attributable to the departure from the new school construction market but there was weakness across all market segments. The decline in AAT was associated with weakness in the zone cabling and custom fabrication market areas during the first quarter.

Consolidated cost of sales for the six months ended June 30, 2009 was $25,210.5, a $3,868.1 decrease, or 13.3%, over the prior year period. The decrease in cost of sales is primarily due to overall decline in net sales over the prior year period. Cost of sales, as a percentage of revenues was 89.6%, an increase of 2.9%. Cost of sales percentages improved in the TP&S segment due to an increased proportion of variable speed alternating current drive products. The cost of sales percentage was higher in the AAT segment do to higher fixed and indirect costs as a percent of sales. The most significant reason for the higher overall cost of goods sold percentage resulted from unexpected costs in the E&I segment, incurred during the completion of the final school construction project that resulted in a negative gross profit of $1,501.7. An explanation of this loss is explained in Note 13 of the financial statements.

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Consolidated gross profit during the six month period ended June 30, 2009 decreased by $1,529.6 to $2,941.8 as compared to $4,471.4 in 2008. The decline is attributable to the gross profits associated with the decline in sales volumes. The gross margin percentage for the six month period was 10.4% as compared to 13.3% for the comparable period in 2008. This decrease is primarily due to the E&I contract referenced above. The loss on this final contract negatively impacted the overall gross profit percentage by 5.3%. The Company has no remaining backlog in the new school construction market.

Selling, General and Administrative Expenses. Total consolidated selling, general and administrative expenses were $3,538.8 during the six month period ended June 30, 2009, a decrease of $654.7 or 15.6% from the prior year period. The improvement is attributable to lower selling expenses ($93.6), primarily sales compensation at the E&I and TP&S segments, lower general and administrative salary and benefit costs($101.3) at the TP&S and E&I segments due to cost reduction measures taken during the latter part of 2008, reduced provisions for stock and cash incentive plans($69.4), lower corporate salaries and benefits ($81.0) and an overall reduction in general and administrative costs, none individually significant($309.4).

Other Income and Expense. Consolidated net other income increased by $292.3 from the prior year period reflecting the net increase of $298.7 in equity income from joint ventures. The increase in equity income occurred due to increased earnings from MIEFE. BOMAY paid a dividend of $1,542.4 to AETI in April, 2009. Interest expense was lower by $79.8 on lower outstanding borrowings on the revolving credit facility and lower short term interest rates.

Provision for Income Taxes. Income tax expense declined by $224.4 as compared to the prior year due to the decrease in earnings before income taxes. The effective tax rate of 35.4% was slightly lower than the earlier year due to higher deemed foreign tax credits in the current period.

Net Income. Net income for the six months ended June 30, 2009 was $360.6, a decrease of $358.1 as compared to $1,140.9 for the prior year period. The decrease in net income is a reflection of lower income before income taxes and lower income tax expense during the second quarter of 2009. As elaborated on above, the lower income before income taxes is associated with the loss of $1,501.7 on the school construction project that was partially offset by improved selling, general and administrative expenses ($654.7) and equity income ($298.7).

Consolidated comparison of the three months ended June 30, 2009 and 2008 (in thousands of dollars).

Revenues and Gross Profit. Total consolidated net sales decreased $4,398.1 or 26.5%, to $12,174.2 for the three months ended June 30, 2009 over the comparable period in 2008. The decline was occasioned by reduced sales level in the E&I segment of $4,676.5. This reduction was primarily due to the withdrawal from the new school construction market that commenced in late 2007. TP&S reported an increase of 5.1% in revenue to $8,150.0 and AAT was essentially flat at $1,980.6.

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Consolidated cost of sales for the three months ended June 30, 2009 was $11,460.5, a $2,870.3 decrease, or 20.0%, over the second quarter of 2008. The decrease in cost of sales is primarily due to the overall reduction in consolidated revenue. Cost of sales, as a percentage of net sales increased from 86.5% to 94.1%. Cost of goods sold and the percentage of net sales were negatively impacted by $1.6 million and 13.1%, respectively, due to the completion of the final new school construction project. The additional costs occurred primarily due to the default of a subcontractor for which loss recovery is not certain.

Consolidated gross profit during the three-month period ended June 30, 2009 decreased by $1,527.8. This decrease is primarily related to the construction contract cited above ($1.2 million) as well as a modest impact from the sales reduction. Consolidated gross profit as a percent of net sales was 5.9% during the three-month period, compared to 13.5% in the prior year and this diminution is related solely to the negative impact of the construction contract. Gross profit percentages in the TP&S segment improved 2.1% due to favorable product mix and AAT experienced a 4.6% decline due to non-recurring labor and engineering costs related to a new value-added manufacturing contract.

Selling, General and Administrative Expenses. Total consolidated selling, general and administrative expenses were $1,727.9 during the three-month period ended June 30, 2009, a decrease of $313.5 from the prior year period. This improvement is principally attributable to reduced selling expenses ($80.7) as well as reduced management and support staff salaries and benefits($123.5), reduced provisions for performance-based compensation ($53.6) and reduced provisions for doubtful accounts ($42.8). The company incurred substantially less in compliance costs for Section 404 of the Sarbanes Oxley statute in the current quarter, accounting for most of the remaining decrease. Most of the improved costs were associated with cost reduction measures implemented in the latter part of 2008.

Other Income and Expense. Consolidated other income and expense decreased by $60.5 due to the decline of $77.8 in equity in joint venture income which was partially offset by reduced interest expense ($31.2).

Provision for Income Taxes. The consolidated income tax expense was $467.3 lower than the prior year period due to reduced earnings before income taxes and a slight decrease in the effective tax rate to 35.4%. This rate change is due to a decrease in the estimated deemed foreign tax credits from equity income.

Net Income(Loss). Net income(Loss) for the three months ended June 30, 2009 was $(291.0) compared to $516.5 for the prior year period. The decrease in net income is primarily attributable to the reduced sales, decline in gross profit margin due to the construction contract partially offset by improved selling, general and administrative expense levels and reduced income tax provisions.

SEGMENT COMPARISON:

Technical Products and Services. The TP&S segment revenue increased $394.4 from $7,755.6 for the second quarter of 2008 to $8,150.0 for the second quarter of 2009. The 5.1% increase in revenue for this segment reflects consistent higher demand for the company’s products and services, even given the current weakness in the domestic traditional energy markets.

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Gross profits for the TP&S segment for the second quarter of 2009 were $1,526.6, an increase of $239.8 over the prior year level of $1,286.8 due primarily to the revenue impact noted above as well as favorable product mix that contributed to a higher gross profit percentage. TP&S income before taxes for the second quarter of 2009 was $1,341.6, an increase of $167.6 over 2008’s level of $1,174.0 due to the increased gross profits partially offset by reduced joint venture income ($77.8). Allocated selling, general and administrative expenses were improved as well.

The backlog for the TP&S segment was approximately $6.1 million as of June 30, 2009, a decrease of approximately $8.3 million since the beginning of the fiscal year. All of this backlog should be realized in revenues during the remainder of the fiscal year. The reduction in backlog is attributable to the decline in the North American drilling market.

Electrical & Instrumentation Construction. The E&I segment reported sales of $2,043.6 in the second quarter of 2009, a decline of $4,676.5 or 69.6 %, over the second quarter of 2008. The decline was primarily associated from the departure from the new school construction business as well as general weakness in industrial, marine and wastewater markets.

Gross profit for the E&I segment during the second quarter of 2008 was a negative $1,196.1, compared to a positive $451.8 in the prior year. The deterioration is ascribable to the reduced sales level compounded by a $1.2 million negative margin generated at the final new school construction project. This loss occurred due to the default of a subcontractor and the additional costs to complete the work for which recovery from the subcontractor is uncertain. The E&I segment’s loss before taxes for the second quarter of 2008 was $1,397.8, compared to a loss of $1,260.7 in 2008. This occurred due to reduced gross profits partially offset by lower allocation of corporate overheads.

The backlog for the E&I segment was approximately $6.0 million as of June 30, 2009, a decrease of increase of $1.1 million over the previous year. Approximately 80% of this backlog should be realized in revenues for the remainder of the fiscal year. The decline in backlog is attributable to the weakness in the industrial and marine markets.

American Access Technologies. The American Access segment sales declined $116.0 from the comparable prior year reporting period or 5.5%. Lower demand for the unit’s zone cabling products were offset by improved sales to value-add manufacturing customers. Gross profits declined by $119.7 with gross profit percentage slightly down. Higher one-time engineering and labor costs associated with the value-add manufacturing sales. Income before income taxes declined $103.5 due to the decreased gross profits offset partially by lower overhead costs. The run rate for this segment is comparable on a year to year basis with quarterly sales of $1,980.6. The segment has been able to replace some weakness in its zone cabling and custom fabrication markets with improvements in value manufacturing contracts.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2009, AETI’s cash and cash equivalents were $1,802.1 compared to $148.6 as of December 31, 2008. As of June 30, 2009, AETI had outstanding borrowings of $4,000.0 under its revolving credit facility, unchanged from the balance as of December 31, 2008. Net current assets were approximately $15,695.0 and $14,768.8 as of June 30, 2009 and December 31, 2008, respectively. As of June 30, 2009, AETI’s current ratio and long-term debt to total capitalization ratios were 3.2% and 15.9%, respectively. The comparable ratios at December 31, 2008 were 2.3% and 16.5%.

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AETI’s long-term debt as of June 30, 2009 was $4,453.9, on which interest payments are current. This amount includes the long-term portion of a capitalized lease obligation described in the financial statement notes.

Operating Activities

During the six months ended June 30, 2009, AETI generated cash flows from operations of $787.5 as compared to utilization of $49.6 for the same period in 2008. Operating cash flow from net income and depreciation was partially offset by the equity income from joint ventures in 2009. Reduced accounts receivable and inventories and increased income tax payable were partially offset by decreased accounts payable and accrued liabilities and increased prepaid expenses and net milestone billings. The 2008 period can be explained by the same factors except that increased accounts payable and accrued liabilities and prepaid expenses were a source and inventories were a use of operating cash flow in the period.

Investing Activities

During the six months ending June 30, 2009, the Company generated $909.2 in cash from net investing activities compared to utilization of $95.9 in 2008. In 2009, capital expenditures have been $488.1 which is comprised primarily of maintenance capital. The Company received $1,388.2 in dividends from BOMAY.

In 2008 the Company invested $282.3 in capital expenditures and received $178.8 in dividends from its MIEFE.

Financing Activities

The Company paid $67.6 in financing costs under a finance lease and received $24.3 in connection with stock purchases under its employee stock purchase plan.

AETI did not record any cash flows from financing activities during the six months ended June 30, 2008.

The Company believes its existing cash, working capital and unused credit facility combined with operating earnings will be sufficient to meet its working capital needs for the next twelve months.

Outlook for Fiscal 2009

There is a high degree of uncertainty regarding the company’s revenue levels for the second half of the fiscal year and as a result, the primary management focus is on increasing our orders for that period and the following year. As previously reported, the company undertook a series of productivity improvement measures which reduced its breakeven levels and reflected itself in improved margins during the most recent fiscal quarter. Management will continue to monitor the company’s sales levels and cost structure and take additional actions as appropriate to maintain AETI’s strong financial position.

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The Company has experienced a pronounced decline in its backlog as a result of reduced demand occasioned by the recent volatility in the financial and commodity markets. Management cannot predict when demand for its traditional products and services will begin to increase so as a result we will continue to adjust base costs and conserve working capital. The Company believes these actions will sustain its strong financial position. In addition, we will maintain our recent product development activities in alternative energy, value added manufacturing and portable data centers in order to augment the revenue from our traditional markets. Although AAT’s sales levels reflected a recent decline due to the zone cabling market decline, its recent efforts to secure additional value-added fabrication customers are likely to restore the unit to break even sales levels during the second half of 2009.

Effects of Inflation

AETI has experienced a high degree of volatility in many of its raw materials including copper, steel and aluminum during the last eighteen months. Most recently, these material costs are generally lower than in 2008 and there are no indications that inflationary pressures will be significant in the foreseeable future. We do not believe that this price volatility has had a significant impact on the company’s operating margins primarily due to relatively short cycle times of the company’s purchasing and project completions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rates

Our market risk sensitive items do not subject us to material risk exposures. Our revolving credit facility remains available through June 30, 2011, subject to optional prepayment in accordance with its terms. At June 30, 2009, the Company had $4,000,000 of variable-rate debt outstanding. At this borrowing level, a hypothetical 10 percent increase in interest rates would have had an insignificant unfavorable impact on the Company’s pretax earnings and cash flows. The primary interest rate exposure on floating-rate debt is based on LIBOR (0.32% at June 30, 2009) plus 2.25% per year. The agreement is collateralized by trade accounts receivable, inventory and work-in-process.

Foreign Currency Transaction Risk

AETI maintains an investment in its Singapore joint venture, MIEFE. The functional currency of this joint venture is the Singapore dollar. The amount of its investment is translated into United States dollars at the exchange rate in effect at the end of each quarterly reporting period. The resulting translation adjustment is recorded as accumulated other comprehensive income in AETI’s consolidated balance sheet.

The Company has an investment in its Chinese joint venture, BOMAY. The functional currency of this joint venture is the Chinese Yuan. BOMAY’s financial statements are translated into United States dollars at the rate prevailing at the end of each quarterly reporting period and any resulting adjustment will be recorded as accumulated other comprehensive income in the Company’s consolidated balance sheet.

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Other than the aforementioned items, the Company does not believe it is exposed to foreign currency exchange risk because all of its sales and purchases are denominated in United States dollars.

Commodity Price Risk

The Company is subject to market risk from fluctuating market prices of certain raw materials. While such materials are typically available from numerous suppliers, commodity raw materials are subject to price fluctuations. We endeavor to recoup these price increases from our customers on an individual contract basis to avoid operating margin erosion. Although historically we have not entered into any contracts to hedge our commodity risk, we may do so in the future.

Commodity price changes can have a material impact on our prospective earnings and cash flows. Copper, steel and aluminum represent a significant element of our material cost. Significant increases in the prices of these materials can reduce our estimated operating margins if we are unable to recover such increases from customer revenues.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company held its annual meeting of stockholders on May 7, 2009. The following nominees were elected as directors. The number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes, for each nominee were as follows:

Nominee	Votes Cast For	Votes Against or Withheld	Abstentions	Non-Votes
Arthur G. Dauber	6,460,398	276,907	-0-	-0-
J. Hoke Peacock II	6,422,746	314,559	-0-	-0-
Stuart Schube	6,459,379	277,926	-0-	-0-
Thomas P. Callahan	6,477,780	259,525	-0-	-0-
Peter Menikoff	6,477,105	260,200	-0-	-0-
Howard W. Kelley	6,477,105	260,200	-0-	-0-

The selection of the Company’s independent registered public accounting firm for the year ending December 31, 2009 was ratified by a vote of 6,724,467 “for”, 7,158 “against” or “withheld”, 5,679 abstentions and no broker non-votes.

ITEM 4T. CONTROLS AND PROCEDURES

An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures as of June 30, 2009. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of June 30, 2009.

No change in internal control over financial reporting occurred during the quarter ended June 30, 2009 that has materially affected, or is reasonably likely to materially affect internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 6. EXHIBITS

(a) Index to Exhibits

Exhibit No.	Exhibit Description
10.1	Amended Loan Document between registrant and J.P. Morgan Chase Bank, N.A. effective June 30, 2009.
31.1	Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer.
31.2	Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer.
32.1	Section 1350 Certifications of Principal Executive Officer and Principal Financial Officer.

SIGNATURES

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

Date: August 11, 2009

AMERICAN ELECTRIC TECHNOLOGIES, INC.
By:	/s/ ARTHUR G. DAUBER
	Arthur G. Dauber
	Chairman and Chief Executive Officer
	(Principal Executive Officer)
By:	/s/ JOHN H. UNTEREKER
	John H. Untereker
	Senior Vice President, Chief Financial Officer and Secretary
	(Principal Financial Officer)

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EX-10.1

Exhibit 10.1

SECOND AMENDMENT TO LOAN AGREEMENT

THIS SECOND AMENDMENT TO LOAN AGREEMENT (the “Amendment”) is made and entered into effective as of June 30, 2009, by and between AMERICAN ELECTIC TECHNOLOGIES, INC., a Florida corporation (“Borrower”), and JPMORGAN CHASE BANK, N.A., a national association (“Lender”).

R E C I T A L S:

WHEREAS, Borrower and Lender entered into a Letter Loan Agreement dated October 31, 2007 (which as the same may have been or may hereafter be amended from time to time is herein called the “Loan Agreement”; the terms defined therein being used herein as therein defined unless otherwise defined herein); and

WHEREAS, Borrower and Lender desire to amend the Loan Agreement to extend the Maturity Date and amend certain terms and provisions of the Loan Agreement.

A G R E E M E N T:

1. Amendments to the Loan Agreement. The Loan Agreement is, effective the date hereof, and subject to the satisfaction of the conditions precedent set forth in Section 2 hereof, hereby amended as follows:

(a) Section 1 of the Loan Agreement is hereby amended in its entirety to read as follows:

“(a) Commitment. Subject to the terms and conditions set forth herein, Lender agrees to make loans (each of which is a “Loan”, and collectively the “Loans”) to Borrower, on a revolving basis (the “Borrowing Base Facility”) from time to time during the period commencing on the date hereof and continuing through July 1, 2011 (the “Maturity Date”), the maturity date of the promissory note evidencing the Borrowing Base Facility, such amounts as Borrower may request hereunder; provided, however, the total principal amount (the “Borrower’s Loan Limit”) outstanding at any time shall not exceed the lesser of (i) an amount equal to the Borrowing Base and (ii) $10,000,000 minus the aggregate face amount of any Letters of Credit. Subject to the terms and conditions hereof, Borrower may borrow, repay and reborrow hereunder. If at any time the outstanding advances under the Borrowing Base Facility exceed the Borrower’s Loan Limit as shown on any reports delivered to Lender under Section 6(d)(ii) or as indicated by Lender’s own records, Borrower shall, on the date of the delivery of such report to Lender or on the date of notice from Lender as to Lender’s records, prepay on the Borrowing Base Facility such amount as may be necessary to eliminate such excess, plus all accrued but unpaid interest thereon. The sums advanced under the Borrowing Base Facility shall be used for general corporate purposes and working capital. As used in this Agreement, the term “Borrowing Base” shall have the meaning set forth in Exhibit A attached hereto.

(b) Interest Rates. The Advance(s) evidenced by this Agreement may be drawn down and remain outstanding as up to five (5) LIBOR Rate Advances

Second Amendment to Loan Agreement – Page 1

and/or a CB Floating Rate Advance. Borrower shall pay interest to Lender on the outstanding and unpaid principal amount of each CB Floating Rate Advance at the CB Floating Rate plus the Applicable Margin and each LIBOR Rate Advance at the Adjusted LIBOR Rate. Interest shall be calculated on the basis of the actual number of days elapsed in a year of 360 days, unless that calculation would result in a usurious interest rate, in which case interest will be calculated on the basis of a 365 or 366 day year, as the case may be. In no event shall the interest rate applicable to any Advance exceed the maximum rate allowed by law. Any interest payment which would for any reason be deemed unlawful under applicable law shall be applied to principal.

(c) Notice and Manner of Electing Interest Rates on Advances. Borrower shall give Lender written notice (effective upon receipt) of Borrower’s intent to draw down an Advance under this Agreement no later than 2:00 p.m. Central time, on the date of disbursement, if the full amount of the drawn Advance is to be disbursed as a CB Floating Rate Advance and no later than 11:00 a.m. Central time three (3) Business Days before disbursement, if any part of such Advance is to be disbursed as a LIBOR Rate Advance. Borrower’s notice must specify: (i) the disbursement date, (ii) the amount of each Advance, (iii) the type of each Advance (CB Floating Rate Advance or LIBOR Rate Advance), and (iv) for each LIBOR Rate Advance, the duration of the applicable Interest Period; provided, however, that Borrower may not elect an Interest Period ending after the Maturity Date. Each LIBOR Rate Advance shall be in a minimum amount of $100,000. All notices under this subparagraph are irrevocable. By Lender’s close of business on the disbursement date and upon fulfillment of the conditions set forth herein and in any other of the Loan Documents, Lender shall disburse the requested Advances in immediately available funds by crediting the amount of such Advances to Borrower’s account with Lender.

(d) Conversion and Renewals. Borrower may elect from time to time to convert one type of Advance into another or to renew any Advance by giving Lender written notice no later than 2:00 p.m. Central time, on the date of the conversion into or renewal of a CB Floating Rate Advance and 11 a.m. Central time three (3) Business Days before conversion into or renewal of a LIBOR Rate Advance, specifying: (i) the renewal or conversion date, (ii) the amount of the Advance to be converted or renewed, (iii) in the case of conversion, the type of Advance to be converted into (CB Floating Rate Advance or LIBOR Rate Advance), and (iv) in the case of renewals of or conversion into a LIBOR Rate Advance, the applicable Interest Period, provided that (1) the minimum principal amount of each LIBOR Rate Advance outstanding after a renewal or conversion shall be $100,000; (2) a LIBOR Rate Advance can only be converted on the last day of the Interest Period for the Advance; and (3) Borrower may not elect an Interest Period ending after the Maturity Date. All notices given under this subparagraph are irrevocable. If Borrower fails to give Lender the notice specified above for the renewal or conversion of a LIBOR Rate Advance by 11:00 a.m. Central time three (3) Business Days before the end of the Interest Period for that Advance, the Advance shall automatically be converted to a CB Floating Rate Advance on the last day of the Interest Period for the Advance.

Second Amendment to Loan Agreement – Page 2

(e) Interest Payments. Interest on the Advances shall be paid as follows:

(i) For each CB Floating Rate Advance, on the last day of each month beginning with the first month following disbursement of the Advance or following conversion of an Advance into a CB Floating Rate Advance, and at the maturity or conversion of the Advance into a LIBOR Rate Advance; and

(ii) For each LIBOR Rate Advance, on the last day of the Interest Period for the Advance and, if the Interest Period is longer than three (3) months, at three-month intervals beginning with the day three (3) months from the date the Advance is disbursed.

(f) Prepayments and Funding Loss Indemnification. Borrower may prepay all or any part of any CB Floating Rate Advance at any time without premium or penalty. Borrower shall pay Lender amounts sufficient (in Lender’s reasonable opinion) to compensate Lender for any loss, cost, or expense incurred as a result of:

(i) Any payment of a LIBOR Rate Advance on a date other than the last day of the Interest Period for the Advance, including, without limitation, acceleration of the Advances by Lender pursuant to this Agreement or the other Loan Documents; or

(ii) Any failure by Borrower to borrow or renew a LIBOR Rate Advance on the date specified in the relevant notice from Borrower to Lender.

(g) Principal Payments. Borrower promises to pay all Advances then outstanding on the Maturity Date.

(h) Default Rate of Interest. After an Event of Default has occurred, whether or not Lender elects to accelerate the maturity of the Note because of such Event of Default, all Advances outstanding under this Agreement shall bear interest at a per annum rate equal to the interest rate being charged on the Advance plus 3% (the “Default Rate”) from the date Lender elects to impose such rate. Imposition of such rate shall not affect any limitations contained in this Agreement on Borrower’s right to repay principal on any LIBOR Rate Advance before the expiration of the Interest Period for that Advance.

(i) Additional Costs. If any applicable domestic or foreign law, treaty, government rule or regulation now or later in effect (whether or not it now applies to Lender) or the interpretation or administration thereof by a governmental authority charged with such interpretation or administration, or compliance by Lender with any guideline, request or directive of such an authority (whether or not having the force of law), shall (1) affect the basis of taxation of payments to Lender of any amounts payable by Borrower under this Agreement or the other Loan Documents (other than taxes imposed on the overall net income of Lender

Second Amendment to Loan Agreement – Page 3

by the jurisdiction or by any political subdivision or taxing authority of the jurisdiction in which Lender has its principal office), or (2) impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, Federal Deposit Insurance Corporation deposit insurance premiums or assessments) against assets of, deposits with or for the account of, or credit extended by Lender, or (3) impose any other condition with respect to this Agreement or the other Loan Documents and the result of any of the foregoing is to increase the cost to Lender of extending, maintaining or funding any Advance or to reduce the amount of any sum receivable by Lender on any Advance, or (4) affect the amount of capital required or expected to be maintained by Lender (or any corporation controlling Lender) and Lender determines that the amount of such capital is increased by or based upon the existence of Lender’s obligations under this Agreement or the other Loan Documents and the increase has the effect of reducing the rate of return on Lender’s (or its controlling corporation’s) capital as a consequence of the obligations under this Agreement or the other Loan Documents to a level below that which Lender (or its controlling corporation) could have achieved but for such circumstances (taking into consideration its policies with respect to capital adequacy) by an amount deemed by Lender to be material, then Borrower shall pay to Lender, from time to time, upon request by Lender, additional amounts sufficient to compensate Lender for the increased cost or reduced sum receivable. Whenever Lender shall learn of circumstances described in this section which are likely to result in additional costs to Borrower, Lender shall give prompt written notice to Borrower of the basis for and the estimated amount of any such anticipated additional costs. A statement as to the amount of the increased cost or reduced sum receivable, prepared in good faith and in reasonable detail by Lender and submitted by Lender to Borrower, shall be conclusive and binding for all purposes absent manifest error in computation.

(j) Illegality. If any applicable domestic or foreign law, treaty, rule or regulation now or later in effect (whether or not it now applies to Lender) or the interpretation or administration thereof by a governmental authority charged with such interpretation or administration, or compliance by Lender with any guideline, request or directive of such an authority (whether or not having the force of law), shall make it unlawful or impossible for Lender to maintain or fund the LIBOR Rate Advances, then, upon notice to Borrower by Lender, the outstanding principal amount of the LIBOR Rate Advances, together with accrued interest and any other amounts payable to Lender under this Agreement or the other Loan Documents on account of the LIBOR Rate Advances shall be repaid (i) immediately upon Lender’s demand if such change or compliance with such requests, in Lender’s judgment, requires immediate repayment, or (ii) at the expiration of the last Interest Period to expire before the effective date of any such change or request provided, however, that subject to the terms and conditions of this Agreement and the other Loan Documents Borrower shall be entitled to simultaneously replace the entire outstanding balance of any LIBOR Rate Advance repaid in accordance with this section with a CB Floating Rate Advance in the same amount.

Second Amendment to Loan Agreement – Page 4

(k) Inability to Determine Interest Rate. If Lender determines that (i) quotations of interest rates for the relevant deposits referred to in the definition of Adjusted LIBOR Rate are not being provided in the relevant amounts or for the relevant maturities for purposes of determining the interest rate on a LIBOR Rate Advance as provided in this Agreement, or (ii) the relevant interest rates referred to in the definition of Adjusted LIBOR Rate do not accurately cover the cost to Lender of making, funding or maintaining LIBOR Rate Advances, then Lender shall, at Lender’s option, give notice of such circumstances to Borrower, whereupon (1) the obligation of Lender to make LIBOR Rate Advances shall be suspended until Lender notifies Borrower that the circumstances giving rise to the suspension no longer exists and (2) Borrower shall repay in full the then outstanding principal amount of each LIBOR Rate Advance, together with accrued interest, on the last day of the then current Interest Period applicable to the LIBOR Rate Advance; provided, however, that, subject to the terms and conditions of this Agreement and the other Loan Documents, Borrower shall be entitled to simultaneously replace the entire outstanding balance of any LIBOR Rate Advance repaid in accordance with this section with an Advance bearing interest at the CB Floating Rate plus the Applicable Margin for CB Floating Rate Advances in the same amount. If the Lender determines on any day that quotations of interest rates for the relevant deposits referred to in the definition of Adjusted One Month LIBOR Rate are not being provided for purposes of determining the interest rate on any CB Floating Rate Advance on any day, then each CB Floating Rate Advance shall hear interest at the Prime Rate plus the Applicable Margin for CB Floating Rate Advances until Lender determines that quotations of interest rates for the relevant deposits referred to in the definition of Adjusted One Month LIBOR Rate are being provided.

(l) Obligations Due on Non-Business Day. Whenever any payment under this Agreement becomes due and payable on a day that is not a Business Day, if no Event of Default then exists, the maturity of the payment shall be extended to the next succeeding Business Day, except, in the case of a LIBOR Rate Advance, if the result of the extension would be to extend the payment into another calendar month, the payment must be made on the immediately preceding Business Day.

(m) Application of Payments. Payments shall be allocated among principal, interest and fees at the discretion of Lender unless otherwise agreed or required by applicable law. Acceptance by Lender of any payment which is less than the payment due at the time shall not constitute a waiver of Lender’s right to receive payment in full at that time or any other time.

(n) Commitment Fee. In consideration of Lender’s commitment to make Advances, Borrower will pay to Lender a commitment fee (the “Commitment Fee”) determined on a daily basis by applying 0.30% per annum to the unused portion of the Borrower’s Loan Limit on each day during the term of the Borrowing Base Facility, determined for each such day by deducting from the amount of the Borrower’s Loan Limit at the end of such day the Facility Usage. For the purposes of this subparagraph (n), the term “Facility Usage” mean the

Second Amendment to Loan Agreement – Page 5

aggregate amount of outstanding Advances under the Borrowing Base Facility. The Commitment Fee shall be due and payable quarterly in arrears on the last day of each March, June, September and December, commencing on June 30, 2009, and at the Maturity Date.”

(b) The definition of “Consolidated Tangible Net Worth” in Section 8(a) of the Loan Agreement is hereby amended in its entirety to read as follows:

“Consolidated Tangible Net Worth” means all of Borrower’s and its Subsidiaries’ assets less the sum of (i) the aggregate book value of Consolidated Intangible Assets, (ii) advances to and investments in joint ventures, (iii) accounts receivable from the holders of equity interests and Borrower’s Affiliates and (iv) Consolidated Total Liabilities.”

(c) Subparagraph (ii) of Section 8(b) of the Loan Agreement is hereby amended in its entirety to read as follows:

“(ii) Total Liabilities to Tangible Net Worth Ratio. Permit, as of the end of each calendar quarter, the ratio of its Consolidated Total Liabilities (excluding any Subordinated Debt) to Consolidated Tangible Net Worth to be more than 1.50 to 1.”

(d) Exhibit A - Definitions. Exhibit A to the Loan Agreement is hereby amended in its entirety and replaced to read as set forth on Exhibit A attached hereto.

2. Conditions of Effectiveness. This Amendment shall become effective when, and only when, Lender shall have received counterparts of this Amendment executed by Borrower and Section 1 hereof shall become effective when, and only when, Lender shall have additionally received any and all other documentation as Lender may reasonably require.

3. Representations and Warranties of Borrower. Borrower represents and warrants as follows:

(a) Borrower is duly authorized and empowered to execute, deliver and perform this Amendment and all other instruments referred to or mentioned herein to which it is a party, and all action on its part requisite for the due execution, delivery and the performance of this Amendment has been duly and effectively taken. This Amendment, when executed and delivered, will constitute valid and binding obligations of Borrower enforceable in accordance with its terms. This Amendment does not violate any provisions of Borrower’s Articles of Incorporation, By-Laws, or any contract, agreement, law or regulation to which Borrower is subject, and does not require the consent or approval of any regulatory authority or governmental body of the United States or any state.

(b) The representations and warranties made by Borrower in the Loan Agreement are true and correct as of the date of this Amendment.

(c) No event has occurred and is continuing which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both.

Second Amendment to Loan Agreement – Page 6

4. Reference to and Effect on the Loan Documents.

(a) Upon the effectiveness of Section 1 hereof, on and after the date hereof, each reference in the Loan Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import, and each reference in the Loan Documents shall mean and be a reference to the Loan Agreement as amended hereby.

(b) Except as specifically amended above, the Loan Agreement and the Note(s), and all other instruments securing or guaranteeing Borrower’s obligations to Lender (collectively, the “Loan Documents”) shall remain in full force and effect and are hereby ratified and confirmed. Without limiting the generality of the foregoing, the Loan Documents and all collateral described therein do and shall continue to secure the payment of all obligations of Borrower under the Loan Agreement and the Note(s), as amended hereby, and under the other Loan Documents.

(c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Lender under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents.

5. Costs and Expenses. Borrower agrees to pay on demand all costs and expenses of Lender in connection with the preparation, reproduction, execution and delivery of this Amendment and the other instruments and documents to be delivered hereunder, including the reasonable fees and out-of-pocket expenses of counsel for Lender. In addition, Borrower shall pay any and all fees payable or determined to be payable in connection with the execution and delivery, filing or recording of this Amendment and the other instruments and documents to be delivered hereunder, and agrees to save Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such fees.

6. Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument.

7. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Texas.

8. Facsimile Documents and Signatures. For purposes of negotiating and finalizing this Amendment, if this document or any document executed in connection with it is transmitted by facsimile machine, it shall be treated for all purposes as an original document. Additionally, the signature of any party on this document transmitted by way of a facsimile machine shall be considered for all purposes as an original signature. Any such faxed document shall be considered to have the same binding legal effect as an original document. At the request of any party, any faxed document shall be re-executed by each signatory party in an original form.

9. Joinder of Guarantor. M & I Electric Industries, Inc. and American Access Technologies, Inc., Guarantor as defined in the Loan Agreement, join in the execution of this Amendment to evidence Guarantor’s consent to the terms hereof, to confirm Guarantor’s continuing obligations under the terms of the Guaranty Agreement, and to acknowledge that without such consent and confirmation, Lender would not enter into this Amendment or

Second Amendment to Loan Agreement – Page 7

otherwise consent to the terms hereof. Additionally, Guarantor represents to Lender that Guarantor is duly authorized and empowered to execute, deliver and perform this Amendment, and all action on its part requisite for the due execution, delivery and the performance of this Amendment has been duly and effectively taken. This Amendment, when executed and delivered, will constitute valid and binding obligations of Guarantor enforceable in accordance with its terms.

10. Final Agreement. THIS WRITTEN AMENDMENT OF LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed in multiple counterparts, each of which is an original instrument for all purposes, all as of the day and year first above written.

BORROWER:
AMERICAN ELECTRIC TECHNOLOGIES, INC.
By:
	John H. Untereker,
	Senior Vice President and CFO
LENDER:
JPMORGAN CHASE BANK, N.A.
By:
	Carlos Valdez, Jr.,
	Senior Vice President

GUARANTOR:
M & I ELECTRIC INDUSTRIES, INC.
By:
	John H. Untereker,
	Senior Vice President and CFO
AMERICAN ACCESS TECHNOLOGIES, INC.
By:
	Arthur Dauber, CEO

Second Amendment to Loan Agreement – Page 8

EXHIBIT A

DEFINITIONS

“Adjusted LIBOR Rate” means, with respect to a LIBOR Rate Advance for the relevant Interest Period, the sum of (i) the Applicable Margin plus (ii) the quotient of (a) the LIBOR Rate applicable to such Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period.

“Adjusted One Month LIBOR Rate” means, with respect to a CB Floating Rate Advance for any day, the sum of (i) 2.50% per annum plus (ii) the quotient of (a) the interest rate determined by Lender by reference to the Page to be the rate at approximately 11:00 a.m. London time, on such date or, if such date is not a Business. Day, on the immediately preceding Business Day for dollar deposits with a maturity equal to one (1) month divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to dollar deposits in the London interbank market with a maturity equal to one (1) month.

“Advance” means a LIBOR Rate Advance or a CB Floating Rate Advance and “Advances” means all LIBOR Rate Advances and all CB Floating Rate Advances under this Agreement.

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Person specified.

“Applicable Margin” means with respect to any CB Floating Rate Advance, zero, and with respect to any LIBOR Rate Advance, 2.25% per annum.

“Borrowing Base” means, for Borrower and each Subsidiary which is a Guarantor, the amount determined as of a particular date equal to the sum of (a) 80% of Eligible Accounts and (b) 40% of Eligible Inventory up to an amount not to exceed $1,000,000; provided, however, that (i) only Collateral for which the representations and warranties under this Agreement and the other Loan Documents are true and correct at the time of calculation shall be included in the aggregate Borrowing Base, (ii) upon notice to Borrower, Lender at any time and from time to time may adjust the preceding percentage(s) or modify or add categories of eligibility, (iii) if Lender at any time determines any method of valuation overstates the actual fair market value at the time, upon notice to Borrower, Lender may recalculate those values to fair market value, and (iv) in no event shall the Borrowing Base ever exceed the Borrower’s Loan Limit.”

“Borrowing Base Report” means a report in the form attached hereto as Exhibit C, appropriately completed, together with the following attachments: a detailed aged schedule of all Eligible Accounts as of the date specified in such report, listing face amounts and dates of invoices of each such Eligible Account and the name of each account debtor obligated on such Eligible Account (and, upon request of Lender, the address of an account debtor, copies of invoices, credit reports, and any other matters and information relating to the Eligible Accounts), a schedule of Eligible Inventory, setting forth the location of all such Eligible Inventory (other than Eligible Inventory in transit), including Eligible Inventory not in the possession of Borrower and the name of the person in possession thereof and whether and how much of such Eligible Inventory consists of raw material, finished goods or otherwise and a summary aged listing of Borrower’s and Guarantor’s accounts payable and an aged list of the ten largest accounts payable.

Exhibit A – Page 1

“Business Day” means (i) with respect to the Adjusted One Month LIBOR Rate and any borrowing, payment or rate selection of LIBOR Rate Advances, a day (other than a Saturday or Sunday) on which banks generally are open in Texas and/or New York for the conduct of substantially all of their commercial lending activities and on which dealings in United States dollars are carried on in the London interbank market and (ii) for all other purposes, a day other than a Saturday, Sunday or any other day on which national banking associations are authorized to be closed.

“CB Floating Rate” means the Prime Rate; provided that the CB Floating Rate shall, on any day, not be less than the Adjusted One Month LIBOR Rate. The CB Floating Rate is a variable rate and any change in the CB Floating Rate due to any change in the Prime Rate or the Adjusted One Month LIBOR Rate is effective from and including the effective date of such change in the Prime Rate or the Adjusted One Month LIBOR Rate, respectively.

“CB Floating Rate Advance” means any Advance under this Agreement when and to the extent that its interest rate is determined by reference to the CB Floating Rate.

“Change of Control” means the occurrence of any of the following events: (a) any Person or two or more Persons acting as a group shall acquire beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Act of 1934, as amended, and including holding proxies to vote for the election of directors other than proxies held by Borrower’s management or their designees to be voted in favor of Persons nominated by Borrower’s Board of Directors) of 35% or more of the outstanding voting securities of Borrower, measured by voting power (including both common stock and any preferred stock or other equity securities entitling the holders thereof to vote with the holders of common stock in elections for directors of Borrower) or (b) one-third or more of the directors of Borrower shall consist of Persons not nominated by Borrower’s Board of Directors (not including as Board nominees any directors which the Board is obligated to nominate pursuant to shareholders agreements, voting trust arrangements or similar arrangements).

“Consolidated” refers to the consolidation of any Person, in accordance with GAAP, with its properly consolidated subsidiaries. References herein to a Person’s Consolidated financial statements, financial position, financial condition, liabilities, etc. refer to the consolidated financial statements, financial position, financial condition, liabilities, etc. of such Person and its properly consolidated subsidiaries.

“Default Rate” has the meaning specified in Section 1(h) of this Agreement, provided in any case that no Default Rate charged by Lender shall ever exceed the Maximum Rate.

“Disclosure Schedule” means Exhibit D attached hereto.

“Dividend” means (a) any dividend or other distribution made by Borrower or a Subsidiary on or in respect of any equity interests in Borrower or such Subsidiary, or (b) any payment made by Borrower or a Subsidiary to purchase, redeem, acquire or retire any equity interest in Borrower or such Subsidiary.

Exhibit A – Page 2

“Eligible Accounts” means all Accounts except the following:

(a) any Account which arises out of a sale to an Account Debtor which is an Affiliate of Borrower.

(b) any Account which has not yet been invoiced or any Account the goods giving rise to which have not been delivered or the services giving rise to which have not been performed, or which otherwise does not represent a completed sale or performance.

(c) any Account balances due or unpaid more than 90 days after its original invoice date or which has an original due date which is more than 90 days after its original invoice date.

(d) any Account owed by an Account Debtor which is also a creditor or supplier of Borrower or by an Account Debtor which has asserted any defense or contested any liability with respect to such Account, or any Account which otherwise is or may become subject to any right of set off by the Account Debtor thereof provided that to the extent the Account exceeds the amount of the right of set off, the positive balance shall be included as an Eligible Account.

(e) any Account owed by an Account Debtor more than 25% (in dollar amount) of whose Accounts are not Eligible Accounts on account of paragraphs (c) or (d) above.

(f) any Account owed by an Account Debtor which has commenced a voluntary case under the bankruptcy or insolvency laws of any jurisdiction, or made an assignment for the benefit of creditors, or against which a decree or order for relief has been entered by a court in an involuntary case under any bankruptcy or insolvency laws of any jurisdiction, or against which any other petition or other application for relief under any bankruptcy or insolvency laws of any jurisdiction has been filed, or which has suspended business or consented to or suffered a receiver, trustee, liquidator or custodian to be appointed for it or for all or a significant portion of its assets or affairs.

(g) except for an amount of up to $100,000 in respect of foreign Eligible Accounts approved by Lender, any Account which (i) arises out of a sale made or services performed outside of the United States or which is owed by an Account Debtor located outside the United States and (ii) is not either secured by a commercial letter of credit satisfactory, in all respects, to Lender or such Account Debtor has not otherwise been approved by Lender.

(h) any Account the sale for which is on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment or any other repurchase or return basis or otherwise contingent on or subject to the fulfillment of any condition.

(i) any Account the Account Debtor of which is the United States or any department, agency or instrumentality thereof.

Exhibit A – Page 3

(j) any Account to the extent that, but for this paragraph (j), the Eligible Accounts owed by any Account Debtor and its Affiliates would exceed 10% of the outstanding aggregate principal balance of all Eligible Accounts.

(k) any Account owed by an Account Debtor which is also an employee or sales agent or independent contractor of Borrower or any of Borrower’s Affiliates.

(l) any Account subject to a lien or security interest other than one permitted under this Agreement.

(m) any Account not valid, binding and enforceable against the Account Debtor thereof in accordance with its terms.

(n) any Account not subject to an enforceable and duly perfected first priority security interest in favor of Lender.

As used in this definition, “Accounts” means all present and future rights of Borrower to payment for goods sold or leased or for services rendered (except those evidenced by instruments or chattel paper), whether now existing or hereafter arising and wherever arising and whether or not earned by performance, and “Account Debtor” means the person which is obligated on any Account.

“Eligible Inventory” means any Inventory which:

(a) is owned by Borrower or a Subsidiary which is a Guarantor free and clear of all liens and security interests other than those permitted under this Agreement and, if held or stored on leased premises, is subject to the terms of a lien waiver letter acceptable to Lender executed by the landlord of such premises if deemed necessary by Lender in its sole discretion; and

(b) is fully and adequately insured with Lender named as loss payee; and

(c) is not on lease or consignment or furnished under any contract of service from or to any person; and

(d) is finished Inventory, ready for sale, and is not, in the opinion of Lender damaged, obsolete, or otherwise not readily saleable at full value; and

(e) is subject to an enforceable security interest in favor of Lender which is duly perfected and of first priority, or, if in transit, will be duly perfected and of first priority immediately upon reaching its destination.

As used in this definition, “Inventory” means all goods, now owned or hereafter acquired by Borrower and wherever located, which are held for sale or lease or are to be furnished under any contract of service, excluding work in process or raw materials in the business of Borrower or a Subsidiary which is a Guarantor, and including goods the sale or other disposition of which has given rise to accounts receivable and which have been returned to or repossessed or stopped in transit by Borrower or any such Subsidiary.

Exhibit A – Page 4

“Interest Period” means, with respect to a LIBOR Rate Advance, a period of one (1), two (2) or three (3) month(s) commencing on a Business Day selected by Borrower pursuant to this Agreement. Such Interest Period shall end on the day which corresponds numerically to such date one (1), two (2) or three (3) month(s) thereafter, as applicable, provided, however, that if there is no such numerically corresponding day in such first, second or third succeeding month(s), as applicable, such Interest Period shall end on the last Business Day of such first, second or third succeeding month(s), as applicable. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day.

“LIBOR Rate” means with respect to any LIBOR Rate Advance for any Interest Period, the interest rate determined by Lender by reference to Reuters Screen LIBOR01, formerly known as Page 3750 of the Moneyline Telerate Service (together with any successor or substitute, the “Service”) or any successor or substitute page of the Service providing rate quotations comparable to those currently provided on such page of the Service, as determined by Lender from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market (the “Page”), to be the rate at approximately 11:00 a.m. London time, two (2) Business Days prior to the commencement of the Interest Period for dollar deposits with a maturity equal to such Interest Period. If no LIBOR Rate is available to Lender, the applicable LIBOR Rate for the relevant Interest Period shall instead be the rate determined by Lender to be the rate at which Lender offers to place U.S. dollar deposits having a maturity equal to such Interest Period with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period.

“LIBOR Rate Advance” means any borrowing under this Agreement when and to the extent that its interest rate is determined by reference to the Adjusted LIBOR Rate.

“Maximum Rate” means the maximum nonusurious rate of interest that Lender is permitted under applicable law to contract for, take, charge or receive.

“Person” means any natural person, corporation, limited liability company, trust, joint stock company, association, company, partnership, governmental authority or other entity.

“Prime Rate” means the rate of interest per annum announced from time to time by Lender as its prime rate. The Prime Rate is a variable rate and each change in the Prime Rate is effective from and including the date the change is announced as being effective. The prime rate is a reference rate and may not be Lender’s lowest rate.

“Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System.

“Reserve Requirement” means the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D.

Exhibit A – Page 5

“Subsidiary” means, with respect to any Person, any corporation, association, partnership, limited liability company, joint venture, or other business or corporate entity, enterprise or organization which is directly or indirectly (through one or more intermediaries) controlled by or owned fifty percent or more by such Person.

Exhibit A – Page 6

EXHIBIT C

BORROWING BASE REPORT

[TO BE ATTACHED]

Exhibit A – Page 7

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Arthur G. Dauber, certify that:

1. I have reviewed this quarterly report on Form 10-Q of American Electric Technologies, Inc.;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’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 registrant’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 registrant’s internal control over financial reporting.

August 11, 2009

By:	/s/ Arthur G. Dauber
	Arthur G. Dauber Principal Executive Officer

23

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, John H. Untereker, certify that:

1. I have reviewed this quarterly report on Form 10-Q of American Electric Technologies, Inc.;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’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 registrant’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 registrant’s internal control over financial reporting.

August 11, 2009

By:	/s/ John H. Untereker
	John H. Untereker Principal Financial Officer

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EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Arthur G. Dauber, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of American Electric Technologies, Inc. on Form 10-Q for the fiscal quarter ended June 30, 2009 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of American Electric Technologies, Inc.

August 11, 2009	By:	/s/ ARTHUR G. DAUBER
		Arthur G. Dauber
		Principal Executive Officer

I, John H. Untereker, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of American Electric Technologies, Inc. on Form 10-Q for the fiscal quarter ended June 30, 2009 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of American Electric Technologies, Inc.

August 11, 2009

By:	/s/ JOHN H. UNTEREKER
	John H. Untereker
	Principal Financial Officer

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