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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007

COMMISSION FILE NUMBER 0-10449



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TVI CORPORATION

(Exact name of registrant as specified in its charter)



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|                                                                |  |                                     
|--------------------------------------------------------------- |  | ------------------------------------
|Maryland                                                        |  | 52-1085536                          
|(State or other jurisdiction of incorporation or incorporation) |  | (I.R.S. Employer Identification No.)

7100 Holladay Tyler Road, Glenn Dale, MD 20769

(Address of principal executive offices, including zip code)

(301) 352-8800

(Registrants telephone number, including area code)



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Indicate by check mark whether the registrant
(1) has 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 is a large accelerated filer, an
accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the Act).

Large Accelerated Filer ̈Accelerated Filer  x    Non-Accelerated
Filer ̈

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

Indicate the number of shares outstanding of each of the issuers
classes of common stock, as of the latest practicable date: 33,227,740 shares of Common Stock issued and outstanding as of May 1, 2007.



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TVI CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE THREE MONTHS ENDED

March 31, 2007

TABLE OF CONTENTS



|                                                                                              |  |     
|--------------------------------------------------------------------------------------------- |  | ----
|                                                                                              |  | Page
|PART I  FINANCIAL INFORMATION                                                                |  |     
|Item 1. Consolidated Financial Statements                                                     |  | 3   
|Consolidated Balance Sheets                                                                   |  | 3   
|Consolidated Statements of Operations                                                         |  | 4   
|Consolidated Statements of Cash Flows                                                         |  | 5   
|Notes to Consolidated Financial Statements                                                    |  | 6   
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 12  
|Item 3. Qualitative and Quantitative Disclosures about Market Risk                            |  | 17  
|Item 4. Controls and Procedures                                                               |  | 17  
|PART II  OTHER INFORMATION                                                                   |  |     
|Item 1. Legal Proceedings                                                                     |  | 17  
|Item 1A. Risk Factors                                                                         |  | 17  
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 24  
|Item 3. Defaults Upon Senior Securities                                                       |  | 24  
|Item 4. Submission of Matters to a Vote of Security Holders                                   |  | 24  
|Item 5. Other Information                                                                     |  | 24  
|Item 6. Exhibits                                                                              |  | 24  
|SIGNATURES                                                                                    |  | 26  
|EXHIBIT INDEX                                                                                 |  | 27  



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PART I  FINANCIAL INFORMATION



|Item 1. | Financial Statements.
|------- | ---------------------

TVI CORPORATION

CONSOLIDATED BALANCE SHEETS

MARCH 31, 2007 and DECEMBER 31, 2006

(in thousands, except per share data)



|                                                                                                                                                              |  |                |        |                   |           
|------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------ | ----------------- | ----------
|                                                                                                                                                              |  | March 31, 2007 |        | December 31, 2006
|                                                                                                                                                              |  | (unaudited)    |        |                  
|ASSETS                                                                                                                                                        |  |                |        |                   |           
|CURRENT ASSETS                                                                                                                                                |  |                |        |                   |           
|Cash and cash equivalents                                                                                                                                     |  | $              |       |                   | $    1,757
|Marketable securities  available for sale                                                                                                                    |  |                | 558    |                   | 2,434     
|Accounts receivabletrade, less allowance for doubtful accounts                                                                                               |  |                | 10,895 |                   | 11,027    
|Inventories, net                                                                                                                                              |  |                | 6,295  |                   | 6,226     
|Income taxes receivable                                                                                                                                       |  |                | 1,071  |                   | 1,308     
|Deferred income taxes, net                                                                                                                                    |  |                | 432    |                   | 722       
|Prepaid expenses and other current assets                                                                                                                     |  |                | 4,024  |                   | 3,933     
|                                                                                                                                                              |  |                |        |                   |           
|Total current assets                                                                                                                                          |  |                | 23,275 |                   | 27,407    
|                                                                                                                                                              |  |                |        |                   |           
|PROPERTY, PLANT AND EQUIPMENT, NET                                                                                                                            |  |                | 18,356 |                   | 18,428    
|                                                                                                                                                              |  |                |        |                   |           
|OTHER ASSETS                                                                                                                                                  |  |                |        |                   |           
|Goodwill                                                                                                                                                      |  |                | 20,932 |                   | 20,932    
|Intangible assets, net                                                                                                                                        |  |                | 5,757  |                   | 5,976     
|Deferred income taxes, net                                                                                                                                    |  |                | 1,634  |                   |          
|Other                                                                                                                                                         |  |                | 48     |                   | 48        
|                                                                                                                                                              |  |                |        |                   |           
|Total other assets                                                                                                                                            |  |                | 28,371 |                   | 26,956    
|                                                                                                                                                              |  |                |        |                   |           
|TOTAL ASSETS                                                                                                                                                  |  | $              | 70,002 |                   | $  72,791 
|                                                                                                                                                              |  |                |        |                   |           
|                                                                                                                                                              |  |               
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                          |  |                |        |                   |           
|CURRENT LIABILITIES                                                                                                                                           |  |                |        |                   |           
|Accounts payable                                                                                                                                              |  | $              | 5,708  |                   | $    2,209
|Accrued expenses                                                                                                                                              |  |                | 2,513  |                   | 2,302     
|Current portion of long-term debt                                                                                                                             |  |                | 2,500  |                   | 2,500     
|Current portion of non-compete payments                                                                                                                       |  |                | 715    |                   | 669       
|                                                                                                                                                              |  |                |        |                   |           
|Total current liabilities                                                                                                                                     |  |                | 11,436 |                   | 7,680     
|Long-term debt, net of current portion                                                                                                                        |  |                | 20,850 |                   | 24,216    
|Non-compete payments, net of current portion                                                                                                                  |  |                | 1,373  |                   | 1,566     
|Deferred income taxes, net                                                                                                                                    |  |                |       |                   | 631       
|                                                                                                                                                              |  |                |        |                   |           
|TOTAL LIABILITIES                                                                                                                                             |  |                | 33,659 |                   | 34,093    
|                                                                                                                                                              |  |                |        |                   |           
|STOCKHOLDERS EQUITY                                                                                                                                          |  |                |        |                   |           
|Preferred stock$1.00 par value; 1,200 shares authorized, no shares issued and outstanding at March 31, 2007 and December 31,
2006                            |  |                |       |                   |          
|Common stock$0.01 par value; 98,800 shares authorized, 33,228 and 33,174 shares issued and outstanding at March 31, 2007 and
December 31, 2006, respectively |  |                | 332    |                   | 332       
|Additional paid-in capital                                                                                                                                    |  |                | 26,241 |                   | 25,991    
|Retained earnings                                                                                                                                             |  |                | 9,770  |                   | 12,375    
|                                                                                                                                                              |  |                |        |                   |           
|TOTAL STOCKHOLDERS EQUITY                                                                                                                                    |  |                | 36,343 |                   | 38,698    
|                                                                                                                                                              |  |                |        |                   |           
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                    |  | $              | 70,002 |                   | $  72,791 
|                                                                                                                                                              |  |                |        |                   |           

The accompanying notes are an integral part of these consolidated financial statements.



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TVI CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2007 and 2006

(in thousands, except per share
data)

(unaudited)



|                                                                                |  |      |        |   |      |   |        |  
|------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                                                                |  | 2007 |        |   | 2006 |  
|NET REVENUE                                                                     |  | $    | 14,320 |   |      | $ | 9,280  |  
|COST OF SALES                                                                   |  |      | 11,768 |   |      |   | 4,512  |  
|                                                                                |  |      |        |   |      |   |        |  
|GROSS PROFIT                                                                    |  |      | 2,552  |   |      |   | 4,768  |  
|                                                                                |  |      |        |   |      |   |        |  
|OPERATING EXPENSES                                                              |  |      |        |   |      |   |        |  
|Selling, general and administrative expenses                                    |  |      | 5,908  |   |      |   | 2,461  |  
|Research and development expenses                                               |  |      | 469    |   |      |   | 398    |  
|                                                                                |  |      |        |   |      |   |        |  
|Total operating expenses                                                        |  |      | 6,377  |   |      |   | 2,859  |  
|                                                                                |  |      |        |   |      |   |        |  
|OPERATING INCOME (LOSS)                                                         |  |      | (3,825 | ) |      |   | 1,909  |  
|INTEREST AND OTHER EXPENSE (INCOME), NET                                        |  |      | 516    |   |      |   | (48    | )
|                                                                                |  |      |        |   |      |   |        |  
|INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES                                 |  |      | (4,341 | ) |      |   | 1,957  |  
|PROVISION (BENEFIT) FOR INCOME TAXES                                            |  |      | (1,736 | ) |      |   | 779    |  
|                                                                                |  |      |        |   |      |   |        |  
|INCOME (LOSS) BEFORE MINORITY INTEREST IN NET INCOME OF CONSOLIDATED SUBSIDIARY |  |      | (2,605 | ) |      |   | 1,178  |  
|MINORITY INTEREST IN NET INCOME OF CONSOLIDATED SUBSIDIARY                      |  |      |       |   |      |   | (1     | )
|                                                                                |  |      |        |   |      |   |        |  
|NET INCOME (LOSS)                                                               |  | $    | (2,605 | ) |      | $ | 1,177  |  
|                                                                                |  |      |        |   |      |   |        |  
|EARNINGS (LOSS) PER COMMON SHAREBASIC                                          |  | $    | (0.08  | ) |      | $ | 0.04   |  
|                                                                                |  |      |        |   |      |   |        |  
|AVERAGE NUMBER OF COMMON SHARES OUTSTANDING  BASIC                             |  |      | 33,259 |   |      |   | 32,528 |  
|                                                                                |  |      |        |   |      |   |        |  
|EARNINGS (LOSS) PER COMMON SHAREDILUTED                                        |  | $    | (0.08  | ) |      | $ | 0.04   |  
|                                                                                |  |      |        |   |      |   |        |  
|AVERAGE NUMBER OF COMMON SHARES OUTSTANDING  DILUTED                           |  |      | 33,488 |   |      |   | 33,000 |  
|                                                                                |  |      |        |   |      |   |        |  

The accompanying notes are an integral part of these consolidated financial statements.



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TVI CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2007 and 2006

(in thousands)

(unaudited)



|                                                                                         |  |      |        |   |      |   |        |  
|---------------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                                                                         |  | 2007 |        |   | 2006 |  
|OPERATING ACTIVITIES                                                                     |  |      |        |   |      |   |        |  
|Net income (loss)                                                                        |  | $    | (2,605 | ) |      | $ | 1,177  |  
|                                                                                         |  |     
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |      |        |   |      |   |        |  
|Depreciation and amortization                                                            |  |      | 1,111  |   |      |   | 188    |  
|Provision for doubtful accounts                                                          |  |      | 86     |   |      |   | 15     |  
|Provision (benefit) for deferred income taxes                                            |  |      | (1,975 | ) |      |   | 20     |  
|Minority interest in net income of consolidated subsidiary                               |  |      |       |   |      |   | 1      |  
|Stock-based compensation expense                                                         |  |      | 115    |   |      |   | 173    |  
|Excess tax benefit from stock-based compensation                                         |  |      |       |   |      |   | (170   | )
|Earnings on marketable securities reinvested                                             |  |      | (24    | ) |      |   | (43    | )
|Changes in operating assets and liabilities:                                             |  |      |        |   |      |   |        |  
|Accounts receivable, trade                                                               |  |      | 46     |   |      |   | 2,754  |  
|Inventory                                                                                |  |      | (129   | ) |      |   | (843   | )
|Prepaid expenses and other current assets                                                |  |      | (91    | ) |      |   | (13    | )
|Income taxes                                                                             |  |      | 237    |   |      |   | (799   | )
|Accounts payable                                                                         |  |      | 3,540  |   |      |   | (1,030 | )
|Accrued expenses                                                                         |  |      | 211    |   |      |   | (740   | )
|                                                                                         |  |      |        |   |      |   |        |  
|Net cash provided by operating activities                                                |  |      | 522    |   |      |   | 690    |  
|                                                                                         |  |      |        |   |      |   |        |  
|INVESTING ACTIVITIES                                                                     |  |      |        |   |      |   |        |  
|Purchases of marketable securities                                                       |  |      | (800   | ) |      |   |       |  
|Sales of marketable securities                                                           |  |      | 2,700  |   |      |   |       |  
|Purchases of intangible assets                                                           |  |      | (16    | ) |      |   | (3     | )
|Purchases of property, plant and equipment                                               |  |      | (744   | ) |      |   | (270   | )
|Cash payments on non-compete agreements                                                  |  |      | (66    | ) |      |   |       |  
|                                                                                         |  |      |        |   |      |   |        |  
|Net cash provided by (used in) investing activities                                      |  |      | 1,074  |   |      |   | (273   | )
|                                                                                         |  |      |        |   |      |   |        |  
|FINANCING ACTIVITIES                                                                     |  |      |        |   |      |   |        |  
|Net repayments on line of credit                                                         |  |      | (2,741 | ) |      |   |       |  
|Payments on long-term debt                                                               |  |      | (625   | ) |      |   |       |  
|Excess tax benefit from stock-based compensation                                         |  |      |       |   |      |   | 170    |  
|Proceeds from exercise of stock options                                                  |  |      | 13     |   |      |   | 22     |  
|                                                                                         |  |      |        |   |      |   |        |  
|Net cash provided by (used in) financing activities                                      |  |      | (3,353 | ) |      |   | 192    |  
|                                                                                         |  |      |        |   |      |   |        |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                     |  |      | (1,757 | ) |      |   | 609    |  
|Cash and cash equivalents at beginning of period                                         |  |      | 1,757  |   |      |   | 2,589  |  
|                                                                                         |  |      |        |   |      |   |        |  
|Cash and cash equivalents at end of period                                               |  | $    |       |   |      | $ | 3,198  |  
|                                                                                         |  |      |        |   |      |   |        |  
|NON-CASH FINANCING ACTIVITIES                                                            |  |      |        |   |      |   |        |  
|Common stock issued for 2005 compensation                                                |  | $    |       |   |      | $ | 237    |  
|                                                                                         |  |      |        |   |      |   |        |  
|Issuance of common stock under Non-compete Agreements                                    |  | $    | 122    |   |      | $ |       |  
|                                                                                         |  |      |        |   |      |   |        |  

The accompanying notes are an integral part of these consolidated financial statements.



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TVI CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2007

1. Basis of
Presentation.

Organization

TVI Corporation
(TVI), a Maryland corporation formed in 1977, together with its subsidiaries (the Company), designs, manufactures, markets and supplies shelter systems, thermal marking devices, filtration systems and infection control
products primarily for homeland security agencies, hospitals, the military, law enforcement agencies and fire departments and public health agencies. The Companys shelter systems include nuclear, biological and chemical decontamination
systems, hospital surge capacity systems and infection control systems, most of which employ the Companys proprietary articulating frame. The Company also designs, manufactures, markets and supplies a line of powered air-purifying respirators
(PAPRs) and also plans to supply disposable filter canisters for the first responder, military, healthcare and industrial markets. In the fourth quarter of 2006, the Company, through its subsidiary Signature Special Event Services, Inc.
(SSES), began providing a broad range of temporary infrastructure offerings for traditional special events and for disaster relief under short and long-term rental contracts.

On October 31, 2006, TVI, through its wholly-owned subsidiary, SSES, acquired substantially all of the assets and specified liabilities of Signature Special Event Services, LLC (SSES LLC), a
privately-held provider of tent and related equipment for special events and disaster recovery. On November 8, 2005, TVI acquired Safety Tech International, Inc. (STI), a privately-held supplier of PAPRs for chemical, biological,
radiological and nuclear (CBRN) protection. As a result of the acquisition, STI became a wholly owned subsidiary of TVI. In April 2004, TVI formed CAPA Manufacturing Corp. (CAPA) as a wholly owned subsidiary of TVI. At that
time, TVI, through CAPA, acquired substantially all of the assets of CAPA Manufacturing, LLC, a privately-held respiratory products research, design and manufacturing company. In April 2006, TVI combined the operations of CAPA with the operations of
STI.

The Companys headquarters is located in Glenn Dale, Maryland where it manufactures most of its products. The Company also has operations in
Frederick, Maryland where it manufactures its PAPRs products. The headquarters of the Companys SSES subsidiary is located in Frederick, Maryland, which also contains SSES administrative offices as well as a full service equipment,
maintenance and manufacturing facility. SSES also has a branch office located in Eldersburg, Maryland where it stores and manufactures its HVAC and mobile kitchen units. Additional full service branch and administrative offices of SSES are located
in North Carolina, Florida, Kentucky, and California.

Operating Segments

The Company determines and discloses its segments in accordance with Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures about Segments of an Enterprise and Related
Information (as amended), which uses a management approach for determining segments. The management approach designates the internal organization that is used by management for making operating decisions and assessing
performance as the source of the Companys reportable segments. For the three months ended March 31, 2006, the Companys management reporting structure was not organized into reporting segments. During the fourth quarter of 2006, the
Company began reporting in three reporting segments as a result of its acquisitions of STI and SSES, its integration and realignment efforts with respect to these acquisitions, and its recently completed high-capacity filter canister manufacturing
line.

The three segments are Shelters and Related Products (shelter systems, surge capacity and infection control systems, command and control systems,
and isolation and thermal products), Personal Protection Equipment (PAPRs and filters) and SSES Rental Services.

Basis of Presentation

The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States
(GAAP) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all material adjustments (consisting of
normal recurring items) considered necessary for a fair presentation have been included. This quarterly report and the accompanying consolidated financial statements should be read in conjunction with the Companys audited financial statements
and notes thereto presented in its Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (the 2006 Annual Report). Footnotes which would substantially duplicate the disclosures in the Companys audited
financial statements for the year ended December 31, 2006 contained in the 2006 Annual Report have



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been omitted. The interim financial information contained in this quarterly report is not necessarily indicative of the results to be expected for any other
interim period or for the full year ending December 31, 2007.

Certain reclassifications have been made to previously reported amounts to conform to
2007 amounts.

Fair Value of Financial Instruments

The
carrying amounts of financial instruments approximate fair value due to the short-term nature of their underlying terms or the variable nature of the interest charged.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period and related disclosure of contingent liabilities.
Actual results could differ from those estimates.



|2. | Basic and Diluted Earnings Per Share.
|-- | -------------------------------------

Basic earnings per share are
calculated using the weighted-average number of common shares outstanding during the period. Diluted earnings per share are calculated using the weighted-average number of common shares plus dilutive potential common shares outstanding during the
period. Potential common shares consist of stock options and convertible preferred stock. As of March 31, 2007, shares attributable to approximately 1.6 million outstanding stock options were excluded from the calculation of diluted
earnings per share because their effect was anti-dilutive.

The calculation of the Companys average number of common shares outstanding 
diluted for the three months ended March 31, 2007 and 2006 is as follows (in thousands):



|                                                      |  |                              |  |       
|----------------------------------------------------- |  | ---------------------------- |  | ------
|                                                      |  | Three Months Ended March 31,
|                                                      |  | 2007                         |  | 2006  
|Average number of common shares outstanding  basic   |  | 33,259                       |  | 32,528
|Dilutive effect of stock options                      |  | 229                          |  | 472   
|                                                      |  |                              |  |       
|Average number of common shares outstanding  diluted |  | 33,488                       |  | 33,000
|                                                      |  |                              |  |       



|3. | Stock-Based Compensation.
|-- | -------------------------

The Company adopted the 1998 Incentive
Stock Option Plan (Plan), which provides for non-qualified and incentive stock options to be issued enabling the holder thereof to purchase Common Stock of the Company at predetermined exercise prices. Incentive stock options may be
granted to purchase shares of Common Stock at a price not less than fair market value on the date of grant. Only employees may receive incentive stock options; all other qualified participants may receive non-qualified stock options with an exercise
price determined by the Companys Board of Directors. The Plan also provides for the outright award of shares of Common Stock. The Plan permits the grant of options and shares for up to 10 million shares of the Companys Common Stock.

At March 31, 2007, options to purchase up to approximately 2.8 million shares of the Companys Common Stock remain available to be granted
under the Plan. The Company believes that such awards better align the interests of employees and others with that of its stockholders. The Plan expires on May 7, 2008.

Option awards are generally granted with an exercise price equal to the market price of the Companys stock at the date of grant. Options granted to employees have a 10-year contractual term while options granted
to directors and others generally have a five-year term. Option awards vest upon terms determined by the Board of Directors. During the three months ended March 31, 2007, options granted under the Plan vested one-third on the first anniversary
date of the grant, one-third on the second anniversary date and one-third on the third anniversary date. The Company issues new shares to satisfy its obligations related to the exercise of options.

The fair values of stock options granted were estimated at the date of grant using the Black-Scholes-Merton option pricing model. The Black-Scholes-Merton model was
originally developed for use in estimating the fair value of traded options, which have different characteristics from TVIs employee incentive and non-qualified stock options. The model is also sensitive to changes in assumptions, which can
materially affect the fair value estimate. The Company used the following assumptions for determining the fair value of options granted under the Black-Scholes-Merton option pricing model:



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|                        |  |                              |  |              
|----------------------- |  | ---------------------------- |  | -------------
|                        |  | Three Months Ended March 31,
|                        |  | 2007                         |  | 2006         
|Expected volatility     |  | 51.8% - 54.1%                |  | 51.6% - 58.5%
|Expected term           |  | 3.5 - 5 years                |  | 3.5 - 5 years
|Risk-free rate          |  | 4.87% - 5.21%                |  | 4.57% - 4.59%
|Expected dividend yield |  | 0.00%                        |  | 0.00%        

The expected volatility was determined with reference to the historical volatility of the Companys stock.
The Company uses historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The
expected term of options granted represents the period of time that options granted are expected to be outstanding; the range given above results from certain groups of employees exhibiting different behavior. The risk-free rate for periods within
the contractual life of the option is based on the U.S. Treasury rate in effect at the time of grant.

Total compensation cost charged to income for
share-based payment arrangements amounted to $115,000 and $173,000 for the three months ended March 31, 2007 and 2006, respectively. The total income tax benefit recognized in income for share-based payment arrangements amounted to $0 and
$170,000 for the three months ended March 31, 2007 and 2006, respectively. No compensation cost related to share-based payment arrangements was capitalized as part of inventory or property, plant or equipment.

A summary of the activity under the Plan for the three months ended March 31, 2007 was as follows:

|                                             |  |                         |   |  |                                       |      |                                                 |      |                                  |   |    
|-------------------------------------------- |  | ----------------------- | - |  | ------------------------------------- | ---- | ----------------------------------------------- | ---- | -------------------------------- | - | ---
|                                             |  | Numberof Shares (000s) |   |  | WeightedAverageExercisePrice PerShare |      | WeightedAverageRemainingContractualTerm inYears |      | AggregateIntrinsicValue ($000s)
|Outstanding at January 1, 2007               |  | 1,853                   |   |  | $                                     | 2.69 |                                                 |      |                                  |   |    
|Granted                                      |  | 77                      |   |  |                                       | 2.33 |                                                 |      |                                  |   |    
|Exercised                                    |  | (50                     | ) |  |                                       | 0.26 |                                                 |      |                                  |   |    
|Canceled or expired                          |  | (69                     | ) |  |                                       | 3.18 |                                                 |      |                                  |   |    
|                                             |  |                         |   |  |                                       |      |                                                 |      |                                  |   |    
|Outstanding at March 31, 2007                |  | 1,811                   |   |  |                                       | 2.72 |                                                 | 5.15 |                                  | $ | 309
|                                             |  |                         |   |  |                                       |      |                                                 |      |                                  |   |    
|Vested or expected to vest at March 31, 2007 |  | 1,733                   |   |  |                                       | 2.71 |                                                 | 4.99 |                                  | $ | 309
|                                             |  |                         |   |  |                                       |      |                                                 |      |                                  |   |    
|Exercisable at March 31, 2007                |  | 1,289                   |   |  |                                       | 2.63 |                                                 | 3.67 |                                  | $ | 309
|                                             |  |                         |   |  |                                       |      |                                                 |      |                                  |   |    

The weighted average grant-date fair value of options granted during the three months ended March 31, 2007
and 2006 was $1.20 and $2.01, respectively. The total intrinsic value of options exercised during the three months ended March 31, 2007 and 2006 was $101,000 and $439,000 respectively.

As of March 31, 2007, there was approximately $340,000 of total unrecognized compensation cost related to nonvested share-based compensation arrangements under the
Plan. That cost is expected to be recognized over a weighted-average period of 1.2 years. The total fair value of shares vested during the three months ended March 31, 2007 and 2006 was approximately $307,000 and $424,000, respectively.

Cash received from option exercises under all share-based payment arrangements for the three months ended March 31, 2007 and 2006 amounted to $13,000
and $22,000, respectively. The actual tax benefit realized for the tax deductions from option exercise of the share-based payment arrangements totaled $0 and $170,000 for the three months ended March 31, 2007 and 2006, respectively.

Other information regarding options outstanding and exercisable as of March 31, 2007 is as follows:



|                         |  |                     |  |                               |      |                                                  |      |                 |           |                               |   |     
|------------------------ |  | ------------------- |  | ----------------------------- | ---- | ------------------------------------------------ | ---- | --------------- | --------- | ----------------------------- | - | ----
|                         |  | Options Outstanding |  | Options Exercisable          
|Range of Exercise Prices |  | Number ofShares     |  | Weighted-AverageExercisePrice |      | Weighted-AverageRemainingContractualLife inYears |      | Number ofShares |           | Weighted-AverageExercisePrice
|$0.275  0.415           |  | 217,667             |  | $                             | 0.35 |                                                  | 0.35 |                 | 217,667   |                               | $ | 0.35
|1.210  2.000            |  | 361,668             |  |                               | 1.44 |                                                  | 1.65 |                 | 336,668   |                               |   | 1.40
|2.010  2.980            |  | 407,500             |  |                               | 2.47 |                                                  | 6.51 |                 | 155,000   |                               |   | 2.82
|3.160  3.990            |  | 459,500             |  |                               | 3.66 |                                                  | 6.83 |                 | 294,500   |                               |   | 3.72
|4.000  4.720            |  | 360,000             |  |                               | 4.51 |                                                  | 7.87 |                 | 280,000   |                               |   | 4.57
|5.500                    |  | 5,000               |  |                               | 5.50 |                                                  | 7.43 |                 | 5,000     |                               |   | 5.50
|                         |  |                     |  |                               |      |                                                  |      |                 |           |                               |   |     
|                         |  | 1,811,335           |  |                               | 2.72 |                                                  | 5.15 |                 | 1,288,835 |                               |   | 2.63
|                         |  |                     |  |                               |      |                                                  |      |                 |           |                               |   |     



|4. | Acquisitions and Pro Forma Financial Information.
|-- | -------------------------------------------------

Amounts Due
from Sellers of SSES LLC

Included in prepaid and other current assets as of March 31, 2007 is approximately $1.9 million in amounts due from the
sellers of the assets of SSES LLC in connection with a purchase price adjustment based on the level of SSES LLCs working



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capital as of the date of acquisition and our reclassification of acquired past due accounts receivable, which the Company has the right to collect from the
sellers.

Pro Forma Financial Information (Unaudited)

On October 31, 2006 the Company purchased substantially all of the assets of privately-held SSES LLC (the Asset Purchase). The following table presents unaudited pro forma financial information for the three months ended
March 31, 2006 as though the acquisition of SSES LLC took place on January 1, 2006 (in thousands except per share data).



|                                         |  |   |       
|---------------------------------------- |  | - | ------
|Revenue                                  |  | $ | 14,677
|Income before provision for income taxes |  |   | 224   
|Net income                               |  |   | 135   
|                                         | 
|Earnings per common share  basic        |  | $ | 0.00  
|Earnings per common share  diluted      |  | $ | 0.00  

The above unaudited pro forma financial information has been provided for comparative purposes only and includes
certain adjustments, such as additional amortization expense for identified intangible assets and interest expense on related borrowings. The results are not intended to be indicative of the results of operations that actually would have resulted
had the SSES acquisition been completed on January 1, 2006, or of future results of operations.



|5. | Inventories, Net.
|-- | -----------------

Inventories as of March 31,
2007 and December 31, 2006 consist of (in thousands):



|                 |  |      |       |      |   |      
|---------------- |  | ---- | ----- | ---- | - | -----
|                 |  | 2007 |       | 2006
|Finished goods   |  | $    | 433   |      | $ | 497  
|Work in progress |  |      | 879   |      |   | 849  
|Raw materials    |  |      | 4,219 |      |   | 4,006
|Other            |  |      | 764   |      |   | 874  
|                 |  |      |       |      |   |      
|Total            |  | $    | 6,295 |      | $ | 6,226
|                 |  |      |       |      |   |      

Other inventories consist of field service, demonstration and other sales support inventory. At
March 31, 2007 and December 31, 2006, inventory reserves for excess and obsolete inventories were approximately $445,000 and $372,000, respectively.



|6. | Significant Customers.
|-- | ----------------------

Net revenue from the
Companys largest customer totaled approximately $1.8 million, or 13% of net revenue, for the three months ended March 31, 2007. Net revenue from the Companys largest customer totaled approximately $2.6 million, or 28% of net
revenue, for the three months ended March 31, 2006. Net revenue from the Companys second largest customer totaled approximately $1.4 million, or 15% of net revenue, for the three months ended March 31, 2006. For the three months
ended March 31, 2006, the ultimate distribution of these sales was to multiple end-users. There were no other customers representing more than 10% of net sales in either period.



|7. | Long-Term Debt.
|-- | ---------------

Long-term debt at March 31, 2007 consists of
the following (in thousands):



|                          |  |   |       
|------------------------- |  | - | ------
|Revolving credit facility |  | $ | 19,183
|Acquisition facility      |  |   | 4,167 
|                          |  |   |       
|Total debt                |  |   | 23,350
|Less current portion      |  |   | 2,500 
|                          |  |   |       
|Long-term debt            |  | $ | 20,850
|                          |  |   |       

Credit Agreement with Branch Banking & Trust Company (BB&T). On October 31,
2006, in connection with the acquisition of SSES LLC, the Company and certain of its subsidiaries entered into a financing and security agreement and



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other related agreements (together, the Credit Agreement) with BB&T. The Credit Agreement provides for a $25.0 million revolving credit
facility (the Revolving Facility) and a $10.0 million acquisition credit facility (the Acquisition Facility) and, together with the Revolving Facility, the Credit Facility). Borrowings under the Credit Facility
are additionally capped by a loan base, which is a function of defined levels of eligible accounts receivable, inventory and net fixed assets.

Among other
things, the Credit Agreement requires the Company to satisfy certain financial requirements. The Company notified BB&T that, for the testing period ended as of March 31, 2007, it was not in compliance with two such financial requirements,
which noncompliance, if not waived by BB&T, would each constitute a continuing event of default under the Credit Facility. Upon an event of default of this nature under the Credit Facility, among other things, BB&T has the right to
accelerate the payment of all of the outstanding indebtedness as of March 31, 2007. BB&T granted to the Company a waiver with respect to the noncompliance by the Company with both financial requirements as of March 31, 2007. No
amendments were made to the Credit Facility and there was no effect on the Companys consolidated financial statements as a result of the noncompliance or corresponding grant of waiver by BB&T.

As of March 31, 2007, the Company had $8.2 million available to draw under the Revolving Facility based on the loan base calculated as of that date.

At March 31, 2007, the Company had one letter of credit outstanding with BB&T to secure purchases of inventory components. It was issued on February 8,
2007 in the amount of $99,900 and expires on May 11, 2007.



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|8. | Segment Reporting.
|-- | ------------------

The Companys reportable segments are
comprised of the three distinct groups of similar products and services: Shelters and Related Products, Personal Protection Equipment and SSES Rental Services. Prior to the acquisition of SSES during the fourth quarter of 2006, the Company had only
one reportable segment. Financial information for the three months ended March 31, 2006 has been restated to present comparative information. The Company evaluates performance based on income from operations of the respective segments.

The following are reconciliations of reportable segment revenues, operating income (loss), assets, and other significant items (in thousands):



|                               |  |                              |        |   |                  |   |       
|------------------------------ |  | ---------------------------- | ------ | - | ---------------- | - | ------
|                               |  | Three Months Ended March 31,
|                               |  | 2007                         |        |   | 2006            
|Net revenue:                   |  |                              |        |   |                  |   |       
|Shelters and related products  |  | $                            | 3,639  |   |                  | $ | 8,000 
|Personal protection equipment  |  |                              | 2,062  |   |                  |   | 1,280 
|SSES rental services           |  |                              | 8,619  |   |                  |   |      
|                               |  |                              |        |   |                  |   |       
|                               |  | $                            | 14,320 |   |                  | $ | 9,280 
|                               |  |                              |        |   |                  |   |       
|Operating income (loss):       |  |                              |        |   |                  |   |       
|Shelters and related products  |  | $                            | (1,784 | ) |                  | $ | 1,705 
|Personal protection equipment  |  |                              | (149   | ) |                  |   | 204   
|SSES rental services           |  |                              | (1,892 | ) |                  |   |      
|                               |  |                              |        |   |                  |   |       
|                               |  | $                            | (3,825 | ) |                  | $ | 1,909 
|                               |  |                              |        |   |                  |   |       
|Depreciation and amortization: |  |                              |        |   |                  |   |       
|Shelters and related products  |  | $                            | 200    |   |                  | $ | 156   
|Personal protection equipment  |  |                              | 42     |   |                  |   | 32    
|SSES rental services           |  |                              | 869    |   |                  |   |      
|                               |  |                              |        |   |                  |   |       
|                               |  | $                            | 1,111  |   |                  | $ | 188   
|                               |  |                              |        |   |                  |   |       
|Capital expenditures, gross:   |  |                              |        |   |                  |   |       
|Shelters and related products  |  | $                            | 70     |   |                  | $ | 147   
|Personal protection equipment  |  |                              | 432    |   |                  |   | 123   
|SSES rental services           |  |                              | 242    |   |                  |   |      
|                               |  |                              |        |   |                  |   |       
|                               |  | $                            | 744    |   |                  | $ | 270   
|                               |  |                              |        |   |                  |   |       
|                               | 
|                               |  | As of                       
|                               |  | March 31,2007                |        |   | December 31,2006
|Total assets:                  |  |                              |        |   |                  |   |       
|Shelters and related products  |  | $                            | 18,935 |   |                  | $ | 19,343
|Personal protection equipment  |  |                              | 23,044 |   |                  |   | 23,373
|SSES rental services           |  |                              | 28,023 |   |                  |   | 30,075
|                               |  |                              |        |   |                  |   |       
|                               |  | $                            | 70,002 |   |                  | $ | 72,791
|                               |  |                              |        |   |                  |   |       



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|ITEM 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|------- | --------------------------------------------------------------------------------------

CAUTIONARY NOTE REGARDING THE USE OF FORWARD-LOOKING

STATEMENTS CONCERNING
OUR BUSINESS

The following section of this report entitled Managements Discussion and Analysis of Financial Condition and
Results of Operations and other sections of this Report contain forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, which are based on managements expectations,
estimates, projections and assumptions. These statements may be identified by the use of forward-looking words or phrases such as should, believes, expects, might result, anticipates,
projects, estimates and others. These forward-looking statements involve risks and uncertainties and are not guarantees of future performance, as actual results could differ materially from our current expectations.

Such risks and uncertainties include executing our business plan, achieving order and sales levels to fulfill revenue expectations;
unanticipated costs or charges; the time and costs involved in the research, development, marketing and promotion for our products; the possible cancellation or non-fulfillment of existing orders or distributor commitments for our products; our
ability to respond to product and other changes in our target markets; our ability to maintain and manage our growth; difficulties in integrating the operations, technologies and products of any businesses we acquire; our ability to meet the
requirements of the NASDAQ Capital Market for continued listing of our common stock; adverse consequences from any future government investigations, lawsuits or private actions; actions of the Companys lender, our compliance with bank
covenants and debt repayment obligations, and our ability to obtain future financing on satisfactory terms; general economic and business conditions; adverse changes in governmental regulations; the possibility that our products contain unknown
defects that could result in product liability claims; and competitive factors in our markets and industry generally. Numerous other factors could cause or contribute to such differences. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as to the date of this report. The Company assumes no obligation to update any such forward-looking statements even if experience or future changes make it clear that projected results expressed or
implied in such statements will not be realized.

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our Consolidated Financial Statements and Notes thereto contained herein.

Overview

We are an international supplier of homeland security, infection control, respiratory and filtration products for first receivers, such as hospitals, and
first responders, such as law enforcement, fire and public health agencies. We are also a provider of shelter and equipment rental services for special events and disaster relief needs. In November 2005, we acquired Safety Tech International, Inc.
(STI), a privately-held supplier of powered air purifying respirators (PAPRs). As a result of the acquisition, STI became a wholly owned subsidiary of TVI. In October 2006, through our newly-formed subsidiary Signature
Special Event Services, Inc. (SSES), we acquired substantially all of the assets of privately-held Signature Special Event Services, LLC, a leading provider of full-service rental services for traditional special events and for disaster
relief with broad temporary infrastructure offerings.

We design, manufacture, market and supply shelter systems, filtration systems and
infection control products primarily for homeland security agencies, hospitals, the military, law enforcement agencies and fire departments and public health agencies. Our shelter systems include nuclear, biological and chemical decontamination
systems, hospital surge capacity systems and infection control systems, most of which employ our proprietary articulating frame. We also design, manufacture, and market thermal products, including thermal marking devices, primarily to the U.S.
military.

We also design, manufacture, market and supply PAPRs through our STI subsidiary, and plan to supply disposable filter canisters
for the first responder, military, healthcare and industrial markets. Subject to first article approval, we anticipate the operational launch of our high-capacity filter canister manufacturing line in our Glenn Dale, Maryland facility.

We are also a national provider of turn-key shelter and equipment rental services for disaster relief, military, government, industrial, sporting,
hospitality and other special event needs through our SSES subsidiary. With facilities in Maryland, Florida, Kentucky, North Carolina and California, our extensive in-house inventory enables us to address events of significant size and complexity,
including extremely large-scale deployments such as our deployment of more than 600,000 square feet of tents, 2,500 tons of HVAC capacity, and 22 miles of power distribution at 40 sites within Texas, Louisiana, Florida and Mississippi as an integral
part of the disaster response effort in connection with Hurricane Katrina. In addition to a substantial inventory of tents, our inventory of rental equipment includes flooring, lighting, mobile kitchens, catering equipment, generators, power
distribution and HVAC equipment.



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Although we seek to continue our growth strategy, we are reevaluating our past approach to growth to
focus on operational execution and integration of our operations across all of our business segments. Our operating results for the fourth quarter of 2006 and the first quarter of 2007 show unacceptably low gross profit margins and operating losses
from each of our segments. We are conducting a top to bottom review of our operations, overhead, sales and marketing and integration efforts across all of our business segments. We are in the process of revising our business plan to focus on
achieving profitable growth and efficient execution.

Tactically, we must address net revenue levels, cost of revenue and manufacturing and
other overhead expenses. We intend, therefore, to:



| | (i) | Reinvigorate key relationships with our distributors, vendors and customers;
| | --- | ----------------------------------------------------------------------------



| | (ii) | Reevaluate our products and services portfolio in terms of profitability, functionality and delivery; and
| | ---- | ---------------------------------------------------------------------------------------------------------



| | (iii) | Assess our sales methods.
| | ----- | -------------------------

Strategically, we must address
our target markets. We intend, therefore, to:



| | (i) | Assess the markets we serve and the potential target markets that we do not serve;
| | --- | ----------------------------------------------------------------------------------



| | (ii) | Determine more efficient ways to allocate our resources and improve our manufacturing and service delivery; and
| | ---- | ---------------------------------------------------------------------------------------------------------------



| | (iii) | Assess our infrastructure to support the markets that we target.
| | ----- | ----------------------------------------------------------------

While we are undertaking the comprehensive business review focusing on the issues discussed above, we are also engaging in a nationwide search for a chief executive officer.

Segments and Product Lines

TVI is organized into three reportable segments reflecting a broadening
of our product and service offerings as a result of our acquisitions of STI and SSES and our recently completed high-capacity filter canister manufacturing line. These segments are Shelters and Related Products (shelter systems, surge capacity and
infection control systems and command and control systems and our isolation and thermal products), Personal Protection Equipment (PAPRs and filters) and SSES Rental Services. For additional information relating to our reportable segments, including
comparable segment data for prior periods, refer to Note 17 in the Notes to Consolidated Financial Statements in the Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2007.

Results of Operations for the Three Months Ended March 31, 2007 Compared With the Three Months Ended March 31, 2006

Net Revenue:

Net revenue increased $5.0 million, or
54%, to $14.3 million for the first quarter of 2007, from $9.3 million for the first quarter of 2006. Net revenue in each of our operating segments during the three months ended March 31, 2007 and 2006 was as follows:



|                              |  |               |      |      |   |    
|----------------------------- |  | ------------- | ---- | ---- | - | ---
|Segment                       |  | 2007          |      | 2006
|                              |  | (in millions)
|Shelters and Related Products |  | $             | 3.6  |      | $ | 8.0
|Personal Protection Equipment |  |               | 2.1  |      |   | 1.3
|SSES Rental Services          |  |               | 8.6  |      |   |   
|                              |  |               |      |      |   |    
|                              |  | $             | 14.3 |      | $ | 9.3
|                              |  |               |      |      |   |    

The increase in consolidated net revenue is primarily attributable to $8.6 million of revenue from
SSES Rental Services, which was acquired during the fourth quarter of 2006. We also experienced an increase in revenue in our Personal Protection Equipment segment of $800,000. These increases were offset by a decrease in revenue in Shelters and
Related Products of $4.4 million, or 55%, which was primarily due to turnover in our sales staff, as well as lower demand in the decontamination market than the corresponding prior period.



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Gross Profit:

Gross profit decreased $2.2 million, or 46%, to $2.6 million for the first quarter of 2007, compared with $4.8 million for the first quarter of 2006. Gross margin as a percentage of net revenue was 17.8% for the first quarter of 2007
compared with 51.4% for the first quarter of 2006. The decrease in the gross margin percentage is primarily due to two causes. First, the first quarter of 2007 incorporates the operating results of our SSES Rental Services segment, which generally
has lower gross margins than our Shelters and Related Products segment. In addition, our SSES Rental Services segment experienced unanticipated project cost overruns during the quarter. Second, significantly lower than anticipated revenue from our
Shelters and Related Products segment resulted in lower gross margins for the segment given the level of fixed manufacturing overhead.

Selling, General
and Administrative:

Selling, general and administrative (SG&A) expense was $5.9 million for the first quarter of 2007,
an increase of $3.4 million, or 140%, compared with $2.5 million for the first quarter of 2006. The increase is primarily attributable to the added SG&A expense of approximately $2.5 million from our SSES Rental Services segment, higher legal
and professional services costs of approximately $600,000 incurred primarily in connection with internal investigations and pending litigation, and accounting and appraisal fees related to the closing of our SSES acquisition.

Research and Development:

Research and development
(R&D) expense was $469,000 for the first quarter of 2007, an increase of $71,000, or 17.8%, compared with $398,000 for the first quarter of 2006. The increase is primarily attributable to costs incurred related to the testing of
filter canisters produced by our new filter canister line.

Operating Income (Loss):

We had an operating loss of $3.8 million for the first quarter of 2007 compared to operating income of $1.9 million for the first quarter of 2006,
reflecting the decline in gross profit and increases in SG&A and R&D expenses. Operating loss was 27% of net revenue for the first quarter of 2007, compared to operating income equal to 21% of net revenue for the first quarter of 2006.

Income Tax Expense (Benefit):

The
effective tax rate (EFT) was 40% for both the first quarter of 2007 and the first quarter of 2006.

Net Income (Loss):

We had a net loss of $2.6 million for the first quarter of 2007, compared with net income of $1.2 million for the first quarter of 2006, reflecting the
decline in gross profit and increases in SG&A and R&D expenses for the first quarter of 2007. Loss per diluted share was $0.08 for the first quarter of 2007, compared with income per diluted share of $0.04 for the first quarter of 2006.

Liquidity and Capital Resources

Management measures our liquidity on the basis of our ability to meet short-term and long-term operational funding needs and to fund additional investments, including acquisitions. Significant factors affecting the management of liquidity
are cash flows from operating activities, capital expenditures, access to bank lines of credit and our ability to attract long-term capital under satisfactory terms.

We expect our currently available cash and investments and our ability to access to our bank credit line if needed, to be sufficient to fund operations, capital expenditures, and working capital needs for the next 12
months.

As of March 31, 2007, working capital was $11.8 million, down from $19.7 million at December 31, 2006. Cash and cash
equivalents and marketable securities available for sale as of March 31, 2007 totaled $558,000, a decrease of 88% from December 31, 2006. Working capital changes are primarily attributable to the decrease in cash and cash equivalents and
marketable securities of $3.6 million and the increase in accounts payable and accrued expenses of $3.7 million.

Accounts receivable as of
March 31, 2007 were $10.9 million, a decrease of $132,000, or 1.2%, from $11.0 million as of December 31, 2006. Days-sales outstanding, or DSO, as of March 31, 2007 was 69 days compared to 71 days as of December 31, 2006. The
decreases in accounts receivable and DSO are primarily attributable to collections of receivables outstanding at December 31, 2006. Generally, we provide Net 30 payment terms to our customers. However, receipt of payments from international and
governmental entities is often delayed and the collection of our receivables from these



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customers can require extra effort and expense. The collection delays have a direct short-term impact on the amount of cash provided by operations during our
reporting periods. The following table reflects additional information related to our accounts receivable at March 31, 2007 (in thousands):



|                                                  |  |                                   |     |              |   |                  |  |   |    
|------------------------------------------------- |  | --------------------------------- | --- | ------------ | - | ---------------- |  | - | ---
|                                                  |  | Accounts Receivable Days Past Due
|                                                  |  | 61 - 90Days                       |     | 91 - 120Days |   | 121 Daysand Over
|Outstanding at March 31, 2007                     |  | $                                 | 900 |              | $ | 261              |  | $ | 908
|Collected through May 3, 2007                     |  |                                   | 733 |              |   | 174              |  |   | 166
|Allowance for doubtful accounts at March 31, 2007 |  |                                   |    |              |   | 29               |  |   | 173

Inventory as of March 31, 2007 was $6.3 million, an increase of 1.1% from December 31,
2006. Annualized inventory turnover was 2.2 times at March 31, 2007 compared to 3.4 times for the year ended December 31, 2006. The increase in inventory and the decrease in inventory turnover are primarily attributable to lower than
anticipated sales in our Shelters and Related Products segment.

The increase in inventory consisted of $199,000 in our Shelters and
Related Products segment and $53,000 in our Personal Protection Equipment segment, offset by a decrease of $110,000 in our marketing demonstration inventory. The increases in inventory at both our Shelters and Related Products and Personal
Protection Equipment segments were the result of raw material purchases associated with unfulfilled and anticipated orders. The decrease in our marketing demonstration inventory primarily relates to amortization, as discussed below. Our marketing
demonstration inventory is excluded from the calculation of our inventory turnover. In addition, we record a reserve against our inventory held for sale and we amortize our marketing demonstration inventory over its three year estimated useful life
to reduce the amounts to the estimated lower of cost or market value. Our reserve has increased by $73,000 since December 31, 2006.

Current liabilities as of March 31, 2007 were $11.4 million, an increase of 48.9% from December 31, 2006. This increase was primarily attributable to the timing of payments to our vendors.

Cash flow provided by operating activities was $522,000 for the first quarter of 2007, compared to $690,000 for the first quarter of 2006. Cash provided
by investing activities totaled $1.1 million for the first quarter of 2007 primarily from a $1.9 million reduction in marketable securities offset by $744,000 in purchases of property, plant and equipment compared to cash used in investing
activities of $273,000 for the first quarter of 2006, primarily from $270,000 in purchases of property, plant and equipment. Cash used in financing activities totaled $3.4 million for the first quarter of 2007 primarily due to payments on debt.

Financing and Security Agreement with Branch Banking & Trust Company. On October 31, 2006, in connection with our
acquisition of Signature Special Event Services, LLC, TVI and certain of its subsidiaries entered into a financing and security agreement and other related agreements (together, the Credit Agreement) with BB&T. The Credit Agreement
provides for a $25.0 million revolving credit facility (the Revolving Facility) and a $10.0 million acquisition credit facility (the Acquisition Facility, and together with the Revolving Facility, the Credit
Facility). Borrowings under the Credit Facility are additionally capped by a loan base which is a function of defined levels of eligible accounts receivable, inventory and net fixed assets. Borrowings under $5.0 million of the Acquisition
Facility (the term loan portion of the Acquisition Facility) bear interest at a rate equal to LIBOR plus 2.25%. Borrowing under the balance of the Acquisition Facility and the Revolving Facility bear interest at a floating rate equal to LIBOR plus a
stated margin of between 1.25% and 2.25% based upon the ratio of TVIs consolidated Funded Debt to consolidated EBITDA as of the end of each fiscal quarter for the immediately preceding four (4) quarters.

The Credit Agreement also provides that BB&T will issue letters of credit for our account in aggregate undrawn amounts of up to $2.0 million. Annual
fees for letters of credit issued for our account will equal 1.25% to 2.25% of the face amount of such letters of credit based upon the ratio of our consolidated Funded Debt to consolidated EBITDA as of the end of each fiscal quarter for the
immediately preceding four (4) quarters. The amount of any outstanding letters of credit issued or committed to be issued by BB&T will reduce, dollar for dollar, the aggregate amount available under the Revolving Facility.

The obligations under the Credit Agreement are secured by a first priority security interest in substantially all of the assets of TVI and certain of its
subsidiaries.

The Credit Agreement contains customary covenants that will, among other things, limit our ability to incur additional
indebtedness, create liens, pay dividends, make certain types of investments, make certain capital expenditures, sell assets, merge with other companies or enter into certain other transactions outside of the ordinary course of business. Among other



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things, the Credit Agreement also requires us to maintain a ratio of EBITDAR (EBITDA plus real property rent or lease expense) to debt service on a
consolidated basis of 1.3 to 1.0 or more on a rolling four quarter basis and a ratio of funded debt to EBITDA on a consolidated basis of 3.0 to 1.0 or less on a rolling four quarter basis (together, the Financial Covenant Requirements).
We notified BB&T that, for the testing period ended as of March 31, 2007, we were not in compliance with the Financial Covenant Requirements (Financial Covenant Requirements Noncompliance) which noncompliance, if not waived by
BB&T, would constitute a continuing event of default under the Credit Facility. Upon an event of default of this nature under the Credit Facility, among other things, BB&T has the right to accelerate the payment of all of the outstanding
indebtedness. BB&T has granted to us a waiver with respect to the Financial Covenant Requirements Noncompliance as of March 31, 2007. No amendments were made to the Credit Facility as a result of the Financial Covenant Requirements
Noncompliance or corresponding grant of waiver by BB&T, however, we have had preliminary and informal discussions with BB&T concerning restructuring the Credit Facility.

We pay a monthly fee equal to an annual rate of 0.20% to 0.35% of the unused Revolving Credit Facility, which rate is based on our consolidated Funded
Debt to EBITDA ratio.

Interest is payable monthly on amounts borrowed under the Revolving Facility and the revolving portion of the
Acquisition Facility (up to a maximum of $5.0 million) with principal and accrued interest due and payable in full on September 30, 2011. Borrowings under the term loan portion of the Acquisition Facility (up to a maximum of $5.0 million) shall
be repaid in 24 monthly payments of principal and interest. The Acquisition Facility will terminate and all amounts owing thereunder will be due and payable on August 31, 2011.

The Credit Agreement provides that advances under the Revolving Credit Facility can be used only for working capital purposes. As of March 31, 2007,
amounts borrowed under the Credit Facility were $23.4 million. As of March 31, 2007, the Company had $8.2 million available to draw under the Revolving Facility based on the loan base calculated as of that date.

We believe that we have adequate production equipment to support our current level of operations. We spent $744,000 on plant and equipment in the three
months ended March 31, 2007 and $2.0 million in the year ended December 31, 2006. These purchases primarily related to the new filter canister manufacturing line and other product expansion initiatives. We will invest in additional
equipment to meet efficiency and delivery requirements should our production levels increase significantly. Additionally, we anticipate incurring capital expenditures for new rental inventory and refurbishing costs for existing rental inventory for
SSES. We currently intend to purchase any such equipment from operating funds; however, we may use funds drawn under the Credit Facility to make such purchases, subject to the availability of such funds under the Credit Facility.

Incentive Bonus Program. We have entered into our Incentive Bonus Program (the Program) that covers three senior SSES employees who
have employment agreements (together, the Participants). The Program consists of an annual bonus based on EBITDA (the EBITDA Bonus), and a separate three-year bonus based on the Companys return on invested capital
related to its acquisition of SSES LLC, payable in 2010 (the Return on Invested Capital Bonus). Any bonus earned under the Program may be paid in any combination of cash and shares as the Company shall elect, provided that at least 35%
of each payment must be in cash and each of the Participants will be entitled to receive one-third of any bonus that becomes payable.

The
Participants collectively will be eligible to receive an annual EBITDA Bonus, if any, for each of 2007, 2008 and 2009 equal to 50% of EBITDA for the acquired business for such year in excess of $3.5 million. Any EBITDA Bonus will be paid within 120
days of the applicable year-end.

The Participants also will be eligible to receive a Return on Invested Capital Bonus payment in 2010
based upon the average quarterly EBIT return for the acquired business measured over a three-year performance period from January 1, 2007 through December 31, 2009 in excess of a hurdle rate. Specifically, the Participants will be entitled
to receive a multiple of 6.6x of one-half of any Excess EBIT Return (before the Participants EBITDA Bonus) for 2007  2009. Excess EBIT Return means a dollar amount obtained by multiplying the difference, if any, by which the actual 2007
 2009 EBIT ratio exceeds a 15% EBIT hurdle ratio times total invested capital (i.e., the adjusted purchase price for SSES, as adjusted for 2007  2009 changes in net working capital and net fixed assets).

Each Participant will be entitled to receive one-third of any Return on Invested Capital Bonus that becomes payable, which may be payable in whole or in
part in the Company common stock, which vests over two years.

The total number of shares of the Companys common stock issuable to
the Participants under the Program, together with any shares issuable to the Participants under any other plan or program of the Company or SSES, shall not exceed 19.9% of the total number of the Companys shares issued and outstanding as of
the closing of the Asset Purchase.

In connection with the acquisition of STI, additional earnout consideration may be payable should
certain conditions be met by STI and its stockholders, including the generation of certain income amounts by STI in the fiscal year ending June 30,



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2007. The maximum amount of earnout payment would be $5.5 million, payable 50% in cash and 50% in the form of restricted Common Stock.

Critical Accounting Policies and Estimates

Note 2 of
the Notes to Consolidated Financial Statements on Form 10-K for the year ended December 31, 2006 describes the significant accounting policies used in the preparation of the Companys financial statements.

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period and related disclosure of contingent liabilities.
Actual results could differ from those estimates.



|Item 3. | Qualitative and Quantitative Disclosures about Market Risk.
|------- | -----------------------------------------------------------

We are exposed to market risk on our variable rate debt under our Credit Facility with BB&T. For variable rate debt, changes in interest rates generally do not influence fair market value, but do affect future earnings and cash flows.
We do not currently use interest rate swaps, futures contracts or options on futures, or other types of derivative financial instruments to mitigate this risk. Based upon the amount of variable rate debt outstanding at the end of the year, and
holding the variable rate debt balance constant, each one percentage point increase in interest rates occurring on the first day of an annual period would result in an increase in interest expense of approximately $234,000 based on the principal
balance under our Credit Facility as of March 31, 2007. Other changes in fair market values as a result of interest rate changes are not currently expected to be material.



|Item 4. | Controls and Procedures.
|------- | ------------------------

Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, our management, with the participation of our Chief
Executive Officer and our Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon
that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------

Seattle Tarp Co., Inc.
(Seattle Tarp) has filed a claim (Arbitration Case) in arbitration in Seattle, Washington with the American Arbitration Association (Case No. 75-181-Y-00070-05 JISI) against TVI and its wholly-owned subsidiary CAPA
Manufacturing Corp. (CAPA). Seattle Tarp alleges that TVIs and CAPAs hiring of a former Seattle Tarp employee (Former STC Employee) resulted in a breach of a confidentiality agreement and the unauthorized use of
Seattle Tarps confidential information under the provisions of Washingtons Uniform Trade Secrets Act and a violation of Washingtons Consumer Protection Act, among other claims. On April 30, 2007, the Arbitrator issued an order
dismissing in part Seattle Tarps trade secret claim and dismissing, in their entirety, Seattle Tarps Consumer Protection Act, unjust enrichment and conversion claims. We do not believe that there is any merit to the remaining claims
asserted by Seattle Tarp and are vigorously defending the matter. We cannot, however, currently estimate the outcome of this matter. In a separate but related matter, Seattle Tarp threatened to file a claim in arbitration against the Former STC
Employee, alleging that the employee breached the terms of an agreement intended to protect his former employer, Seattle Tarp, by accepting employment with TVI. The employee has filed a petition (Civil Action) in the Superior Court of
Washington in and for King County (Case No. 04-2-34129-9 SEA) seeking declaratory judgment that no such breach occurred. Seattle Tarp has filed counterclaims alleging that in connection with his employment at TVI the employee is engaging in the
unauthorized use of confidential information. Seattle Tarp is seeking damages under various theories of liability. The employee is vigorously pursuing the matter, and TVI is currently bearing the employees litigation expenses. The Civil Action
has been consolidated with the Arbitration Case in a single proceeding as part of the Arbitration Case in Seattle, Washington with the American Arbitration Association.



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We are, from time to time, a party to disputes arising from normal business activities, including various
employee-related matters. In the opinion of our management, resolution of these matters will not have a material adverse effect upon our financial condition or future operating results.



|Item 1A. | Risk Factors.
|-------- | -------------

Our business, results of operations
and financial condition are subject to a number of risks, including the risks set forth below. You should carefully consider these risks. Additional risks and uncertainties, including those that are not yet identified or that we currently believe
are not significant, may also adversely affect our business, results of operations and financial condition.

Our business strategy includes capital
expenditures and pursuing strategic acquisitions and investments, which may not prove to be successful and may dilute our current stockholders percentage ownership.

Our business strategy includes making capital outlays, such as for the construction of our filter line, and acquiring or making strategic investments in
other companies with a view to expanding our portfolio of products and services, expanding into new markets and businesses, acquiring new technologies, and accelerating the development of new or improved products. To do so, we may use a significant
amount of our cash reserves, incur debt or assume indebtedness or issue equity that would dilute our current stockholders percentage ownership. On October 31, 2006, we acquired Signature Special Event Services, LLC through our wholly owned
SSES subsidiary for a cash purchase price of $21.75 million, including our working capital adjustment as of the closing. We borrowed approximately $23.5 million under our new credit facility with Branch, Banking & Trust Company
(BB&T) to pay the cash purchase price and pay other amounts in connection with the acquisition and the new credit facility and related expenses and fees. Acquisitions and strategic investments involve numerous risks, including those
associated with the acquisition of SSES. In addition, the operations of SSES are significantly more capital intensive than our other businesses, which may require us to increase our borrowings or use cash resources to fund SSESs operations.

Acquisitions are a key part of our business strategy; however, such acquisitions may not achieve all or any of their intended benefits.

Our acquisitions of STI and SSES involve various risks, including the incurrence of significant new secured indebtedness; the potential that customer
relationships may be adversely impacted resulting in less or no revenue from such customers; the potential loss of key employees; the risk of diverting managements attention from normal daily operations of our existing businesses; potential
difficulties in completing projects or contracts associated with in-process inventory; risks of entering markets in which we have no or limited direct prior experience; initial dependence on unfamiliar supply chains or relatively small supply
partners; and insufficient revenues to offset increased expenses associated with the acquisition. We also may encounter other risks in our acquisition strategy, including:



| |  |  | increased competition for acquisitions, which may increase the cost of our acquisitions;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | our failure to discover material liabilities in target companies; and
| | - |  | ---------------------------------------------------------------------



| |  |  | the failure of prior owners of any acquired businesses or their employees to comply with applicable laws or regulations such as the Federal Acquisition Regulations
and health, safety, employment and environmental laws, or their failure to fulfill their contractual obligations to the federal government or other clients.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In connection with our acquisitions of STI and SSES, as well as future acquisitions, if any, we have and may continue to incur significant acquisition
costs and expenses as well as amortization expenses related to intangible assets. We also may incur significant write-offs of goodwill associated with STI, SSES or other companies, businesses or technologies that we may acquire in the future. Our
operating results could be adversely and materially affected by these costs, expenses and write-offs.

There can be no assurance that our
acquisitions of STI or SSES will be successful and will not materially adversely affect our business, operating results, or financial condition. We must also manage any growth resulting from the acquisitions effectively. Failure to manage such
growth effectively and successfully integrate the operations of STI, SSES or future acquisitions, if any, could have a material adverse effect on our business, financial condition and results of operations.

We may have difficulty integrating the operations of any companies we acquire, which may adversely affect our results of operations.

The success of our acquisition strategy significantly depends upon our ability to successfully integrate any businesses we may acquire, including our
recent acquisition of SSES. The integration of SSES and other businesses we may acquire in the future into our operations may result in unforeseen events or operating difficulties, absorb significant management



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attention and require significant financial resources that would otherwise be available for the ongoing organic development of our businesses. These
integration difficulties could include:



| |  |  | the integration of personnel with disparate business backgrounds;
| | - |  | -----------------------------------------------------------------



| |  |  | the loss of key employees of acquired companies;
| | - |  | ------------------------------------------------



| |  |  | the transition to new information, supply and distribution systems;
| | - |  | -------------------------------------------------------------------



| |  |  | the coordination of geographically dispersed organizations;
| | - |  | -----------------------------------------------------------



| |  |  | the reconciliation of different corporate cultures; and
| | - |  | -------------------------------------------------------



| |  |  | the integration of disclosure and financial reporting controls of acquired companies with our controls and, where applicable, improvement of the acquired
companys controls.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For these or other reasons, we may be unable to retain key clients or to retain or renew
contracts of acquired companies. Moreover, any acquired business may fail to generate the revenues or net income we expected or produce the efficiencies or cost-savings that we anticipated. Any of these outcomes could materially adversely affect our
business, financial condition and operating results.

Our indebtedness under our senior secured credit facility could limit our ability to grow and
compete.

As of March 31, 2007, we had $23.4 million of indebtedness outstanding under our senior credit facility with BB&T.
The facility is secured by a lien on substantially all of our assets. Our indebtedness under the senior secured credit facility could have important consequences to our business. For example, it could:



| |  |  | limit our ability to borrow additional funds or obtain additional financing in the future;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | limit our ability to pursue acquisition opportunities;
| | - |  | ------------------------------------------------------



| |  |  | expose us to greater interest rate risk since the interest rate on borrowings under our senior secured credit facility is variable;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | limit our flexibility to plan for and react to changes in our business and our industry and make us less flexible in responding to changing economic conditions; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | make us more vulnerable to economic downturns and less able to withstand competitive pressures.
| | - |  | -----------------------------------------------------------------------------------------------

Refer to Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources for a discussion of
the terms of and limitations on borrowings under our senior secured credit facility with BB&T.

The agreement governing our senior secured credit
facility contains various covenants that limit our managements discretion in the operation of our business.

Our senior secured
credit facility with BB&T contains various covenants that restrict our ability to, among other things:



| |  |  | obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate or other purposes;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | borrow under the facility based upon borrowing base limitations;
| | - |  | ----------------------------------------------------------------



| |  |  | pay dividends and make other distributions;
| | - |  | -------------------------------------------



| |  |  | merge, consolidate or transfer all or substantially all of our assets; or
| | - |  | -------------------------------------------------------------------------



| |  |  | create liens.
| | - |  | -------------

Our senior secured
credit facility with BB&T also requires that we comply with a ratio of EBITDAR to debt service and a ratio of funded debt to EBITDA, both of which are calculated on a consolidated rolling four quarter basis. As of March 31, 2007, we were
not in compliance with these financial covenants. Although BB&T has granted to us a waiver of our compliance with these covenants and any corresponding event of default as of March 31, 2007, there is no assurance that BB&T will provide
a waiver in the event of any future non-compliance. A failure to comply with these covenants and other provisions of our senior secured credit facility in the future could result in an event of default under the facility, which could, among other
things, permit BB&T to accelerate payment of the debt under the facility.

SSES generally does not have long-term agreements with its customers and
generally does not have a significant backlog of unfilled orders, making its revenue and operating results for any quarter difficult to forecast and substantially dependent upon customer orders received and fulfilled in that quarter.



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SSES generally does not have long-term agreements with its customers. Rather, SSESs revenue derives
from customer business relationships that were historically developed and maintained. If SSES is unable to maintain strong business relationships with these customers or unable to retain key employees that maintain these relationships, TVIs
results of operations or financial condition may be materially and adversely affected. Further, many of SSESs customers place orders for deliveries with little advance notice. These orders generally have no cancellation or rescheduling penalty
provisions. Therefore, cancellations, reductions or delays of orders from any significant customer could have a material adverse effect on our business, financial condition and results of operations.

A significant portion of our sales are to federal, state and local governmental entities, the loss or significant reduction of which would have a material adverse
impact on our business, financial condition and results of operations.

The loss or significant reduction in government funding of
programs in which we participate or the funded agencys decision not to spend appropriated funds could materially adversely affect our future revenues, earnings and cash flows and thus our ability to comply with our financial obligations. U.S.
government contracts are conditioned upon Congress continuing approval of the amount of necessary spending. Congress usually appropriates funds for a given program each fiscal year even though contract periods of performance may exceed one
year. Consequently, at the beginning of a major program, the contract is usually partially funded, and additional monies are normally committed to the contract only if Congress makes appropriations for future fiscal years. State contracts are
generally subject to similar funding considerations. Therefore, if Congress does not appropriate funds for programs under which the government procures our products, the lack of funds may result in a loss or significant reduction of our government
sales. In addition, even if funded, an agency may elect not to spend appropriated funds for various reasons, which may have a similar adverse effect on our business, financial condition and results of operations.

Selling to the U.S. government subjects us to unfavorable termination provisions and other review and regulation.

Companies such as ours that are engaged in supplying defense-related services and equipment to U.S. government agencies are subject to certain business
risks peculiar to the defense industry. These risks include the ability of the U.S. government to unilaterally suspend us from receiving new orders or contracts pending resolution of alleged violations of procurement laws or regulations; terminate
existing orders or contracts; reduce the value of existing orders or contracts; audit our contract-related costs and fees, including allocated indirect costs; and control and potentially prohibit the export of our products.

Because we rely on a limited number of third party distributors for the marketing, sale and support of our products, the termination or disruption of these
relationships may materially adversely affect our business.

We sell the majority of our products through a limited number of
independent distributors and third party sales agents, such as Fisher Scientific Company LLC in the U.S. and Canada, W.W. Grainger, Inc. in the U.S. and Professional Protection Systems Ltd. and OPEC Systems internationally. Approximately 18% and 60%
of our total sales in 2006 and 2005, respectively, were made through Fisher Scientific; approximately 13% and 4% of our total sales in 2006 and 2005, respectively, were made through W.W. Grainger. We anticipate that our distributors will continue to
account for most of our sales in our Shelters and Related Products segment for the foreseeable future. We have a limited ability to influence our distributors marketing efforts and relying on distributors could harm our business for various
reasons, including that the agreements with our distributors may contain unfavorable terms, such as exclusivity provisions or early termination rights; such agreements may terminate prematurely or result in litigation due to disagreements; our
distributors may not devote sufficient resources to the sale of our products or may be unsuccessful in their efforts to sell our products or otherwise impair our reputation; existing relationships with our distributors may preclude us from entering
into new arrangements; and we may not be able to negotiate new distributor agreements on acceptable terms.

We are subject to economic, political and
other risks associated with our international sales, which could materially adversely affect our business.

A portion of our revenue is
generated from the international sale of our products through distributors, predominately in Canada, Western Europe and Australia. Net revenue outside the United States was approximately 10%, 3% and 13% of our total net revenue in 2006, 2005 and
2004, respectively. Our international sales are subject to a variety of factors, including changes in the political or economic conditions in a country or region; future fluctuations in exchange rates; trade protection measures and import or export
licensing requirements; difficulty in effectively managing our international distributors; and differing tax laws and regulatory requirements, and changes in those laws and requirements. If we are unable to adapt to the requirements of our
international customers or the markets in which they operate, we may experience a material adverse effect on our international sales.

The purchase
orders and contracts governing the purchase for our products may commit us to unfavorable terms.



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We generally sell our PAPRs and shelter systems and most other products pursuant to purchase orders
issued by the purchasing party. Although we attempt to ensure that the terms of such purchase orders are acceptable to us, some purchase orders may contain unfavorable terms, such as heightened performance or warranty obligations or return rights.
Additionally, our larger customers may use purchase orders with established terms that are not subject to negotiation or change by us.

Additionally, we generally provide certain products, including our thermal products, through formal contracts with the U.S. and state governments. These contracts generally can be terminated by the government either for its convenience or
if we default by failing to perform under the contract. Termination for convenience provisions provide only for our recovery of costs incurred or committed settlement expenses and profit on the work completed prior to termination. Termination for
default provisions provide for the contractor to be liable for excess costs incurred by the U.S. government in procuring undelivered items from another source. These contracts are generally fixed price contracts, as the price we charge is not
subject to adjustment based on cost incurred to perform the required work under the contract. Therefore, we fully absorb any cost overruns on these fixed price contracts and this potentially reduces our profit margin on the contract. Failure to
anticipate technical problems, estimate costs accurately or control costs during performance of a fixed price contract may reduce our profit or cause a loss on such contracts.

The future growth of our operations, should it occur, could place a significant strain on our management, financial controls, operations systems, personnel, and other resources.

Our ability to manage our future growth, should it occur, will depend in large part upon a number of factors including our ability to efficiently: build
and train sales and marketing staff to create an expanding presence in the rapidly evolving market for our products and services and keep them fully informed over time regarding the technical features, issues and key selling points of our products
and services; build, provide incentives for and support strong distribution channel partners and keep them informed regarding technical features, issues and key selling points of our products and services; develop our customer support capacity for
direct and indirect sales personnel so that we can provide customer support without diverting engineering resources from product development efforts; and expand our internal management and financial controls and the systems supporting such controls,
such as our enterprise resource planning systems, significantly to maintain control over our operations and provide support to other functional areas.

We may not succeed with these efforts. Our failure to grow efficiently could cause our expenses to increase and our revenues to decline or grow more slowly than expected and could otherwise impair our growth.

We may not be able to obtain critical components.

We purchase a number of critical custom components from single source vendors for which alternative sources may not be available. Delays or interruptions in the supply of these components could result in delays or
reductions in product shipments. The purchase of these components from outside suppliers on a single source basis subjects us to risks, including the continued availability of supplies, price increases and potential quality assurance problems. While
alternative suppliers may be available, these suppliers must be identified and qualified. We cannot be certain that any such suppliers will meet our required qualifications or that alternative suppliers can be identified in a timely fashion, if at
all. Consolidations involving suppliers could reduce further the number of component alternatives and affect the cost of such supplies. An increase in the cost of such supplies could make our products less competitive. Production delays, lower
margins or less competitive product pricing could have a material adverse effect on our business, financial condition and results of operations.

Our
future financial performance will depend in large part on the successful development, demand for and acceptance of our products and services.

The market for our shelter, decontamination, PAPRs and other products and systems, as well as the market for our SSES rental services, may not grow, may grow at a slower rate than we expect or may diminish. Furthermore, the market may not
accept our products. If the market fails to perform as we anticipate, or if the market fails to accept our products, our business could suffer.

Additionally, we believe that we must enhance the functionality of our products to maintain successful commercialization and continued acceptance of our product offerings. If we are unable to identify and develop new enhancements to
existing products on a timely and cost-effective basis, or if new enhancements do not achieve market acceptance, we may experience customer dissatisfaction, reduction or cancellation of orders and loss of revenue. The life cycle of our products is
difficult to predict and the market for many of our products is characterized by rapid technological change, changing customer preferences and evolving industry standards. The introduction of products employing new technologies and emerging industry
standards could render our existing products obsolete and unmarketable.



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We are subject to significant government regulation.

The U.S. legal and regulatory environment governing our products is subject to constant change. Further changes in the regulatory environment relating to
the marketing of our shelter, decontamination systems, PAPRs and our other products that increase the administrative and operational costs associated with the marketing of our products or that increase the likelihood or scope of competition, could
harm our business, financial condition and results of operations.

Although we have received NIOSH approval to incorporate our filter
canister into one of our own PAPRs designs, we currently have several commercial filter applications for OEMs under review with NIOSH. If regulatory review and approval takes longer than we anticipate or if NIOSH does not grant the approvals that we
seek, the delay or lack of regulatory approval may have a material adverse effect on our business, financial condition and results of operations.

The regulation of our products outside the United States varies by country. Noncompliance with foreign country requirements may include some or all of the risks associated with noncompliance with U.S. regulation as well as other risks.

The variable and often long sales cycles for our products could cause significant fluctuation in our quarterly and annual results.

The typical sales cycle of our products and services is unpredictable and generally involves a significant commitment of resources by our customers. A
customers decision to purchase our products generally involves the evaluation of the available alternatives by a significant number of personnel in various functional areas and often is subject to delays over which we may have little or no
control, including budgeting constraints, internal procurement and other purchase review procedures and the inclusion or exclusion of our products on customer-approved standards list. Accordingly, we typically must expend substantial resources
educating prospective customers about our products. Therefore, the length of time between the date of initial contact with the potential customer or distribution channel partner and the related sale of our products may be as much as one year, with
the larger sales generally requiring significantly more time. Additionally, the length of time between the date of initial contact and the sale is often subject to delays over which we may have little or no control, including the receipt of
necessary government funding. As a result, our ability to predict the timing and amount of specific sales is limited. If we experience any delay or failure in completing sales, we may incur significant expense without generating any associated
revenue which, if significant, could have a material adverse effect on our business and could cause operating results to vary significantly from quarter-to-quarter.

If we are unable to attract, retain and motivate key management and personnel, we may become unable to operate our business effectively.

We recently accepted the resignations of our former Chief Executive Officer and our former Executive Vice President and have appointed two of our
directors as interim CEO and COO, respectively. We also recently announced that our Senior Vice President and Chief Financial Officer has taken a medical leave of absence and that we have appointed our Controller as acting CFO. There is significant
competition for qualified executive officers and other management personnel and in our search for executive talent we will be competing with companies that are much larger and have much greater financial and other resources than we do. Qualified
executive and other management personnel are in great demand throughout our industry, and our future success depends in large part on our ability to attract, train, motivate and retain highly skilled employees and the ability of our executive
officers and other members of senior management to work effectively as a team. The loss of the future services of any executive officer or the failure to attract and retain the highly trained technical personnel that are integral to our sales,
product development, service and support teams, could have a material adverse effect on our business.

Our products rely on intellectual property
rights. Any failure by us to obtain and protect these rights could enable our competitors to market products with similar features that may reduce demand for our products, which would adversely affect our revenues. Additionally, we could be subject
to claims that our products violate the intellectual property rights of others.

Although we seek to protect our products through a
combination of patent, trade secret, copyright, and trademark law, there is no guarantee that our methods of protecting our intellectual property rights in the United States or abroad will be adequate. Despite our efforts to protect our proprietary
rights, unauthorized parties may attempt to copy or otherwise obtain and use our products or technologies. Policing unauthorized use of our products is difficult, and we cannot be certain that the steps we have taken will prevent misappropriation of
our technology, particularly in foreign countries where the laws may not protect our intellectual property rights as effectively as those in the United States. If we are unable to protect our proprietary technology or that of our customers, our
results of operations and any competitive advantage that we may have may be materially and adversely affected.



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We generally enter into confidentiality or other agreements with our employees, consultants, channel
partners and other corporate partners, and do control access to our intellectual properties and the distribution of our proprietary information. These measures afford only limited protection and may prove to be inadequate. Others may develop
technologies that are similar or superior to our technology or design around the intellectual properties we own or utilize.

We expect that
products may be increasingly subject to third-party infringement claims as the number of competitors in the markets that we serve grows and the functionality of products in different industry segments grows and overlaps. Although we are not aware
that our products employ technology that infringes any proprietary rights of third parties, there has been significant litigation in recent years involving patents and other intellectual property rights, and third parties may assert infringement
claims against us. Regardless of whether these claims have any merit, they could be time-consuming to defend; result in costly litigation; divert our managements attention and resources; cause product shipment delays; or require us to enter
into royalty or licensing agreements, which may not be available on terms acceptable to us, if at all.

A successful claim of product
infringement against us or our failure or inability to license the infringed or similar technology could damage our business because we would not be able to sell our products without redeveloping them or otherwise incurring significant additional
expenses and we may be judged liable for significant damages.

Our products may contain unknown defects that could result in product liability claims or
decrease market acceptance and have a material adverse effect on our business, financial condition and results of operations.

We have
offered, and continue to offer, various warranties on our products. Our products may contain unknown defects or result in failures, which are not detected until after commercial distribution and use. Any of these defects could be significant and
could harm our business, financial condition and results of operations. Any significant defects or errors may result in costly litigation; diversion of managements attention and resources; loss of sales; delay in market acceptance of our
products; increase in our product development costs; or damage to our reputation.

In addition, the sale and support of our products may
entail the risk of product liability or warranty claims based on personal injury or other damages due to such defects or failures. Although we maintain reserves for warranty-related claims that we believe to be adequate, we cannot assure you that
warranty expense levels or the results of any warranty-related legal proceedings will not exceed our reserves. Additionally, although we carry comprehensive general liability insurance and product liability insurance for damages that may arise from
our products, our current insurance coverage may be insufficient to protect us from all liability that may be imposed under these types of claims. Consequently, the marketing of our products entails product liability and other risks and could have a
material adverse effect on our business, financial condition and results of operations.

Intense competition in our industry could limit our ability to
attract and retain customers.

The markets for our products and services are intensely competitive. The markets for our products are
characterized by rapidly evolving industry standards, changes in customer needs and preferences and opportunities relating to technological advancement, and are significantly affected by new product introductions and improvements. The markets for
our services, including SSESs event rental offerings, are characterized by high customer expectations with respect to performance and intense price competition. Many of our existing and potential competitors have longer operating histories,
significantly greater financial, technical, marketing, personnel and other resources, greater name recognition, broader product offerings and a larger installed base of customers than us, any of which could provide them with a significant
competitive advantage. Increased competition could also result in price reductions for our products and services and lower profit margins, either of which could materially and adversely affect our business, financial condition and results of
operations.

We expect to face increased competition in the future from our current competitors. In addition, new competitors or alliances
among existing and future competitors may emerge and rapidly gain significant market share, many of which may possess significantly greater financial, technical, marketing, personnel and other resources.

Our Common Stock is subject to significant price fluctuations.

Effective in August 2004, our common stock was listed and began trading on the NASDAQ Small Cap Market, now known as the NASDAQ Capital Market. Previously, our common stock traded on the OTC Bulletin Board.
Historically, there has been a limited public market for our common stock.

The trading price of our common stock is likely to be volatile
and sporadic and the trading volume of our common stock has fluctuated significantly from day to day during recent periods. The stock market in general and, in particular, the market for so-called micro-cap companies, such as TVI, has
experienced extreme volatility in recent years. This volatility has often been unrelated to the operating performance of particular companies. Volatility in the market price of our common



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stock may prevent investors from being able to sell their common stock at or above the price such investors paid for their shares or at any price at all. In
addition, in the event our operating results fall below the expectations of public market analysts and others, the market price of our common stock would likely be materially adversely affected.

Our common stock may be delisted from the NASDAQ Stock Market, which would likely adversely affect our ability to raise capital and our stockholders ability to
sell their shares

Under NASDAQ Stock Market Rule 4310(c)(4), stocks listed on the NASDAQ Capital Market must maintain a minimum bid
price of $1.00 per share in order to maintain continued listing. Under the rule, if a companys stock closes below the minimum $1.00 per share requirement for 30 consecutive business days, it is subject to potential delisting from the NASDAQ
Capital Market.

As of May 7, 2007, our common stock had closed below the minimum bid price of $1.00 per share for 10 consecutive
business days. If our common stock closes below the minimum bid price for 30 consecutive business days, then we will be notified by NASDAQ that our common stock is subject to delisting and will be given 180 calendar days to regain compliance by
maintaining a bid price of at least $1.00 for 10 consecutive business days thereafter. If the Companys common stock is delisted from NASDAQ, we would seek a listing on the over-the-counter bulletin board, or OTCBB. However, the market
liquidity of the Companys common stock on the OTCBB would be significantly limited, which would reduce stockholders ability to sell Company securities in the secondary market. Additionally, any such delisting would harm the
Companys ability to raise capital through alternative financing sources on acceptable terms, if at all, and may result in the loss of confidence in the Companys financial stability by suppliers, customers and employees. We cannot give
investors any assurance that we will be able to maintain compliance with the $1.00 per-share minimum price requirement for continued listing on NASDAQ or that our common stock will not be delisted by NASDAQ in the future.

We have adopted certain anti-takeover provisions that could prevent or delay a change in control.

Our Articles of Incorporation and Bylaws contain the following provisions: an advance notice provision setting forth procedures governing
stockholder proposals and the nomination of directors, other than by or at the direction of the Board of Directors or a Board committee; and a classified Board structure, generally providing for three-year staggered terms of office for
all members of our Board.

Additionally, in 2003 we adopted a Stockholders Rights Plan, which is designed to enable all TVI stockholders to
realize the full value of their investment and to provide for fair and equal treatment for all TVI stockholders in the event that an unsolicited attempt is made to acquire the Company.

Although we believe that each of the above measures are designed to promote both effective corporate governance and orderly Board deliberations of
important business matters, these provisions may discourage, delay or prevent a third party from acquiring or merging with TVI, even if such action may be considered favorable to some of TVIs stockholders.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds.
|------- | ------------------------------------------------------------

None.



|Item 3. | Defaults upon Senior Securities.
|------- | --------------------------------

None.



|Item 4. | Submission of Matters to a Vote of Security Holders.
|------- | ----------------------------------------------------

None.



|Item 5. | Other Information.
|------- | ------------------

None.



|Item 6. | Exhibits.
|------- | ---------



|               |  |                                                                                                                                                                                                                   
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                       
|10.18          |  | Lease dated as of February 22, 2007 between Signature Special Event Services, Inc. and Welcome Holdings, L.L.C. (incorporated by reference to Exhibit 10.18 of our Form 10-K for the year ended
December 31, 2006)
|               | 
|31.1           |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                               
|               | 
|31.2           |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                               



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|               |  |                                                                                                    
|-------------- |  | ---------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                        
|32.1           |  | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|               | 
|32.2           |  | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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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.



|                  |  |                                                  
|----------------- |  | -------------------------------------------------
|                  |  | TVI CORPORATION                                  
|                  |  | (Registrant)                                     
|                  | 
|Date: May 8, 2007 |  | /s/ Harley A. Hughes                             
|                  |  | Harley A. Hughes                                 
|                  |  | Interim President and Chief Executive Officer    
|                  | 
|Date: May 8, 2007 |  | /s/ Sherri S. Voelkel                            
|                  |  | Sherri S. Voelkel                                
|                  |  | Vice President and Acting Chief Financial Officer



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EXHIBIT INDEX



|               |  |                                                                                                    
|-------------- |  | ---------------------------------------------------------------------------------------------------
|Exhibit Number |  | Exhibit Description                                                                                
|31.1           |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|               | 
|31.2           |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|               | 
|32.1           |  | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|               | 
|32.2           |  | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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