Technology Research (TRCI) 10-K 2010 FY Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Form 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2010

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period            to            

Commission file number 0-13763

TECHNOLOGY RESEARCH CORPORATION

(Exact name of Registrant as specified in its charter)

FLORIDA	59-2095002
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5250-140th Avenue North

Clearwater, Florida 33760

(Address of principal executive offices)

(727) 535-0572

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act:

Common Stock, Par Value $.51 Per Share

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

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 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “accelerated filer” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, as of September 30, 2009, was $15,124,862 based upon the $3.27 closing sale price for the registrant’s Common Stock as reported on the NASDAQ Stock Market System on such date. We have excluded shares of voting and non-voting stock held by executive officers, directors and holders of more than 5% of our Common Stock from this calculation because such persons or institutions may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination of such status for other purposes.

As of June 7, 2010, 6,603,620 shares of the registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive proxy statement related to its 2010 Annual Meeting of Stockholders to be held on August 5, 2010 are incorporated by reference into Part II, Item 5 and Part III of this Form 10-K.

TECHNOLOGY RESEARCH CORPORATION

FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

PART I			1
	Item 1.	Business	1
	Item 1A.	Risk Factors	10
	Item 1B.	Unresolved Staff Comments	16
	Item 2.	Properties	16
	Item 3.	Legal Proceedings	17
	Item 4.	Reserved	17
PART II			17
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	17
	Item 6.	Selected Consolidated Financial Data	19
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	26
	Item 8.	Financial Statements and Supplementary Data	27
	Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	27
	Item 9A.	Controls and Procedures	28
	Item 9B.	Other Information	28
PART III			28
	Item 10.	Directors, Executive Officers, and Corporate Governance	28
	Item 11.	Executive Compensation	28
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	29
	Item 13.	Certain Relationships, Related Transactions, and Director Independence	29
	Item 14.	Principal Accounting Fees and Services	29
PART IV			29
	Item 15.	Exhibits, Financial Statement Schedules	29
SIGNATURES			32
Exhibit 21— Subsidiaries of Technology Research Corporation
Exhibit 23.1 — Consent of Independent Registered Public Accounting Firm-KRMT
Exhibit 23.2 — Consent of Independent Registered Public Accounting Firm-KPMG
Exhibit 31.1 —  Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2 —  Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1 —  Certification of Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2 —  Certification of Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002

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As used in this Annual Report on Form 10-K, “we”, “our”, “us”, the “Company” and “TRC” all refer to Technology Research Corporation and its subsidiary unless the context otherwise requires.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934, and any forward looking statements made herein are based on our current expectations, involve a number of risks and uncertainties and should not be considered as guarantees of future performance. Such statements may be identified by terminology such as “may,” “will,” “should,” “expects,” “scheduled,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “potential,” or “continue,” or the negative of such terms, or other comparable terminology. These statements are only predictions, and actual events as well as results may differ materially.

In evaluating these statements, you should specifically consider the information described in the “Risk Factors”and other documents we file from time to time with the Securities and Exchange Commission such as our quarterly reports on Form 10-Q and our current reports on Form 8-K. Other key factors include, but are not limited to, the acceptance of any new products, such as the voltage booster and network digital switching, the effective utilization of our Honduran manufacturing facility and Far East contract manufacturers, changes in manufacturing efficiencies, the impact of competitive products and pricing and interruptions of or cancellation of existing orders or contracts. We cannot provide any assurance that predicted future results, levels of activity, performance or goals will be achieved, and we disclaim any obligation to revise any forward-looking statements subsequent to events or circumstances or the occurrence of unanticipated events. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and of information currently and reasonably known. All references to fiscal years apply to our fiscal years, which ended March 31, 2010, March 31, 2009 and March 31, 2008.

PART I

ITEM 1. BUSINESS

OVERVIEW

Technology Research Corporation is a recognized leader in providing cost effective engineered solutions for applications involving power management and control, intelligent battery systems technology and electrical safety products based on our proven ground fault sensing andFire Shield® technology. These products are designed, manufactured and distributed to the consumer, commercial and industrial markets worldwide. The Company also supplies power monitors and control equipment to the United States Military and its prime contractors.

TRC was incorporated in Florida in 1981. Our principal offices are located at 5250-140th Avenue North, Clearwater, Florida 33760, our telephone number is (727) 535-0572 and our website can be accessed atwww.trci.net. Information contained or referenced on our website is not incorporated by reference into, and does not form a part of, this Annual Report on Form 10-K.

In fiscal 2010, we undertook a strategic planning process that included a comprehensive review of our existing products, customers and the markets in which we compete over a strategic planning horizon of three years. During this process, it became evident that many of the current markets for electrical safety products in which we compete are mature, with limited opportunities for growth in the future. In order for us to achieve sustainable long-term growth, and increase shareholder value, management believes we must move into markets that allow for higher margins and less commoditization. We intend to continue to focus resources on our key market sectors: military, transportation/specialty vehicle, and industrial/commercial markets. These markets have many of the same needs and will allow us to converge much of our development talent to product platforms that will serve each of these markets. We will continue to take advantage of our positions in the mature military mobile generator set and ground fault sensing markets which should generate substantial cash flow over the next three years. This cash flow will help us transition the business to include higher-growth markets that will sustain revenue growth in future years as the markets for our electrical safety products mature. We have undertaken a number of initiatives to lower costs, improve asset turnover and reduce our risk. These initiatives include, but are not limited to, (i) simplifying our product line, (ii) designing standard product platforms, (iii) expanding the utilization of our operations in Honduras, and (iv) developing new designs and operations software to improve quality, accelerate product development and reduce the cost of our redesigned products.

Over our three-year strategic horizon, our plan is to be a profitable niche player in the power management and power storage markets with projected double-digit growth rates. Management believes this will require us to develop skills to migrate from an electromechanical ground fault company to a microprocessor-based developer of power products that serve our military, transportation/specialty vehicle, and industrial markets. We intend to develop or acquire skills that focus on four key technologies to drive growth. These include:

• Products that convert Alternating Current (AC) to Direct Current (DC) and convert DC to AC

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With the proliferation of electronics products, the use of inverters is continuing to grow. The latest technology to support these electronics devices is generally referred to as pure sine wave, a process which converts DC power to AC power. While we currently build pure sine wave inverters for military generator sets, these products use older electromechanical technologies that are not competitive in a commercial or renewable energy environment. Although our use of this technology historically has been focused on military generator sets, we intend to expand our capabilities to utilize this technology for our inverter products.

• Converting AC power into DC power while optimizing the life of the batteries being charged.

The demand for battery charging products continues to rise for consumers, industrial and military applications. We intend to utilize our in-house skills, together with acquired engineering talent to enhance our development of this technology. Our experience and capabilities in serving the military sector provides us with an excellent entry into this market.

• Developing intelligence and communications products through the use of microprocessor based technology.

By upgrading and developing our firmware and through the expansion of engineering resources, we plan to expand our Network Digital Switching (NDS) multiplexing product line in fiscal year 2011.

• Power management and distribution technologies.

With TRC’s experience in developing electrical safety products that provide ground fault sensing capabilities, we intend to transition our product mix to include products utilizing intelligent power distribution for the use of micro grid applications for the military and commercial market segments.

On March 31, 2010, we completed an acquisition of all of the common stock of Patco Electronics, Inc., a Titusville, Florida based company (“Patco”). Patco designs and manufactures battery management tools for secondary or re-chargeable batteries in several battery chemistries, including lead acid and lithium ion. Patco’s product solutions support customers in military, commercial and industrial sectors. The acquisition of Patco greatly enhances our ability to convert AC power into DC current that optimizes the life of the batteries being charged, thereby enabling us to take advantage of one of the four technologies identified in our strategic plan to drive business growth. For its calendar year ended December 31, 2009, Patco revenue was approximately $6 million and its net income was approximately $1.7 million.

We plan to pursue our operating strategy; however, actual results could differ materially from those projected or assumed in any of our forward-looking statements within this report. Our future financial condition and results of operations, as well as our operational and financial expectations, are subject to inherent risks and uncertainties. Some, but not all, of the factors impacting these risks and uncertainties are set forth below in the section entitled “Risk Factors.”

We file reports with the Securities and Exchange Commission (“SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. Copies of our reports filed with the SEC may be obtained by the public at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549, or by calling the SEC at 1-800-SEC-0330. The information provided on our website is not part of this report, and is therefore not incorporated by reference unless such information is otherwise specifically referenced elsewhere in this report.

GENERAL

We make available free of charge through our website at www.trci.net, via a link to the SEC’s website at www.sec.gov, our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after such materials are electronically filed with, or furnished to, the SEC. You may also obtain free copies of these materials by contacting our Chief Financial Officer, Thomas G. Archbold, at our mailing address of 5250 - 140th Avenue North, Clearwater, Florida 33760, telephone (727) 535-0572.

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Revenue (in thousands) contributed by commercial and military products and royalties from license agreements are as follows:

Year ended March 31,	Commercial		%	Military		%	Royalties		%	Total
2010	$	14,709	42.2	$	19,706	56.6	$	418	1.2	$	34,833
2009		18,582	55.1		14,674	43.5		477	1.4		33,733
2008		22,680	61.0		14,152	38.1		328	0.9		37,160
2007		26,471	69.7		11,521	30.3		—	0.0		37,992
2006		32,250	70.7		13,370	29.3		—	0.0		45,620

Our backlog of unshipped orders as of March 31, 2010 was approximately $9.2 million, as compared to approximately $15.2 million as of March 31, 2009. This backlog consists of approximately 19% of commercial product orders and approximately 81% of military product orders, including approximately $2.3 million from Patco, all of which are expected to ship within the year ending March 31, 2011. The decrease in backlog is principally due to our prime military customer releasing full calendar year orders prior to the closing of our fiscal 2009 year, resulting in the prior year backlog being uncharacteristically high. Our unshipped backlog orders include orders for products where written customer requests have been accepted and the delivery of products is anticipated within the next 12 months. Our policy is to make adjustments to our backlog to reflect, among other things, customer delivery date changes as well as order cancellations. We schedule production based upon purchase orders in backlog and our customer’s delivery requirements. Generally, our orders may be changed, rescheduled or cancelled with limited penalties prior to shipment, although our military backlog is generally non-cancellable. For these reasons, our backlog at any particular date is not necessarily indicative of future sales for any succeeding period.

Commercial Products and Markets

Core Commercial Products. Our core commercial business was developed out of the demand for the following Underwriters Laboratories (“UL”) classifications of ground fault protective devices: Ground Fault Circuit Interrupters (“GFCI”); Equipment Leakage Current Interrupters (“ELCI”); Portable Residual Current Devices (“PRCD”); and Leakage Current Detection Interrupters (“LCDI”).

Ground fault protective devices help protect against the hazards of fire and electrical shock that result when water comes in contact with electrically “live” conductors or when faulty electrical grounding is found in old or damaged extension cords, appliance cords, house wiring and electrical equipment. The demand for our commercial products has resulted from the National Electrical Code (“NEC”) requirements, UL product standards and voluntary efforts by industry to improve the electrical safety of commercial products.

Electrical safety is compromised when a ground fault occurs, which is a condition where electric current finds an abnormal path to ground, such as when a power tool comes in contact with water while plugged into a live outlet or when it is damaged in such a way as to cause internal wiring to come in contact with exposed metal parts allowing electricity to pass through the user of that power tool. Upon such occurrence, the entire device can become as electrically alive as the power line to which it is attached. If a person is touching such a live device while grounded (by being in contact with the ground or, for example, a metal pipe, gas pipe, drain or any attached metal device), that person can be seriously or fatally injured by electric shock. Fuses or circuit breakers do not provide adequate protection against such shock, because the amount of current necessary to injure or kill a human or animal is far below the level of current required for a fuse to blow or a circuit breaker to trip.

Our GFCI, ELCI and PRCD products are all ground fault devices providing protection from dangerous electrical shock by sensing leakage of electricity and cutting off power. Ground fault devices are currently available in three types: circuit breaker, receptacle and portable. We specialize in the portable types of these products. Ground fault devices constantly monitor electric current, and as long as the amount of current returning from the device is equal to the amount that is directed to the device, the GFCI performs no activities. Conversely, if there is less current coming back than there is flowing into the device, some portion must be taking a path through a foreign body, thereby creating a hazard. Upon recognizing that condition, the ground fault device terminates the flow of electricity instantaneously. Ground fault devices range in rating from 120V/15A to 600V/80A (the largest are part of our unique HD-PRO family of products).

Our LCDI devices are intended to reduce the risk of electrical fires by disconnecting power when sensing current leakage between conductors of power cords. OurFire Shield® product lines are approved in the UL classification of LCDIs. Several years ago, both government and industry research into the major causes of fire led to a search for new, cost-effective methods to prevent electrical fires. In response to this need, we developed and patentedFire Shield®, a product designed to prevent fires caused by damaged or aging appliance power supply cords and extension cords, which have been identified as a leading cause of electrical fires.

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OurFire Shield® technology currently addresses four distinct market applications: (i) theFire Shield® Power Surge Strip - a consumer product; (ii) theFire Shield® Safety Circuit - an OEM product; (iii) theFire Shield® Power Cord - an OEM product; and (iv) theFire Shield® Safety Extension Cord - a consumer product.

Our line ofSurge Guard™ andSurge Guard Plus™ products are designed to meet the rigorous requirements of the recreational vehicle (“RV”) market. These products provide power protection and have both OEM and after-market applications. In addition, we have introduced the Surge Guard Automatic Transfer Switch, which incorporates a transfer switch into the functionality of our Surge Guard products, thus eliminating the need for two separate products.

Our 30 Amp and 50 Amp Surge Guard RV Voltage Regulators are part of our power protection product line and used in recreational vehicles to provide a reliable source of power when experiencing low RV park input voltage. This product automatically and continually monitors line voltage conditions and will boost voltage to an acceptable level to help prevent low voltage damage to the RV’s appliances and electronic devices.

In fiscal 2010, we introduced a network digital switching product family for the RV and specialty transportation vehicle markets that eventually will provide power management of lighting, transfer switches, room slide-outs, pumps, awnings, security features , diagnostics and other user information. These products are microprocessor control based and rely upon embedded software (firmware) to provide programmable devices that can communicate reducing wiring and harnessing requirements throughout the vehicle.

Research, Development and Engineering

We place substantial emphasis on new product development and believe that continued investment in product development is required to maintain and improve our competitive position. Our product development activities emphasize new proprietary products, enhancement of existing products and process technologies. Our research and product development activities occur in Clearwater, Florida and in Titusville, Florida. Our Engineering Department is engaged in designing and developing new commercial and military products and improving existing products to meet the needs of our customers.

In connection with our efforts to develop new products, we have directed our focus on “Engineer to Engineer” type solutions. What this means is that we are working on long term type contracts where we supply our technology to other OEMs for the equipment and products they manufacture. The OEM equipment can be for commercial, industrial or military applications, but is usually application specific in nature. We have developed a power management system architecture that can be used for power management of lighting, transfer switches, room slide-outs, pumps, awnings security features, diagnostics and other user information. In fiscal 2011, we will continue to roll-out our Network Digital Switching product line which is microprocessor based, one of the key strategic initiatives that we identified in our strategic planning process.

In addition to our focus on new product development, we continue to look at ways to reduce cost and improve the value proposition to our customers with our existing products.

We spent $2.6 million, $2.4 million and $1.9 million in fiscal 2010, 2009 and 2008, respectively, on research, development and engineering activities, and we anticipate spending levels at approximately 7% of revenue in fiscal 2011. All engineering activities are expensed as incurred.

Marketing, Sales and Distribution

Our products are sold throughout the world, primarily through an in-house sales force, through product licensing agreements and sales and marketing agreements. We will continue to market existing and new products through these channels. In addition, we are looking for other viable channels through which to market our products. We rely heavily upon the marketing skills and experience, as well as the business experience, of our management personnel in marketing our products.

We complement our sales and marketing activities through the use of additional distributors and sales representative organizations. Our sales efforts in the industrial/construction market is supported by utilizing approximately 30 independent sales representatives who sell to over 1,500 electrical, industrial and safety distributors. The majority of our sales, however, are made through our in-house sales force. We exhibit our products at numerous trade shows, which have resulted in new commercial markets including the recreational vehicle industry and the appliance industry.

We also market through OEMs, both domestically and internationally, that sell our products as a component of an end user product or under their own brand names (“private label”). We continue to implement a “value-add” upgrade strategy, which provides a finished product to those who private label our products and who are currently only receiving subassembly modules. Our plastic and receptacle molding capabilities are a key factor in providing “value add” upgrades to our customers.

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Commercial/Industrial Markets. We market and sell our GFCI, ELCI (including the heavy duty HD-PRO products), LCDI and our cable protection and management products to the commercial/industrial market. This market is served by over 1,500 electrical and safety distributors and a number of catalogers. These electrical distributors include branches of major chains as well as smaller independent distributors. Catalogers range from safety to industrial and electrical suppliers. We also make private label products for a number of industry leaders to help penetrate this market.

Consumer/Retail Markets. We currently market and sell various portable GFCI, LCDI and other specialty products to the consumer market. Our major retail customers include Wal-Mart, Home Depot, Meijers, and Ace Hardware, as well as with many independent retailers. Our products are also being offered through magazines, catalogs and E-commerce retailers such as Amazon.com. We continue to have success selling our aftermarket RV Surge Guard products through retailers such as Camping World and distributors. We are now one of Camping World’s top 30 suppliers.

In fiscal 2010, we continued our growth and marketing in niche markets such as in the college and university segment of the consumer market with ourFire Shield® LCDI products. A number of colleges and universities are either mandating, or strongly suggesting the use of LCDI protected extension cords and surge strips on campus. In turn, this helps drive our revenue through retailers.

Original Equipment Manufacturers (OEMs). We primarily sell GFCI, ELCI, LCDI and RV Surge Guard and Surge Guard Plus products to this market. The OEM market can also be significantly impacted by new and revised product standards as outlined below:

Impact of New and Revised Product Standards. The NEC requires ground fault protection for many applications, which are enforced by OSHA and local government building codes and adhered to by most manufacturers. We presently focus our marketing efforts in certain spot markets, which have developed in response to NEC imposed requirements. The NEC requirements are often incorporated into UL product standards.

An important change in OSHA Regulations in 2007 broadened the requirements for using portable GFCIs in most industries. This new regulation extends GFCI use requirements for the first time to OSHA’s General Industry category of businesses which cover most of the rest of U.S. industry with the exception of agriculture, mining and maritime. Now, in order to comply with OSHA Regulations, a great deal of maintenance, remodeling or repair activities involving buildings, structures or equipment must be done with workers using GFCI protected equipment. Our sales personnel and representative organizations are finding a significant amount of new opportunities for sales of the Company’s Shock Shield® and TRC Power products to industrial supply distributors. Other distribution channels catering to buyers of equipment and supplies throughout U.S. industry are also being targeted.

License Agreements. From time to time, we enter into license and sales and marketing agreements concerning our portable GFCI, ELCI and LCDI products. These agreements are intended to assist our market penetration into those areas where it would be difficult for us to compete on a direct basis and provide the best return on investment to us.

Military Products and Markets

We design and manufacture products for sale to the military engine generator set controls market. Our expertise in this area is well-known, and our performance in product quality and delivery to the United States military and its prime contractors have resulted in our being recognized as a leader in this industry. The Defense Logistics Agency established a program rating system for its suppliers in 1995 for product quality, packaging and on-time deliveries, and since its inception and for the fourteenth straight year, we have been honored as a Best Value Medalist for the highest rating Gold Category, which signifies our commitment to military contract performance.

We are currently a supplier of control equipment used in engine generator systems purchased by the United States military and its prime contractors. The term “control equipment” refers to the electrical devices used to control the electrical power output of the generating systems. In general, the controls monitor and regulate the operation of engine generator mobile electric generating system sets. Electric generating systems are basic to all branches of the military, and demand is generally less volatile than products utilized in armaments and missiles. Sales are made either directly to the government for support parts or to prime contractors for new production electric generator sets which incorporate our products. We are a qualified supplier for more than 50 control equipment products as required by the U.S. Department of Defense and serve as a supplier of the following types of control equipment, among others: protective relays and relay assemblies, instrumentation transducer controls, fault locating panel indicators, current and power transformer assemblies for current sensing control and instrumentation, motor operated circuit breaker assemblies and electrical load board and voltage change board assemblies. These products are also furnished for spare parts support for existent systems in the military inventory.

In 1989, we completed the redesign of the control equipment related to the 5/10/15/30/60KW Tactical Quiet Generator (“TQG”) Systems programs. We are actively supplying these parts to DRS Technologies, Inc. (“DRS”) and L-3 Communications Inc., who are the prime contractors. In addition, we are also supplying to DRS control equipment related to the 3KW and the 100-200KW TQG systems program which first began in November 1998. The 3KW program, which accounted for approximately $3.7 million in fiscal 2010 revenue, is currently under contract with DRS Technologies until 2012 and is expected to be part of a

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competitive procurement by the Army for a follow-on contract potentially running through 2017. We are actively involved with Letterkenny Army Depot in support of overhauling and refurbishment of the 3KW power inverters being returned from Iraq and Afghanistan. We also supply products for maintenance and spare parts support directly to the U.S. military.

We furnish various types of A.C. power voltage and frequency monitors to the military for its U.S. Navy vessels. These monitors provide system protection for the 400 Hz. electrical distribution systems that are used on all classes of U.S. Navy surface vessels, such as minesweepers, destroyers, guided missile cruisers and aircraft carriers in addition to other types of naval vessels. The monitors meet the environmental and stringent U.S. Navy high shock, vibration and endurance testing requirements, and they are furnished for new vessel production, retrofit upgrades and existing vessel replacement parts support.

Our newly acquired subsidiary, Patco, designs and manufactures battery management tools for secondary or re-chargeable batteries in several battery chemistries, including lead acid and lithium ion. Patco’s product solutions support customers in military, commercial and industrial sectors. To date, Patco’s revenue has been concentrated in military training commands both domestically as well as internationally.

Our contracts with the U.S. Government are on a fixed-price bid basis. As with all fixed-price contracts, whether government or commercial, we may not be able to negotiate higher prices to cover losses should unexpected manufacturing costs be incurred. All government contracts contain a provision that allows for cancellation by the government “for convenience.” However, the government must pay for costs incurred and a percentage of profits expected if a contract is canceled.

Testing and Qualification

A number of our commercial products must be tested and approved by UL or an approved testing laboratory. UL publishes certain “Standards of Safety” which various types of products must meet and requires that specific tests be undertaken to ascertain whether the products meet the prescribed standards. If a product passes these tests, it receives UL approval. Once our products have been initially tested and qualified by UL, they are subject to regular field checks and quarterly reviews and evaluations. UL may withdraw its approval for such products if they fail to pass these tests and if prompt corrective action is not taken. Our portable electrical safety products have received UL approval. In addition, certain of our portable GFCI and ELCI products have successfully undergone similar testing procedures conducted by comparable governmental testing facilities in Europe, Canada and Japan. We are a member of several committees (UL, IEC, NEMA, CANENA) relating to the establishment of standards requirements for electrical safety devices for both global and North American markets. We also serve on committees for the Recreational Vehicle Industry Association, the Recreational Vehicle Aftermarket Association and the Government Liaison Committee for the Electrical Generating Systems association.

Our military products are subject to testing and qualification standards imposed by the U. S. Government. We have established a quality control system, which has been qualified by the United States Department of Defense to operate under the requirements of a particular specification (MIL-I-45208). To the extent we design a product that we believe meets those specifications, we submit the product to the responsible government-testing laboratory. Upon issue of the qualification approval and source listing, the product is rarely subject to re-qualification; however, the U. S. Government may disqualify a product if it is subject to frequent or excessive operational failures. In addition, our governmental contracts provide that the current specifications and requirements could be changed at any time, which could require us to redesign our existing products or to develop new products which would have to be submitted for testing and qualification prior to their approval for purchase by the military or its prime contractors. Certain contracts also require witness testing and acceptance by government inspectors prior to shipment of the product.

Our wholly-owned foreign subsidiary, TRC/Honduras S.A. de C.V., is an ISO 9000:2000 certified manufacturing facility and an approved supplier to several major corporations, and holds UL, Canadian Standards Association (“CSA”) and the German standards association, Verband Deutsher Elektrotechniker (“VDE”), approvals.

Our manufacturing facility in Clearwater, Florida is an ISO 9000:2008 certified manufacturing facility.

Environmental Regulations

Our operations involve the use of hazardous and toxic materials and are subject to federal, state and local laws governing the use, storage and handling of such materials. We fall under the Conditionally Exempt Small Quantity Generators Rule as defined by the Environmental Protection Agency (“EPA”) due to the small amounts of hazardous waste we generate each year, and the cost of disposing such materials is not material to our financial condition, results of operations or cash flows. We believe we are in general compliance with these regulations and that we have obtained all necessary permits to operate our business.

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Design and Manufacturing

We currently design almost all of the products that we produce and generally will not undertake special design work for customers unless we receive a contract or purchase order to produce the resulting products. A significant number of our commercial and military electronic products are specialized in that they combine both electronic and magnetic features in design and production. As we begin to execute on our strategic plan and introduce intelligent products to the marketplace, more of our added-value is in the firmware, which is proprietary and difficult to copy.

The business of an electronics manufacturer primarily involves assembly of component parts. We mold most of our own plastic parts for our commercial product lines at our manufacturing facility in Honduras. The remainder of the products that we manufacture is assembled from component parts that are produced or distributed by other companies.

Our wholly-owned subsidiary, TRC/Honduras, S.A. de C.V., manufactures most of our high-volume products sold in the U.S. TRC/Honduras, S.A. de C.V. leases 47,000 square feet of property which is located in ZIP San Jose, a free trade zone and industrial park, located in San Pedro Sula, Honduras. We also manufacture some component parts for our military business in Honduras as well. The benefits of being located in a free trade zone include no Honduran duties on imported raw materials or equipment, no sales or export tax on exported finished products, no U.S. income taxes incurred for any profits generated by the subsidiary, and various other benefits. We utilize our subsidiary in Honduras and Asian contract manufacturers to provide quality products to customers at our most competitive prices

Our newly acquired wholly-owned subsidiary, Patco, is engaged in the design and manufacture of intelligent battery management tools in its Titusville, Florida facility. The battery cells packaged by Patco are purchased from third part manufacturers and are delivered to Patco as sealed cells.

We continue to manufacture our military products and distribute certain of our commercial products, which are manufactured off-shore, through our 43,000 square foot facility in Clearwater, Florida.

Patents and Trademarks

Our policy is to seek patents on inventions relating to new or enhanced products and processes developed as part of our ongoing research, engineering, manufacturing and support activities. We seek to protect our products and technologies primarily through patents, trade secrecy measures, copyrights, trademark registrations, licensing restrictions, confidentiality agreements and other contractual arrangements that are designed to protect our proprietary information. No assurances can be given that others will not independently develop competitive technology that is not covered by our intellectual property rights or that any measures that we take to protect our proprietary products will be effective. We currently own and hold a number of U.S. patents related to certain products, of which five have been issued in the past two years. We have also filed other patent applications and are awaiting action on those applications. Our U.S. patents are valid for 14 to 20 years depending on the type of patent and the effective date of application. There can be no assurance that pending patent applications or other application that we may file will result in issued patents, or that any issued patents will survive challenges to their validity.

The lives of certain patents, related to our ground fault technology, have expired, or will expire within the next few years which could affect our business in certain markets. We believe the success of our business depends on our technical and engineering expertise, and marketing and service abilities of our employees. We vigorously protect our patents, but there can be no assurance that others will not independently develop similar products, duplicate our products or design around the patents issued to us.

We have registered our TRC® trademark with the U.S. Patent and Trademark Office. Our Shock Shield®, Electra Shield® and Fire Shield® brand names are also U.S. registered trademarks. Our industry is commonly exposed to claims and litigation involving patent and other intellectual property rights, including claims for indemnification arising out of contractual arrangements with customers. Litigation is often necessary to enforce patent rights or other intellectual property rights.

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Major Customers and Exports

Significant customers who accounted for 10% or more of our revenue, and aggregate exports were:

	Years ended March 31,
	(In thousands)
Customer	2010		2009	2008
U.S. Military (direct sales)	$	4,325	3,517	6,400
DRS Technologies, Inc., a U.S. Government Prime Contractor		11,423	10,251	6,986
Total Revenue for major customers	$	15,748	13,768	13,386
Exports:
Africa	$	3	1	1
Australia		—	2	1
Canada		35	63	62
Europe		1,413	2,000	1,921
Far East		83	1,548	2,189
Mexico		13	125	526
Middle East		23	28	17
South America		10	27	13
Total exports	$	1,580	3,794	4,730

Our military product sales are primarily to military procurement logistic agencies for field service support on previously shipped military equipment and to OEM prime contractors of electric generators. In fiscal 2010, military revenue was approximately 57% of total revenue, compared to approximately 44% in fiscal 2009 and 38% in fiscal 2008. In fiscal 2010, year to year direct sales to the U.S. military increased approximately 23%, sales to DRS increased approximately 11%, and overall, military revenue increased approximately 34% from fiscal 2009 to fiscal 2010. When comparing fiscal 2009 with fiscal 2008, direct sales to the U.S. military decreased approximately 45%, sales to DRS increased approximately 47%, and overall, military revenue increased approximately 3%. Direct U.S. military revenue accounted for approximately 13% of our total revenue while DRS accounted for approximately 33% of our total revenue for fiscal 2010, as compared to approximately 10% and 30%, respectively, for fiscal 2009, and approximately 17% and 19%, respectively, for fiscal 2008. Additionally, in fiscal 2010, DRS also contracted with us through subcontractors, which combined with DRS revenue, would have accounted for 37% of our revenue in fiscal 2010.

Our exports were down approximately 58% in fiscal 2010, as compared to the prior year, primarily due to our decision to exit the room air conditioner (“RAC”) business in June 2009 and to rely upon a licensing strategy for this market.

We offer our customers no specific product liability protection except with regard to those customers that are specifically named as “Broad Form Vendors” under our product liability coverage. We do extend protection to purchasers in the event there is a claimed patent infringement that pertains to our portion of the final product that is purchased. We also carry product and general liability insurance for protection in such cases.

Competition

Our commercial and military business is highly competitive.

In the commercial market, we have significant competition. As a result, we may not be able to maintain current profit margins due to price erosion. We believe, however, that our product knowledge, patented technology, ability to respond quickly to customer requirements, positive customer relations, technical background, industry experience and implementation of our global manufacturing strategy and cost reduction efforts are major operational areas where we are able to effectively compete.

In the military market, we must compete with other companies, some being larger and some smaller than we are and acting as suppliers of similar products to prime government contractors. We believe that our knowledge of the procurement process, engineering and technical support, price and delivery are major competitive factors in the military market. We believe that we have competitive strengths in all of these areas due to senior management’s involvement in the government procurement process and experience in the design engineering requirements for military equipment. A substantial portion of spare parts procurement by the U.S. Department of Defense is set aside for small business concerns, which are defined in general as entities that do not exceed 750 employees. Because we are classified as a small business concern, we qualify for such set aside procurements for which larger competitors are not qualified. The entry barriers to the military market are significant because of the need, in most cases, for products to pass stringent government tests and qualifications.

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Employees

As of March 31, 2010, we employed 85 persons on a full time basis at our headquarters in Clearwater, Florida, 426 persons at our subsidiary in Honduras and 18 at our newly acquired Patco subsidiary. Due to the seasonality of portions of our business and the production requirements placed on our facility in Honduras, the number of personnel may vary significantly from the first half of the fiscal year compared to the second half of the fiscal year.

None of our employees are represented by a collective bargaining unit, and we consider our relations with our employees to be stable. While we believe we have established good relations with the local labor force in both the United States and Honduras, our reliance upon a foreign manufacturing facility subjects us to risks inherent in international operations. Competition for management, technical, manufacturing, sales and support personnel is intense, and there can be no assurance that we will be successful in attracting or retaining such personnel.

Executive Officers of the Registrant

Set forth below is information related to our executive officers and their ages as of March 31, 2010.

Name	Age	Position
Owen Farren	59	Chairman of the Board, President and Chief Executive Officer
Raymond B. Wood	75	Senior Vice President and Director of Government Operations and Marketing
Thomas G. Archbold	50	Vice President of Finance and Chief Financial Officer
J. Bradley Freeman	46	Vice President of Operations
Douglas B. Tilghman	48	Vice President of Engineering

Owen Farren has been Chairman of the Board of Directors since November 2007, a Director of the Company since February 2007, and President & CEO since January 2007. Prior to joining TRC he was the President of StratEx an interim management and turnaround firm from 2002 to December 2006. From 1990 to 2002, he worked at SL Industries (AMEX:SLI) a power electronics and motion control company where he served as Chairman, President & CEO. From 1983 until 1990, he worked for Simco Company, a static control company and a unit of Illinois Tool Works Inc. (NYSE:ITW), where he served as President. Mr. Farren has an MBA in Finance and a BS in Marketing both from Indiana University.

Raymond B. Wood, a founder of the Company, has been a Director of the Company and Senior Vice President and Director of Government Operations and Marketing of the Company since its inception in 1981. From 1974 to 1981, he was Manager of Engine Generator Component Marketing for Square D Company. He was employed by Electromagnetic Industries, Inc. for 17 years prior to its acquisition by Square D Company. During this time, he held the position of General Manager of Electromagnetic Industries of Georgia Inc., the systems manufacturing plant for military products such as diesel generating systems, generators, controls, semi-trailers, etc. Previous assignments included service as Project and Design Engineer for military products produced by Electromagnetic Industries Inc. Mr. Wood is a charter member of the industries association, Electrical Generating Systems Association (“EGSA”), has served on its Board of Directors and has been the Chairman of the Government Liaison Committee for over 30 years. Mr. Wood is also a member of the U.S. Naval Institute and the National Defense Industrial Association. For over 45 years, he has been involved in design, manufacture and qualification conformance evaluation for listing by the Department of Defense, marketing and product application concerning control and measurement of electric power for Mobile Ground Power Military Engine Generator Systems, and electrical power controls for Naval Shipboard and Military Armored Tracked Vehicle application. During such period, Mr. Wood has had extensive experience with the military procurement, contract administration, engineering and test qualifying locations, as well as with the government prime contractors to the Department of Defense. Mr. Wood has served on numerous ad hoc committees for military engine generator specification review requirements and is frequently consulted for solutions to problems encountered with military engine generator systems by both the military and prime contractors to the Department of Defense.

Thomas G. Archboldwas appointed, effective as of November 17, 2008, our interim Chief Financial Officer and interim Principal Accounting Officer. Prior to joining TRC in October 2008, Mr. Archbold served as a consultant to Taylor White Specialized Staffing Services, Inc., an accounting and financial placement servicing firm. Effective as of December 15, 2008, our Board approved the appointment of Mr. Archbold as our Vice President of Finance and Chief Financial Officer. From April 2004 to August 2007, Mr. Archbold served as Chief Financial Officer of HMS Holdings Corp. (NASDAQ:HMSY), a publicly held

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provider of cost management services for government sponsored health and human services programs. From August 2002 to April 2004, Mr. Archbold served as Controller of HMS Holdings Corp. Mr. Archbold began his career with Ernst & Young (1982-1991) where he served as a Senior Manager. Mr. Archbold received a BS in Professional Accountancy from CW Post College in 1982.

J. Bradley Freemanjoined TRC in April 2008 as our Vice President of Operations and has been an executive officer of TRC since August 2008. Prior to joining TRC, he held the position of Vice President of Operations at R2 Technology, a medical device manufacturer. His responsibilities at R2 included supply chain management, operations, customer service and information technologies. Prior to R2, he worked at Siemens Medical, Ultrasound Division from April 2000 until April 2005, where he held positions as Chief Information Officer and Vice President of Strategic Purchasing. Mr. Freeman holds a BS in Political Science from Florida State University.

Douglas B. Tilghmanjoined TRC in October 2007 as our Vice President of Engineering and has been an executive officer of TRC since August, 2008. With over 22 years of experience in electronics hardware and firmware, he most recently was Director of Engineering at both Laird Technologies (electromagnetic shielding) and S. L. Waber/S. L. Industries (surge protection). Mr. Tilghman also spent 3 years as a full time Professor of Electrical Engineering at Lehigh Carbon Community College and as an Adjunct BSET Coordinator/Professor for Temple University. Prior to this, he spent five years with General Electric and served as a Project Leader and AFCI Program Manager at GE Circuit Breaker division. Mr. Tilghman is a graduate of GE Crotonville’s school for New Managers. He also spent six years with Deltech/Ingersol Rand as a Design Engineer for embedded control systems for large compressed air equipment. Mr. Tilghman holds an AASEE, BSEE, MS-Engineering Management/EE and is pursuing a Ph.D. in Engineering Management.

ITEM 1A. RISK FACTORS

Stockholders and investors should carefully consider the risk factors described below, together with the other information contained in this Annual Report, before making any investment decision with respect to our securities. The risks and uncertainties described below are not the only ones we face. If any of the following risks occur, our business, financial condition, or results of operation could be significantly impacted and the trading price of our common stock could decline:

Our growth is subject to a number of economic risks.

As widely reported, financial markets in the United States, Europe and Asia have been experiencing extreme disruption in recent months, including, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations of others. Governments have taken unprecedented actions intended to address extreme market conditions that include severely restricted credit and declines in real estate values. While currently these conditions have not impaired our ability to access credit markets and finance our operations, there can be no assurance that there will not be a further deterioration in financial markets and confidence in major economies. These economic developments affect businesses such as ours in a number of ways. The current tightening of credit in financial markets adversely affects the ability of customers and suppliers to obtain financing for significant purchases and operations and could result in a decrease in or cancellation of orders for our products and services. Our business is also adversely affected by decreases in the general level of economic activity, such as decreases in business and consumer spending, purchase of electrical safety equipment by consumers and businesses and military procurement.

Failure to achieve our operating strategy could negatively affect our revenue and profits.

Our operating strategy is to grow revenue and improve gross margin in our military, recreational vehicle, industrial, and consumer markets as well as closely aligned markets if they share similar products or have other synergies. We plan to achieve these growth goals through internal development of new products, acquisitions, strategic partnerships and licensing. We have undertaken a number of initiatives to lower costs, improve asset turnover and reduce our risk. These initiatives include, but are not limited to, product line simplification, establishing product platforms in design, greater utilization of our operations in Honduras, utilizing new designs and operations software to improve quality, accelerate product development and reduce the cost of redesigned products.

Any or all of these objectives may not be realized or, if realized, may not result in increased revenue, profitability or market presence. Executing our strategy may also place a strain on our production, information technology systems and other resources.

We rely on the availability of substantial working capital to finance our growth and meet our capital requirements.

Our ability to continue the growth of our business requires a large amount of working capital. If we are unable to fund this growth, we may not be able to compete effectively. Our requirement for capital depends on the market’s acceptance of our products, the growth of our marketing effort, our ability to expand our customer base, our need for additional capital equipment to adopt new manufacturing methods and new products and for future acquisitions. We cannot be sure that additional financing, if needed, will be available or if such financing will be on favorable terms. Without access to these additional funds, we may not be able to remain competitive.

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The unavailability of and cost increases in raw materials and components could negatively affect our revenue and profits.

Raw materials and components constitute a significant portion of our cost of sales. Factors that are largely beyond our control, such as movements in commodity prices for the specific materials required, may affect the future cost of raw materials and components. As an example, our products require a substantial amount of plastic. Because the primary resource used in manufactured plastics is petroleum, the cost and availability of plastic varies to a great extent with the price of petroleum. We have experienced fluctuations in prices of plastic, as well as steel, aluminum and especially copper, which could continue in fiscal 2011.

In addition, the inability of our suppliers to timely deliver raw materials or components could be disruptive and costly. If we are unable to obtain raw materials on a timely basis at an affordable cost or if we experience any significant delays or interruptions of supply, our financial results could be significantly impacted.

We depend upon a limited number of key suppliers.

We purchase a significant volume of products from contract manufacturers in China. In fiscal 2010, for example, our purchases from vendors in China were $0.9 million and we expect this amount to decrease in fiscal 2011 as we have exited the RAC business. The purchase price for these products is set in U.S. dollars. If the exchange rate between the U.S. dollar and Chinese yuan changes so that the yuan appreciates significantly against the dollar, the cost of building our products could increase significantly. We anticipate that outsource providers will play key roles in our manufacturing operations. Although we aim at selecting reputable providers, it is possible that one or more of these providers could fail to perform as we expect and such failure could have an adverse impact on our business. Because of the role of our outsource providers, we will need to monitor the performance of these suppliers and adopt new procedures to deal with and manage the performance of these outsource providers. Any delay or failure in the implementation of our operational changes and monitoring of these relationships could adversely affect our customer relationships and/or have a negative effect on our operating results.

The loss of or significant decrease in sales to large customers would adversely affect our revenue and profits.

We rely upon a continuous flow of new orders from our large customers. Failure to obtain anticipated orders or delays or cancellations of orders or significant pressure to reduce prices from key customers could have a material adverse effect on us. Our largest customer accounted for 33% of our net revenue for the year ended March 31, 2010. Our largest customer also contracted with us through various subcontractors. If those revenues were included, our largest customer accounted for 37% of our revenue in fiscal 2010. Any reduction in, or cancellation of, orders placed by this customer would at least temporarily, and possibly longer, cause a material reduction in our net revenue, income from operations and net income. In addition, as a result of the desire to more closely manage inventory levels, there is a growing trend in business, especially in our commercial markets, to make purchases on a “just-in-time” basis. This requires us to shorten our lead time for production in certain cases and more closely anticipate demand, which could in the future require the carrying of additional inventories or require additional expenses to expedite delivery.

Our long-term contracts may not be renewed.

We currently have contracts with the U.S. military to provide control equipment used in engine generator systems. These contracts currently run through 2012. We also are a key supplier of control equipment to DRS, a prime contractor with the U.S. military. As a result of the war in Iraq, demand for these military products has remained strong. If the war ends or significantly winds down or if our contracts with the military expire and are not renewed, demand for these products could be greatly reduced.

We may face cancellations, reductions or delays in our product orders that could adversely affect our operating results.

From time to time we receive commercial orders from customers that require us to manufacture products on short notice and have such products available for shipment, even though the order may be reduced, cancelled or delayed. Some orders may be designed to meet the unique needs of a particular customer. As a result, changes, delays or cancellations of orders could result in an inventory of unsalable products and possible inventory write-downs that could adversely affect our operating results.

Adverse changes in the operations of global manufacturing facilities could decrease our manufacturing capacity.

We manufacture a significant number of products in Honduras and obtain a significant proportion of the raw materials and sub-assembly components used in the manufacturing of our products outside the United States. International operations are subject to risks including, among others:

• labor unrest;

• political instability;

• lack of developed infrastructure;

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• longer payment cycles and greater difficulty in collecting accounts;

• increases in investment and other restrictions or requirements by foreign governments in order to operate in the country or own the subsidiary;

• import and export duties and quotas;

• changes in domestic and international customs and tariffs;

• unexpected changes in regulatory environments;

• difficulty in complying with a variety of foreign laws;

• difficulty in obtaining distribution and support;

• the difficulty in management and operation of an enterprise in another country;

• potentially adverse tax consequences; and

• changes in exchange rates between the U.S. dollar and the foreign currency.

Labor in Honduras has historically been readily available and at lower cost than available in many other nations; however, we cannot be assured that labor will continue to be available in Honduras at costs consistent with historical levels. A substantial increase in labor costs could have a material adverse effect on our results of operation.

Interruptions in manufacturing operations could disrupt our business.

Approximately 42% of our revenue is derived from products manufactured or assembled at our manufacturing facility in Honduras and by contract manufacturers located in China. These manufacturing operations, as well as our manufacturing plant in Clearwater, Florida, are subject to hazards that could result in material damage to any such facilities. Such damage to or prolonged interruption in the operations of such facilities for repairs, labor disruption, hurricanes, typhoons or other reasons, could have a material adverse effect on us. In addition, our contract manufacturing agreements can be terminated on short notice. If our contract manufacturers located in China are unable or unwilling to manufacture and deliver products to enable us to meet the delivery schedules and quality that we require, we could be forced to seek additional suppliers, thereby resulting in further delays and additional expenses in shipping products to our customers.

We depend upon our subsidiary in Honduras for a substantial portion of our manufacturing capacity. Managing a distant subsidiary and fully integrating it into our business is challenging. We rely on local supervising officers, managers and staff to carry out our manufacturing operations. The challenge of language differences and cultural factors involved in our operations can stretch our administrative capabilities.

We may not be able to adequately protect our intellectual property.

We believe that our rights in owned and licensed trademarks are of increasing importance to our business success and that our ability to create demand for our products is dependent to a large extent on our ability to exploit these trademarks, such as our SurgeGuard and Fire Shield® brand name. There can be no assurance as to the breadth or degree of protection that these trademarks may afford us, or that we will be able to successfully leverage our trademarks in the future. The costs associated with protecting our intellectual property rights, including litigation costs, may be material. We also cannot be sure that we will be able to successfully assert our intellectual property rights or that these rights will not be invalidated, circumvented or challenged. Any inability to do so, particularly with respect to trademarks in which we have made significant capital investments, or a successful intellectual property challenge or infringement proceeding against us, could have a material adverse effect on us.

Our success also depends in part on our proprietary technology and patent rights. If we fail to adequately protect this technology and our patent rights, we may lose our competitive position or face significant expense to protect or enforce our intellectual property rights. We intend to continue to protect our proprietary technology through patents, copyrights and trade secrets. Despite this intention, we may not be successful in achieving adequate protection. Claims allowed on any of our patents may not be sufficiently broad to protect our technology and any patents issued to us also may be challenged, invalidated or circumvented. With respect to our pending applications for patents, there can be no assurance that we will be successful in obtaining patents from these applications.

The loss of patent protection could impact our operating results.

We currently hold patents on several products, the main patent being the ‘337 patent underlying our Fire Shield® technology for cord fire prevention. This patent provides legal protection against competitors who could unlawfully copy our technology. Once these patents expire, competitors will be able to legally utilize our technology and competition could increase, resulting in lower prices in the marketplace. If we are unable to develop new patented technologies we may be unable to maintain our profit margins and we could lose our technological advantage in the marketplace.

Our business can be adversely affected by competitors’ patents.

Competitors may register new patents on products that make it very difficult for us to effectively compete in certain markets. As a result, our current products could become obsolete or uneconomical. For example, our products could become difficult to market as a result of a competitor’s patented products that provides equal or superior performance at a lower cost. If we are not able to meet these competitive challenges, we could lose revenue or be forced to write down the value of our inventory.

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Seasonality can impact our revenue.

Our business can vary significantly from quarter to quarter. This seasonality may also result in cash outlays or additional interest expense due to an increased need to borrow funds to maintain sufficient working capital to support such increased demand.

We face competition from companies that produce similar products.

The markets for our products are highly competitive. We believe that competition is based upon several factors, including price, quality, access to retail shelf space, product features and enhancements, brand names, new product introductions, marketing support and distribution systems. We compete with established companies, a number of which have substantially greater facilities, personnel, financial and other resources. Some competitors may be willing to reduce prices and accept lower profit margins to compete with us. As a result of this competition, we could lose market share and sales, or be forced to reduce our prices to meet competition. In such cases, we could be required to write down our inventory to market value.

Additionally, our current products could become obsolete as a result of new customer demands or competitors’ new products. For example, our products could become unmarketable as a result of a new product that provides superior performance at a lower cost. If we cannot adapt to these competitive challenges, we may not be able to effectively compete.

Our design and manufacture of products for sale to the United States military, combined with our international supply chain, subjects us to certain governmental regulations, such as the International Traffic in Arms Regulations (“ITAR”).

Certain of our products that we sell to the United States military are subject to ITAR, which is administered by the U.S. Department of State. ITAR regulates the export of related technical data and defense services as well as foreign production. Given the current global political climate, there is increased focus by regulators and companies such as ours on ITAR and the actions that it regulates. In October 2008, we received approval from the U.S. government for our manufacturing license agreement between the Company and our Honduran subsidiary and we have begun to transfer work to our facility in Honduras. Also, if we discover issues that are sufficiently material, the U.S. Department of State could impose fines on us, investigate our business practices or impose other remedies upon us which could have a material adverse effect on our business. Furthermore, the conduct and resolution of any such issues that are sufficiently material could be time consuming, expensive and distracting from the conduct of our business. In addition, if our ITAR-related enhancements and improvements were to fail or be ineffective for a prolonged period of time, it could have a materially adverse effect on our operating results.

The introduction of new products involves risks and we may not realize the degree or timing of benefits initially anticipated.

We seek to achieve growth through the design, development, production and sale of innovative products. We regularly invest substantial amounts in research and development efforts that pursue new products. Our ability to realize the anticipated benefits of these new products depends on a variety of factors, including meeting development, production, certification and regulatory approval schedules; execution of internal performance plans; availability of internal and supplier-produced parts and materials; achieving cost targets and production efficiencies and the level of customer interest in new products. These factors involve significant risks and uncertainties. We may encounter difficulties in developing and producing these new products, and may not realize the degree or timing of benefits initially anticipated.

We depend on military contracts for a substantial portion of our revenues and the loss of a military contract or a delay or decline in funding of existing or future military contracts could adversely affect our revenues, cash flow and ability to fund our growth.

For the year ended March 31, 2010, 56.6% of our revenue came from military product orders, as compared to 43.5% and 38.1% of total revenues for the fiscal years ended 2009 and 2008, respectively. Because of the growing importance of our military product sales, we are vulnerable if a key military contract is delayed or cancelled for budgetary reasons.

The factors that could cause us to lose these contracts or could otherwise materially harm our business, prospects, financial condition or results of operations include:

• re-allocation of government resources as the result of actual or threatened terrorism or hostile activities or for other reasons;

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• budget constraints affecting government spending generally, or specific departments such as the U.S. Department of Defense, and changes in fiscal policies or a reduction of available funding;

• the adoption of new laws or regulations pertaining to government procurement;

• government appropriations delays or shutdowns;

• suspension or prohibition from contracting with the government or any significant agency with which we conduct business;

• impairment of our reputation or relationships with any significant government agency with which we conduct business; and

• delays in the payment of our invoices by government payment offices.

Our business may be affected by government contracting risks.

U.S. government contracts are subject to termination by the government, either for the convenience of the government or for default as a result of our failure to perform under the applicable contract. Many of the U.S. Government related military orders we have received either as a contractor or subcontractor may extend over a period of years. The U.S. Government military programs are normally funded, however, on an annual basis. Under our contract agreements, the U.S. Government generally has the right to exercise options to extend or expand our contract orders and may modify, suspend or cancel sub orders at its convenience. If terminated by the government as a result of our default, we could be liable for additional costs the government incurs in acquiring undelivered goods or services from another source and any other damages it suffers. If we or one of our business units were charged with wrongdoing as a result of any U.S. government investigation (including violation of certain environmental or export laws), the U.S. government could suspend us from bidding on or receiving awards of new U.S. government contracts pending the completion of legal proceedings. If convicted or found liable, the U.S. government could subject us to fines, penalties, repayments and treble and other damages. The U.S. government could void any contracts found to be tainted by fraud. The U.S. government also reserves the right to debar a contractor from receiving new government contracts for fraudulent, criminal or other seriously improper conduct. Debarment generally does not exceed three years. Independently, failure to comply with U.S. laws and regulations related to the export of goods and technology outside the United States could result in civil or criminal penalties and suspension or termination of our export privileges.

We are required to comply with laws and regulations relating to the formation, administrations and performance of U.S. Government contracts, which affect how we do business with our customers.

The laws and regulations for which we are subject include:

• Federal Acquisition Regulations govern the formation, administration and performance of U.S. Government contracts;

• the Truth in Negotiations Act and implementing regulations require certification and disclosure of all cost and pricing data in connection with contract negotiations;

• U.S. Government Cost Accounting Standards impose accounting requirements that govern the right to seek reimbursement under certain U.S. Government contracts;

• the Civil False Claims Act provides substantial civil penalties that may be assessed for submitting a false or fraudulent claim to the U.S. Government for payment or approval; and

• changes in regulations toward contractors such as regulations related to organizational conflicts of interest (OCI) or award protests.

Any material failure to comply with applicable laws affecting our military contracts could result in contract termination, price reductions or debarment from contracting.

Our ability to expand our revenue depends, in part, on newly acquired businesses or product lines. 

We may acquire partial or full ownership in businesses or may acquire rights to market and distribute particular products or lines of products. The acquisition of a business or of the rights to market specific products or use specific product names may involve a financial commitment, either in the form of cash or stock consideration. There is no guarantee that the acquired businesses or product lines will contribute positively to earnings. The anticipated synergies may not materialize, cost savings may

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be less than expected, sales of products may not meet expectations, and acquired businesses may carry unexpected liabilities. Because we have a small management team, we may not be able to effectively assimilate the operations, technologies, personnel and products from the acquired company or our management team may be diverted from our other business concerns.

We depend on new products that are technical in nature.

Our products are technical in nature and require significant engineering in order to develop. Rapid technological changes in our industry subject us to increased pressure to develop technological advances in our products. We believe that our future success depends in part upon our ability to develop and offer new products with improved capabilities and add additional features and adaptations of our existing products for new uses. If we are unable to develop sufficient new products to remain competitive, or if our products experience reliability problems, our business could be impacted. Although products are tested prior to being sold, unanticipated or latent performance issues could be experienced subsequent to release. If new products have reliability or quality problems, our performance may be impacted by reduced orders, higher manufacturing costs, and additional service and warranty expenses. Additionally, if we incur significant numbers of quality issues, we could initiate a formal product recall which could result in significant additional costs. Our failure to complete commercialization of these products in a timely manner could result in unanticipated costs and inventory obsolescence, which would adversely affect our financial results.

Our stock price has been volatile.

In recent years, the price of our common stock has fluctuated greatly. The price of our common stock could continue to be volatile and fluctuate in response to a variety of factors including, but not limited to, the following:

• general and global economic fluctuation;

• quarter-to-quarter variations in our operating results;

• material differences in revenue or earnings from levels expected by investors;

• announcements of restructurings, technological innovations, reductions in force, departure of key employees, consolidations of operations or introduction of new products;

• development in, or claims relating to, patent or other proprietary rights;

• success or failure of our new and existing products;

• disruptions with key customers or suppliers; or

• political, economic or environmental events occurring globally.

Government regulations could adversely impact our operations.

Throughout the world, most federal, state, provincial and local authorities require Underwriters Laboratory, Inc. or other safety regulation certification prior to marketing electrical products in those jurisdictions. Most of our products have such certifications; however, there can be no assurance that our products will continue to meet such specifications. Many foreign, federal, state and local governments also have enacted laws and regulations that govern the labeling and packaging of products and limit the sale of product containing certain materials deemed to be environmentally sensitive. A determination that our products are not in compliance with such rules and regulations could result in the imposition of fines or an award of damages to private litigants.

Product liability and product recalls could harm our reputation, revenue and financial condition.

We design and manufacture or have manufactured for use our standard products and we assemble these products for delivery to our customers. We also rely on component parts that are manufactured or distributed by other suppliers. In the event that a flaw or deficiency in such products or components is found, we could face product liability claims, recall efforts or we could voluntarily initiate a recall. If a flaw or deficiency in a product or component is discovered before any damages or injury occurs, we may need to initiate a product recall effort. Any such recall initiative could entail substantial costs and adversely affect our reputation, revenue and financial condition. To the extent that claims are brought for personal injury or property damages, we could incur liability for such damages and be required to compensate persons who have suffered injury.

Our business and results of operations could be impacted by the implementation of Sarbanes Oxley.

Under current rules, we were required to complete an assessment of the adequacy of internal control over financial reporting under Section 404 of the Sarbanes Oxley Act of 2002 as of March 31, 2010. We also must include in our assessment, a report detailing management’s assessment of the design effectiveness of our internal control over financial reporting as well as the operating effectiveness of our internal control over financial reporting. Although we will devote significant resources into developing and updating the required documentation and perform the required testing, there can be no assurance that we will be able to comply with all of Section 404’s requirements.

Additionally, our independent registered public accounting firm must issue an attestation report on the operating effectiveness of our internal control over financial reporting as of March 31, 2011. If our internal control over financial reporting

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is not designed or operating effectively, our independent registered public accounting firm may either disclaim an opinion or may issue a qualified opinion as to the effectiveness of our internal control over financial reporting. If this should occur, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements, which in turn, could cause a decline in the market price of our common stock.

We have undertaken and will continue to seek entry into acquisition transactions which, if unsuccessful, could negatively impact our financial position and business operations.

To grow our business and implement our core objectives, we have relied upon and will seek to identify acquisition targets we believe will enable TRC to carry out its strategic objectives. These transactions require a significant investment of time, financial resources and may disrupt or impair management’s ability to effectively manage the business. Undertaking a material acquisition presents many other risks which include:

• an acquired entity or business may not operate profitably, which could affect our operating income, profit margins and we may be unable to recover the investment we make in the acquisition;

• we may be unable to retain major customers of the acquired business after the acquisition is complete;

• we may encounter operational and performance problems with an acquired business, product line or product development efforts that had not been fully completed prior to the acquisition;

• completing an acquisition may require us to deplete our cash resources, take on additional debt or issue additional shares of capital stock, thereby diluting the ownership interests of our shareholders; and

• we may not be able to accurately estimate the financial effect of an acquisition on the profitability of our business or realize improved financial performance as anticipated prior to our entering into the acquisition.

Successful integration of Patco into our Company is dependent on several factors, and the failure to realize the expected benefits of the acquisition of Patco could have an adverse effect on our operations.

We acquired Patco on March 31, 2010, and, as a result, we significantly increased the size of our operations and business. We cannot assure you that we will be able to integrate the operations of Patco without encountering difficulties. Because Patco’s manufacturing operations are conducted at our leased facility located in Titusville, Florida, we will be required to coordinate a geographically separate manufacturing facility, integrate personnel with disparate business backgrounds and combine different company cultures as a result of the acquisition. Any unexpected difficulties in successfully integrating the operations of Patco into our operations could have a material adverse effect on our business, financial condition, results of operations or prospects, and could lead to failure to realize the anticipated benefits of the acquisition. Moreover, our management will be required to dedicate substantial time and effort to the integration of Patco into our operations in fiscal 2011. During the integration process, these efforts could divert management’s focus and resources from other strategic opportunities and operational matters.

We may not be able to realize the entire book value of goodwill and other intangible assets from acquisitions.

As of March 31, 2010, we have approximately $5.5 million of goodwill and $3.9 million of intangible assets. We have implemented the relevant accounting guidance which requires that existing goodwill not be amortized, but instead be assessed annually for impairment or sooner if circumstances indicate a possible impairment. We will monitor for impairment of goodwill on past and future acquisitions. We perform our impairment testing in the fourth quarter of each year. In the event that the book value of goodwill is impaired, any such impairment would be charged to earnings in the period of impairment. There can be no assurances that future impairment of goodwill will not have a material adverse effect on our business, financial condition or results of operations. Management performs the goodwill valuation.

The risks listed above are not the only risks that we face. Additional risks that are not yet known or that we believe to be immaterial may also impair business operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

Our executive offices and U.S. manufacturing facility are located on 4.7 acres of leased land in the St. Petersburg-Clearwater Airport Industrial Park. The lease, with options, extends until 2021 and is subject to certain price escalation provisions

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every five years. This leased land is adequate to enable us to expand this facility to 60,000 square feet. The present facility provides a total of 43,000 square feet, including 10,000 square feet of offices and engineering areas, as well as 23,000 square feet of production area and 10,000 square feet of warehouse space.

Our wholly-owned subsidiary in Honduras, TRC Honduras S.A. de C.V., leases 47,000 square feet of building space from ZIP San Jose, an industrial park located in San Pedro Sula, Honduras. These facilities include 3,000 square feet of office area, as well as 39,000 square feet of production area and 5,000 square feet of warehouse space. TRC Honduras S.A. de C.V. produces the majority of our commercial products.

Our wholly-owned subsidiary, Patco, leases 10,000 square feet in Titusville, Florida from Hosea partners, Ltd., an entity founded and controlled by Patco’s founding shareholder, Roger M. Boatman, a related party, which includes about 3,000 square feet of office space and 7,000 square feet of manufacturing and warehouse space. Patco manufactures and assembles our battery charging products and battery management product solutions.

ITEM 3. LEGAL PROCEEDINGS

We are involved in various claims and legal actions arising in the ordinary course of business. In our opinion, the ultimate disposition of these matters will not have a material adverse effect on our financial condition, result of operations or cash flows.

ITEM 4. RESERVED

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is registered under Section 12(g) of the Securities Exchange Act of 1934 and quoted on the NASDAQ stock market system, to which we gained admittance in December 1984, under the symbol “TRCI”. In November 1995, NASDAQ approved our application for listing on the National Market System. The following tables set forth a range of high and low market prices for our common stock for the fiscal years ended March 31, 2010 and 2009, as reported on the NASDAQ Stock Market, and the dividends declared with respect to each quarter ended within such years.

Fiscal Year Ended	High		Low	Cash Dividends
March 31, 2010:
First quarter	$	2.69	1.65	$	0.02
Second quarter		4.01	2.06		0.02
Third quarter		4.24	3.20		0.02
Fourth quarter		4.87	3.09		0.02
				$	0.08
March 31, 2009:
First quarter	$	3.31	2.48	$	0.02
Second quarter		2.69	1.00		0.02
Third quarter		2.15	1.45		0.02
Fourth quarter		2.15	1.32		0.02
				$	0.08

As of June 4, 2010, the approximate number of stockholders of record was 294. This number does not include any adjustment for stockholders beneficially owning common stock held of record by any institutional fiduciary, which we believe to represent approximately an additional 2,574 stockholders.

Our authorized capital stock, as of June 4, 2010, consisted of 10,000,000 shares of common stock, par value $0.51, of which 6,603,620 shares were outstanding.

Dividends

The payment of dividends on our common stock is within the discretion of our Board of Directors. In fiscal years 2010, 2009 and 2008 we paid a quarterly cash dividend of $.02 per share or $.08 annually.

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Securities Authorized for Issuance Under Equity Compensation Plans

Information with respect to this item may be found under the caption “Equity Compensation Plans” in our definitive proxy statement to be delivered to stockholders in connection with our 2010 Annual General Meeting of Stockholders. Such information is incorporated by reference.

Stock Repurchase Program

We did not repurchase any equity securities during the years ended March 31, 2010 or 2009. On June 28, 2006, the Board of Directors terminated the Stock Repurchase Program.

Restricted stock grants

On December 15, 2008, our Board of Directors approved the grant of restricted stock awards to certain key employees and executive officers of the Company under the Company’s Amended and Restated 2000 Long Term Incentive Plan. The total number of restricted stock grants that were issued was 81,999 at a grant date fair value of $1.70. With the exception of one award made to our Senior Vice President and Director of Government Operations and Marketing (which will vest annually over a two year period), the restricted stock grants vest annually over a three year period, with one-third vesting annually on the anniversary date of the grant. We granted 25,000 shares of restricted stock awards (non-vested shares) in February 2009 at a grant date fair value of $1.90 per share to our non-employee directors.

The terms of restricted stock awards provide that the grantees could satisfy their tax withholding obligations upon the vesting of their restricted stock by having the Company withhold a number of vested shares having a value on the date of vesting equal to the tax withholding obligation. As a result of this tax obligation, we repurchased 4,285 of the Company’s restricted stock awards to satisfy federal tax obligations that were triggered by the vesting of these shares.

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated balance sheet data as of March 31, 2010 and 2009 and operating results for the years ended March 31, 2010, 2009, and 2008 are derived from our consolidated financial statements which are included elsewhere in this Form 10-K. The selected consolidated balance sheet data as of March 31, 2008, 2007 and 2006 and operating results for the years ended March 31, 2007 and 2006 are derived from audited consolidated financial statements which are not included in this Form 10-K. You should read the selected financial data in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data.”

	Years ended March 31,
	2010		2009		2008		2007		2006
	(In thousands)
Revenue	$	34,833	33,733		37,160		37,992		45,620
Cost of sales		21,196	22,266		27,900		29,368		34,978
Gross profit		13,637	11,467		9,260		8,624		10,642
Operating expenses		9,444	9,907		9,123		10,000		7,922
Income (loss) from operations		4,193	1,560		137		(1,376	)	2,720
Interest expense		—	(10	)	(75	)	(182	)	(255	)
Other income		29	590		182		3,264		32
		29	580		107		3,082		(223	)
Income before income taxes		4,222	2,140		244		1,706		2,497
Income tax expense (benefit)		1,384	500		(112	)	244		746
Net income	$	2,838	1,640		356		1,462		1,751
Earnings per share:
Basic	$	0.48	0.27		0.06		0.25		0.30
Diluted	$	0.47	0.27		0.06		0.25		0.30
Shares outstanding:
Basic		5,903	5,891		5,889		5,884		5,786
Diluted		5,997	5,897		5,958		5,907		5,834
Consolidated Balance Sheet Data:
Cash and cash equivalents and short-term investments	$	8,216	6,950		3,627		3,969		3,107
Working capital		17,711	18,003		15,734		16,032		15,393
Total assets		33,538	25,479		24,950		28,279		29,144
Long-term debt		—	—		—		2,000		2,000
Total debt		—	—		—		3,000		3,000
Total stockholders’ equity		26,760	21,481		19,889		19,725		18,158
Cash dividends paid		0.08	0.08		0.08		0.075		0.06

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis describes the principal factors affecting the results of our operations, liquidity and capital resources, as well as our critical accounting policies. This discussion should be read in conjunction with the accompanying audited consolidated financial statements, which include additional information about our significant accounting policies, practices and the transactions that underlie our financial results, and the risk factors described in “ITEM 1A — RISK FACTORS” of this Annual Report on Form 10-K. Since we qualify as a smaller reporting company, the tabular disclosure of contractual obligations contemplated by Item 303(a)(5) of SEC Regulation S-K has been omitted as permitted by Item 303(d) of SEC Regulation S-K.

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Executive Summary

In comparing our results of operations for fiscal 2010 versus fiscal 2009 and looking forward to fiscal 2011, management believes there are a number of significant items which have or will impact our financial results. Most significantly, on March 31, 2010, we completed an acquisition of all of the common stock of Patco for $5.0 million in cash, 674,950 shares of our common stock and contingent cash payments if certain revenue targets for the sale of certain battery products are met for either or both of the two years subsequent to March 31, 2010. Patco designs and manufactures battery management tools for secondary or re-chargeable batteries in several battery chemistries, including lead acid and lithium ion. Patco’s product solutions support customers in military, commercial and industrial sectors.

The acquisition of Patco was completed on March 31, 2010, and therefore the results of operations of Patco are not included in our fiscal 2010 results of operations. We did, however, incur approximately $0.5 million of acquisition related expenses that have been charged to our fiscal 2010 results of operations. In its stand-alone financial statements for its calendar year ended December 31, 2009, Patco’s revenue was approximately $6 million and its net income was approximately $1.7 million. The nature of Patco’s business, however, has resulted in significant variations in revenue flow. Over a three year period ending on December 31, 2009, Patco’s revenue grew from $0.9 million to approximately $6.0 million. Consequently, we anticipate that Patco’s revenue may not result in a smooth quarterly flow of revenue.

The Patco purchase price of $8.2 million (including estimated contingent payments recorded at present value of $.7 million) was funded from existing cash resources of $5.0 million and the issuance of common stock valued at $2.4 million (674,950 shares issued at the March 31, 2010 closing price of $4.82 discounted down to $3.59). As part of the accounting for the acquisition of Patco, we are required to allocate the purchase price to the net assets acquired at fair market value. The allocation of the purchase price is based upon estimates of the assets and liabilities acquired in accordance with the relevant accounting guidance. Our allocation of purchase price resulted in recording approximately $5.5 million of the purchase price as goodwill. In addition, we expect to record approximately $1.5 million of intangible amortization expense in fiscal 2011 due to the Patco acquisition. As a result of the Patco acquisition, we are contingently liable for an additional cash payment if certain revenue targets are met for revenue recorded on identified battery and charger products sold by Patco for either or both of the two years ended March 31, 2012.

We are currently engaged in several initiatives to integrate Patco into our operations. Our primary focus in this effort is to ensure that we continue to deliver quality products to our customers. As the economics of the acquisition were not predicated on cost synergies, and while we believe that we will ultimately realize cost synergies, this will not be our primary focus in fiscal 2011.

In addition to the Patco acquisition, other factors also impacted the comparability of our results of operations between fiscal 2010 and fiscal 2009. These include:

Revenue for fiscal 2010 was $34.8 million, an increase of $1.1 million from $33.7 million in fiscal 2009. Military revenue increased by $5.0 million in fiscal 2010 over fiscal 2009, primarily due to an accelerated delivery schedule in our military business. We anticipate that fiscal 2011 military revenue (exclusive of Patco’s military revenue) will return to fiscal 2009 levels. Commercial revenue (including royalties) decreased by $3.9 million in fiscal 2010 from fiscal 2009. The extreme volatility and disruption of financial markets in the United States, Europe and Asia and depressed conditions in the real estate market have all contributed to weakening worldwide economic conditions and have contributed to a reduction in revenue in our commercial business that began during the third quarter of fiscal year 2009 and has continued throughout the fiscal year 2010. The decline in commercial revenue was principally a result of weakness in our traditional markets, including RV OEM and industrial construction, and a continuing decline in RAC revenue, a market that we exited as of June 30, 2009.

Gross margin in fiscal 2010 increased by $2.2 million over fiscal 2009 levels primarily due to the overall increase in revenue, a favorable shift in the mix of our military and commercial business and the impact of cost reductions we were able to make in our operations, primarily in overhead. Additionally, the gross margin for fiscal 2010 was negatively impacted by a $0.3 million increase in inventory reserves based on an analysis of the future utility of inventory, primarily in our commercial product lines, and an increased warranty provision of $0.1 million. Gross margin for fiscal 2010 was also reduced by $0.3 million due to the write-off of RAC inventory and tooling. The fiscal 2009 gross profit margin was favorably impacted by $0.6 million from the disposition of inventory held with one of our contract manufacturers.

In fiscal 2009 other income of $0.6 million principally consisted of non-recurring income resulting from settlements with vendors and a payment received in the prior year as part of a legal settlement.

The current year effective tax rate computation was negatively impacted by $0.5 million of non-deductible deal expenses associated with the stock acquisition of Patco, which increased the effective tax rate by approximately 4%.

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Overview

We are a recognized leader in providing cost effective engineered solutions for applications involving power management and control, intelligent battery systems technology and electrical safety products based on our proven ground fault sensing andFire Shield ® technology. These products are designed, manufactured and distributed to the consumer, commercial and industrial markets worldwide. The Company also supplies power monitors and control equipment to the United States Military and its prime contractors.

We recognize revenue from equipment sales when evidence of a sales arrangement exists, pricing is fixed or determinable, delivery, including title passage has taken place, and collectability from the customer is reasonably assured. Amounts billed to customers in sales transactions related to shipping and handling are classified as product revenue. Royalty revenue is recognized when reported by licensees.

Our gross margins are affected by many different factors including competitive price pressures, product mix, differences in manufacturing volumes, changes in the cost of raw materials, charges for excess or obsolete inventory, and costs of warranty repairs. We generally provide a one-year warranty on product sales. We believe that our accrued warranty is adequate to cover the cost of future warranty work on products we have sold.

Selling and marketing expenses include salaries, bonuses, commissions and related employee expenses for sales personnel, advertising, promotional and trade show expenses, travel, consulting fees, and facilities expense.

General and administrative expenses consist of salaries, bonuses and related employee expenses, travel, consulting fees, facilities expense, legal and audit, charge offs of bad debts and board of director fees.

Research and development expenses principally include salaries for engineers and technical support staff, consulting, outside testing service fees, maintenance contracts on software, and depreciation of engineering equipment.

Results of Operations

The following table summarizes our operating results as a percentage of revenue for each of the periods shown:

	2010		2009		2008		2007		2006
Revenue:
Commercial	42.2	%	55.1	%	61.0	%	69.7	%	70.7	%
Military	56.6	%	43.5	%	38.1	%	30.3	%	29.3	%
Royalties	1.2	%	1.4	%	0.9	%	—		—
Total Revenue	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	60.9	%	66.0	%	75.1	%	77.3	%	76.7	%
Gross profit	39.1	%	34.0	%	24.9	%	22.7	%	23.3	%
Operating expenses:
Selling and marketing	7.0	%	8.6	%	7.4	%	7.6	%	5.8	%
General and administrative	11.2	%	13.7	%	12.0	%	12.8	%	7.3	%
Research and development	7.4	%	7.1	%	5.1	%	5.3	%	4.3	%
Acquisition related expenses	1.5	%	—		—		—		—
Business restructuring charges	—		—		—		0.4	%	—
Other	—		—		—		0.2	%	—
Total operating expenses	27.1	%	29.4	%	24.6	%	26.3	%	17.4	%
Income (loss) from operations	12.0	%	4.6	%	0.4	%	(3.6	)%	5.9	%
Interest expense	0.0	%	0.0	%	(0.2	)%	(0.5	)%	(0.6	)%
Other income	0.1	%	1.7	%	0.5	%	8.6	%	0.1	%
	0.1	%	1.7	%	0.3	%	8.1	%	(0.5	)%
Income before income taxes	12.1	%	6.3	%	0.7	%	4.5	%	5.4	%
Income tax expense (benefit)	4.0	%	1.5	%	(0.3	)%	0.6	%	1.6	%
Net income	8.1	%	4.9	%	1.0	%	3.9	%	3.8	%

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Fiscal 2010 and 2009 Comparison

Revenuefor fiscal 2010 increased $1.1 million, or 3.3% to $34.8 million from $33.7 million for the prior fiscal year. Commercial revenue decreased $3.9 million to $14.7 million from $18.6 million. Royalty income decreased to $.4 million from $.5 million. Military revenue increased $5.0 million or 34.3% to $19.7 million from $14.7 million in fiscal 2009. The increase in military revenue during the first half of fiscal year 2010 was primarily due to an accelerated delivery schedule in our military business while military revenue in the second half of fiscal 2010 was consistent with both the comparable levels in the prior year and anticipated levels for fiscal year 2011. The extreme volatility and disruption of financial markets in the United States, Europe and Asia and depressed conditions in the real estate market have all contributed to weakening worldwide economic conditions and have contributed to a reduction in revenue in our commercial business that began during the third quarter of fiscal year 2009 and has continued throughout fiscal 2010. The decline in commercial revenue was principally a result of weakness in our traditional markets, including RV OEM and industrial construction and a continuing decline in RAC revenue, a market that we exited as of June 30, 2009.

Gross profitincreased $2.2 million to $13.6 million for fiscal 2010 from $11.5 million for fiscal 2009. The increase in gross margin was due to a favorable shift in the mix of military and commercial business. The current fiscal 2010 margin was negatively impacted by a $0.3 million increase in inventory reserves based on an analysis of the future utility of inventory, primarily in our commercial product lines, and an increased warranty provision of $0.1 million. Additionally, gross margin for fiscal 2010 was reduced by $0.3 million due to the write-off of RAC inventory and tooling. The prior year gross profit margin for fiscal 2009 was favorably impacted by $0.6 million from the disposition of inventory held with one of our contract manufacturers.

Selling and marketing expense of $2.4 million in fiscal 2010 decreased $0.5 million or 15.7% from $2.9 million in fiscal 2009. The $0.5 million decrease from the prior year was primarily due to lower compensation costs. Selling and marketing expense as a percent of revenue decreased to 7.0% of revenue from 8.6% in fiscal 2009 principally due to the significant decrease in commercial revenue.

General and administrative expensedecreased $0.7 million or 15.8% to $3.9 million for fiscal 2010 from $4.6 million in the prior year. The decrease from the prior year was principally due to decreased professional fees and bad debt expense. General and administrative expense as a percent of revenue decreased from 13.7% in fiscal 2009 to 11.2% in fiscal 2010 primarily due to the decrease in general and administrative expenses discussed above and the lower revenue in fiscal 2009.

Research and development expense of $2.6 million increased 8.7% in fiscal 2010 from $2.4 million in fiscal 2009. Research and development expense as a percent of revenue increased to 7.4% from 7.1 % in the prior year. The increase in research and development expense from the prior year period is primarily due to a shift in engineering headcount to degreed engineers from technicians and consulting related expenses as we added resources to improve our engineering expertise.

Acquisition related expenseof $0.5 million in fiscal 2010 related to the acquisition of Patco and includes investment banker’s fees, legal and accounting costs.

Other income (expense), net was $0.6 million of income in fiscal 2009 and was primarily attributable to payments received as part of a legal settlement.

Income tax expense increased $0.9 million to $1.4 million in fiscal 2010 from $.5 million in fiscal 2009. Income tax expense as a percent of income before income taxes was 32.8% in fiscal 2010, compared with 23.4 % in fiscal 2009. In fiscal 2010, the higher effective tax rate was primarily attributable to the increased military revenue which is primarily produced in the United States rather than Honduras. Additionally, our fiscal 2010 effective tax rate reflects approximately $.5 million of non-deductible Patco acquisition related expenses, which increased the effective tax rate by approximately 4%.

Historically, our effective tax rate has varied based on the mix of income before income taxes derived from our Honduran subsidiary, which had not been subject to income taxes, and the balance of income before income taxes derived in the United States, which is subject to income taxes. Our Honduran subsidiary is profitable which decreases our effective tax rate. We do not record deferred income taxes on the foreign undistributed earnings of an investment in a foreign subsidiary that are essentially permanent in duration.

Net income was $2.8 million for fiscal 2010, compared with $1.6 million reported in fiscal 2009, an increase of $1.2 million. Gross profit in fiscal 2010 was $2.2 million higher than fiscal 2009 and operating expenses decreased by $0.5 million from the prior year. These amounts were partially offset by a reduction in other income of $0.6 million and an increase in income tax expense of $0.9 million.

Fiscal 2009 and 2008 Comparison

Revenuefor fiscal 2009 decreased $3.4 million, or 9.2% to $33.7 million from $37.2 million for the prior fiscal year. Commercial revenue decreased $4.1 million to $18.6 million from $22.7 million. Royalty income increased to $0.5 million from $0.3 million. Military revenue increased $0.5 million or 3.7% to $14.7 million from $14.2 million in fiscal 2008. The recent

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extreme volatility and disruption of financial markets in the United States, Europe and Asia and depressed conditions in the real estate market have all contributed to weakening worldwide economic conditions and have contributed to a reduction in revenue in our commercial business. The decline in commercial revenue was principally a result of a continuing decline in RAC revenue due to competition from off-shore, low-cost manufacturers and the impact of the recession on several of our major markets, including RV and industrial construction. The increase in military revenue was attributable to increased demand after supplemental government funding became available during the current fiscal year.

Gross profit increased $2.2 million to $11.5 million for fiscal 2009 from $9.3 million for fiscal 2008. In fiscal 2008, due to a steep decline in demand for RAC products, we recorded a write-down to inventory for lower of cost or market of $1.5 million and recorded losses on purchase commitments in excess of requirements of $0.5 million. In fiscal 2009, we received the sum of $0.3 million from one of our contract manufacturers in full and complete settlement for the disposition of our FireShield cable inventory, settlement of additional purchase commitments and for the salvage value of additional FireShield cable inventory that had been manufactured into work in progress and finished goods. As a result of these settlement negotiations, we recognized a $0.6 million gain on the disposition of this inventory and settlement of purchase obligations with one of our supply manufacturers. Gross profit as a percentage of revenue increased 9.1 percentage points from 24.9% in fiscal 2008 to 34.0% in fiscal 2009 primarily due to the items previously discussed.

Selling and marketing expense of $2.9 million in fiscal 2009 increased $.1 million or 5.2% from $2.8 million in fiscal 2008. The $0.1 million increase from the prior year was primarily due to an increase in military marketing. Selling and marketing expense as a percent of revenue increased to 8.6% of revenue from 7.4% in fiscal 2008 principally due to the significant decrease in commercial revenue.

General and administrative expenseincreased $.1 million or 3.2% to $4.6 million for fiscal 2009 from $4.5 million in the prior year. The increase from the prior year was principally due to increased professional fees and obligations incurred from the retirement of our Chief Financial Officer. General and administrative expense as a percent of revenue increased from 12.0% in fiscal 2008 to 13.7% in fiscal 2009 primarily due to the increase in general and administrative expenses discussed above and the lower revenue in fiscal 2009.

Research and development expense of $2.4 million increased 25.1% in fiscal 2009 from $1.9 million in fiscal 2008. Research and development expense as a percent of revenue increased to 7.1% from 5.1 % in the prior year. The increase in research and development expense from the prior year period is primarily due to an increased headcount in engineering development and consulting related expenses as we added resources to improve our engineering expertise.

Other income (expense), net was $0.6 million of income in fiscal 2009 versus $0.1 million of income in fiscal 2008, an increase in income of $0.5 million. The increase in other income was primarily attributable to payments received as part of a legal settlement. In addition, interest expense declined from the prior year due to the repayment of all borrowings in fiscal 2008.

Income tax expense increased $0.6 million to $0.5 million from a benefit of $0.1 million in fiscal 2008. The increase was due to lower income in fiscal 2008 as well as the jurisdictional source where the income was earned. Our 2008 U.S. income was eliminated due to the large write down in inventory to market value and the increased loss on purchase commitments resulting in the only income we earned in fiscal 2008 being earned in Honduras where there is no income tax. Income tax expense as a percent of income before income taxes was 23.4% in fiscal 2009, compared with (45.9) % in fiscal 2008.

Historically, our effective tax rate has varied based on the mix of income before income taxes derived from our Honduran subsidiary, which had not been subject to income taxes, and the balance of income before income taxes derived in the United States, which is subject to income taxes. Our Honduran subsidiary is profitable which decreases our effective tax rate. We do not record deferred income taxes on the foreign undistributed earnings of an investment in a foreign subsidiary that are essentially permanent in duration.

Net income was $1.6 million for fiscal 2009, compared with $0.4 million reported in fiscal 2008, an increase of $1.2 million. Gross profit in fiscal 2009 was $2.2 million higher than fiscal 2008 and other income was $0.5 million higher than the prior year, but these income increases were partially offset by an increase in operating expenses of $0.8 million.

Critical Accounting Policies

The preparation of financial statements and related disclosures, in conformity with United States generally accepted accounting principles, requires management to make judgments, assumptions and estimates that affect the amounts reported. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below.

        A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: (i) we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and (ii) different estimates that we could reasonably have used, or changes in the estimates actually used resulting from events that could be reasonably foreseen as likely to have a material effect on our financial condition or results of operations.

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Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the consolidated financial statements once known. In addition, we are periodically faced with uncertainties, the outcomes of which are not within our control and will not be known for prolonged periods of time. These uncertainties are discussed in the section above entitledDisclosure Regarding Forward-Looking Statements and in section Item 1A above, entitledRisk Factors. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, we believe that our consolidated financial statements are fairly stated in accordance with United States generally accepted accounting principles and present a meaningful presentation of our financial condition and results of operations.

We believe that the following are critical accounting policies:

Revenue Recognition/Allowance for Doubtful Accounts. We recognize revenue from commercial customers when an order has been received and accepted, pricing is fixed, delivery has occurred and title to the product has passed and collectability is reasonably assured. Title generally passes upon shipment to the customer; however, in a limited number of cases, title passes upon receipt of shipment by the customer. We have no installation obligation subsequent to product shipment. Similarly, revenue from sales to distributors are recognized as title passes to them without additional involvement or obligation. Collection of receivables related to distributor sales is not contingent upon subsequent sales to third parties. Royalty revenue is recognized as reported by licensees.

We may enter into government contracts that fall within the scope of FASB ASC Topic 912-605, “Contractors-Federal Government Revenue Recognition”. Currently we do not have any transactions being accounted for within the scope of FASB ASC Topic 912-605. We may enter into government contracts that fall within the scope of FASB ASC Topic 605-35, “Revenue Recognition, Construction-Type and Production-Type Contracts”. For government contracts within the scope of FASB Topic 605-35, we record revenue under a units-of-delivery model with revenue and costs equal to the average unit value times the number of units delivered. Any estimated loss on an overall contract would be recognized in the period determined in accordance with FASB ASC Topic 605-35. We have not experienced past losses on government contracts.

We record an allowance for estimated losses resulting from the inability of customers to make timely payments of amounts due on account of product purchases. We assess the credit worthiness of our customers based on multiple sources of information, including publicly available credit data, subscription based credit reports, trade association data, and analyzes factors such as historical bad debt experience, changes in customer payment terms or payment patterns, credit risk related to industry and geographical location and economic trends. This assessment requires significant judgment. If the financial condition of our customers were to worsen, additional write-offs could be required, resulting in write-offs not included in our current allowance for doubtful accounts.

Inventories. Because of the lead times required to obtain certain raw materials, we must maintain sufficient quantities on hand to meet expected product demand for each of our many products. If actual demand is much lower than forecasted, we may not be able to dispose of our inventory at or above our cost. We write down our inventory for estimated excess and obsolete amounts to the lower of cost or market. We review the reasonableness of our estimates each quarter (or more frequently). A write-down is established for inventory that has had no activity for long periods of time or for which management believes is no longer salable. This write-down is reviewed and approved by the senior management team. In the future, based on our quarterly analysis, if we estimate that any remaining write-down for obsolescence is inadequate, we may need to adjust it. At present, based on our analysis, we believe the write-down amount is properly valued for the inventory held by us.

Income Taxes. Significant management judgment is required in developing our provision for income taxes, including the determination of any accrual for tax contingencies, any foreign withholding taxes or any United States income taxes on undistributed earnings of the foreign subsidiary, deferred tax assets and liabilities and any valuation allowances that might be required to be applied against the deferred tax assets. It had been management’s intention to reinvest undistributed earnings of our foreign subsidiary and thereby indefinitely postpone their repatriation. Accordingly, prior to fiscal 2005 no provision had been made for foreign withholding taxes or United States income taxes which would become payable if undistributed earnings of our foreign subsidiary are paid to us as dividends. In fiscal 2005 and fiscal 2006, pursuant to Sections 951 and 956 of the Internal Revenue Code, approximately $3.3 million of current year and prior undistributed earnings of our subsidiary in Honduras were deemed dividends to the parent company and subject to U.S. income tax. Accordingly a provision was recorded for all of the taxes attributable to these deemed dividends in fiscal 2005 and fiscal 2006. The circumstances that triggered the taxation of our foreign earnings no longer exist and it is our intention to reinvest future undistributed earnings of our foreign subsidiary and thereby indefinitely postpone their repatriation.

We apply the Comparable Profits Method for transfer pricing to determine the amounts our subsidiary charges to the parent.

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Warranty. We generally provide a one year warranty period for our products. We also provide coverage on certain of our surge products for “downstream” damage of products not manufactured by us. Our warranty provision represents our estimate of probable liabilities, calculated as a function of sales volume and historical repair experience for each product under warranty. Our warranty accrual represents our estimate of our liability for warranty repairs that we will incur over the warranty period.

Impairment of Long-Lived Assets. We review long-lived assets for possible impairment of carrying value whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with the relevant accounting guidance. In evaluating the fair value and future benefit of our assets, management performs an analysis of the anticipated undiscounted future net cash flows to be derived from the use of individual assets over their remaining amortization period. If the carrying amount of an asset exceeds its anticipated undiscounted cash flows, we recognize an impairment loss equal to the difference between its carrying value and its fair value.

Goodwill, representing the excess of acquisition costs over the fair value of net assets of acquired businesses, is not amortized but is reviewed for impairment at least annually and written down only in the periods in which it is determined that the recorded value is greater than its fair value. For the purposes of performing this impairment test, our business segments are our reporting units. The fair values of those reporting units, to which goodwill has been assigned, is compared with their recorded values. If recorded values are less than the fair values, no impairment is indicated. Since adoption, no impairment losses have been recorded.

Share-Based Compensation. Share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period of the award. Determining the appropriate fair value model and calculating the fair value of stock-based awards at the grant date requires judgment, including estimating stock price volatility and expected option life. If actual forfeitures differ significantly from our estimates, adjustments to compensation cost may be required in future periods.

The discussion below contains forward-looking statements about our expectations of what could happen in the future. Forward-looking statements involve uncertainties and risk and our actual results could differ materially from the results anticipated by our forward-looking statements due to many known and unknown factors, including but not limited to those previously discussed in “Risk Factors” and elsewhere in this report. See also the cautionary notice regarding forward-looking statements at the beginning of this Form 10-K under the heading “Disclosures Regarding Forward-Looking Statements.”

You should read the following discussion and analysis in conjunction with “Item 6. Selected Financial Data” and “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.

Liquidity and Capital Resources

As of March 31, 2010, our cash and cash equivalents increased $5.3 million to $8.2 million from the March 31, 2009 balance of $3.0 million. The three components of this increase were cash provided by operating activities of $8.1 million, cash used in investing activities of $2.3 million and cash used in financing activities of $0.5 million.

Cash provided by operating activities primarily resulted from net income of $2.8 million, a reduction in inventory of $1.7 million, depreciation expense of $1.0 million, a decrease in trade and other accounts receivable of $1.2 million, a decrease in income taxes of $0.7 million and stock compensation expense of $0.5 million. The decrease in inventory is primarily attributable to manufacturing process improvements that lowered required inventory levels. The decrease in accounts receivable reflects continued improved collection processes. The increase in stock compensation expense reflects full year of expense for stock option grants made late in fiscal 2009. The decrease in net deferred tax assets reflect the decrease in temporary differences between book and tax deductible items, principally the inventory reserves and purchase commitments recorded in 2008.

Cash used in investing activities was due to cash of $4.8 million used to acquire Patco along with cash of $.5 million paid for purchases of property, plant and equipment less cash received of $3.0 million from the maturity of short term investments.

Cash used in financing activities was due to dividends paid of $0.5 million.

Effective as of September 30, 2009, we entered into the Loan Agreement and Replacement Note with Wachovia, our current institutional lender for a $3 million revolving credit facility. The Replacement Note provides for an interest rate equal to the 30-day London Interbank Offering Rate (“LIBOR”) Market Index Rate plus the applicable LIBOR Spread. The revolving line of credit can be used for acquisitions, working capital and general corporate purposes. Revolving loans may be borrowed, repaid and re-borrowed until September 30, 2011, at which time all amounts borrowed must be repaid. As of March 31, 2010, we were in compliance with the covenants under our revolving credit agreement. As of March 31, 2010 and 2009, we had no outstanding borrowings.

We have no off-balance sheet arrangements and no debt relationships other than noted above.

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We believe cash flow from operations, the available bank borrowings and current short-term investments and cash and cash equivalents will be sufficient to meet our working capital requirements for the next 12 months.

New Accounting Standards

Effective July 2009, the FASB codified accounting literature into a single source of authoritative accounting principles, except for certain authoritative rules and interpretive releases issued by the SEC. Since the codification did not alter existing U.S. GAAP, it did not have an impact on our consolidated financial statements. All references to pre-codified U.S. GAAP have been removed from this Form 10-K.

In September 2006, the FASB issued accounting guidance that provided a common definition of fair value and established a framework to make the measurement of fair value under U.S. GAAP more consistent and comparable. It also required expanded disclosures to provide information about the extent to which fair value is used to measure assets and liabilities, the methods and assumptions used to measure fair value, and the effect of fair value measures on earnings. In February 2008, the FASB issued accounting guidance which permitted a one-year deferral of the application of such fair value accounting guidance for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The Company adopted the non-deferred portion of this accounting guidance as of April 1, 2008 and the deferred portion as of April 1, 2009. The adoption did not have a significant impact on our consolidated financial statements.

In June 2008, the FASB issued accounting guidance on earnings per share which provides that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, be considered participating securities and therefore included in the computation of earnings per share pursuant to the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for each class of common stock and any participating securities as if all earnings for the period had been distributed. The Company’s participating securities consist of unvested restricted stock awards. The new accounting guidance resulted in a change in the Company’s accounting policy effective September 1, 2009 and requires that all prior-period earnings per share data that is presented be adjusted retrospectively. The adoption of this accounting guidance did not have a significant impact on the Company’s consolidated financial statements.

In May 2009, the FASB issued guidance for the accounting for subsequent events. The guidance incorporates guidance into the accounting literature that was previously addressed only in auditing standards about management’s requirement to evaluate subsequent events for potential recognition or disclosure. The guidance refers to subsequent events that provide additional evidence about conditions that existed at the balance-sheet date as “recognized subsequent events”. Subsequent events which provide evidence about conditions that arose after the balance-sheet date but prior to the issuance of the financial statements are referred to as “non-recognized subsequent events”. The adoption of this pronouncement did not have a significant impact on our financial statements.

In October 2009, the FASB issued new accounting guidance for revenue recognition with multiple deliverables. This guidance impacts the determination of when the individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting. Additionally, this new accounting guidance modifies the manner in which the transaction consideration is allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration. The new guidance is effective for us prospectively for revenue arrangements entered into or materially modified beginning in the first quarter of fiscal 2011. Early adoption is permitted. This accounting guidance is not expected to have a significant impact on our consolidated financial statements.

In October 2009, the FASB issued new guidance for the accounting for certain revenue arrangements that include software elements. This new guidance amends the scope of pre-existing software revenue guidance by removing from the guidance non-software components of tangible products and certain software components of tangible products. This new guidance is effective for us prospectively for revenue arrangements entered into or materially modified beginning in the first quarter of fiscal 2011. Early adoption is permitted. We do not expect the impact of this new guidance to be material to our consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not engage in investing or trading market risk sensitive instruments. We also do not purchase, for investing, hedging, or for purposes “other than trading,” instruments that are likely to expose us to market risk, whether interest rate, foreign currency exchange, commodity price or equity price risk, except as noted in the following paragraph. We have not entered into any forward or futures contracts, purchased any options or entered into any interest rate swaps. Additionally, we do not currently engage in foreign currency hedging transactions to manage exposure for transactions denominated in currencies other than U.S. dollars.

As of March 31, 2010, we have no long-term debt. Effective as of September 30, 2009, we entered into the Loan Agreement and Replacement Note with Wachovia, our current institutional lender. The Replacement Note provides for an interest

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rate equal to the 30-day London Interbank Offering Rate (“LIBOR”) Market Index Rate plus 2.10%, through December 31, 2009. Thereafter, the interest rate will be reset quarterly. As a result, effective for the quarter beginning on January 1, 2010 and continuing thereafter, the interest rate on the Replacement Note will be reset at a rate equal to the LIBOR Market Interest Rate plus the applicable LIBOR Spread for such quarter as follows:

If Funded Debt/EBITDA Ratio Is:	The LIBOR Spread (basis points) will be:
< 1.50:1.00	210
> 1.50:1.00 < 2.00:1.00	240
> 2.00:1.00	270

The revolving line of credit can be used for acquisitions, working capital and general corporate purposes. Revolving loans may be borrowed, repaid and re-borrowed until September 30, 2011, at which time all amounts borrowed must be repaid. The Loan Agreement obligates us to pay a customary unused facility fee for a credit facility of this size. The revolving loans under the Loan Agreement are secured by a continuing security interest in most of our key assets including accounts and notes receivable, inventory, investments, demand deposit accounts maintained with our lender and 65% of the voting stock of our Honduran subsidiary, which require us to maintain certain financial ratios. As of March 31, 2010 and 2009, we had no borrowings on our Wachovia credit facility.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements and Schedule required by this Item are set forth on the pages indicated at Item 15(a).

Consolidated Financial Statements
	Page
Report of Independent Registered Public Accounting Firm – Kirkland, Russ, Murphy & Tapp, P.A.	F-1
Report of Independent Registered Public Accounting Firm – KPMG LLP	F-2
Consolidated Balance Sheets as of March 31, 2010 and 2009	F-3
Consolidated Statements of Income for the years ended March 31, 2010, 2009 and 2008	F-4
Consolidated Statements of Stockholders’ Equity for the years ended March 31, 2010, 2009 and 2008	F-5
Consolidated Statements of Cash Flows for the years ended March 31, 2010, 2009 and 2008	F-6
Notes to Consolidated Financial Statements	F-7 thru F-21
Consolidated Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts	F-22

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On September 2, 2009, KPMG LLP (“KPMG”) was advised that the firm’s services as auditors of the Company were terminated. The decision was approved by the Audit Committee of the Board of Directors of the Company.

The audit reports of KPMG on the consolidated financial statements of Technology Research Corporation and subsidiary as of and for the years ended March 31, 2009 and 2008 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle.

In connection with the audit of the Company’s consolidated financial statements for each of the fiscal years ended March 31, 2009 and 2008 there were: (1) no disagreements between the Company and KPMG on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of KPMG, would have caused KPMG to make reference in connection with their opinion to the subject matter of the disagreement, and (2) no reportable events.

The Company has engaged Kirkland, Russ, Murphy & Tapp, P.A. an independent member of the BDO Seidman Alliance, (“KRMT”) to serve as its new independent registered certified public accountants. Prior to the engagement of KRMT to provide the audit of the Company’s financial statements and the review of interim filings, the Company did not consult KRMT regarding any matter requiring disclosure under Item 304(a)(2) of Regulation S-K.

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ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report, we carried out, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer (“theCertifying Officers”), an evaluation of the effectiveness of our “disclosure controls and procedures” (as the term is defined under Rules 13a–15(e) and 15d–15(e) promulgated under the Securities Exchange Act of 1934 as amended). Based on this evaluation, the Certifying Officers have concluded that our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There have been no changes in internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control over Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Management conducted an assessment of the effectiveness of our internal control over financial reporting as of March 31, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control – Integrated Framework”. Based on this assessment, management concluded that, as of March 31, 2010, our internal control over financial reporting was effective.

We acquired Patco on March 31, 2010, and we excluded from our assessment of the effectiveness of our internal control over financial reporting as of March 31, 2010, Patco’s internal control over financial reporting associated with total assets of $2.0 million included in our consolidated financial statements as of March 31, 2010. There was no revenue from the acquisition of Patco included in our results of operations for the year ended March 31, 2010.

This Annual Report does not include an attestation report of our independent registered public accounting firm, Kirkland, Russ, Murphy & Tapp, P.A., regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide management’s report in this Annual Report.

ITEM 9B. OTHER INFORMATION

None.

PART III

Certain information required by Part III is incorporated by reference from our definitive proxy statement (the “Proxy Statement”) for the 2010 annual meeting of stockholders, pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, which we will file no later than 120 days after the end of the fiscal year covered by this Report. With the exception of the information expressly incorporated by reference from the Proxy Statement, the Proxy Statement is not to be deemed filed as a part of this Report.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Pursuant to Paragraph G(3) of the General Instructions to Form 10-K, the information required by Part III (Items 10, 11, 12, 13 and 14) is being incorporated by reference herein from our definitive proxy statement (or an amendment to our Annual Report on Form 10-K) to be filed with the SEC within 120 days of the end of the fiscal year ended March 31, 2010 in connection with our 2010 Annual Meeting of Shareholders. Information regarding our executive officers that is required by this item is set forth in Part I, Item I of this report under the caption “Executive Officers of Registrant.”

ITEM 11. EXECUTIVE COMPENSATION

See Item 10.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table provides information as of March 31, 2010, with respect to shares of our Common Stock that may be issued under existing equity compensation plans.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (#)	Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights ($)	Number of Securities Available for Future Issuance Under Equity Compensation Plans (Excluding Securities in Column (a)) (#)
Equity compensation plans approved by stockholders	910,118	4.39	376,885
Equity compensation plans not approved by stockholders	—	—	—
Totals	910,188	4.39	376,885

ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

See Item 10.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

See Item 10.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) List of documents filed as part of this Report.

(1) All financial statements.

Index to Financial Statements	Page
Report of Independent Registered Accounting Firm – Kirkland, Russ, Murphy & Tapp, P.A.	F-1
Report of Independent Registered Accounting Firm – KPMG LLP Consolidated Financial Statements:	F-2
Consolidated Balance Sheets as of March 31, 2010 and 2009	F-3
Consolidated Statements of Income for the years ended March 31, 2010, 2009 and 2008	F-4
Consolidated Statements of Stockholders’ Equity for the years ended March 31, 2010, 2009 and 2008	F-5
Consolidated Statements of Cash Flows for the years ended March 31, 2010, 2009 and 2008	F-6
Notes to Consolidated Financial Statements	F-7 thru F-21
(2) Financial Statement Schedules.
Schedule II - Valuation and Qualifying Accounts	F-22

All other schedules have been omitted because the required information is included in the Consolidated Financial Statements or the notes thereto, or is not applicable or required.

(3)Exhibits.

Exhibit No.	Description
3.1	Articles of Incorporation dated May 26, 1981. Incorporated by reference to TRC’s Form 10-K filed on June 18, 2009.
3.2	Amendment to Articles of Incorporation dated February 12, 1982. Incorporated by reference to TRC’s Form 10-K filed on June 18, 2009.
3.3	Amendment to Articles of Incorporation dated September 2, 1983. Incorporated by reference to TRC’s Form 10-K filed on June 18, 2009.

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3.4	Amendment to Articles of Incorporation dated November 30, 1983. Incorporated by reference to TRC’s Form 10-K filed on June 18, 2009.
3.5	Amendment to Articles of Incorporation dated June 13, 1984. Incorporated by reference to TRC’s Form 10-K filed on June 18, 2009.
3.6	Amendment to Articles of Incorporation dated December 21, 1987. Incorporated by reference to TRC’s Form 10-K filed on June 18, 2009.
3.7	Amendment to Articles of Incorporation dated September 24, 1990. Incorporated by reference to TRC’s Form 10-K filed on June 18, 2009.
3.8	Amendment to Articles of Incorporation dated August 23, 1995. Incorporated by reference to TRC’s Form 10-K filed on June 18, 2009.
3.9	Amended and Restated By-Laws, effective May 15, 2008. Incorporated by reference to TRC’s Form 8-K filed on May 21, 2008.
10.1	License Agreement, dated March 24, 2002, between the Company and Tecumseh Products Company granting use of the Company’sFire Shield® technology to be integrated into a protective product for Refrigeration and Air Conditioning Systems against electric faults. Incorporated by reference to TRC’s Annual Report on Form 10-KSB for the year ended March 31, 2002, filed on June 27, 2002.
10.2	Patent Infringement Lawsuit Settlement Agreement, dated December 29, 2006, by and between the Company and Tower Manufacturing Corporation. Incorporated by reference to TRC’s Form 10-Q for the period ended December 31, 2006, filed on June 20, 2007.
10.3	Amended and Restated Loan Agreement, dated December 27, 2007, between the Company and Wachovia Bank, National Association, extending the maturity date to September 30, 2009, and eliminating the Company’s wholly-owned subsidiary, Technology Research Corporation Honduras/S.A. de C.V. as a co-borrower. Incorporated by reference to TRC’s Form 8-K filed on January 30, 2008.
10.4	Promissory Note, dated December 27, 2007, payable by the Company to Wachovia Bank, N.A. Incorporated by reference to TRC’s Form 8-K filed on January 30, 2008.
10.5	Security Agreement, dated December 27, 2007, between the Company and Wachovia Bank, N.A. Incorporated by reference to TRC’s Form 8-K filed on January 30, 2008.
10.6	Form of Individual Director Indemnification Agreement. Incorporated by reference to TRC’s Form 10-K for the year ended March 31, 2007, filed on June 29, 2007.(1)
10.7	Form of Non-Qualified Stock Option Grant under the Company’s 2000 Long Term Incentive Plan. Incorporated by reference to TRC’s Form 10-K for the year ended March 31, 2007, filed on June 29, 2007.(1)
10.8	Form of Qualified Stock Option Grant under the Company’s 2000 Long Term Incentive Plan. Incorporated by reference to TRC’s Form 10-K for the year ended March 31, 2007, filed on June 29, 2007.(1)
10.9	Amended and Restated 2000 Long Term Incentive Plan effective August 27, 2008. Incorporated by reference to TRC’s Form DEF 14A filed on July 21, 2008.
10.10	Separation Agreement and General Release with Barry Black dated September 2, 2008. Incorporated by reference to TRC’s Form 8-K filed on September 3, 2008.(1)
10.11	Amendment No. 1 to Separation Agreement and General Release with Barry Black dated October 31, 2008. Incorporated by reference to TRC’s Form 8-K filed on November 4, 2008.(1)
10.12	Settlement Agreement between Technology Research Corporation and Shanghai ELE Manufacturing Corporation. Incorporated by reference to TRC’s Form 8-K filed on November 14, 2008.*
10.13	Form of Restricted Stock Agreement - Employee. Incorporated by reference to TRC’s Form 8-K filed on December 19, 2008.

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10.14	Form of Nonqualified Stock Option Agreement - Director. Incorporated by reference to TRC’s Form 8-K filed on February 9, 2009.
10.15	Form of Restricted Stock Agreement - Director. Incorporated by reference to TRC’s Form 8-K filed on February 19, 2009.
10.16	Stock Purchase Agreement, dated as of March 2, 2010, by and among Technology Research Corporation and Hosea Partners, Ltd., Roger Boatman, as trustee of the Roger M. Boatman Trust, and Melvin R. Hall and Elsa G. Hall, as joint tenants with right of survivorship. Incorporated by reference to TRC’s Form 8-K filed on March 3, 2010.
10.17	Employment Agreement dated March 31, 2010 between Patco Electronics, Inc., and Roger M. Boatman. Incorporated by reference to TRC’s Form 8-K filed on April 1, 2010.
10.18	Lease Agreement dated March 31, 1010 between Patco Electronics, Inc. and Hosea Partners, Ltd. Incorporated by reference to TRC’s Form 8-K filed on April 1, 2010.
10.19	Indemnity Escrow Agreement dated March 31, 2010 between Technology Research Corporation and the selling shareholders of Patco Electronics, Inc. Incorporated by reference to TRC’s Form 8-K filed on April 1, 2010.
10.20	Registration Rights Agreement dated March 31, 2010 between Technology Research Corporation and the selling shareholders of Patco Electronics, Inc. Incorporated by reference to TRC’s Form 8-K filed on April 1, 2010.
10.21	First Amendment to the Amended and Restated Loan Agreement by and between Technology Research Corporation and Wachovia Bank, N.A. Incorporated by reference to TRC’s Form 8-K filed on October 6, 2009.
10.22	Promissory Note payable by Technology Research Corporation to Wachovia Bank, N.A. Incorporated by reference to TRC’s Form 8-K filed on October 6, 2009.
10.23	Security Agreement by and between Technology Research Corporation and Wachovia Bank, N.A. Incorporated by reference to TRC’s Form 8-K filed on October 6, 2009.
10.24	Retirement and Consulting Agreement between the Company and Raymond B. Wood. Incorporated by reference to TRC’s Form 8-K filed on May 25, 2010.
10.25	Nominating and Governance Committee Charter. Incorporated by reference to TRC’s Form 8-K filed on March 18, 2009.
21	Subsidiaries of the Registrant. Filed herewith.
23.1	Consent of Independent Registered Public Accounting Firm – Kirkland, Russ, Murphy & Tapp, P.A. Filed herewith.
23.2	Consent of Independent Registered Public Accounting Firm – KPMG, LLP. Filed herewith
31.1	Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
31.2	Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
32.1	Certification of Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.
32.2	Certification of Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.

₍₁₎ Management contracts and compensatory plans or arrangements required to be filed as an Exhibit pursuant to Item 15(b) of Form 10-K.

* Confidential treatment requested for certain portions of this exhibit, which portions are omitted and filed separately with the Securities and Exchange Commission.

31

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TECHNOLOGY RESEARCH CORPORATION
By:	/s/Owen Farren
	Owen Farren
	President and Chief Executive Officer
	(Principal Executive Officer)
Date:	June 7, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant in the capacities indicated and on the dates indicated:

Signature	Title	Date
/s/ Owen Farren	Chairman Board of Directors, President and Chief Executive Officer	June 7, 2010
Owen Farren	(Principal Executive Officer)
/s/ Thomas G. Archbold	Vice President of Finance and Chief Financial Officer	June 7, 2010
Thomas G. Archbold	(Principal Financial and Accounting Officer)
/s/ Raymond B. Wood	Director and Senior Vice President of Government Operations	June 7, 2010
Raymond B. Wood
/s/ Gerry Chastelet	Director	June 7, 2010
Gerry Chastelet
/s/ Raymond V. Malpocher	Director	June 7, 2010
Raymond V. Malpocher
/s/ Patrick M. Murphy	Director	June 7, 2010
Patrick M. Murphy
/s/ N. John Simmons, Jr.	Director	June 7, 2010
N. John Simmons, Jr.
/s/ David F. Walker	Director	June 7, 2010
David F. Walker

32

Consolidated Financial Statements

Index

	Page
Report of Independent Registered Public Accounting Firm-Kirkland, Russ, Murphy & Tapp, P.A.,	F-1
Report of Independent Registered Public Accounting Firm-KPMG LLP	F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of March 31, 2010 and 2009	F-3
Consolidated Statements of Income for the years ended March 31, 2010, 2009 and 2008	F-4
Consolidated Statements of Stockholders’ Equity for the years ended March 31, 2010, 2009, and 2008	F-5
Consolidated Statements of Cash Flows for the years ended March 31, 2010, 2009 and 2008	F-6
Notes to Consolidated Financial Statements	F-7
Consolidated Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts	F-22

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES

Report of Independent Registered Public Accounting Firm

The Board of Directors

Technology Research Corporation:

We have audited the accompanying consolidated balance sheet of Technology Research Corporation and subsidiaries (the “Company”) as of March 31, 2010, and the related consolidated statements of income, stockholders’ equity and cash flows for the year then ended. In connection with our audit of the consolidated financial statements, we have also audited the consolidated financial statement schedule as listed in the accompanying index. The Company’s management is responsible for these consolidated financial statements and the consolidated financial statement schedule. Our responsibility is to express an opinion on these consolidated financial statements and consolidated financial statement schedule based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2010, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ Kirkland, Russ, Murphy &Tapp, P.A.

June 7, 2010

Clearwater, Florida

Certified Public Accountants

F-1

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES

Report of Independent Registered Public Accounting Firm

The Board of Directors

Technology Research Corporation:

We have audited the accompanying consolidated balance sheet of Technology Research Corporation and subsidiary as of March 31, 2009, and the related consolidated statements of income, stockholder’s equity, and cash flows for each of the years in the two-year period ended March 31, 2009. In connection with our audits of the consolidated financial statements, we also have audited the related financial statement schedule. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Technology Research Corporation and subsidiary as of March 31, 2009, and the results of their operations and their cash flows for each of the years in the two-year period ended March 31, 2009, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

June 15, 2009

Tampa, Florida

Certified Public Accountants

F-2

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

March 31, 2010 and 2009

(In thousands, except share and per share data)

	2010			2009
ASSETS
Current assets:
Cash and cash equivalents	$	8,216		2,954
Short-term investments		—		3,996
Trade and other accounts receivable, net of allowance for doubtful accounts of $38 in 2010 and $203 in 2009		4,400		5,372
Income taxes receivable (note 8)		29		631
Inventories (notes 2 and 3)		7,315		8,013
Deferred income taxes (note 8)		729		622
Prepaid expenses and other current assets		299		265
Total current assets		20,988		21,853
Property, plant and equipment, net of accumulated depreciation of $10,532 in 2010 and $9,852 in 2009 (note 4)		3,123		3,189
Intangible assets net of accumulated amortization of $238 in 2010 and $178 in 2009		3,929		404
Goodwill		5,465		—
Other assets		33		33
Total assets	$	33,538		25,479
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	1,423		1,309
Unsettled treasury obligation		—		998
Accrued expenses		1,720		1,422
Accrued dividends		134		121
Total current liabilities		3,277		3,850
Income taxes payable (note 8)		303		111
Deferred income taxes (note 8)		2,460		37
Patco earn-out (note 2)		738		—
Total liabilities		6,778		3,998
Stockholders’ equity (note 9):
Common stock $0.51 par value; 10,000,000 shares authorized, 6,629,405 shares issued and 6,603,620 shares outstanding, and 5,912,328 shares issued and 5,890,828 shares outstanding, respectively		3,379		3,015
Additional paid-in capital		12,570		9,982
Retained earnings		10,867		8,524
Common stock held in treasury, 25,785 and 21,500 shares, respectively, at cost		(56	)	(40	)
Total stockholders’ equity		26,760		21,481
Total liabilities and stockholders’ equity	$	33,538		25,479

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

F-3

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income

Years ended March 31, 2010, 2009 and 2008

(In thousands, except share and per share data)

	2010		2009		2008
Revenue (note 11):
Commercial	$	14,709	18,582		22,680
Military		19,706	14,674		14,152
Royalties		418	477		328
Total Revenue		34,833	33,733		37,160
Cost of sales		21,196	22,266		27,900
Gross profit		13,637	11,467		9,260
Operating expenses:
Selling and marketing		2,444	2,899		2,756
General and administrative		3,896	4,627		4,463
Research and development		2,589	2,381		1,904
Acquisition related transaction costs		515	—		—
Total operating expenses		9,444	9,907		9,123
Income from operations		4,193	1,560		137
Interest expense		—	(10	)	(75	)
Other income		29	590		182
		29	580		107
Income before income taxes		4,222	2,140		244
Income tax expense (benefit) (note 8)		1,384	500		(112	)
Net income	$	2,838	1,640		356
Earnings per share - basic	$	0.48	0.27		0.06
Earnings per share - diluted	$	0.47	0.27		0.06
Shares outstanding - basic		5,902,532	5,890,828		5,889,136
Shares outstanding - diluted		5,996,599	5,897,237		5,958,336

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

F-4

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

Years ended March 31, 2010, 2009 and 2008

(In thousands, except share and per share data)

	Shares		Amount		Additional paid-in capital		Retained earnings		Treasury stock		Total Stockholders’ equity
Balances as of March 31, 2007:	5,888,828		$	3,014	9,287		7,464		(40	)	19,725
Dividends - $0.08 per share	—			—	—		(474	)	—		(474	)
Net income	—			—	—		356		—		356
Stock compensation expense	—			—	278		—		—		278
Tax benefit related to exercise of stock options	—			—	1		—		—		1
Exercise of stock options	2,000			1	2		—		—		3
Balances as of March 31, 2008:	5,890,828			3,015	9,568		7,346		(40	)	19,889
Dividends - $0.08 per share	—			—	—		(462	)	—		(462	)
Net income	—			—	—		1,640		—		1,640
Stock compensation expense	—			—	414		—		—		414
Balances as of March 31, 2009:	5,890,828			3,015	9,982		8,524		(40	)	21,481
Dividends - $0.08 per share	—			—	—		(495	)	—		(495	)
Net income	—			—	—		2,838		—		2,838
Stock compensation expense	—			—	475		—		—		475
Exercise of stock options	1,333			1	1		—		—		2
Restricted stock vesting, net of shares withheld for tax payments	36,509			19	(19	)	—		(16	)	(16	)
Tax benefit of restricted stock vesting	—			—	49		—		—		49
Shares issued for Patco acquisition	674,950			344	2,082		—		—		2,426
		��
Balances as of March 31, 2010:	6,603,620		$	3,379	12,570		10,867		(56	)	26,760

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

F-5

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended March 31, 2010, 2009 and 2008

(In thousands)

	2010			2009		2008
Cash flows from operating activities:
Net income	$	2,838		1,640		356
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion on short-term investments		—		(47	)	(17	)
Bad debt expense		2		166		69
Accretion of interest on note receivable		—		—		(127	)
Collection of interest on note receivable		—		—		142
Depreciation		961		1,100		1,157
Amortization of intangible assets		59		59		60
Stock compensation expense		475		414		278
Deferred income taxes		(236	)	824		(549	)
Loss on disposal of assets		145		156		—
Changes in operating assets and liabilities, net of effects of acquisition:
Trade and other accounts receivable		1,245		1,035		308
Inventories, net		1,746		(225	)	1,506
Prepaid expenses and other current assets		(7	)	(7	)	93
Other assets		—		12		2
Trade accounts payable		(167	)	(1,802	)	84
Accrued expenses		261		(359	)	372
Income taxes		729		(323	)	(1,043	)
Net cash provided by operating activities		8,051		2,643		2,691
Cash flows from investing activities:
Maturities of short-term investments		7,000		6,500		2,000
Purchases of short-term investments		(4,002	)	(7,956	)	(2,980	)
Cash paid for acquisition of Patco, net of cash acquired		(4,793	)	—		—
Purchases of property and equipment		(534	)	(761	)	(429	)
Proceeds from collection of notes receivable		—		869		850
Net cash used in investing activities		(2,329	)	(1,348	)	(559	)
Cash flows from financing activities:
Borrowings of short-term debt		—		2,200		—
Repayments of short and long-term debt		—		(2,200	)	(3,000	)
Proceeds from the exercise of stock options		2		—		3
Tax benefit related to exercise of stock options		49		—		1
Treasury stock purchase		(16	)	—		—
Cash dividends paid		(495	)	(473	)	(475	)
Net cash used in financing activities		(460	)	(473	)	(3,471	)
Net increase (decrease) in cash and cash equivalents		5,262		822		(1,339	)
Cash and cash equivalents at beginning of year		2,954		2,132		3,471
Cash and cash equivalents at end of year	$	8,216		2,954		2,132
Supplemental cash flow information:
Cash paid for interest	$	—		10		76
Cash paid for income taxes		—		—		1,480
Supplemental schedule of noncash investing activities:
Purchase of short-term investments		—		(998	)	—
Unsettled Treasury obligation		—		998		—
Common stock issued in connection with Patco acquisition		2,426		—		—
Contingent consideration in connection with Patco acquisition		738		—		—
Supplemental schedule of noncash financing activities:
Vesting of restricted stock	$	19		—		—

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

F-6

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

March 31, 2010, 2009, and 2008

(In thousands, except share and per share data)

(1) Summary of Significant Accounting Policies

(a) Description of Business

Technology Research Corporation and subsidiaries (the “Company”) is an internationally recognized leader in the design, manufacture and marketing of electrical safety products that save lives, protect people against serious injury from electrical shock and/or prevent electrical fires in the home and workplace. Based on its core technology in ground fault sensing, our products are designed to meet the needs of the consumer, commercial and industrial markets worldwide. We also supply power monitors and control equipment to the United States military and its prime contractors, primarily for use on mobile electric generators. Our corporate headquarters are located in Clearwater, Florida. We incorporated TRC Honduras, S.A. de C.V., a wholly owned subsidiary, for the purpose of manufacturing our high volume products in Honduras. As of March 31, 2010, we acquired 100% of the common stock of Patco Electronics, Inc. (“Patco”). We primarily sell our products direct to the customer, through retail stores, to original equipment manufacturers and through electrical distributors involved in a variety of industries and to governmental entities. We perform credit evaluations of all new customers and generally do not require collateral. Our customers are located throughout the world. See note 11 for further information on major customers. We also license our technology for use by others in exchange for a royalty or product purchases.

(b) Use of Estimates

The preparation of the consolidated financial statements requires management to make estimates and assumptions relating to the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

(c) Principles of Consolidation

The consolidated financial statements include the financial statements of Technology Research Corporation and our wholly owned subsidiaries, TRC Honduras, S.A. de C.V. and Patco Electronics, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

(d) Cash Equivalents

Cash equivalents amounted to $23 and $1,017 as of March 31, 2010 and 2009, respectively, and consisted of money market accounts. For purposes of the consolidated statements of cash flows, we consider all short-term investments with original maturities of three months or less to be cash equivalents.

(e) Short-term Investments

The value of the short-term investment totaled $3,996 as of March 31, 2009, consisting of original cost plus accrued interest on U.S. Treasury Bills and included $998 for an unsettled purchase of a U.S. Treasury bill resulting in a matching liability being recorded in current liabilities. We consider all of our short-term investments to beheld-to-maturity, and therefore, are recorded at amortized cost.

(f) Revenue Recognition/Allowance for Doubtful Accounts

We recognize revenue from commercial customers when an order has been received and accepted, pricing is fixed, delivery has occurred and title to the product has passed and collectability is reasonably assured. Title generally passes upon shipment to the customer; however, in a limited number of cases, title passes upon receipt of shipment by the customer. We have no installation obligation subsequent to product shipment. Similarly, revenue from sales to distributors is recognized as title passes to them without additional involvement or obligation. Collection of receivables related to distributor sales is not contingent upon subsequent sales to third parties. Royalty Revenue is recognized as reported by licensees.

We may enter into government contracts that fall within the scope of FASB ASC Topic 912-605, “Contractors-Federal Government Revenue Recognition”. Currently we do not have any transactions being accounted for within the scope of FASB ASC Topic 912-605. We may enter into government contracts that fall within the scope of FASB ASC Topic 605-35, “Revenue Recognition, Construction-Type and Production-Type Contracts”. For government contracts within the scope of FASB Topic 605-35, we record revenue under a units-of-delivery model with revenue and costs equal to the average unit value times the number of units delivered. Any estimated loss on an overall contract would be recognized in the period determined in accordance with FASB ASC Topic 605-35. We have not experienced past losses on government contracts.

F-7

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES (Continued)

Notes to the Consolidated Financial Statements

March 31, 2010, 2009, and 2008

(In thousands, except share and per share data)

We record an allowance for estimated losses resulting from the inability of customers to make timely payments of amounts due on account of product purchases. We assess the credit worthiness of our customers based on multiple sources of information, including publicly available credit data, subscription based credit reports, trade association data, and analyzes factors such as historical bad debt experience, changes in customer payment terms or payment patterns, credit risk related to industry and geographical location and economic trends. This assessment requires significant judgment. If the financial condition of its customers were to worsen, additional write-offs could be required, resulting in write-offs not included in our current allowance for doubtful accounts.

(g) Concentration of Credit Risk

We maintain most of our short-term investments in U.S. Treasury Bills. Our cash balances may exceed amounts insured by the Federal Deposit Insurance Corp. (FDIC).

We sell products to customers throughout the world and in many markets including retail, distribution, OEM, and directly to consumers. Customers are reviewed for creditworthiness, and we maintain an allowance for anticipated losses. We had one customer with an accounts receivable balance at March 31, 2010 and 2009 of $1.1 and $2.9 million, respectively, and one customer with an accounts receivable balance at March 31, 2010 and 2009 of $0.5 and $0.1 million, respectively. These were the only customers with an accounts receivable balance equal to more than 10% of total accounts receivable at March 31, 2010 and 2009.

(h) Inventories

Inventories are stated at the lower of cost or market. Market represents net realizable value. Cost is determined using the first-in, first-out method.

(i) Property, Plant, and Equipment

Property, plant, and equipment are stated at cost. Depreciation is calculated on the straight-line half-year method over the estimated useful lives of the assets. 

(j) Impairment or Disposal of Long-Lived Assets

We review long-lived assets for possible impairment of carrying value whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with relevant accounting guidance related to long-lived assets. In evaluating the fair value and future benefit of our assets, management performs an analysis of the anticipated undiscounted future net cash flows to be derived from the use of individual assets over their remaining amortization period. If the carrying amount of an asset exceeds its anticipated undiscounted cash flows, we recognize an impairment loss equal to the difference between its carrying value and its fair value.

(k) Goodwill

Goodwill, representing the excess of acquisition costs over the fair value of net assets of acquired businesses, is not amortized but is reviewed for impairment at least annually. Fair value is based on a projection of the estimated discounted future net cash flows expected to result from the reporting unit, using a discount rate reflective of our cost of funds. For the purposes of performing this impairment test, our business segments are our reporting units. The fair value of our reporting units, to which goodwill has been assigned, is compared with the reporting units’ recorded values. If recorded values are less than the fair values, no impairment is indicated. If fair values are less than recorded values, an impairment charge is recognized for the difference between the carrying value and the fair value. We perform our annual goodwill impairment testing for all reporting units in the fourth quarter of each year.

(l) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

F-8

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES (Continued)

Notes to the Consolidated Financial Statements

March 31, 2010, 2009, and 2008

(In thousands, except share and per share data)

(m) Share-Based Compensation

Share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over the employees’ requisite service period. In order to determine the fair value of stock options on the date of grant, we apply the Black-Scholes option-pricing model. Inherent in the model are assumptions related to risk-free interest rate, dividend yield, expected stock-price volatility, and expected option term. We use these estimates as variables in the Black-Scholes option pricing model. Depending upon the number of stock options granted, any fluctuations in these calculations could have a material effect on the results presented in our Consolidated Statements of Income. In addition, any differences between estimated forfeitures and actual forfeitures could also have a material impact on our financial statements.

Total share-based compensation expense recorded in the consolidated statements of income was $475, $414, and $278 for the years ended March 31, 2010, 2009, and 2008, respectively.

(n) Earnings Per Share

In accordance with the relevant accounting guidance for computing earnings per share, unvested share-based payment awards that contain rights to receive non-forfeitable dividends (whether paid or unpaid) are participating securities, and should be included in the two-class method of computing earnings per share. As of April 1, 2009, we implemented the accounting guidance which required us to treat unvested shares of restricted stock as participating securities in accordance with the two-class method in the calculation of both basic and diluted earnings per share and required that all prior-period earnings per share data that is presented be adjusted retrospectively. We had no shares of unvested restricted stock as of March 31, 2008 so the retrospective application of the accounting guidance had no effect on our earnings per share for the year ended March 31, 2008.

The following tables summarize the components of basic and diluted earnings per share computations.

	Years ended March 31,
	2010		2009	2008
Reconciliation of undistributed earnings:
Net income available to common shareholders	$	2,838	1,640	356
Less dividends on common stock		490	454	474
Less dividends on unvested participating securities		5	8	—
Undistributed earnings (1)	$	2,343	1,178	(118	)

	Years ended March 31,
	2010		2009	2008
Basic earnings per share computation:
Net income available to common shareholders	$	2,838	1,640	356
Less: dividend equivalents on unvested participating securities		5	8	—
Less: undistributed earnings allocated to unvested participating securities (1)		25	21	—
Undistributed earnings allocated to common shareholders	$	2,808	1,611	356
EPS Denominator:
Weighted average shares outstanding for basic earnings per share		5,902,532	5,890,828	5,889,136
Basic earnings per common share	$	0.48	0.27	0.06

	Years ended March 31,
	2010		2009	2008
Diluted earnings per common share computation (1)
Net income available to common shareholders	$	2,838	1,640	356
Less: dividend equivalents on unvested participating securities		5	8	—
Less: undistributed earnings allocated to unvested participating securities		25	21	—
Undistributed earnings allocated to common shareholders	$	2,808	1,611	356
EPS Denominator:
Weighted average shares outstanding for basic earnings per share		5,902,532	5,890,828	5,889,136
Dilutive common shares issuable upon exercise of stock options (2)		54,803	6,409	69,200
Dilutive unvested common shares associated with restricted stock awards		39,264	—	—
Weighted average shares outstanding - diluted		5,996,599	5,897,237	5,958,336
Diluted earnings per common share	$	0.47	0.27	0.06

F-9

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES (Continued)

Notes to the Consolidated Financial Statements

March 31, 2010, 2009, and 2008

(In thousands, except share and per share data)

(1) For the years ended March 31, 2010 and 2009, 70,490 and 106,999 of our issued but unvested shares of restricted stock, respectively, are considered participating securities. For the year ended March 31, 2008, there were no shares of restricted stock outstanding. The undistributed earnings are allocated to both common shares and unvested participating securities in computing the earnings per share under the two-class method.

(2) For the years ended March 31, 2010, 2009 and 2008, options to purchase 653,865, 930,001 and 287,800 shares of common stock, respectively, were considered anti-dilutive for purposes of calculating earnings per share.

(o) Recently Issued Accounting Standards

Effective July 2009, the FASB codified accounting literature into a single source of authoritative accounting principles, except for certain authoritative rules and interpretive releases issued by the SEC. Since the codification did not alter existing U.S. GAAP, it did not have an impact on our consolidated financial statements. All references to pre-codified U.S. GAAP have been removed from this Form 10-K.

In September 2006, the FASB issued accounting guidance that provided a common definition of fair value and established a framework to make the measurement of fair value under U.S. GAAP more consistent and comparable. It also required expanded disclosures to provide information about the extent to which fair value is used to measure assets and liabilities, the methods and assumptions used to measure fair value, and the effect of fair value measures on earnings. In February 2008, the FASB issued accounting guidance which permitted a one-year deferral of the application of such fair value accounting guidance for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The Company adopted the non-deferred portion of this accounting guidance as of April 1, 2008 and the deferred portion as of April 1, 2009. The adoption did not have a significant impact on our consolidated financial statements.

In June 2008, the FASB issued accounting guidance on earnings per share which provides that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, be considered participating securities and therefore included in the computation of earnings per share pursuant to the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for each class of common stock and any participating securities as if all earnings for the period had been distributed. The Company’s participating securities consist of unvested restricted stock awards. The new accounting guidance resulted in a change in the Company’s accounting policy effective April 1, 2009 and requires that all prior-period earnings per share data that is presented be adjusted retrospectively. The adoption of this accounting guidance did not have a significant impact on the Company’s consolidated financial statements.

In May 2009, the FASB issued guidance for the accounting for subsequent events. The guidance incorporates guidance into the accounting literature that was previously addressed only in auditing standards about management’s requirement to evaluate subsequent events for potential recognition or disclosure. The guidance refers to subsequent events that provide additional evidence about conditions that existed at the balance-sheet date as “recognized subsequent events”. Subsequent events which provide evidence about conditions that arose after the balance-sheet date but prior to the issuance of the financial statements are referred to as “non-recognized subsequent events”. The adoption of this pronouncement did not have a significant impact on our financial statements.

In October 2009, the FASB issued new accounting guidance for revenue recognition with multiple deliverables. This guidance impacts the determination of when the individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting. Additionally, this new accounting guidance modifies the manner in which the transaction consideration is allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration. The new guidance is effective for us prospectively for revenue arrangements entered into or materially modified beginning in the first quarter of fiscal 2011. Early adoption is permitted. This accounting guidance is not expected to have a significant impact on our consolidated financial statements.

In October 2009, the FASB issued new guidance for the accounting for certain revenue arrangements that include software elements. These new guidance amends the scope of pre-existing software revenue guidance by removing from the guidance non-software components of tangible products and certain software components of tangible products. This new guidance is effective for us prospectively for revenue arrangements entered into or materially modified beginning in the first quarter of fiscal 2011. Early adoption is permitted. We do not expect the impact of this new guidance to be material to our consolidated financial statements.

F-10

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES (Continued)

Notes to the Consolidated Financial Statements

March 31, 2010, 2009, and 2008

(In thousands, except share and per share data)

(p) Advertising Expenses

We account for advertising expenditures as expense in the period incurred. For the fiscal years ended March 31, 2010, 2009, and 2008, advertising expenses were $166, $204 and $186, respectively.

(q) Fair Value of Financial Instruments

We use the three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows;

Level 1. Observable inputs such as quoted prices in active markets;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.

The fair value of short-term investments, trade and other accounts receivable, trade accounts payable, accrued expenses, accrued dividends and income taxes receivable approximates their book value due to their short-term nature.

(2) Acquisition

On March 31, 2010, we completed an acquisition of all of the common stock of Patco for $5.0 million in cash and 674,950 shares of our common stock and contingent cash payments if certain revenue targets are met for either or both of the two years after the closing of the transaction. Included in the purchase price is $738, the present value of the contingent cash payments based upon our best estimate of Patco’s future revenue. Patco designs and manufactures battery management tools for secondary or re-chargeable batteries in several battery chemistries, including lead acid and lithium ion. Patco’s product solutions support customers in military, commercial and industrial sectors. Additionally, we incurred approximately $0.5 million of transaction costs, consisting primarily of broker’s commissions and professional service fees associated with the Patco acquisition.

The allocation of the purchase price is based upon estimates of the assets and liabilities acquired in accordance with the relevant accounting guidance. The acquisition of Patco is based on management’s consideration of past and expected future performance as well as the potential strategic fit with our long-term goals. The expected long-term growth, market position and expected synergies to be generated by Patco are the primary factors which gave rise to an acquisition price which resulted in the recognition of goodwill.

Cash			$	5,000
Common Stock – 674,500 shares valued at the $4.82 closing price March 31, 2010 (discounted)				2,426
Present value of contingent consideration				738
Total purchase price			$	8,164
The allocation of the aggregate purchase price of this acquisition is as follows:
Goodwill			$	5,465
Identifiable intangible assets				3,584
Net assets acquired:
Cash	207
Accounts receivable	275
Inventory	1,048
Fixed assets	506
Other assets	27
Liabilities assumed	(396	)
Deferred tax liabilities on Patco basis differences	(2,552	)
Net assets acquired				(885	)
			$	8,164

Identifiable intangible assets principally include employment agreements, trade secrets and purchased backlog (see Note 5).

F-11

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES (Continued)

Notes to the Consolidated Financial Statements

March 31, 2010, 2009, and 2008

(In thousands, except share and per share data)

Unaudited pro forma results of operations assuming the acquisition was consummated at the beginning of 2010 and 2009 are presented below. The proformas below represent our historical results combined with those of Patco for the periods presented, adjusted for specific factually supportable items such as amortization of intangible assets. The pro forma results of operations do not include the costs of integration and are not necessarily indicative of either future results of operations or results that would have been achieved if the acquisitions had been consummated at the beginning of the periods presented below.

	For the Year Ended March 31,
(unaudited)	2010		2009
Total Revenue	$	39,686	$	37,548
Net Income	$	3,557	$	1,457
Earnings Per Share
Basic	$	0.54	$	0.22
Diluted	$	0.53	$	0.22
Weighted average common shares outstanding
Basic		6,578		6,566
Diluted		6,672		6,572

(3) Inventories

Inventories at March 31, 2010 and 2009 consist of the following:

	2010		2009
Raw materials	$	4,871	5,084
Work-in-process		336	766
Finished goods		2,108	2,163
Total	$	7,315	8,013

Approximately 40% and 42% of our inventories were located in Honduras as of March 31, 2010 and 2009, respectively. As part of the acquisition of Patco on March 31, 2010, we acquired net inventory of approximately $1.0 million.

(4) Property, Plant and Equipment

Property, plant and equipment as of March 31, 2010 and 2009 consist of:

	2010		2009	Estimated useful lives
Building and improvements	$	1,881	1,870	20 years
Machinery and equipment		11,774	11,171	3 – 15 years
		13,655	13,041
Less: Accumulated depreciation		10,532	9,852
	$	3,123	3,189

Approximately 25% and 32% of our property, plant and equipment was located in Honduras as of March 31, 2010 and 2009, respectively. As part of the acquisition of Patco on March 31, 2010, we acquired net property, plant and equipment of approximately $0.5 million.

F-12

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES (Continued)

Notes to the Consolidated Financial Statements

March 31, 2010, 2009, and 2008

(In thousands, except share and per share data)

(5) Intangible Assets

Intangible assets as of March 31, 2010 are as follows:

	Asset		Accumulated Amortization		Net		Useful Life
Employment / non-compete agreements	$	1,780	$	7	$	1,773	3 - 5 years
Trade name, trade secrets, trademarks		1,060		6		1,054	1 - 10 years
Backlog orders		759		0		759	1 year
Patents and developed technology		501		196		305	10 years
Customer relationships		67		29		38	9 years
Goodwill (a)		5,465		0		5,465
	$	9,632	$	238	$	9,394

(a) Goodwill resulted from the acquisition of Patco on March 31, 2010.

Intangible assets as of March 31, 2009 were as follows:

	Asset		Accumulated Amortization		Net		Useful Life
Employment / non-compete agreements	$	8	$	4	$	4	3 - 5 years
Trade name, trade secrets, trademarks		6		6		0	1 year
Patents and developed technology		501		146		355	10 years
Customer relationships		67		22		45	9 years
	$	582	$	178	$	404

Amortization of intangibles over the next five years is as follows:

Year ending March 31,
2011	$	1,607
2012		846
2013		846
2014		256
2015		256
Thereafter		118

(6) Warranty and accrued expenses

We generally provide a one year warranty period for all of our products. We also provide coverage on certain of our surge products for “downstream” damage of products not manufactured by us. Our warranty provision represents management’s best estimate of probable liabilities, calculated as a function of sales volume and historical repair experience for each product under warranty. In September 2009 we increased the warranty reserve by $100 to cover potential claims arising from production problems at one of our foreign contract manufacturers. As of March 31, 2010, no claims have been filed against this additional reserve. A roll-forward of the activity in our warranty liability, included in accrued expenses, for the fiscal years ended March 31, 2010, 2009, and 2008 is as follows:

	Years ended March 31,
	2010			2009		2008
Beginning balance	$	164		137		90
Warranty expense		253		151		152
Warranty claims		(180	)	(124	)	(105	)
Ending balance	$	237		164		137

F-13

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES (Continued)

Notes to the Consolidated Financial Statements

March 31, 2010, 2009, and 2008

(In thousands, except share and per share data)

Accrued expenses include compensation related items of $1,365 and $1,105 at March 31, 2010 and 2009, respectively.

(7) Debt

Effective September 30, 2009, we entered into the First Amendment to Amended and Restated Loan Agreement (the “Loan Agreement”) and Promissory Note dated that same date (the “Replacement Note”) with Wachovia Bank, N.A. (“Wachovia”), our current institutional lender. The Replacement Note provides for an interest rate on our line of credit equal to the 30-day London Interbank Offering Rate (“LIBOR”) Market Index Rate plus 2.10%, through December 31, 2009. Thereafter, the interest rate will be reset quarterly as follows:

If Funded Debt/EBITDA Ratio Is:	The LIBOR Spread (basis points) will be:
< 1.50:1.00	210
> 1.50:1.00 < 2.00:1.00	240
> 2.00:1.00	270

As a result, effective for the quarter beginning on January 1, 2010 and continuing thereafter, the interest rate on the Replacement Note will be reset at a rate equal to the LIBOR Market Interest Rate plus the applicable LIBOR Spread for such quarter. The Loan Agreement extends the maturity date Loan Agreement until September 30, 2011.

The Loan Agreement reduced our existing $6,000,000 credit facility to $3,000,000. As of March 31, 2010 and 2009, we had no borrowings on this credit facility. The revolving line of credit can be used for working capital and general corporate purposes. Revolving loans may be borrowed, repaid and re-borrowed until September 30, 2011, at which time all amounts borrowed must be repaid. Our Loan Agreement with Wachovia obligates us to pay a customary unused facility fee for a credit facility of this size. The revolving loans under the Loan Agreement are secured by a continuing security interest in most of our key assets, including accounts and notes receivable, inventory, investments, demand deposit accounts maintained with our lender and 65% of the voting stock of Technology Research Corporation/Honduras, S.A. DE C.V, our wholly-owned subsidiary.

We have no off-balance sheet arrangements and no debt relationships other than noted above.

(8) Income Taxes

Our effective income tax rate was 32.8%, 23.4% and (45.9%) for the years ended March 31, 2010, 2009, and 2008, respectively. The effective income tax rate is based on the estimated income for the year and the composition of this income from the U.S. and from our subsidiary in Honduras. The income tax rate on income earned from Honduras is zero due to a tax holiday and, therefore, the effective rate is generally lower than the U.S. statutory rate due to the mix of income earned in the U.S. versus income earned in Honduras. The fiscal 2009 effective rate reflects a higher percentage of income earned in Honduras than in fiscal 2010, while the fiscal 2010 effective rate includes the impact of non-deductible Patco acquisition costs.

Pursuant to the accounting for uncertainty in income taxes accounting guidance, we must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such uncertain tax positions are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. To the extent we prevail in matters for which accruals have been established or are required to pay amounts in excess of accruals, our effective tax rate in a given financial statement period could be affected. As of March 31, 2010, we have unrecognized tax benefits of $321, of which $18 is included in income taxes receivable and $303 is included in noncurrent income taxes payable. As of March 31, 2009, we had unrecognized tax benefits of $127, of which $16 was included in income taxes receivable and $111 was included in noncurrent income taxes payable. During fiscal 2010 and 2009, we recorded $194 and $115, respectively, of unrecognized tax benefits primarily related to transfer pricing. Interest expense related to uncertain tax positions amounted to $3 in both fiscal 2010 and 2009. Total accrued interest at March 31, 2010 and 2009 was $10 and $7, respectively, and was included in income taxes receivable. There are no accrued penalties. It is our policy is to recognize interest and penalties in the provision for income taxes.

F-14

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES (Continued)

Notes to the Consolidated Financial Statements

March 31, 2010, 2009, and 2008

(In thousands, except share and per share data)

A reconciliation of unrecognized tax benefits is as follows:

	2010		2009
Beginning balance	$	127	12
Additions based on tax positions related to the current year		—	111
Additions for tax positions of prior years		194	4
Balance as of March 31	$	321	127

We file U.S. Federal and Florida income tax returns. Audits relating to all U.S. federal income tax matters for our income tax returns have been completed through the fiscal 2004 year. State income tax returns for fiscal years 2006 through 2009 have not been audited and we are currently undergoing a Federal tax audit for fiscal 2008.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of March 31, 2010 and 2009 are presented below:

	2010			2009
Deferred tax assets:
Accounts receivable, principally due to allowance for doubtful accounts	$	13		72
Inventories, principally due to a different cost basis for financial reporting purposes and additional costs inventoried for tax purposes		308		288
Stock-based compensation		266		166
Net operating loss carryforward		16		20
Accrued expenses		221		166
Intangible assets, principally due to differences in amortization		58		51
Total gross deferred tax asset		882		763
Deferred tax liabilities:
Property, plant and equipment, principally due to differences in depreciation		(162	)	(107	)
Patco intangible assets		(2,371	)	—
Prepaid expenses		(80	)	(71	)
Total gross deferred tax liability		(2,613	)	(178	)
Net deferred tax asset (liability)	$	(1,731	)	585

Net deferred tax asset (liability) included in the accompanying consolidated balance sheets as of March 31, 2010 and 2009 are as follows:

	2010			2009
Deferred income taxes, current asset	$	729		622
Deferred income taxes, noncurrent asset (liability)		(2,460	)	(37	)
	$	(1,731	)	585

Management assesses the likelihood that the deferred tax assets will be realized which is dependent upon the generation of taxable income during the periods in which those temporary differences become deductible. Management considers historical taxable income, the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes we will realize the benefits of these deductible differences at March 31, 2010.

At March 31, 2010, we have net operating loss carryforwards for state income tax purposes of $449, which are available to offset future state taxable income through 2029.

F-15

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES (Continued)

Notes to the Consolidated Financial Statements

March 31, 2010, 2009, and 2008

(In thousands, except share and per share data)

Income tax expense (benefit) for the years ended March 31, 2010, 2009, and 2008 consists of:

	2010			2009		2008
Current:
Federal	$	1,561		(330	)	404
State		61		6		33
		1,622		(324	)	437
Deferred:
Federal		(228	)	768		(518	)
State		(10	)	56		(31	)
		(238	)	824		(549	)
	$	1,384		500		(112	)

Income tax expense (benefit) for the years ended March 31, 2010, 2009 and 2008 differs from the amounts computed by applying the Federal income tax rate of 34% to income before income taxes as a result of the following:

	2010			2009		2008
Computed expected tax expense	$	1,436		728		83
Increase (reduction) in income taxes resulting from:
Foreign earnings for which no income taxes have been provided		(478	)	(421	)	(233	)
State income taxes, net of Federal income tax effect		51		41		1
Incentive stock options		66		68		42
Domestic production activities deduction		(84	)	—		(25	)
Non-deductible Patco acquisition costs		175		—		—
Provision for uncertain tax positions		203		118		16
Other		15		(34	)	4
	$	1,384		500		(112	)

The operating results of our foreign manufacturing subsidiary are not subject to foreign tax as it is operating under an indefinite tax holiday granted on January 7, 2002 by the Honduran Secretary of Industry and Commerce. Prior to January 7, 2002, the subsidiary operated under a 20-year tax holiday. The foreign operations generated income of approximately $0.8 million in 2010, $1.2 million in 2009, and $0.7 million in 2008. In March 2007, we determined that during fiscal years March 31, 2005 and 2006 we had inadvertently triggered additional U.S. taxable income and an income tax liability due to our borrowings under our joint line of credit with our subsidiary in Honduras. In April 2007, we filed amended income tax returns and paid additional income taxes for the years ended March 31, 2005 and 2006. In June 2007, we filed restated financial statements with the SEC. As of March 31, 2010 no income taxes have been provided on the $0.8 million of earnings in Honduras in fiscal 2010, $1.2 million of earnings in Honduras in fiscal 2009 and $0.7 million of earnings in Honduras in fiscal 2008.

The total amount of undistributed earnings of our foreign subsidiary for income tax purposes was approximately $3.8 million as of March 31, 2010. It is our intention to reinvest undistributed earnings of our foreign subsidiary and thereby indefinitely postpone its remittance. Accordingly, no provision has been made for foreign withholding taxes or United States income taxes which may become payable if undistributed earnings of the foreign subsidiary were paid as dividends to us. The unrecognized deferred tax liability on those earnings is approximately $1.3 million.

(9) Stock Options and Grants

We have adopted stock plans that provide for the grant of equity based awards to employees and directors, including incentive stock options, non-qualified stock options and restricted stock awards (non-vested shares) of our common stock (the “Plans”). Employee stock options generally vested over a three year period and, until March 2008, director stock options vested over a two year period. Beginning in March 2008, when directors were granted stock options for the fiscal 2009 year, the director options also vest over a three-year period. The exercise price of incentive stock options granted under the Plans will not be less than 100% of the fair market value of shares of common stock on the date of grant. For any participant owning stock representing more than 10% of the voting power of all classes of our stock, the exercise price for an incentive stock option may not be less than 110% of the fair market value of the shares of our common stock on the date of grant. The term of a stock option may not exceed ten years. Non-qualified stock options will be granted at the fair market value on the date of grant.

F-16

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES (Continued)

Notes to the Consolidated Financial Statements

March 31, 2010, 2009, and 2008

(In thousands, except share and per share data)

Our 1993 Incentive Stock Option Plan and 1993 Amended and Restated Non-Qualified Stock Option Plan have expired, and no options will be granted from these plans in the future. Certain options under these plans, however, are still outstanding and can be exercised in the future.

On March 24, 2000, our Board of Directors adopted the 2000 Long Term Incentive Plan and it was approved by our stockholders in August 2000 at our annual meeting. The 2000 Long Term Incentive Plan provides for the grant of incentive stock options within the meaning of Section 422 of the Internal Revenue Code to employees and non-qualified stock options to either employees or directors. The 2000 Long Term Incentive Plan also allows for the grant of restricted stock awards (non-vested shares) to our officers and directors.

On June 24, 2008, our Board of Directors approved the Amended and Restated 2000 Long Term Incentive Plan and it was approved by our stockholders on August 27, 2008 at our annual meeting. The Amended and Restated 2000 Long Term Incentive Plan provides for the grant of incentive stock options within the meaning of Section 422 of the Internal Revenue Code to employees and non-qualified stock options to either our employees or directors. The Amended and Restated 2000 Long Term Incentive Plan also allows for the grant of restricted stock awards (non-vested shares) to either our employees or directors. A total of 500,000 additional shares of our common stock have been reserved for issuance under the Amended and Restated 2000 Long Term Incentive Plan. A total of 1.6 million shares of our common stock have been reserved for issuance under the Amended and Restated 2000 Long Term Incentive Plan, of which 376,885 shares remain available for awards as of March 31, 2010.

The table below summarizes option activity in the Plans for the fiscal years ended March 31, 2010, 2009, and 2008:

	Shares available for grant		Options outstanding		Aggregate intrinsic value (in thousands)		Weighted average exercise price		Weighted average remaining contractual life
Balance as of March 31, 2007	403,850		344,935		$	107	$	9.10	7.44
Options granted	(444,700	)	444,700				$	3.27	9.74
Options canceled	177,350		(25,683	)			$	11.69
Options exercised	—		(2,000	))		3	$	1.80
Balance as of March 31, 2008	136,500		761,952			34	$	5.63	8.35
Additional shares reserved	500,000		—
Options granted	(274,001	)	274,001				$	1.93	9.64
Options canceled	77,250		(77,250	)			$	7.37
Options expired	—		(3,117	)			$	1.63
Options exercised	—		—
Restricted stock grants	(106,999	)	—
Balance as of March 31, 2009	332,750		955,586			1	$	4.44	8.09
Options granted	—		—
Options canceled	29,836		(29,836	)		19	$	3.32
Options expired	14,299		(14,299	)		8	$	9.92
Options exercised	—		(1,333	)		2	$	1.67
Restricted stock grants	—		—
Balance as of March 31, 2010	376,885		910,118			1,457	$	4.39	6.94
Exercisable as of March 31, 2010			626,151		$	775	$	5.29	6.33

The weighted average grant date fair value of options granted during the fiscal years ended March 31, 2009, and 2008 was 1.07 per share, and $2.17 per share, respectively. There were no options granted during fiscal year ended March 31, 2010. The total intrinsic value of options exercised during the fiscal years ended March 31, 2010, 2009, and 2008 was $2, $—  , and $3, respectively.

As of March 31, 2010, there was $309 of unrecognized compensation cost related to non-vested stock options that is expected to be recognized over a weighted average period of 1.1 years. The total fair value of stock options vested during the fiscal years ended March 31, 2010, 2009, and 2008 was $406, $388, and $153, respectively.

We estimated the fair value of stock-based payment awards on the date of grant using the Black-Scholes option pricing model, which is impacted by our stock price as well as assumptions regarding several subjective variables including our expected stock price volatility over the term of the awards, actual and projected employee option exercise experience, the risk free interest rate and expected dividends. The estimated expected term of options that have been granted was based on historical option

F-17

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES (Continued)

Notes to the Consolidated Financial Statements

March 31, 2010, 2009, and 2008

(In thousands, except share and per share data)

exercise trends. Estimated volatility was based on historical volatility over the expected term and the risk free interest rate was based on U.S. Treasury Bills similar to the expected term. The expected dividend yield was based on our experience with paying dividends over the past 12 months. We are also required to estimate forfeitures at the time of the grant and to revise these estimates in later periods if actual forfeitures differ from those estimates. Historical data was used to estimate pre-vesting forfeitures and record stock-based compensation expense only for those awards that are expected to vest.

There were no stock options granted during 2010. The per share weighted average exercise price of stock options granted during 2009 and 2008 was $1.93, and $3.27, respectively, on the date of grant using the Black-Scholes option pricing model, with the following assumptions:

	Years Ended March 31,
	2010	2009		2008
Weighted-average expected dividend yield	N/A	3.1	%	1.9	%
Weighted-average risk free interest rate	N/A	2.1	%	3.9	%
Weighted-average expected volatility	N/A	76.3	%	83.5	%
Weighted-average expected life	N/A	7.5 years		7.45 years

As of March 31, 2010, the range of exercise prices and weighted average remaining contractual life of options outstanding and exercisable was as follows:

	Options Outstanding				Options Exercisable
Range of exercise prices	Number of outstanding as of March 31, 2010	Weighted average remaining contractual life(years)	Weighted average exercise price		Number exercisable as of March  31, 2010	Weighted average exercise price
$ 1.50 -1.63	5,000	2.0	$	1.50	5,000	$	1.50
$ 1.64 -1.80	201,253	8.1		1.70	83,594		1.71
$ 1.81 - 4.87	469,865	7.7		3.09	303,557		3.18
$ 4.88 - 5.17	60,000	6.2		5.02	60,000		5.02
$ 5.18 - 8.30	50,000	4.8		7.27	50,000		7.27
$ 8.31 - 12.34	124,000	3.5		12.34	124,000		12.34
	910,118	6.9	$	4.39	626,151	$	5.29

We have also reserved 32,667 shares of our common stock for issuance to employees or prospective employees at the discretion of the Board of Directors of which 16,033 shares are available for future issue. There were no such shares issued during the years ended March 31, 2010, 2009, or 2008.

We granted 81,999 shares of restricted stock awards (non-vested shares) in December 2008 at a grant date fair value of $1.70 per share. We granted 25,000 shares of restricted stock awards (non-vested shares) in February 2009 at a grant date fair value of $1.90 per share. The restricted shares have a three-year vesting period, with one-third of such restricted shares vesting after the completion of a year of service. On February 15, 2010 and December 15, 2009, 8,335 and 28,174 restricted shares, respectively, vested and as of March 31, 2010, 70,490 shares of restricted stock are non-vested and remain outstanding.

As of March 31, 2010, there was $105 of total unrecognized compensation cost related to non-vested restricted stock awards that is expected to be recognized over a weighted average period of 1.7 years. There was no vesting of restricted stock in fiscal 2009.

F-18

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES (Continued)

Notes to the Consolidated Financial Statements

March 31, 2010, 2009, and 2008

(In thousands, except share and per share data)

The following table summarizes restricted stock activity since March 31, 2008:

	Shares		Weighted-average Grant-Date Fair Value
Non-vested balance as of March 31, 2008	—
Restricted stock granted	106,999		$	1.75
Restricted stock vested	—
Restricted stock forfeited	—
Non-vested balance as of March 31, 2009	106,999		$	1.75
Restricted stock granted	—
Restricted stock vested	(36,509	)		1.75
Restricted stock forfeited	—
Non-vested balance as of March 31, 2010	70,490		$	1.75

(10) Commitments and Contingencies

(a) Leases

We lease the land on which our operating facility is located in Clearwater, Florida. This operating lease was for a period of 20 years through August 2001 with options to renew for two additional ten-year periods. We utilized the first ten-year option and extended the lease through August 2011. The lease provides for rent adjustments every five years. We are responsible for payment of taxes, insurance and maintenance. In the event we elect to terminate the lease, title to all structures on the land reverts to the lessor.

Our subsidiary leases its operating facility in Honduras. The initial operating lease was for five years through February 2002, and since then, has been extended on a yearly basis through March 2011.

Our subsidiary leases its operating facility in Titusville, Florida. The initial operating lease is for three years through March 2013. We are responsible for payment of taxes, insurance and maintenance.

Future minimum lease payments under non-cancelable operating leases as of March 31, 2010 are:

Year ending March 31,
2011	$	306
2012		103
2013		89
Thereafter		—
Total minimum lease payments	$	498

Rental expense for all operating leases was approximately $232 in 2010, $217 in 2009, and $261 in 2008.

(b) Indemnification

The Stock Purchase Agreement (SPA) between us and the Selling Shareholders of Patco contains indemnification provisions pursuant to which we agreed to indemnify the Selling Shareholders for liabilities resulting from untrue representations and warranties made at closing or breaches of covenants not waived by the Selling Shareholders. There is a minimum indemnification claim threshold of $75 and our liability is capped at $5 million, the cash portion of the purchase price. We are not aware of any potential claims under the indemnification provisions of the SPA.

F-19

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES (Continued)

Notes to the Consolidated Financial Statements

March 31, 2010, 2009, and 2008

(In thousands, except share and per share data)

(11) Major Customers

We operate in one business segment - the design, development, manufacture and marketing of electronic control and measurement devices for the distribution of electric power. We only report sales and standard gross profit by market (commercial and military), no allocations of manufacturing variances and other costs of operations or assets are made to the markets. Sales by market are:

	Years ended March 31,
	(In thousands)
Customer	2010		2009	2008
U.S. Military (direct sales)	$	4,325	3,517	6,400
DRS Technologies, Inc., a U.S. Government Prime Contractor		11,423	10,251	6,986
Total Revenue for major customers	$	15,748	13,768	13,386
Exports:
Africa	$	3	1	1
Australia		—	2	1
Canada		35	63	62
Europe		1,413	2,000	1,921
Far East		83	1,548	2,189
Mexico		13	125	526
Middle East		23	28	17
South America		10	27	13
Total exports	$	1,580	3,794	4,730

(12) Benefit Plan

Our 401(k) plan covers all employees with three months of service who are at least 21 years old. We match employee contributions dollar-for-dollar up to $400. Our contributions were approximately $20 in 2010, $23 in 2009, and $23 in 2008.

(13) Litigation

On February 16, 2007, Shanghai ELE Manufacturing Corporation (“ELE”) filed a declaratory judgment action against us in the Central District of California alleging that our United States Patent No. 6,292,337 (“the ‘337 patent”) is invalid and not infringed by ELE. We had previously written a letter to ELE requesting that they cease all infringing activity relating to the ‘337 patent. On April 11, 2007 we filed a counterclaim against ELE asserting that the patent is valid and that ELE’s Leakage Current Detectors and Interrupters (LCDIs), among other things, infringe our ‘337 patent. We also sought monetary damages against ELE for past infringement of the ‘337 patent. The ‘337 patent underlies our Fire Shield® technology for cord fire prevention.

On August 4, 2008, we entered into a Settlement Agreement with ELE. Under the Settlement Agreement, the civil action involving TRC and ELE was dismissed. As part of the Settlement Agreement we entered into a cross-licensing arrangement with ELE for our ‘337 patent and ELE’s Chinese patents Nos. ZL200420096315.2, ZL 200520118736.5 and ZL200520118737.X for the period such patents remain valid and enforceable. The parties agreed to make payments to each other for sales of products made prior to July 1, 2008, thereby resulting in us receiving a net payment from ELE as part of the terms of the confidential Settlement Agreement.

Under this licensing arrangement, we will receive royalty payments for periods beginning after June 30, 2008, based on the number of designated ELE Leakage Current Detector Interrupter Products sold.

We are involved in various claims and legal actions arising in the ordinary course of business. In management’s opinion, the ultimate disposition of these matters will not have a material adverse effect on our financial condition, result of operations or cash flows.

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TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES (Continued)

Notes to the Consolidated Financial Statements

March 31, 2010, 2009, and 2008

(In thousands, except share and per share data)

(14) Selected Quarterly Financial Data (Unaudited)

Information (unaudited) related to operating revenue, operating income, net income and earnings per share, by quarter, for the years ended March 31, 2010 and 2009 are:

	First quarter		Second quarter	Third quarter	Fourth quarter
Year ended March 31, 2010:
Revenue	$	9,699	9,627	7,588	7,919
Gross profit		4,050	3,906	2,756	2,925
Income from operations		1,701	1,646	690	156
Net income (loss)		1,215	1,217	482	(76	)
Basic earnings (loss) per share		.20	.20	.08	(.01	)
Diluted earnings (loss) per share		.20	.20	.08	(.01	)
Year ended March 31 2009:
Revenue	$	8,631	9,297	7,821	7,984
Gross profit		2,534	3,524	2,551	2,858
Income from operations		63	784	161	552
Net income		58	938	255	389
Basic earnings per share		.01	.16	.04	.06
Diluted earnings per share		.01	.16	.04	.06

Fourth quarter results of operations in fiscal 2010 includes $0.5 million of Patco acquisition related expenses that were non-deductible for tax purposes.

(15) Transactions with Officers and Other Related Parties

(a) Hosea Partners, LTD

As part of the acquisition of Patco, we entered into a lease with Hosea (a significant shareholder as a result of the acquisition of Patco) for Patco’s facility in Titusville, Florida. The lease is a three year, triple net lease and provides for monthly rental payments of $7. There was no expense recognized under this lease in the fiscal year ended March 31, 2010.

(b) Employment Agreements

We are obligated under three employment agreements with Patco employees that provide for salary and benefit continuation in the event of termination without cause, that expire in March 2013.

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COMPANY NAME

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Month 00, 2004

Schedule II

Valuation and Qualifying Accounts

Years ended March 31, 2010, 2009, and 2008

(In thousands)

			Additions
Description	Balance  at beginning of period		Charges  to costs and expense	Charged  to other accounts	Deductions (1)		Balance at end  of period
Allowance for doubtful accounts:
Year ended March 31, 2010	$	203	2	—	(167	)	38
Year ended March 31, 2009	$	123	166	—	(86	)	203
Year ended March 31, 2008	$	273	69	—	(219	)	123

(1) Write-offs, net of recoveries

F-22