Technology Research (TRCI) 10-Q 2011 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Form 10-Q

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

For the quarterly period ended June 30, 2010

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

For the transition period from            to            

0-13763

(Commission file No.)

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)

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

Indicate by check mark whether the registrant 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  ¨    No  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See 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 of the Exchange Act).    Yes  ¨    No  x

The aggregate number of shares of the Registrant’s Common Stock, $.51 par value, outstanding on June 30, 2010, was 6,606,842.

FORM 10-Q

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)	3
Condensed Consolidated Balance Sheets	3
Condensed Consolidated Statements of Income	4
Condensed Consolidated Statements of Cash Flows	5
Notes to the Condensed Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results  of Operations	13
Item 3. Quantitative and Qualitative Disclosures About Market Risk	19
Item 4. Controls and Procedures	19
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	19
Item 1A. Risk Factors	19
Item 6. Exhibits	20
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
SIGNATURES	20

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share data)

	June 30, 2010			March 31, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	8,468		8,216
Trade and other accounts receivable, net of allowance for doubtful accounts of $43 at June 30, 2010 and $38 at March 31, 2010		4,372		4,400
Income taxes receivable (note 8)		—		29
Inventories (notes 3 and 4)		7,603		7,315
Deferred income taxes (note 8)		782		729
Prepaid expenses and other current assets		346		299
Total current assets		21,571		20,988
Property, plant and equipment, net of accumulated depreciation of $10,679 at June 30, 2010 and $10,532 at March 31, 2010		3,068		3,123
Intangible assets, net of accumulated amortization of $906 in 2011 and $238 in 2010		3,261		3,929
Goodwill		4,402		4,402
Other assets		34		33
Total assets	$	32,336		32,475
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	1,271		1,423
Accrued expenses		1,098		1,720
Accrued dividends		135		134
Income taxes payable (note 8)		244		—
Total current liabilities		2,748		3,277
Income taxes payable (note 8)		375		303
Deferred income taxes (note 8)		1,146		1,397
Patco earn-out (note 3)		738		738
Total liabilities		5,007		5,715
Stockholders’ equity (note 9):
Common stock $0.51 par value; 10,000,000 shares authorized, 6,632,627 shares issued and 6,606,842 shares outstanding, and 6,629,405 shares issued and 6,603,620 shares outstanding, respectively		3,380		3,379
Additional paid-in capital		12,681		12,570
Retained earnings		11,324		10,867
Common stock held in treasury, 25,785 shares at cost		(56	)	(56	)
Total stockholders’ equity		27,329		26,760
Total liabilities and stockholders’ equity	$	32,336		32,475

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

3

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Unaudited)

(In thousands, except share and per share data)

	Three Months Ended June 30,
	2010		2009
Revenue:
Commercial	$	4,331	3,365
Military		6,011	6,208
Royalty		90	126
Total revenue		10,432	9,699
Cost of sales		6,181	5,649
Gross profit		4,251	4,050
Operating expenses:
Selling and marketing		672	672
General and administrative		1,805	1,004
Research and development		933	673
Total operating expenses		3,410	2,349
Income from operations		841	1,701
Other income, net		1	3
Income before income taxes		842	1,704
Income tax expense		251	489
Net income	$	591	1,215
Earnings per share - basic	$	0.09	0.20
Earnings per share - diluted	$	0.08	0.20
Shares outstanding - basic		6,604,622	5,890,828
Shares outstanding - diluted		6,887,621	5,915,579

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

4

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Three Months Ended June 30,
	2010			2009
Cash flows from operating activities:
Net income	$	591		1,215
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of interest on short-term investments		—		(5	)
Bad debt expense		6		—
Depreciation		254		275
Loss on disposal of property and equipment		3		143
Amortization of intangible assets		668		15
Stock compensation expense		104		127
Deferred income taxes		(304	)	(44	)
Changes in operating assets and liabilities:
Trade and other accounts receivable, net		22		(407	)
Inventories, net		(288	)	961
Prepaid expenses and other current assets		(47	)	(65	)
Other assets		(1	)	—
Trade accounts payable		(152	)	25
Accrued expenses		(621	)	(309	)
Income taxes		345		533
Net cash provided by operating activities		580		2,464
Cash flows from investing activities:
Maturities of short-term investments		—		1,000
Purchase of short-term investments		—		(2,995	)
Purchases of property and equipment		(202	)	(100	)
Net cash used in investing activities		(202	)	(2,095	)
Cash flows from financing activities:
Proceeds from the exercise of stock options		8		—
Cash dividends paid		(134	)	(120	)
Net cash used in financing activities		(126	)	(120	)
Net increase in cash and cash equivalents		252		249
Cash and cash equivalents at beginning of period		8,216		2,954
Cash and cash equivalents at end of period	$	8,468		3,203

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

5

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(In thousands, except share data)

1. Basis of Presentation:

The unaudited interim condensed consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in complete financial statements prepared in accordance with United States generally accepted accounting principles have been omitted pursuant to such rules and regulations. The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Technology Research Corporation (the “Company”) Annual Report on Form 10-K for the year ended March 31, 2010. Operating results for the three-month period ended June 30, 2010 are not necessarily an indication of the results that may be expected for the fiscal year ending March 31, 2011.

The information furnished reflects, in the opinion of our management, all adjustments necessary for a fair presentation of the financial results for the interim periods presented.

2. 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.

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

	Three months ended June  30,
	2010		2009
Reconciliation of undistributed earnings:
Net income available to common shareholders	$	591	1,215
Less: dividends on common stock		133	118
Less: dividends on unvested participating securities		2	2
Undistributed earnings (1)	$	456	1,095
	Three months ended June  30,
	2010		2009
Basic earnings per share computation:
Net income available to common shareholders	$	591	1,215
Less: dividend equivalents on unvested participating securities		2	2
Less: undistributed earnings allocated to unvested participating securities (1)		6	20
Undistributed earnings allocated to common shareholders	$	583	1,193
EPS Denominator:
Weighted average shares outstanding for basic earnings per share		6,604,622	5,890,828
Basic earnings per common share	$	0.09	0.20

6

	Three months ended June  30,
	2010		2009
Diluted earnings per common share computation:(1)
Net income available to common shareholders	$	591	1,215
Less: dividend equivalents on unvested participating securities		2	2
Less: undistributed earnings allocated to unvested participating securities		6	20
Undistributed earnings allocated to common shareholders	$	583	1,193
EPS Denominator:
Weighted average shares outstanding for basic earnings per share		6,604,622	5,890,828
Dilutive common shares issuable upon exercise of stock options (2)		246,683	3,848
Dilutive unvested common shares associated with restricted stock awards		36,316	20,903
Weighted average shares outstanding—diluted		6,887,621	5,915,579
Diluted earnings per common share	$	0.08	0.20

(1) For the three months ended June 30, 2010, 90,090 of unvested outstanding shares of restricted stock are considered participating securities. For the three months ended June 30, 2009, 106,999 of unvested outstanding shares of restricted stock were considered participating securities. 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 three-month periods ended June 30, 2010 and 2009, options to purchase 245,100 and 915,943 shares of common stock, respectively, were considered anti-dilutive for the purposes of calculating earnings per share.

3. 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 $0.7 million, the present value of the contingent cash payments that could be paid as additional earn-out payments based upon our best estimate of Patco’s future sales of its battery products. 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, recorded in the year ended March 31, 2010, 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. As a result of adjustments to the purchase price allocation, both goodwill and deferred tax liabilities have been reduced $1.063 million effective March 31, 2010.

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			$	4,402
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	(1,489	)
Net assets acquired				178
			$	8,164

7

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

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 acquisition had been consummated at the beginning of the periods presented below.

	For the three months ended June 30,
(unaudited)	2010		2009
Total Revenue	$	10,432	$	11,058
Net Income		578		1,357
Earnings Per Share
Basic	$	0.09		0.21
Diluted		0.08		0.21
Weighted average common shares outstanding
Basic		6,605		6,566
Diluted		6,888		6,591

4. Inventories:

Inventories consist of the following:

	June 30, 2010		March 31, 2010
Raw materials	$	5,726	4,871
Work-in-process		437	336
Finished goods		1,440	2,108
Total	$	7,603	7,315

5. Intangible Assets

Intangible assets as of June 30, 2010 are as follows:

	Asset		Accumulated Amortization		Net		Useful Life
Employment / non-compete agreements	$	1,780	$	155	$	1,625	3 -5 years
Trade name, trade secrets, trademarks		1,060		56		1,004	1 -10 years
Backlog orders		759		455		304	1 year
Patents and developed technology		501		209		292	10 years
Customer relationships		67		31		36	9 years
Total Intangible Assets	$	4,167	$	906	$	3,261
Goodwill (a)	$	4,402			$	4,402

8

Intangible assets as of March 31, 2010 were 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
Total Intangible Assets	$	4,167	$	238	$	3,929
Goodwill (a)	$	4,402			$	4,402

(a) See footnote 3 – Acquisition.

6. Warranty:

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 June 30, 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 three months ended June 30, 2010 and 2009 is as follows:

	Three months ended June 30,
	2010			2009
Beginning balance	$	237		164
Warranty expense		29		42
Warranty claims		(30	)	(44	)
Ending balance	$	236		162

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 provided 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 is reset quarterly as follows:

If Funded Debt/EBITDA Ratio Is:	The LIBOR Spread (basis points) will be:
< 1.50:1.00	210
³ 1.50:1.00 < 2.00:1.00	240
³ 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 was 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.

9

The Loan Agreement reduced our existing $6,000,000 credit facility to $3,000,000. As of June 30 and March 31, 2010, we had no borrowings on this credit facility. 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. 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 29.8% and 28.7% for the three months ended June 30, 2010 and 2009, 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 lower than the U.S. statutory rate due to the mix of income earned in the U.S. versus income earned in Honduras. The higher current period rate reflects a higher percentage of income earned in the U.S. with the inclusion of Patco’s earnings.

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 June 30, 2010, we have unrecognized tax benefits of $393, of which $18 is included in income taxes receivable and $375 is included in noncurrent income taxes payable. As of March 31, 2010, we had unrecognized tax benefits of $321, of which $18 was included in income taxes receivable and $303 was included in noncurrent income taxes payable. During the three months ended June 30, 2010 and 2009, we recorded $72 and $79, respectively, of unrecognized tax benefits primarily related to transfer pricing. Interest expense related to uncertain tax positions amounted to $4 and $1 for the three months ended June 30, 2010 and 2009, respectively. Total accrued interest at June 30, 2010 and March 31, 2010 was $14 and $10, 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.

A reconciliation of unrecognized tax benefits is as follows:

	Three months ended June 30,
	2010		2009
Beginning balance	$	321	127
Additions based on tax positions related to the current year		—	—
Additions for tax positions of prior years		72	79
Ending balance	$	393	206

We file U.S. Federal and Florida income tax returns. We have concluded an audit on all U.S. federal income tax matters through the fiscal 2008 year. Federal income tax returns for fiscal years 2009 and 2010 and state income tax returns for fiscal years 2006 through 2010 have not been audited.

9. Stock-Based Compensation:

For purposes of determining the variables used in the calculation of stock compensation expense under current

10

accounting guidance, we perform an analysis of current market data and historical company data to calculate an estimate of implied volatility, the expected term of the option and the expected forfeiture rate. 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 Condensed Statements of Income. In addition, any differences between estimated forfeitures and actual forfeitures could also have a material impact on our financial statements.

Stock compensation expense of $104 and $127, respectively, was included in the Condensed Consolidated Statements of Income for the three months ended June 30, 2010 and 2009.

Cash received from the exercise of stock options under all share-based payment arrangements for the three months ended June 30, 2010 and 2009 was $8 and zero, respectively. Currently, we expect to utilize available registered shares when share-based awards are issued.

Stock Option Plans

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, our 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 will not be less than 110% of the fair market value of the shares of common stock on the date of grant. The term of stock options may not exceed ten years. Non-qualified stock options will be granted at the fair market value on the date of grant.

Our 1993 Incentive Stock Option Plan and our 1993 Amended and Restated Non-Qualified Stock Option Plan have expired, and no options will be granted from these plans 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 its 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 our employees or directors. The 2000 Long Term Incentive Plan also allows for the grant of restricted stock awards (non-vested shares) to 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 329,117 shares remain available for awards as of June 30, 2010.

The table below summarizes stock option activity in the Plans from April 1 through June 30, 2010:

	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, 2010	376,885		910,118		$	1,456		$	4.39	6.94
Options granted	(53,300	)	53,300			1			5.10	—
Options canceled	18,888		(18,888	)		(64	)		1.70	—
Options expired	1,800		(1,800	)		—			12.34	—
Options exercised	—		(3,222	)		(9	)		2.48	—
Restricted stock grants	(19,600	)	—			—			—
Restricted stock canceled	4,444		—			—			—
Balance as of June 30, 2010	329,117		939,508		$	1,587		$	4.48	6.75
Exercisable as of June 30, 2010			645,573		$	943		$	5.19	6.01

11

The weighted average grant date fair value of options granted during the three months ended June 30, 2010 was $5.10 per share. The total intrinsic value of options exercised during the three months ended June 30, 2010 was $9. There were no options granted or exercised during the three months ended June 30, 2009.

As of June 30, 2010, there was $351 of unrecognized compensation cost related to non-vested stock options that is expected to be recognized over a weighted average period of 1.8 years. The total fair value of stock options vested during the three months ended June 30, 2010 and 2009 was $20 and $20, 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 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.

The assumptions used to value stock option grants for the three months ended June 30, 2010 and 2009 are as follows:

	Three months ended June 30,
	2010		2009
Weighted-average expected dividend yield	2.11	%	N/A
Weight-average risk free interest rate	2.78	%	N/A
Weighted-average expected volatility	61.98	%	N/A
Weighted-average expected life	7.20 years		N/A

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. We granted 19,600 shares of restricted stock awards (non-vested shares) in June 2010 at a grant date fair value of $5.10 per share. The shares have a three-year vesting period. As of June 30, 2010, 85,646 shares of restricted stock are non-vested and remain outstanding.

As of June 30, 2010, there was $189 of total unrecognized compensation cost related to non-vested restricted stock awards that is expected to be recognized over a weighted average period of 2.25 years. During the three month period ended June 30, 2010, none of the restricted shares that are issued and outstanding became vested.

The following table summarizes restricted stock activity from April 1 through June 30, 2010:

	Shares		Weighted-average Grant-Date Fair Value
Non-vested balance at March 31, 2010	70,490		$	1.75
Restricted stock granted	19,600			5.14
Restricted stock vested	—
Restricted stock forfeited	(4,444	)
Non-vested balance as of June 30, 2010	85,646		$	2.53

10. Litigation

We 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 its financial condition, result of operations or cash flows.

12

11. New Accounting Standards

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. The adoption of this guidance did not have a significant impact on the Company’s consolidated financial statements.

In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance related to fair value disclosure requirements. Under this guidance, companies will be required to make additional disclosures concerning significant transfers of amounts between the Level 1 and Level 2 fair value disclosures, as well as further disaggregation of the types of activity that were previously disclosed in the rollforward of Level 3 fair value disclosures. Further, the guidance clarifies the level of aggregation of assets and liabilities within the fair value hierarchy that may be presented. The adoption of this guidance did not have a significant impact on the Company’s consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

As used in this interim report on Form 10-Q, “we”, “our”, “us”, the “Company” and “TRC” all refer to Technology Research Corporation and its subsidiaries unless the context otherwise requires.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This interim report on Form 10-Q contains forward-looking statements, which are subject to the safe harbor provisions created by of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934. 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.

The identification of certain statements as “forward-looking” is not intended to mean that other statements not specifically identified are not forward-looking. Forward-looking statements include, but are not limited to, statements that relate to our future revenue, product development, demand, acceptance and market share, competitiveness, gross margins, levels of research and development (R & D), outsourcing plans and operating expenses, tax expenses, our management’s plans and objectives for our current and future operations, the levels of customer spending or R & D activities, general economic conditions and the sufficiency of financial resources to support future operations, and capital expenditures. Such statements are based on current expectations and are subject to risks, uncertainties, and changes in condition, significance, value and effect, including those discussed below under the heading “Risk Factors” within the section of this report entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other documents we file from time to time with the Securities and Exchange Commission (“SEC”), such as our last filed Annual Report onForm 10-K for the fiscal year ended March 31, 2010, our quarterly reports on Form 10-Q, and our current reports on Form 8-K. Such risks, uncertainties and changes in condition, significance, value and effect could cause our actual results to differ materially from those expressed herein and in ways not readily foreseeable. Readers are cautioned not to place undue reliance on these forward-looking statements,

13

which speak only as of the date hereof and are based on information currently and reasonably known to us. We undertake no obligation to release the results of any revisions to these forward-looking statements, which may be made to reflect events or circumstances which occur after the date hereof or to reflect the occurrence or effect of anticipated or unanticipated events.

Actual results could, however, 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. See Part II, Item 1A, entitledRisk Factors.

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 Quarterly Report on Form 10-Q.

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;

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

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

• Power management and distribution technologies.

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.

14

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 in the section entitled “Risk Factors”, set forth in our Annual Report on Form 10-K for the fiscal year ended March 31, 2010.

Revenue was $10.4 million in the first quarter of fiscal 2010, compared with $9.7 million reported in the same quarter last year, an increase of 7.6%. Commercial revenue increased by $0.9 million while military revenue decreased by $0.2 million in spite of the $1.8 million of Patco revenue. The increase in commercial revenue was principally a result of the softening of the impact of the recession on several of our major markets. The decrease in military revenue was primarily due to an accelerated delivery schedule from our largest customer in the prior year that has now returned to historical levels.

Gross profit increased $0.2 million due to Patco’s results ($0.8 million) that offset the decline in the favorable shift in the mix of military and commercial business. Operating expenses were up for the quarter ended June 30, 2010 compared with the quarter ended June 30, 2009 due to the inclusion of Patco’s expenses, amortization of expenses incurred for certain intangible assets acquired in the Patco acquisition and new product development expenses. Net income for the first fiscal quarter ended June 30, 2010 was $0.6 million compared with net income of $1.2 million for the first quarter of last year. Diluted earnings per share is $0.08 for the quarter ended June 30, 2010 compared with diluted earnings per share of $0.20 for last year’s first quarter.

RESULTS OF OPERATIONS

Revenuefor the first quarter ended June 30, 2010 was $10.4 million, as compared to $9.7 million reported in the same quarter last year, an increase of 7.6%. Commercial revenue increased by $0.9 million while military revenue decreased by a net of $0.2 million, which consisted of a decrease of $2 million for existing customers, offset by $1.8 million of Patco revenue. The increase in commercial revenue was principally a result of the softening of the impact of the recession on several of our major markets. The decrease in military revenue was primarily due to an accelerated delivery schedule from our largest customer in the prior year that has now returned to historical levels.

Gross profitincreased $0.2 million, or 5.0%, to $4.3 million for the quarter ended June 30, 2010, and as a percentage of revenue, gross profit decreased to 40.7% for the quarter ended June 30, 2010 from 41.8% in the prior year quarter. Increased gross margin was due to Patco’s results ($0.8 million) that offset the decline in the favorable shift in the mix of military and commercial business.

Selling and marketing expense of $0.7 million was unchanged for the quarter ended June 30, 2010, as compared to the prior year quarter. As a percentage of revenue, selling and marketing expense decreased to 6.4% from the 6.9% of revenue for the first quarter of last year. This decrease in selling and marketing expense as a percent of revenue was primarily due to the increase in revenue in the first quarter of the current year compared with the first quarter of the prior year. Patco’s selling and marketing expenses for the period were insignificant.

General and administrativeexpense of $1.8 million, or 17.3% of revenue for the quarter ended June 30, 2010, increased from $1.0 million, or 10.4% of revenue for the quarter ended June 30, 2009. The increase of $0.8 million in the first quarter of fiscal 2010 is primarily due to $0.7 million of amortization expense related to the Patco acquisition. The 6.9 percentage point increase in general and administrative expense as a percent of revenue in the first quarter ended June 30, 2010, as compared to the quarter ended June 30, 2009 primarily results from the higher expenses compared to slightly higher revenue for the current period.

Research and developmentexpense was $0.9 million, or 8.9% of revenue, for the quarter ended June 30, 2010, an increase of $0.3 million from $0.7 million or 6.9% of revenue for the first quarter of fiscal 2009. The increase is mainly attributable to higher compensation and consulting related expenses as we improve our engineering expertise, increased spending on product development, and Patco’s engineering expenses of $0.1 million.

Income tax expensewas $0.3 million for the quarter ended June 30, 2010, compared with an expense of $0.5 million for the three months ended June 30, 2009. Income tax expense as a percentage of income before taxes was

15

29.8% for the quarter ended June 30, 2010, as compared to 28.7% in the prior year quarter. Our effective tax rate varies based primarily on the mix of income before income taxes derived from our subsidiary in Honduras, which is not subject to income taxes, and the balance of income before income taxes, which is subject to U.S. income taxes. At each reporting period, we make our best estimate of the effective tax rate expected for the full fiscal year and apply that rate to the current year-to-date income before income taxes. Any difference between the current and preceding estimated effective tax rate expected for the full fiscal year is reflected as an adjustment in the current quarter’s income tax expense. In accordance with current accounting guidance, we do not record deferred income taxes on the foreign undistributed earnings of an investment in a foreign subsidiary that is essentially permanent in duration. If circumstances change, and it becomes apparent that some or all of the undistributed earnings of our subsidiary will be remitted in the foreseeable future, but U.S. income taxes have not been recognized, we will record as an expense of the current period the U.S. income taxes attributed to that remittance.

Net incomefor the quarter ended June 30, 2010 was $0.6 million, compared to $1.2 million in the same quarter last year. The basic and diluted earnings per share was $0.09 and $0.08, respectively, for the quarter ended June 30, 2010, compared to a basic and diluted earnings per share of $0.20 for the same quarter last year.

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents increased from $8.2 million as of March 31, 2010 to $8.5 million as of June 30, 2010. Cash provided by operating activities was $0.6 million, cash used in investing activities was $0.2 million and cash used in financing activities was $0.1 million resulting in a total increase in cash of $0.3 million for the three-month period ended June 30, 2010.

Cash provided by operating activities primarily resulted from net income of $0.6 million, amortization expense related to the Patco acquisition of $0.7 million, and depreciation expense of $0.3 million, partially offset by a decrease in accrued expenses of $0.6 million and an increase in inventories of $0.3 million.

Cash used in investing activities was due to purchase of property and equipment.

Cash used in financing activities was due to the payment of quarterly dividends.

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 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 was 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
³ 1.50:1.00 < 2.00:1.00	240
³ 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 June 30, 2010 and March 31, 2010, we had no borrowings on our Wachovia credit facility.

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

16

OFF-BALANCE SHEET ARRANGEMENTS

We do not have financial partnerships with unconsolidated entities, such as entities often referred to as structured finance or variable interest entities, which are often established for the purposes of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As a result, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had such relationships.

NEW ACCOUNTING STANDARDS

See Note 11 – “New Accounting Standards” to the Condensed Consolidated Financial Statements for a discussion of recent accounting standards.

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.

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 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.

17

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.

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.

18

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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We do not engage in investing in 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 June 30, 2010, we have no long-term debt. If we borrow under our Wachovia credit facility, our borrowing costs will be affected by changes in interest rates. We also have exposure to changes in interest rates from investments in held-to-maturity securities. With our current level and term of investments, a 1% change in the market rate of interest would result in a change in interest income of approximately $100 on an annual basis.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

As of the end of the period covered by this interim report on Form 10-Q, we carried out, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer (the “Certifying 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 are effective to ensure that information required to be disclosed by us in the reports we file or submit under Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

Further, there were no changes in our internal control over financial reporting during our first fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. 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 1A. Risk Factors.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, the reader should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our annual Report on Form 10-K for the fiscal year ended March 31, 2010. There have been no material changes in our risk factors from those disclosed in Part I, Item 1A, of the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2010.

19

Item 6. Exhibits.

Exhibit 31.1 — Certification of the CEO pursuant to Rule 13a-14(a) or Rule 15(d)-14(a).

Exhibit 31.2 — Certification of the CFO pursuant to Rule 13a-14(a) or Rule 15(d)-14(a).

Exhibit 32.1 — Certification pursuant to 18 U.S.C. §1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.2 — Certification pursuant to 18 U.S.C. §1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

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

	TECHNOLOGY RESEARCH CORPORATION
August 6, 2010	By:        /s/ Owen Farren
	Owen Farren
	President and Chief Executive Officer
	(Principal Executive Officer)
August 6, 2010	By:        /s/ Robert D. Woltil
	Robert D. Woltil
	Interim Chief Financial Officer
	(Principal Financial and Accounting Officer)

20