Torotel (TTLO) 10-Q/A 2009 Q3 Quarterly report (amended)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q/A

Amendment No. 1

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended January 31, 2009
o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from [    ] to [    ]

Commission File No. 1-8125

TOROTEL, INC.

(Exact name of registrant as specified in its charter)

MISSOURI	44-0610086
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

620 NORTH LINDENWOOD DRIVE, OLATHE, KANSAS  66062

(Address of principal executive offices)

(913) 747-6111

(Registrant’s telephone number)

NONE

(Former name, former address and former fiscal year, if changed since last report)

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, and (2) has been subject to such filing requirements for the past 90 days.

Yes x   No o

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer  o (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934.)

Yes o   No x

As of March 10, 2009, there were 5,878,340 shares of Common Stock, $.01 par value, outstanding.

TOROTEL, INC. AND SUBSIDIARIES

INDEX

PART I.		FINANCIAL INFORMATION
	Item 1.		Financial Statements
	Consolidated Condensed Balance Sheets as of January 31, 2009 and April 30, 2008			1
	Consolidated Statements of Operations for the nine months ended January 31, 2009 and 2008			2
	Consolidated Statements of Operations for the three months ended January 31, 2009 and 2008			3
	Consolidated Statements of Cash Flows for the nine months ended January 31, 2009 and 2008			4
	Notes to Consolidated Condensed Financial Statements			5
	Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
	Item 4T.		Controls and Procedures	18
PART II.		OTHER INFORMATION
	Item 4.		Submission of Matters to a Vote of Security Holders	19
	Item 6.		Exhibits	20
SIGNATURES				21

EXPLANATORY NOTE

This Quarterly Report on Form 10-Q/A is being filed as Amendment No. 1 to Torotel’s Quarterly Report on Form 10-Q for the quarterly period ended January 31, 2009.  Amendment No. 1 is filed with the Securities and Exchange Commission (the “Commission”) for the purpose of revising Exhibits 32.1 and 32.2, the Certifications of the Chief Executive Officer and Chief Financial Officer, to change the quarterly period ended date to January 31, 2009.  The original report as filed referred to a quarterly period ended date of October 31, 2008.

PART I.     FINANCIAL INFORMATION

Item 1.       Financial Statements

CONSOLIDATED CONDENSED BALANCE SHEETS

	(Unaudited)
	As of		As of
	January 31,		April 30,
	2009		2008
ASSETS
Current assets:
Cash	$	318,000	$	410,000
Trade receivables, net	819,000		775,000
Inventories, net	824,000		551,000
Prepaid expenses and other current assets	37,000		23,000
	1,998,000		1,759,000
Property, plant and equipment, net	991,000		1,022,000
Other assets	3,000		2,000
	$	2,992,000	$	2,783,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	77,000	$	64,000
Trade accounts payable	221,000		342,000
Accrued liabilities	142,000		186,000
	440,000		592,000
Long-term debt, less current maturities	608,000		647,000
Stockholders’ equity	1,944,000		1,544,000
	$	2,992,000	$	2,783,000

The accompanying notes are an integral part of these statements.

1

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Nine Months Ended
	January 31,		January 31,
	2009		2008
Net sales	$	5,579,000	$	4,441,000
Cost of goods sold	3,556,000		2,778,000
Gross profit	2,023,000		1,663,000
Operating expenses:
Engineering	264,000		196,000
Selling, general and administrative	1,365,000		1,395,000
	1,629,000		1,591,000
Earnings from operations	394,000		72,000
Other expense:
Interest expense	43,000		46,000
Earnings before provision for income taxes	351,000		26,000
Provision for income taxes	—		—
Net earnings	$	351,000	$	26,000
Basic earnings per share	$	.07	$	.00
Diluted earnings per share	$	.06	$	.00

The accompanying notes are an integral part of these statements.

2

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Three Months Ended
	January 31,		January 31,
	2009		2008
Net sales	$	1,619,000	$	1,392,000
Cost of goods sold	1,044,000		875,000
Gross profit	575,000		517,000
Operating expenses:
Engineering	87,000		65,000
Selling, general and administrative	372,000		371,000
	459,000		436,000
Earnings from operations	116,000		81,000
Other expense:
Interest expense	14,000		15,000
Earnings before provision for income taxes	102,000		66,000
Provision for income taxes	—		—
Net earnings	$	102,000	$	66,000
Basic earnings per share	$	.02	$	.01
Diluted earnings per share	$	.02	$	.01

The accompanying notes are an integral part of these statements.

3

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Nine Months Ended
	January 31,			January 31,
	2009			2008
Cash flows from operating activities:
Net earnings	$	351,000		$	26,000
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:
Cost recognized on cancellation of restricted stock	—			33,000
Loss on disposal of assets	1,000			—
Stock compensation earned	49,000			37,000
Depreciation	78,000			65,000
Change in value of stock appreciation rights	(24,000		)	27,000
Increase (decrease) in cash flows from operations resulting from changes in:
Trade receivables	(44,000		)	103,000
Inventories	(273,000		)	(66,000		)
Prepaid expenses and other assets	(15,000		)	(21,000		)
Trade accounts payable	(121,000		)	(63,000		)
Accrued liabilities	(20,000		)	21,000
Net cash (used in) provided by operating activities	(18,000		)	162,000
Cash flows from investing activities:
Capital expenditures	(21,000		)	(53,000		)
Net cash used in investing activities	(21,000		)	(53,000		)
Cash flows from financing activities:
Principal payments on long-term debt	(47,000		)	(43,000		)
Payments on capital lease obligations	(6,000		)	—
Net cash used in financing activities	(53,000		)	(43,000		)
Net (decrease) increase in cash	(92,000		)	66,000
Cash, beginning of period	410,000			247,000
Cash, end of period	$	318,000		$	313,000
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest	$	43,000		$	46,000
Income taxes	$	—		$	—
Non-cash investing and financing activities:
Capital expenditure	$	(27,000	)	$	—
Proceeds from capital lease	$	27,000		$	—

The accompanying notes are an integral part of these statements.

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)

Note 1 — Nature of Operations

Torotel, Inc. (“Torotel”) specializes in the custom design and manufacture of a wide variety of precision magnetic components, consisting of transformers, inductors, reactors, chokes and toroidal coils, for use in commercial, industrial and military electronics.  Torotel also designs and distributes ballast transformers for the airline industry.  Approximately 97% of Torotel’s sales during the first nine months of fiscal 2009 have been derived from domestic customers.

Note 2 — Basis of Presentation

The condensed consolidated balance sheet as of April 30, 2008, which has been derived from audited financial statements, is accompanied by the unaudited interim condensed consolidated financial statements, which reflect the normal recurring adjustments that in the opinion of management are necessary to present fairly Torotel’s financial position at January 31, 2009, and the results of operations for the three and nine months ended January 31, 2009.

The unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although management believes the disclosures made are adequate to make the information not misleading.

The financial statements contained herein should be read in conjunction with Torotel’s financial statements and related notes filed on Form 10-KSB for the year ended April 30, 2008.

Note 3 — Reclassification

Historically, certain costs associated with Torotel’s facility have been included with the selling, general and administrative expenses in the consolidated statements of operations.  These facilities costs are part of the overhead pool used to determine the burden rate for calculating the amount of overhead applied to work in process inventories.  Management believes these facilities costs should be presented as part of cost of goods sold in the consolidated statements of operations.  Accordingly, facilities costs of $53,000 and $159,000 are included in cost of goods sold in the accompanying consolidated statement of operations for the three and nine months ended January 31, 2009, respectively, with a corresponding decrease in selling, general and administrative expenses.  In order to fairly present comparative results, management has reclassified selling, general and administrative expenses of $51,000 and $155,000 to cost of goods sold for the three and nine months ended January 31, 2008, respectively.

Note 4 — Inventories

The components of inventories are summarized as follows:

	January 31,		April 30,
	2009		2008
Raw materials	$	884,000	$	669,000
Work in process	198,000		173,000
Finished goods	104,000		84,000
	1,186,000		926,000
Less: reserve for obsolete and excess inventories	362,000		375,000
	$	824,000	$	551,000

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Note 5 — Income Taxes

Torotel adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes - an Interpretation of FASB No. 109, effective May 1, 2007, which clarified the accounting for uncertainty in tax positions.  FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  It is management’s responsibility to determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position.  Based on a third-party review of prior year federal and state tax returns, Torotel had no unrecognized tax benefits as of the date of adoption, the income tax positions taken or expected to be taken for the open tax years are appropriately stated and supported for all open years, and the adoption of FIN 48 did not have a material effect on Torotel’s consolidated financial statements.  Open tax years are April 30, 2005, 2006, 2007 and 2008.  Torotel would recognize interest and penalties accrued on unrecognized tax benefits as well as interest received from favorable tax settlements within income tax expense.  At the adoption date of May 1, 2007, and as of January 31, 2009, Torotel recorded no accrued interest or penalties related to uncertain tax positions.  Management expects no significant change in the amount of unrecognized tax benefit, accrued interest or penalties within the next twelve months.

Note 6 — Restricted Stock Agreements

Restricted Stock Agreements are authorized by the Compensation and Nominating Committee (“Committee”) and the Board of Directors of Torotel.  The Committee and the Board have determined that the interests of Torotel and its stockholders will be promoted by hiring talented individuals and, to induce such individuals to accept employment with Torotel, the Committee and the Board believe a key component of such individuals’ compensation should be granting equity ownership opportunities based upon the acceptance of employment and the continuing employment of such individual, subject to certain conditions and restrictions.

A Restricted Stock Agreement was entered into between Torotel and Benjamin E. Ames, Jr. on July 31, 2006, as part of Mr. Ames’ employment as Executive Vice President of Torotel Products, Inc. with primary responsibilities being new business development.  The amount of the restricted stock award was 200,000 shares of common stock, $.01 par value per share.  Based upon Mr. Ames attaining mutually agreed upon written annual goals, the shares shall be released from the restrictions on transfer and risk of forfeiture in the amount of 40,000 shares per year for five years beginning July 31, 2007, and each anniversary thereof.  Based on the market price of $.30 for Torotel’s common stock, the fair value of the restricted stock at the date of award was $60,000.  The restricted shares are non-vested stock pursuant to SFAS 123(R).  Stock compensation cost during the three and nine months ended January 31, 2009 was $3,000 and $9,000, respectively.  Stock compensation cost of $3,000 per quarter will be recorded during the aggregate five-year vesting period provided the mutually agreed upon goals are achieved.  As of January 31, 2009, a total of 80,000 shares have been released from the restrictions on transfer.

Restricted Stock Agreements were entered into between Torotel and 12 key employees on August 7, 2007, pursuant to the Stock Award Plan (“SAP”).  The SAP provides key employees the opportunity to acquire common stock of Torotel pursuant to awards earned for accomplishing goals that promote the long-term financial performance of Torotel.  Under the terms of the SAP, which was filed as Exhibit 10.9 on Form 10-KSB on July 30, 2007, the restricted stock awards have a five (5) year restriction period, which shall lapse based on certain conditions as outlined in the SAP.  The Restricted Stock Agreements afford the

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grantees all of the rights of a stockholder with respect to the award shares, including the right to vote such shares and to receive dividends and other distributions payable with respect to such shares since the date of award.  The aggregate amount of the restricted stock awards outstanding as of January 31, 2009, was 526,750 shares of common stock, $.01 par value per share.  Based on the market price of $.50 for Torotel’s common stock at the date of award, the fair value of the restricted stock outstanding was $263,375 as of January 31, 2009.  The restricted shares are non-vested stock pursuant to SFAS 123(R).  Stock compensation cost during the three and nine months ended January 31, 2009 was $13,169 and $39,506, respectively.  Stock compensation cost of $13,169 will be recorded per quarter during the remaining five-year vesting period provided the financial performance metrics as outlined in the SAP are likely to be attained.

Under the terms of each agreement, the non-vested shares are restricted as to disposition and subject to forfeiture under certain circumstances.  The agreements provide the employee with all voting rights with respect to the restricted shares.  The agreements further provide, subject to certain conditions, that if prior to all of the restricted shares having been released, Torotel undergoes a change in control, then all of the restricted shares shall be released and no longer subject to restrictions under the agreements.

Restricted stock activity for each nine month period through January 31 is summarized as follows:

	2009				2008
	Restricted		Weighted		Restricted		Weighted
	Shares		Average		Shares		Average
	Under		Grant		Under		Grant
	Option		Price		Option		Price
Outstanding at beginning of period	686,750		$	.453	225,000		$	.317
Granted	—		—		575,750		$	.500
Vested	(40,000	)	$	.300	(40,000	)	$	.300
Forfeited	—		—		(74,000	)	$	.483
Outstanding at end of period	646,750		$	.463	686,750		$	.453

Note 7 — Stockholders’ Equity

The components of stockholders’ equity are summarized as follows:

	January 31,			April 30,
	2009			2008
Common stock, at par value	$	60,000		$	60,000
Capital in excess of par value	12,399,000			12,350,000
Accumulated deficit	(10,425,000		)	(10,776,000		)
	2,034,000			1,634,000
Less treasury stock, at cost	90,000			90,000
	$	1,944,000		$	1,544,000

Torotel has 6,000,000 shares of common stock, $.01 par value, authorized and 5,878,340 shares issued and outstanding.  The changes in shares of common stock outstanding are summarized as follows:

Balance, May 1, 2008	5,878,340
Restricted stock activity	—
Treasury stock activity	—
Balance, January 31, 2009	5,878,340

Note 8 — Earnings Per Share

Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Share, requires dual presentation of basic and diluted EPS on the face of the statement of operations.  Basic EPS excludes

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dilution and is computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding for the period.  Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.  The 646,750 shares issued and outstanding pursuant to the Restricted Stock Agreements (see Note 6 of Notes to Consolidated Financial Statements) meet the definition of contingently issuable shares as outlined in SFAS No. 128; as a result, these shares will not be included in the basic EPS calculation until the performance measurements have been satisfied.  The restricted shares are treated as a common stock equivalent for the diluted EPS calculation.  Pursuant to SFAS No. 128, the basic and diluted earnings per common share were computed as follows:

Year-to-Date EPS Calculations

	2009		2008
Net earnings	$	351,000	$	26,000
Weighted average common shares outstanding for basic EPS	5,218,402		5,152,395
Incremental shares for the effect of restricted stock	659,938		543,498
Weighted average common shares outstanding for dilutive EPS	5,878,340		5,695,893
Basic earnings per share	$	.07	$	.00
Diluted earnings per share	$	.06	$	.00

Quarterly EPS Calculations

	2009		2008
Net earnings	$	102,000	$	66,000
Weighted average common shares outstanding for basic EPS	5,231,590		5,117,590
Incremental shares for effect of restricted stock	646,750		686,750
Weighted average common shares outstanding for dilutive EPS	5,878,340		5,804,340
Basic earnings per share	$	.02	$	.01
Diluted earnings per share	$	.02	$	.01

Note 9 — Stock Appreciation Rights

On September 10, 2004, the board of directors of Torotel approved the Directors Stock Appreciation Rights Plan (the “Plan”) for non-employee directors.  Each SAR is equal to one share of common stock of Torotel, and the aggregate number of SARs that may be granted under the Plan shall not exceed 500,000. The effective date of the Plan is October 1, 2004, and the Plan has a term of ten (10) years.  The SARs are now accounted for under SFAS No. 123(R), Accounting for Stock-Based Compensation.

Pursuant to the Plan, 20,000 SARs were granted on the effective date to each of the three current non-employee directors serving at that time.  The initial price at which each SAR was granted was $.35, which equaled the market price of Torotel’s common stock on the date of grant.  Accordingly, no compensation cost was recognized at the time of grant in accordance with APB Opinion 25, prior to the adoption of SFAS No. 123(R) on May 1, 2006.

SARs shall automatically be granted in the future as follows: (1) each person who is elected as a director, who was not a director on the effective date of the Plan, shall be granted 10,000 SARs on the date such person is elected a director; and (2) on each May 1 following the effective date during the term of the Plan, each person serving as a director on such date shall be granted 10,000 SARs.  After the initial grant,

8

the price at which each SAR is granted shall be the average of the closing price of Torotel’s common stock for the ten consecutive days immediately preceding the date of grant.  Upon exercise of a SAR, Torotel will pay the grantee an amount (the “Spread”) equal to the excess of the Exercise Price over the SAR grant price multiplied by the number of shares being exercised.  The Exercise Price shall be the average of the closing price of Torotel’s common stock for the ten consecutive days immediately preceding the notice of exercise.  For any payments that exceed $10,000, Torotel has the option to make quarterly payments over three years with interest payable quarterly at the prime rate of Torotel’s primary bank.

Each SAR granted hereunder may be exercised to the extent that the grantee is vested in such SAR.  The SARs will vest according to the following schedule:

Number of Years the Grantee has remained	Shares represented
a director of the Company following	by a SAR in which
the Date of Grant	a Grantee is Vested
Under one	0	%
At least one but less than two	33	%
At least two but less than three	67	%
Three or more	100	%

A grantee shall become fully (100%) vested in each of their SARs under the following circumstances: (i) upon termination of the grantee’s service as a director of Torotel for reasons of death, disability or retirement; (ii) if the Compensation and Nominating Committee (the “Committee”), in its sole discretion, determines that acceleration of the SAR vesting schedule would be desirable for Torotel; or (iii) if Torotel shall, pursuant to action by its Board of Directors, at any time propose to merge into, consolidate with, or sell or otherwise transfer all or substantially all of its assets to another corporation, and provision is not made pursuant to the terms of such transaction for the assumption by the surviving, resulting or acquiring corporation of outstanding SARs or for substitution of new SARs therefore, the Committee shall cause written notice of the proposed transaction to be given to each grantee not less than twenty days prior to the anticipated effective date of the proposed transaction, and his or her SARs shall become fully (100%) vested and, prior to a date specified in such notice, which shall be not more than ten days prior to the anticipated effective date of the proposed transaction, each grantee shall have the right to exercise his or her SARs.

In accordance with SFAS 123(R), compensation expense is recognized over the vesting period based upon the estimated fair value of the SARs pursuant to the terms of the Plan using the Black-Scholes options-pricing model as of the end of each financial reporting period.  As of January 31, 2009, the fair value of the SARs was determined using the following assumptions: no dividend payments over the life of the SARs since Torotel has not issued any form of dividend since 1985; an expected volatility of 137.4% based on Torotel’s historical volatility using the weekly closing price over the past 3.00 years; a risk-free interest rate of 1.75%; and an expected life of 3.00 years based on the length of service estimated to be served.  Based on these assumptions, the fair value prices per share of the outstanding SARs are summarized as follows:

	SARs							Aggregate		Aggregate
	Under	Exercise		Fair Value		%		Vested		Intrinsic
Grant Date	Option	Price		Price		Vested		Fair Value		Value
October 1, 2004	60,000	$	.350	$	.183	100	%	$	11,000	$	—
May 1, 2005	30,000	$	.302	$	.187	100	%	$	6,000	$	—
May 1, 2006	30,000	$	.695	$	.160	67	%	$	3,000	$	—
May 1, 2007	30,000	$	.500	$	.171	33	%	$	2,000	$	—
June 4, 2007	10,000	$	.412	$	.178	33	%	$	—	$	—
May 1, 2008	40,000	$	.550	$	.168	0	%	$	—	$	—

The vested portion represents 123,300 SARs.  As of January 31, 2009, the total aggregate intrinsic value of these exercisable SARs was zero.

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SARs transactions for each nine month period through January 31 are summarized as follows:

	2009			2008
		Weighted			Weighted
	SARs	Average		SARs	Average
	Under	Grant		Under	Grant
	Option	Price		Option	Price
Outstanding at beginning of period	160,000	$	.438	120,000	$	.424
Granted	40,000	$	.550	40,000	$	.478
Exercised	—	—		—	—
Forfeited	—	—		—	—
Outstanding at end of period	200,000	$	.460	160,000	$	.438
SARs exercisable at end of period	123,300	$	.408	90,000	$	.378
Weighted average fair value of SARs granted during the period		$	.168		$	.554

The following information applies to SARs outstanding for each nine month period through January 31:

	2009	2008
Number outstanding	200,000	160,000
Range of grant prices	$.302 - $.695	$.302 - $.695
Weighted average grant price	$.460	$.438
Weighted average remaining contractual life	7.23 yrs.	7.72 yrs.

Total compensation expense for the outstanding SARs for the nine months ended January 31, 2009 and 2008 was a credit of $24,000 and an expense of $27,000, respectively.  Total compensation expense for the outstanding SARs for the three months ended January 31, 2009 and 2008, was a credit of $22,000 and an expense of $12,000, respectively.  As of January 31, 2009, there was $13,000 of total unrecognized compensation expense related to non-vested SARs granted under the Plan.  That cost is expected to be recognized over a weighted average period of .74 years.  The liability for SARs on the consolidated balance sheet as of January 31, 2009, was $22,000.

Note 10 — Concentrations of Credit Risk

Financial instruments that potentially subject Torotel to concentrations of credit risk consist principally of cash and accounts receivable.  Torotel grants unsecured credit to most of its customers.  Management does not believe that it is exposed to any extraordinary credit risk as a result of this policy.  Torotel deposits all monies at the Bank of Blue Valley.  These accounts are secured up to $250,000 by the Federal Deposit Insurance Corporation through December 31, 2009.  At various times, these cash balances exceed federally insured limits.  Torotel has not experienced any losses in such accounts.  Management does not believe Torotel is exposed to any significant credit risk with respect to its cash balances.

Note 11 — Financing Agreement

On September 30, 2008, Torotel Products renewed its revolving credit agreement with Bank of Blue Valley, increasing this line of credit to $500,000.  Advances under the credit line are limited to 75% of eligible billed receivables.  The revolving line is collateralized by the land and buildings in Olathe, Kansas.  Under the terms of the agreement, the outstanding balance of the revolving line bears interest at 1.00% over the bank’s corporate base rate with an interest rate floor of 6.00% and has a maturity date of September 30, 2009.  As of January 31, 2009, the effective borrowing rate was 6.00% and the entire credit line was available.

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

Overview

Torotel conducts business primarily through two wholly owned subsidiaries, Torotel Products, Inc. (“Torotel Products”) and Electronika, Inc. (“Electronika”).  In addition, Torotel has a 12.88% equity interest in Apex Innovations, Inc. (“Apex”).

Torotel Products designs and manufactures a wide variety of magnetic components for use in military, aerospace and industrial electronic applications.  These magnetic components, which consist of transformers, inductors, reactors, chokes, and toroidal coils, are used to modify and control electrical voltages and currents in electronic devices.  For example, if equipment containing one of these components receives an electrical voltage or current which is too high for proper operation of the equipment, the component would modify and control the electrical voltage or current to allow proper operation of the equipment.  While Torotel Products primarily manufactures the components in accordance with pre-developed mechanical and electrical requirements, in some cases it will be responsible for both the overall design and manufacture of the components.  The magnetic components are sold to manufacturers who incorporate them into an end-product.  The major applications include aircraft navigational equipment, voice and data secure communications, medical equipment, avionics equipment, and conventional missile guidance systems.  As part of its growth strategy, Torotel Products has been actively pursuing opportunities in electro-mechanical assemblies. These efforts are meeting with success as $659,000 in revenue has been generated from these assemblies during the first nine months of fiscal 2009, with another $144,000 due to ship in Torotel’s fourth fiscal quarter.  Management continues to focus its efforts in areas and solutions that offer significant growth, which includes continued expansion of the product base beyond electronic components.

Torotel Products markets its components primarily through a 4-person internal sales force and four independent manufacturers’ representatives paid on a commission basis.  Torotel Products also utilizes its 4-person engineering department in its direct sales efforts for the purpose of expanding its reach into new markets and/or customers.

Torotel Products is an approved source for magnetic components used in numerous military and aerospace systems, which means Torotel Products is automatically solicited for any procurement needs for such applications.  The magnetic components manufactured by Torotel Products are sold primarily in the United States, and most sales are awarded on a competitive bid basis.  The markets in which Torotel Products competes are highly competitive.  A substantial number of companies sell components of the type manufactured and sold by Torotel Products.  In addition, Torotel Products sells to a number of customers who have the capability of manufacturing their own electronic components.  The principal methods of competition for electronic products in the markets served by Torotel Products include, among other factors, price, on-time delivery performance, lead times, customized product engineering and technical support, marketing capabilities, quality assurance, manufacturing efficiency, and existing relationships with customers’ engineers.  While magnetic components are not susceptible to rapid technological change, Torotel Products’ sales, which do not represent a significant share of the industry’s market, are susceptible to decline given the competitive nature of the market.

Electronika is a marketing and licensing company selling ballast transformers to the airline industry.  These transformers activate and control the lights in commercial airplane cockpits.  Electronika’s ballast transformers are approved as spare and replacement parts in DC-8, DC-9, DC-10, MD-80 and MD-88 aircraft; however, sales of ballast transformers have been made primarily for use in DC-8 and DC-9 aircraft.  As a result, the business of Electronika is subject to various risks including, without limitation, any decline in use of the referenced aircraft, and competition for the available spare parts business.  Electronika’s sales do

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not represent a significant portion of any particular market.

Electronika’s requirements for the ballast transformers are outsourced pursuant to a Manufacturing Agreement with Magnetika, Inc. (“Magnetika”), a corporation owned by the Caloyeras family.  Under the terms of the agreement, Magnetika provides all necessary raw material, labor, testing, packaging and related services required to complete the manufacture, delivery and sale of the ballast transformers.  Electronika retains ownership of all designs, drawings, specifications and intellectual property rights associated with the ballast transformers.  Magnetika is a manufacturing company that, in addition to the aforementioned ballast transformers, manufactures various other products similar to those of Torotel for other unrelated customers.  Magnetika’s annual sales are estimated to be about two times the annual sales of Torotel.  Total purchases of goods from Magnetika by Electronika amounted to $50,000 for the nine months ended January 31, 2009.

Business Outlook

Management still anticipates fiscal 2009 revenues to increase approximately 15-20%, which is less than the nearly 50% that was originally anticipated.  As disclosed in Torotel’s last filing on Form 10-Q, this revenue shortfall is due to various factors.  First, the nearly two-month labor strike at Boeing caused many of Torotel’s aerospace customers to re-schedule the delivery of their orders to dates in early fiscal 2010 (this is in addition to the re-scheduling that had already occurred as a result of Boeing’s ongoing production delays for the 787); second, by customer request the monthly delivery requirements for the potted coil assembly were reduced temporarily while the customer completes a re-tooling of their production line to handle the higher quantities (management now anticipates higher monthly shipments of the potted coil assembly to begin in June 2009); and third, anticipated revenues from a follow-on contract for the new ballast assembly did not occur until January with a majority of the deliveries scheduled in fiscal 2010.  The overall business outlook in fiscal 2010 remains favorable because of the higher demand projected for the potted coil assembly; however, this higher demand will likely be offset partially by less demand for magnetic components because of the current economic climate and the uncertainty surrounding the next U.S. defense budget as well as the ongoing delays in aircraft orders and production.

The industry mix of Torotel Products’ net sales for the first nine months of fiscal 2009 was 44% defense, 33% aerospace and 23% industrial compared to 50% defense, 37% aerospace and 13% industrial for the same period last year.  As of January 31, 2009, the order backlog is $3.8 million.  This amount is comprised of $2.1 million for the potted coil assembly, $1.3 million in magnetic components and $400,000 in electro-mechanical assemblies.  New order bookings during the first nine months of fiscal 2009 have declined approximately 8% compared to the same period last year.  Management believes new order bookings for fiscal 2009 will likely show an overall decline of approximately 45% when compared to the prior year.  A large portion of this decrease is attributable to the timing of the next contract for the potted coil assembly.  This contract, originally expected in late fiscal 2009, will not be awarded until the second quarter of fiscal 2010.  New order bookings exclusive of the potted coil assembly will likely show a decline of approximately 12%, which is attributable to the magnetic components products.

The primary factors that drive gross profit and net earnings for Torotel Products are sales volume and product mix.  The gross profits on mature products/programs and larger transformer devices tend to be higher than those that are still in the prototyping or early production stages and simpler inductor devices.  As a result, in any given accounting period the mix of product shipments between higher and lower margin jobs has a significant impact on the gross profit and net earnings of Torotel Products.

Torotel’s operating plan continues to include additional sales and marketing costs in the form of personnel and/or commissions, trade show exhibits, electronic newsletters and new print literature.  Management believes a well developed growth strategy is in place and that going forward, some or all of

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these expenditures will be necessary on a continuing basis in order to achieve the desired growth.  Future annual earnings will continue to be impacted by increased auditing costs associated with complying with SEC regulations, the standards of the Public Company Accounting Oversight Board (United States) and Section 404 of the Sarbanes-Oxley Act of 2002.

Electronika’s net sales continue to be impacted by the decline in the number of active DC-8 and DC-9 aircraft.  Management expects these sales to continue to decline.

Results of Operations

The following management comments regarding Torotel’s results of operations and outlook should be read in conjunction with the Consolidated Financial Statements included pursuant to Item 1 of this Quarterly Report.

The discussion and analysis of the results of operations include the operations of Torotel and its subsidiaries, Torotel Products and Electronika.  While each company’s results are included in the following discussion, segment reporting is not applicable because the products offered are similar in form and function, and target similar markets.

Nine Months Ended January 31, 2009 Compared With Nine Months Ended January 31, 2008

Consolidated net sales increased nearly 26%.  The net sales of Torotel Products increased nearly 24% from $4,413,000 to $5,455,000.  This increase is primarily attributable to the new ballast assembly for a major industrial application, a new assembly for a military application, higher sales of the capacitor assemblies and higher demand for molded coils used in down-hole drilling applications.  The net sales of Electronika increased 343% from $28,000 to $124,000.  This increase is the result of product shipments that were previously delayed awaiting Boeing’s approval of a replacement for an encapsulating material that had become obsolete.  Management expects Electronika’s sales to return to the lower levels seen in previous periods.

Consolidated gross profit as a percentage of net sales decreased 1%.  The gross profit percentage of Torotel Products decreased nearly 2% because of higher material and labor costs associated with the product mix and higher fixed production costs.  These higher costs were offset partially by the effect of the higher sales volume.  Electronika’s gross profit as a percentage of net sales remained unchanged.

Engineering expenses, applicable only to Torotel Products, increased 35% from $196,000 to $264,000 because of a $43,000 increase in payroll costs primarily associated with engineering college interns, a $13,000 increase in training costs and a $12,000 increase in travel costs.  Management does not anticipate any significant increase in the present level of engineering expenses.

Consolidated selling, general and administrative (“SG&A”) expenses decreased 2%.  The SG&A expenses of Torotel decreased 38% from $324,000 to $200,000 primarily because of a $74,000 decrease in professional fees and a $50,000 decrease in the fair value of stock appreciation rights.  The SG&A expenses of Torotel Products increased 9% from $1,071,000 to $1,165,000 primarily because of a $103,000 increase in payroll costs, a $38,000 increase in sales commissions, a $24,000 increase in IT costs, a $17,000 increase in consulting costs, a $17,000 increase in building maintenance and supplies, an $11,000 increase in utilities costs, a $7,000 increase in equipment rental costs and a $3,000 increase in property taxes.  These increases were offset partially by a $104,000 decrease in training costs and a $22,000 decrease in stock compensation costs.  Electronika did not incur any SG&A expenses in either period.  Management does anticipate an increase in the present level of SG&A expenses for the balance of fiscal 2009.

Interest expense, entirely attributable to Torotel Products, decreased nearly 7% because of a lower debt level.

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For the reasons discussed above, the consolidated pretax earnings increased from $26,000 to $351,000.  The pretax loss of Torotel decreased from $324,000 to $200,000.  The pretax earnings of Torotel Products increased from $333,000 to $477,000.  The pretax earnings of Electronika increased from $17,000 to $74,000.

Three Months Ended January 31, 2009 Compared With Three Months Ended January 31, 2008

Consolidated net sales increased 16%.  The net sales of Torotel Products increased 15% from $1,392,000 to $1,597,000.  This increase is primarily attributable to a new assembly for a military application, higher sales of the capacitor assemblies and higher demand for magnetic components for the AMRAAM missile system.  The net sales of Electronika increased from zero to $22,000.

Consolidated gross profit as a percentage of net sales decreased 2%.  The gross profit percentage of Torotel Products decreased 2% because of higher material and labor costs associated with the product mix and higher fixed production costs.  These higher costs were offset partially by the effect of the higher sales volume.  Electronika’s gross profit as a percentage of net sales remained unchanged.

Engineering expenses, applicable only to Torotel Products, increased 34% from $65,000 to $87,000 because of an $11,000 increase in payroll costs primarily associated with an engineering college intern, an $8,000 increase in training costs and a $3,000 increase in travel costs.

Consolidated selling, general and administrative (SG&A) expenses increased less than 1%.  The SG&A expenses of Torotel decreased 79% from $47,000 to $10,000 primarily because of a $33,000 decrease in the fair value of stock appreciation rights and an $8,000 decrease in auditing fees.  These decreases were offset partially by a $4,000 increase in professional fees.  The SG&A expenses of Torotel Products increased 12% from $324,000 to $362,000 primarily because of a $53,000 increase in payroll costs, a $6,000 increase in consulting costs, a $5,000 increase in sales commissions, $3,000 increase in utilities costs and $3,000 increase in property taxes.  These increases were offset partially by a $32,000 decrease in training costs.  Electronika did not incur any SG&A expenses in either period.

Interest expense, entirely attributable to Torotel Products, decreased 7% because of a lower debt level.

For the reasons discussed above, the consolidated pretax earnings increased from $66,000 to $102,000.  The pretax loss of Torotel decreased from $47,000 to $10,000.  The pretax earnings of Torotel Products decreased from $113,000 to $99,000.  The pretax earnings of Electronika increased from breakeven to $13,000.

Liquidity and Capital Resources

As of January 31, 2009, Torotel had $318,000 in cash compared to $410,000 as of April 30, 2008 and $313,000 as of January 31, 2008.  Management anticipates a decline in cash flow from operations during the fourth quarter of fiscal 2009 given the anticipated increase in inventories due to the re-scheduling of deliveries described under the Business Outlook section on page 12 of this Report and the ongoing inventory purchases for the current contract for the potted coil assembly.

The table below presents the summary of cash flow for the nine month periods indicated.

	2009			2008
Net cash (used in) provided by operating activities	$	(18,000	)	$	162,000
Net cash used in investing activities	$	(21,000	)	$	(53,000	)
Net cash used in financing activities	$	(53,000	)	$	(43,000	)

Net cash provided by operating activities fluctuates between periods primarily as a result of differences

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in operating earnings, the timing of shipments and the collection of accounts receivable, changes in inventory, level of sales and payment of accounts payable.  The $21,000 of cash used in investing activities was the result of capital expenditures.  Management anticipates approximately $10,000 of capital expenditures during the remainder of fiscal 2009.  The $53,000 of cash used in financing activities is because of long-term debt payments on the mortgage and capital lease obligations with the Bank of Blue Valley.  Management believes that the projected cash flow from operations, combined with its existing cash balances, will be sufficient to meet its funding requirements for the foreseeable future.  Torotel does have a $500,000 bank line of credit available, which management anticipates could be utilized to help fund any working capital requirements.

Management believes that inflation will have only a minimal effect on future operations since such effects will be offset by sales price increases, which are not expected to have a significant effect upon demand.

Return on Capital Employed (“ROCE”) is the primary tool for managing Torotel’s business.  The performance of Torotel’s management and the majority of its decisions will be measured by whether Torotel’s ROCE improves.  ROCE measures output (EBIT) versus input (Net Operating Assets = Capital Employed).  For these purposes, net operating assets is defined as “trade receivables plus inventories plus net fixed assets plus miscellaneous operating assets less trade accounts payable less accrued liabilities”.  For the fiscal years ended April 30, 2006, 2007 and 2008, Torotel’s ROCE was 19.04%, -.66% and 12.25%, respectively.  Torotel’s ROCE for the 12-month trailing period ended January 31, 2009 was 23.71%.

Critical Accounting Policies

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures.  Significant estimates used in preparing these consolidated financial statements include those assumed in computing the carrying value of equipment, allowance for doubtful accounts receivable, reserve for obsolete and excess inventory, the valuation allowance on deferred tax assets and the reserve for warranty costs.  Accordingly, actual results could differ from those estimates.  Any changes in estimates are recorded in the period in which they become known.

Credit Risk

Financial instruments that potentially subject Torotel to concentrations of credit risk consist principally of cash and accounts receivable.  Torotel grants unsecured credit to substantially all of its customers.  Management does not believe that it is exposed to any extraordinary credit risk as a result of this policy.  Torotel deposits all monies at the Bank of Blue Valley.  These accounts are secured up to $250,000 by the Federal Deposit Insurance Corporation through December 31, 2009.  At various times, these cash balances exceed federally insured limits.  Torotel has not experienced any losses in such accounts.  Management does not believe Torotel is exposed to any significant credit risk with respect to its cash balances.

Fair Value of Financial Instruments

Carrying amounts of certain financial instruments, including cash, trade receivables, prepaid expenses and other current assets, trade accounts payable and accrued liabilities approximate fair value due to their short maturities.  As of January 31, 2009, the amount of Torotel’s long-term debt approximates fair value based on the present value of estimated future cash flows using a discount rate commensurate with a borrowing rate available to Torotel.

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Treasury Stock

Torotel utilizes the weighted average cost method in accounting for its treasury stock transactions.

Revenue Recognition

Revenue is recognized when a fixed price contract or purchase order exists; delivery has occurred; and collection is reasonably assured.  Selling terms are FOB Shipping Point so Torotel considers its products delivered once they have been shipped and title and risk of loss have been transferred.  Torotel’s consolidated net sales arising from contracts having deliveries scheduled over a period of more than one year for the nine month periods ended January 31, 2009 and 2008, were approximately 20% and 27%, respectively, because of the contracts for the potted coil assembly.

Allowance for Doubtful Accounts

Gross trade accounts receivable are offset with an allowance for doubtful accounts.  The allowance for doubtful accounts is management’s best estimate of the amount of probable credit losses in Torotel’s existing accounts receivable.  Management reviews the allowance for doubtful accounts on a regular basis, and all past due balances are reviewed individually for collectibility.  Account balances are charged against the allowance when placed for collection.  Recoveries of receivables previously written off are recorded when received.  The majority of the customer accounts are considered past due after the invoice becomes older than the customer’s credit terms.  Interest is not charged on past due accounts.

Inventories

Inventories are stated at the lower of cost or market.  Cost is determined using a moving average cost method of valuation that approximates the first-in, first-out method.  Torotel’s industry is characterized by short-term customer commitments and changes in demand, as well as other market considerations.  Provisions for estimated obsolete and excess inventory are based on reviews of inventory usage, quantities on hand and latest product demand information from customers.  Inventories are reviewed utilizing a 12-month time horizon.  Individual part numbers that have not had any usage in a 12-month time period are categorized as obsolete; individual part numbers having more than a 12-month supply based on the current year’s usage are categorized as excess.  The reserve balance is analyzed for adequacy along with the inventory review each quarter.

Property, Plant and Equipment

Property, plant and equipment are carried at cost.  Depreciation and amortization are provided in amounts sufficient to relate the costs of depreciable assets to operations primarily using the straight-line method over estimated useful lives of three to five years for property and equipment, and ten to twenty years for buildings and improvements.

Cash Flows

For purposes of the statements of cash flows, Torotel considers all short-term investments purchased with original maturity dates of three months or less to be cash equivalents.

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Equity Investment in Apex

Torotel has a 12.88% interest in Apex.  The investment in Apex has no carrying value on the consolidated balance sheets of Torotel, and in the opinion of Torotel management, it is not likely that any of the investment will be recovered.  If Apex were to eventually be sold, any cash recovered would be recognized as a gain upon receipt of the proceeds.

Warranty Costs

Torotel has a reserve for estimated warranty costs associated with products returned from customers.  A limited warranty is provided for a period of one year which requires Torotel to repair or replace defective products at no cost to the customer.  The warranty reserve is based on historical experience and reflects management’s best estimate of probable liability under the product warranties.

New Accounting Pronouncements

Effective May 1, 2008, Torotel adopted Statement of Financial Accounting Standard No. 157 (“SFAS 157”), Fair Value Measurements.  SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  SFAS 157 applies to other accounting pronouncements that require or permit fair value measurements, but does not require any new fair value measurements.  The adoption of SFAS 157 did not have any effect on Torotel’s results of operations, financial condition and cash flows.

Effective May 1, 2008, Torotel adopted Statement of Financial Accounting Standard No. 159 (“SFAS 159”), The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115.  SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value.  The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.  SFAS 159 is expected to expand the use of fair value measurement, which is consistent with the FASB’s long-term measurement objectives for accounting for financial instruments.  Most of the provisions of this Statement apply only to entities that elect the fair value option.  However, the amendment to FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, applies to all entities with available-for-sale and trading securities.  The adoption of SFAS 159 did not have any effect on Torotel’s results of operations, financial condition and cash flows.

Forward-Looking Information

This report, as well as our other reports filed with the Securities and Exchange Commission (“SEC”), and in press releases and other public communications throughout the year, contains forward looking statements made pursuant to the safe harbor provisions of The Private Securities Litigation Reform Act of 1995.  The words “believe,” “estimate,” “anticipate,” “project,” “intend,” “expect,” “plan,” “outlook,” “forecast,” “may,” “will,” “should,” “continue,” “predict” and similar expressions are intended to identify forward looking statements.  This report contains forward-looking statements regarding, among other topics, our expected financial position, results of operations, cash flows, strategy, budgets and management’s plans and objectives.  Accordingly, these forward-looking statements are based on assumptions about a number of important factors.  While we believe that our assumptions about such factors are reasonable, such factors involve risks and uncertainties that could cause actual results to be different from what appear here.

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These risk factors include: the ability to adequately pass through to customers unanticipated future increases in raw material costs, decreased demand for products, delays in developing new products, expected orders that do not occur, loss of key customers, the impact of competition and price erosion as well as supply and manufacturing constraints, general economic conditions in the United States and specifically, economic conditions affecting the defense and aerospace industries, the availability of credit, and other risks and uncertainties.  In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this report will prove accurate, and our actual results may differ materially from these forward-looking statements.  We assume no obligation to update any forward-looking statements made herein.

Item 4T.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Torotel’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Torotel’s disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report.  Based on such evaluation, these officers have concluded that Torotel’s disclosure controls and procedures are effective.

Changes in Internal Controls  There were no significant changes in Torotel’s internal controls over financial reporting or in other factors that in management’s estimates are reasonably likely to materially affect Torotel’s internal controls over financial reporting subsequent to the date of the evaluation.

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PART II. OTHER INFORMATION

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

The annual meeting of shareholders was held in Kansas City, Missouri, on Monday, September 15, 2008, to vote on:

a.The following two management proposals:

(1)To elect two members to serve on the Board of Directors for a three-year term, with those nominees receiving the greatest number of votes being elected; and

(2)To approve an amendment to Torotel’s Articles of Incorporation to increase the number of authorized shares of common stock, par value $.01 per share, from 6,000,000 to 8,000,000 shares, with the affirmative vote of a majority of the shares of common stock present, in person or by proxy, and entitled to vote required to approve this proposed amendment.

b.The following three shareholder proposals:

(3)To consider and vote upon a shareholder proposal that permits only shareholders to make, alter, amend, suspend or repeal the Corporation’s By-Laws;

(4)To consider and vote upon a shareholder proposal to revoke a provision of the Corporation’s By-Laws to remove advance notice requirements for shareholders to bring business before a shareholder meeting; and

(5)To consider and vote upon a shareholder proposal to reduce the number of members on the Board of Directors from seven to five.

A majority of the outstanding shares of common stock entitled to be voted at the meeting, represented in person or by proxy, was necessary to constitute a quorum to transact business at the meeting.  At the meeting, there were 5,640,205 shares represented which was 95.95% of the shares outstanding and eligible to vote.  The voting results were as follows:

Proposal 1.Shareholders elected the following individuals to three-year terms on the Board of Directors, with the number of shares voting “FOR” each nominee indicated.

S. Kirk Lambright, Jr.	2,768,890
H. James Serrone	2,931,119

In addition to the directors elected above, Anthony H. Lewis, Dale H. Sizemore, Jr., Richard A. Sizemore and Stephen K. Swinson also serve as directors.  The current three-year terms for Messrs. Sizemore end in 2009, while the three-year terms for Messrs. Lewis and Swinson end in 2010.

Proposal 2.Shareholders rejected the amendment to increase the number of authorized shares of common stock, with the number of shares voting “FOR”, “AGAINST”, and “ABSTAIN” indicated below.

FOR	2,724,278
AGAINST	2,869,127
ABSTAIN	46,800

Proposal 3.Shareholders narrowly approved the shareholder proposal recommending that the Board of Directors submit to shareholders for a vote a proposed amendment to the Corporation’s Articles of

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Incorporation that would permit only shareholders to make, alter, amend, suspend or repeal the Corporation’s By-Laws, with the number of shares voting “FOR” , “AGAINST”, and “ABSTAIN” indicated below.

FOR	2,866,106
AGAINST	2,043,618
ABSTAIN	146,965
BROKER NON VOTES	583,516

Proposal 4.Shareholders narrowly approved the shareholder proposal recommending that the Board of Directors submit to shareholders for a vote a proposed amendment to the Corporation’s Articles of Incorporation that would revoke a provision of the Corporation’s By-Laws to remove advance notice requirements for shareholders to bring business before a shareholder meeting, with the number of shares voting “FOR”, “AGAINST”, and “ABSTAIN” indicated below.

FOR	2,829,153
AGAINST	2,079,741
ABSTAIN	147,795
BROKER NON VOTES	583,516

Proposal 5.Shareholders narrowly approved the shareholder proposal recommending that the Board of Directors submit to shareholders for a vote a proposed amendment to the Corporation’s Articles of Incorporation that would reduce the number of members on the Board of Directors from seven to five, with the number of shares voting “FOR”, “AGAINST”, and “ABSTAIN” indicated below.

FOR	2,826,064
AGAINST	2,082,475
ABSTAIN	148,150
BROKER NON VOTES	583,516

The Board of Directors plans to consider the recommendations in Proposals 3, 4 and 5 as part of its planning for the 2009 Shareholders’ Meeting.

Item 6.   Exhibits

a)Exhibits

Exhibit 31.1	Officer Certification
Exhibit 31.2	Officer Certification
Exhibit 32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

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

Torotel, Inc.

(Registrant)

/s/ Dale H. Sizemore, Jr.

Dale H. Sizemore, Jr.

Chief Executive Officer

Date:  April 23, 2009

/s/ H. James Serrone

H. James Serrone

Chief Financial Officer

Date:  April 23, 2009

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