**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-Q**




xQuarterly
      report
      pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for
      the
      quarterly period ended September 30, 2007




o 
Transition
      report
      pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for
      the
      transition period from ____to ___




Commission
      file number: 001-33604





**LIMCO-PIEDMONT
      INC.**


(Exact
      Name of Registrant as Specified in Its Charter)




**Delaware**
            
            **73-1160278**(State
                or Other Jurisdiction of
            
            (I.R.S.
                EmployerIncorporation
                or Organization)
            
            Identification
                No.)




**5304
      S. Lawton Ave.**


**Tulsa,
      Oklahoma, 74107**


(Address
      of Principal Executive Offices)


**(918)
      445-4300**


(Registrant’s
      Telephone Number, Including Area Code)




**N/A**


(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 (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 
      o No 
      o




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




Large
                accelerated filer o
            Accelerated
                filer o
            Non-accelerated
                filer x




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




As
      of
      November 13, 2007 the Registrant had 13,205,000 shares
      outstanding.





**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**




INDEX


**Page**PART
                  I - FINANCIAL INFORMATION:Item
                  1.
              Unaudited
                  Condensed Consolidated Balance Sheets
                September
                  30, 2007 and December 31, 2006
              2Unaudited
                  Condensed Consolidated Statements of Income
                Three
                  and nine months ended September 30, 2007 and 2006
              3Unaudited
                  Statements of Changes in Shareholders’ Equity
              4Unaudited
                  Condensed Consolidated Statements of Cash Flows
                Nine
                  months ended September 30, 2007 and 2006
              5Notes
                  to Unaudited Condensed Consolidated Financial Statements
              6-13Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              14-23Item
                  3.
              Quantitative
                  and Qualitative Disclosures About Market Risk
              23Item
                  4T.
              Controls
                  and Procedures
              24PART
                  II - OTHER INFORMATION:Item
                  1.
              Legal
                  Proceedings
              25Item
                  1A.
              Risk
                  Factors
              25-32Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              33Item
                  6.
              Exhibits
                  and Reports on Form 8-K
              33SIGNATURES
              34


1


**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**





**UNAUDITED
      CONDENSED CONSOLIDATED BALANCE SHEETS**


(in
      thousands, except per share data)




**September 30,**
              **2007**
            
            **December 31,**
              **2006****ASSETS**Current
                Assets:Cash
            
            $
            3,306
            
            $
            4,309Short-term
                investments
            
            
            30,929
            
            
            —Accounts
                receivable (net of allowance for doubtful accounts of $103 and $245
                at
                September 30, 2007 and December 31, 2006, respectively)
            
            
            10,452
            
            
            8,188Other
                accounts receivable and prepaid expenses
            
            
            714
            
            
            727Inventories
            
            
            16,380
            
            
            14,611Total
                current assets
            
            
            61,781
            
            
            27,835Property,
                plant and equipment, net
            
            
            3,860
            
            
            2,920Intangible
                assets, net
            
            
            1,828
            
            
            2,183Goodwill
            
            
            4,780
            
            
            4,780Other
                long-term assets
            
            
            —
            
            
            294Total
                assets
            
            $
            72,249
            
            $
            38,012**LIABILITIES
                AND SHAREHOLDERS' EQUITY**Current
                Liabilities:Current
                maturities of long-term debt
            
            $
            --
            
            $
            4,000Accounts
                payables
            
            
            5,373
            
            
            6,525Parent
                company payables
            
            
            1,903
            
            
            3,122Other
                accounts payable and accrued expenses
            
            
            1,662
            
            
            2,838Total
                current liabilities
            
            
            8,938
            
            
            16,485Long-Term
                Liabilities:Long-term
                debt, related party
            
            
            —
            
            
            4,000Deferred
                income taxes
            
            
            436
            
            
            436Total
                long-term liabilities
            
            
            436
            
            
            4,436Total
                liabilities
            
            
            9,374
            
            
            20,921Commitments
                and contingenciesShareholders'
                Equity:Common
                stock, $0.01 par value; 25,000 sharesauthorized,
                13,205 and 9,000 shares issued and outstanding at September 30, 2007
                and
                December 31,2006,
                respectively
            
            
            132
            
            
            90Additional
                paid-in capital
            
            
            48,783
            
            
            7,446Retained
                earnings
            
            
            13,960
            
            
            9,555Total
                shareholders' equity
            
            
            62,875
            
            
            17,091Total
                liabilities and shareholders' equity
            
            $
            72,249
            
            $
            38,012





See
      notes
      to unaudited condensed consolidated financial statements.


2


**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**




**UNAUDITED
        CONDENSED CONSOLIDATED STATEMENTS OF INCOME**
 (in
        thousands, except per share data)





**Three
                months ended**
              **September
                30,**
            
            **Nine
                months ended**
              **September
                30,**2007
            
            2006
            
            2007
            
            2006RevenueMRO
                services
            
            $
            12,831
            
            $
            11,068
            
            $
            37,877
            
            $
            32,510Parts
                services
            
            
            3,813
            
            
            3,409
            
            
            17,022
            
            
            7,870Total
                revenue
            
            
            16,644
            
            
            14,477
            
            
            54,899
            
            
            40,380Cost
                and operating expensesMRO
                services
            
            
            9,342
            
            
            7,891
            
            
            26,219
            
            
            24,027Parts
                services
            
            
            3,083
            
            
            2,777
            
            
            13,897
            
            
            6,140Selling
                and marketing
            
            
            673
            
            
            564
            
            
            1,975
            
            
            1,657General
                and administrative
            
            
            1,552
            
            
            1,120
            
            
            5,391
            
            
            2,995Amortization
                of intangibles
            
            
            119
            
            
            115
            
            
            355
            
            
            342Operating
                income
            
            
            1,875
            
            
            2,010
            
            
            7,062
            
            
            5,219Other
                income (expense)Interest
                income
            
            
            271
            
            
            245
            
            
            542
            
            
            444Interest
                expense
            
            
            (178
            )
            
            (372
            )
            
            (719
            )
            
            (856
            )Total
                other income (expense)
            
            
            93
            
            
            (127
            )
            
            (177
            )
            
            (412
            )Income
                before taxes
            
            
            1,968
            
            
            1,883
            
            
            6,885
            
            
            4,807Provision
                for income taxes
            
            
            538
            
            
            696
            
            
            2,480
            
            
            1,781Net
                income
            
            $
            1,430
            
            $
            1,187
            
            $
            4,405
            
            $
            3,026Net
                income per share:Basic
            
            $
            0.12
            
            $
            0.13
            
            $
            0.46
            
            $
            0.34Diluted
            
            $
            0.12
            
            $
            0.13
            
            $
            0.46
            
            $
            0.34Weighted
                average number of common shares outstanding:Basic
            
            
            12,406
            
            
            9,000
            
            
            9,673
            
            
            9,000Diluted
            
            
            12,437
            
            
            9,000
            
            
            9,678
            
            
            9,000





See
      notes
      to unaudited condensed consolidated financial statements.


3


**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**





**UNAUDITED** **STATEMENTS
      OF CHANGES IN SHAREHOLDERS' EQUITY**


(in
      thousands, except per share data)





**Additional**
            
            
            
            **Total****Common
                Stock**
            
            **Paid-in**
            
            **Retained**
            
            **Shareholders’****Shares**
            
            **Amount**
            
            **Capital**
            
            **Earnings**
            
            **Equity**Balance
                at January 1, 2007
            
            
            9,000
            
            $
            90
            
            $
            7,446
            
            $
            9,555
            
            $
            17,091Net
                income for the period
            
            
            —
            
            
            —
            
            
            —
            
            
            4,405
            
            
            4,405Issuance
                of common stock- initial public offering
            
            
            4,205
            
            
            42
            
            
            41,167
            
            
            —
            
            
            41,209Share
                based compensation expense
            
            
            —
            
            
            —
            
            
            170
            
            
            —
            
            
            170Balance
                at September 30, 2007
            
            
            13,205
            
            $
            132
            
            $
            48,783
            
            $
            13,960
            
            $
            62,875





See
      notes
      to unaudited condensed consolidated financial statements.




4


**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**




**UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**


(in
      thousands)


**Nine months ended**
                **September 30,**2007
              
              2006Cash
                  flow from operating activities:Net
                  income
              
              $
              4,405
              
              $
              3,026Adjustment
                  to reconcile net income to net cash provided by (used in) operatingactivities:Depreciation
                  and amortization
              
              
              796
              
              
              739Share
                  based compensation expenses
              
              
              170Changes
                  in allowance for doubtful accounts
              
              
              (142
              )
              
              34Changes
                  in certain operating assets and liabilities:Decrease
                  (increase) in accounts receivable
              
              
              (2,122
              )
              
              (963
              )Decrease
                  (increase) in other accounts receivable and prepaid
                  expenses
              
              
              13
              
              
              (13
              )Decrease
                  (increase) in inventories
              
              
              (1,769
              )
              
              (568
              )Increase
                  (decrease) in accounts payable, other accounts payable and accrued
                  expenses
              
              
              (2,328
              )
              
              585Increase
                  (decrease) in Parent company account
              
              
              (1,219
              )
              
              52Net
                  cash provided by (used in) operating activities
              
              
              (2,196
              )
              
              2,892Cash
                  flows from investing activities:Proceeds
                  from sale of certificate of deposit
              
              
              —
              
              
              514Purchase
                  of investments and other assets
              
              
              (30,928
              )
              
              —Purchases
                  of property and equipment
              
              
              (1,381
              )
              
              (210
              )Net
                  cash provided by (used in) investing activities
              
              
              (32,309
              )
              
              304Cash
                  flows from financing activities:Proceeds
                  from issuance of common stock, initial public offering, net of
                  294,000
                  Capitalized initial public offering costs
              
              
              41,502
              
              
              —Repayment
                  of short-term bank credit
              
              
              (4,000
              )
              
              —Repayment
                  of long-term loan
              
              
              (4,000
              )
              
              (3,000
              )Net
                  cash provided by (used in) financing activities
              
              
              33,502
              
              
              (3,000
              )Increase
                  (decrease) in cash and cash equivalents
              
              
              (1,003
              )
              
              196Cash
                  and cash equivalents at the beginning of period
              
              
              4,309
              
              
              2,259Cash
                  at the end of period
              
              $
              3,306
              
              $
              2,455




See
      notes
      to unaudited condensed consolidated financial statements.




5


**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**




**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




**Note
      1 - General**




*a.
       Description of Business:*





Limco-Piedmont
      Inc. (“the Company”), a Delaware corporation, is principally engaged
      in:




·  The
      repair and overhaul of heat transfer components, auxiliary power units ("APUs"),
      propellers, landing gear and pneumatic ducting .




·  Inventory
      management and parts services for commercial, regional and charter airlines
      and
      business aircraft owners.




*b.
       Unaudited Interim Results:*




The
      accompanying condensed consolidated financial statements of Limco-Piedmont
      Inc.
      and subsidiaries (the “Company”) presented herein have been prepared by the
      Company and are unaudited. They do not include all the notes in our annual
      financial statements and, therefore, should be read in conjunction with the
      consolidated financial statements and notes thereto in our Registration
      Statement and Prospectus filed with the Securities and Exchange Commission
      dated
      July 18, 2007. In the opinion of the Company's management, the accompanying
      unaudited condensed financial statements reflect all adjustments (consisting
      of
      normal and recurring adjustments) considered necessary to present fairly the
      Company's financial position, results of operations and cash flows for all
      periods presented. The results of operations for the three- and nine -month
      periods ended September 30, 2007 are not necessarily indicative of the results
      to be expected for the year ending December 31, 2007 or any other interim period
      or for any other future year.




Preparation
      of financial statements in conformity with accounting principles generally
      accepted in the United States of America requires management to make estimates
      and assumptions that affect the reported amounts in the financial statements
      and
      accompanying notes. Actual results could differ from those
      estimates.




**Note
      2 -** **Short-Term
      Investments**




Short-term
      investments are accounted for in accordance with Statement of Financial
      Accounting Standards (“SFAS”) No. 115, “Accounting for Certain Investment in
      Debt and Equity Securities”. Management determines the classification of its
      investments in marketable debt and equity securities at the time of purchase
      and
      reevaluates such determinations as of each balance sheet date. As of September
      30, 2007, all marketable securities covered by SFAS No. 115, were designated
      as
      available-for-sale. Securities available-for-sale are carried at fair value,
      with the unrealized gains and losses, net of income taxes, reported as a
      separate component of shareholder’s equity. Realized gains and losses and
      declines in market value judged to be other than temporary, of which there
      were
      none for the three and nine months ended September 30, 2007, are included in
      other income. Interest and dividends are also included in other income. Our
      short-term investments consist solely of auction rate tax exempt securities.Auction
      rate securities are highly liquid, variable rate debt securities. While the
      underlying security has a long-term nominal maturity, the interest rate is
      reset
      through auctions that are typically held every 7, 28, or 35 days. The securities
      trade at par and are callable at par on any interest payment date at the option
      of the issuer. Interest is paid at the end of each auction period. We classify
      these securities as short term because we intend to liquidate them as
      theneedfor
      working capital arises in the ordinary course of business and we are able to
      liquidate them or roll them over to the next reset period.




6


**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**




**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**







**Note
      3 - Inventories**




Inventories
      are composed of the following:




**September 30,**
            
            **December 31,****2007**
            
            **2006**(in
                thousands)Raw
                material
            
            $
            5,365
            
            $
            5,399Work
                in process
            
            
            4,905
            
            
            3,347Spare
                parts assemblies
            
            
            6,110
            
            
            5,865$
            16,380
            
            $
            14,611




**Note
      4 - Related Parties**




*a.
       Transactions with related parties:*





**Nine months ended September 30,**2007
            
            2006(in
                thousands)Purchases
            
            $
            3,815
            
            $
            2,146





Historically,
      the Company has purchased a majority of its cores for heat exchangers from
      its
      parent, TAT Technologies Ltd. (“Parent”). In January 2007, the Company entered
      into a manufacturing agreement in which it is required to purchase all cores
      required for its heat exchangers from its Parent through January 31, 2017.
      Parent company payables as of September 30, 2007 and December 31, 2006 were
      $1,903,000 and $3,122,000 respectively. Parent company payables are unsecured
      and provide for no interest payments. Heat exchanger not manufactured by the
      Parent may be purchased from other vendors, including Hamilton Sundstrand.




7


**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**




**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




**Note
      4 - Related Parties (cont.)**




*b.
       Long-term debt, related party:*




The
      Company’s long-term debt, related party is debt previously due to the Parent and
      consisted of the following:




**September
                30,**
            
            **December
                31,****2007**
            
            **2006**(in
                thousands)Term
                loan with principal payments of $500,000 due June 30, 2009 and 2010,
                and
                interest payments due quarterly at a rate of Libor + 3% (8.38% at
                December
                31, 2006)
            
            $
            -
            
            $
            1,000Term
                loan with principal payments of $1,000,000 due June 30, 2008, 2009
                and
                2010, and interest payments due quarterly at a rate of
                7.25%
            
            
            -
            
            
            3,000Total
                debt
            
            
            -
            
            
            4,000Less –
                current maturities
            
            
            -
            
            
            -$
            -
            
            $
            4,000





The
      term
      loans were repaid from the proceeds of the initial public offering which the
      Company completed on July 23, 2007.




**Note
      5 - Long-Term Debt**




The
      Company’s long-term debt consisted of the following:




**September
                  30,**
              
              **December
                  31,****2007**
              
              **2006**(in
                  thousands)Term
                  loan to bank due July 1, 2007 together with interest at a rate
                  of Libor
                  plus 1.3%
              
              $
              -
              
              $
              4,000Less –
                  current maturities
              
              
              -
              
              
              (4,000
              )$
              -
              
              $
              -





The
      term
      loan was renewed on July 1, 2007 for 45 days, and was repaid from the proceeds
      of the initial public offering which the Company completed on July 23,
      2007.




**Note
      6- Earning Per Share**




The
      consolidated statements of earnings present basic and diluted earning per share.
      Basic earning per share is computed by dividing income available to common
      stockholders by the weighted-average number of common shares outstanding during
      the period. Diluted earning per share considers the potential effect of dilution
      on basic earning per share assuming potentially dilutive securities that meet
      certain criteria, such as stock options, were outstanding since issuance. The
      treasury stock method is used to determine the dilutive effect of potentially
      dilutive securities.




8


**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**




**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




**Note
      6 - Earning Per Share (cont.)**




The
      following table reconciles basic shares outstanding to diluted shares
      outstanding:




**Three
                month ended**
              **September
                30,**
            
            **Nine
                month ended**
              **September
                30,**2007
            
            2006
            
            2007
            
            2006Basic
                shares outstanding
            
            
            12,406
            
            
            9,000
            
            
            9,673
            
            
            9,000Add:
                effect of dilutive stock options
            
            
            31
            
            
            -
            
            
            6
            
            
            -Diluted
                shares outstanding
            
            
            12,437
            
            
            9,000
            
            
            9,679
            
            
            9,000





**Note
      7 - Employee** **Share
      Based Compensation**




The
      Company entered into a share based compensation agreement with its CEO in August
      2005. The compensation agreement included the grant of 45,000 phantom stock
      options and other stock options to be issued upon the completion of an IPO
      by
      the Company. The phantom stock options had an exercise price of $6.37 and
      provided that at the date of exercise, the CEO would receive a cash payment
      for
      the difference between the exercise price and the average closing price of
      our
      parent company’s ordinary share for the 60 days preceding the exercise date.
      During the three and the nine months periods ended September 30, 2007, the
      Company recorded compensation expense of $0 and $324,700, respectively. At
      September 30, 2007, all of the phantom stock options had been
      exercised.




Effective
      as of July 19, 2007, the date of our initial public offering, the Company
      established an incentive compensation plan, or the 2007 plan, under which it
      may
      issue options to purchase up to 600,000 shares of its common stock. Concurrently
      with the closing of the initial public offering, the Company issued a total
      of
      404,250 options exercisable at $11.00 per share, the initial public offering
      price, to its directors, named executive officers and certain other key
      employees. The options vest in three equal annual installments, except for
      66,000 options that vest in four equal semi-annual installments, and are
      exercisable at the initial public offering price of $11.00 per
      share.




Compensation
      expense attributable to outstanding stock options was $170,000 ($105,400 after
      tax), or $0.01 per share on both a basic and diluted basis, for the three and
      nine month periods ended September 30, 2007. As of September 30, 2007, the
      total
      unrecognized compensation cost related to non-vested stock awards was $2.0
      million and the weighted average period over which the cost is expected to
      be
      recognized is approximately 3.5 years.




9






**LIMCO-PIEDMONT
        INC. AND SUBSIDIARIES**
  **NOTES
        TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
  **Note
        7 - Employee Share Based** **Compensation
        (cont.)**
  A
          summary
          of our stock option plan as of September 30, 2007 and changes during the
          three
          month period then ended, is presented below:
  **Shares**
                
                **Weighted**
                  **average****Exercise
                    price**
                
                **Aggregate**
                  **intrinsic**
                  **value
                    (1)**
                
                **Weighted
                    average contractual life****remaining in years**(In
                    thousands)
                
                
                
                (In
                    thousands)Outstanding
                    at July 1, 2007
                
                
                —Granted
                
                
                404
                
                $
                11
                
                
                —
                
                
                —Outstanding
                    at September 30, 2007
                
                
                404
                
                $
                11
                
                $
                918
                
                
                5Excisable
                    at September 30, 2007
                
                
                -Options
                    expected to vest at September 30, 2007
                
                
                404
  (1)
            The
            intrinsic value of a stock option is the amount by which the market value
            of the
            underlying stock on September 30, 2007, exceeds the strike price of the
            option.
  The
            weighted average grant date fair value of the stock options granted during
            the
            three months ended September 30, 2007 was $5.38, excluding 66,000 options
            whose
            fair value was $4.94 as a result of a shorter vesting period.
  The
            fair
            value of each option grant was estimated on the date of grant using the
            Black-Scholes option-pricing model with the following weighted average
            assumptions:
  **Three
                      months ended**
                    **September
                      30, 2007**Quantity
                  
                  
                  338,250
                  
                  
                  66,000Weighted
                      average expected stock price volatility
                  
                  
                  62
                  %
                  
                  62
                  %Weighted
                      average expected option life (in years)
                  
                  
                  3.50
                  
                  
                  2.92Average
                      risk free interest rate
                  
                  
                  4.96
                  %
                  
                  4.96
                  %Average
                      dividend yield
                  
                  
                  -
                  
                  
                  -Discount
                      for post-vesting restriction
                  
                  
                  N/A
                  
                  
                  N/A
 
 Note
            8 -SegmentReporting
  *a.
             Segment Activities Disclosure* :
  The
            Company manages its business on a basis of two reportable segments as
            follows:
  ·  The
            repair and overhaul of heat transfer components, APUs, propellers, landing
            gear
            and pneumatic ducting.
  ·  The
            parts
            segment focuses on inventory management and parts services for commercial,
            regional and charter airlines and business aircraft owners.
  10
  **LIMCO-PIEDMONT
            INC. AND SUBSIDIARIES**
  **NOTES
            TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
  Note
            8 -SegmentReporting (cont.)
  The
            Company evaluates segment performance based on revenue and operating
            income.
  The
            operating income reported in our segments excludes corporate and other
            unallocated amounts. Although such amounts are excluded from the business
            segment results, they are included in reported consolidated earnings.
            Corporate
            and unallocated amounts include executive level expenses and expenses
            related to
            our accounting and finance, human resources and information technology
            departments.
  *b.
             Operational segments* :
  The
            following financial information is a summary of the operating income
            of each
            operational segment:
  **Nine
                      months ended September 30, 2007****MRO**
                  
                  **Parts**
                  
                  **Corporate**
                  
                  **Consolidated**(in
                      thousands)Revenue
                  
                  $
                  37,877
                  
                  $
                  17,022
                  
                  $
                  -
                  
                  $
                  54,899MRO
                      services cost
                  
                  
                  26,219
                  
                  
                  -
                  
                  
                  -
                  
                  
                  26,219Part
                      services cost
                  
                  
                  -
                  
                  
                  13,897
                  
                  
                  -
                  
                  
                  13,897Selling
                      and marketing
                  
                  
                  1,575
                  
                  
                  400
                  
                  
                  -
                  
                  
                  1,975General
                      and administrative
                  
                  
                  801
                  
                  
                  273
                  
                  
                  4,317
                  
                  
                  5,391Amortization
                      of intangibles
                  
                  
                  355
                  
                  
                  -
                  
                  
                  -
                  
                  
                  355Operating
                      income (expense)
                  
                  $
                  8,927
                  
                  $
                  2,452
                  
                  $
                  (4,317
                  )
                  $
                  7,062
 
 **Nine
                      months ended September 30, 2006****MRO**
                  
                  **Parts**
                  
                  **Corporate**
                  
                  **Consolidated**(in
                      thousands)Revenue
                  
                  $
                  32,510
                  
                  $
                  7,870
                  
                  $
                  -
                  
                  $
                  40,380MRO
                      services cost
                  
                  
                  24,027
                  
                  
                  -
                  
                  
                  -
                  
                  
                  24,027Part
                      services cost
                  
                  
                  -
                  
                  
                  6,140
                  
                  
                  -
                  
                  
                  6,140Selling
                      and marketing
                  
                  
                  1,347
                  
                  
                  310
                  
                  
                  -
                  
                  
                  1,657General
                      and administrative
                  
                  
                  903
                  
                  
                  323
                  
                  
                  1,769
                  
                  
                  2,995Amortization
                      of intangibles
                  
                  
                  342
                  
                  
                  -
                  
                  
                  -
                  
                  
                  342Operating
                      income (expense)
                  
                  $
                  5,891
                  
                  $
                  1,097
                  
                  $
                  (1,769
                  )
                  $
                  5,219
 
 **Three
                      months ended September 30, 2007****MRO**
                  
                  **Parts**
                  
                  **Corporate**
                  
                  **Consolidated**(in
                      thousands)Revenue
                  
                  $
                  12,831
                  
                  $
                  3,813
                  
                  $
                  -
                  
                  $
                  16,644MRO
                      services cost
                  
                  
                  9,342
                  
                  
                  -
                  
                  
                  -
                  
                  
                  9,342Part
                      services cost
                  
                  
                  -
                  
                  
                  3,083
                  
                  
                  -
                  
                  
                  3,083Selling
                      and marketing
                  
                  
                  558
                  
                  
                  115
                  
                  
                  -
                  
                  
                  673General
                      and administrative
                  
                  
                  198
                  
                  
                  102
                  
                  
                  1,252
                  
                  
                  1,552Amortization
                      of intangibles
                  
                  
                  119
                  
                  
                  --
                  
                  
                  -
                  
                  
                  119Operating
                      income (expense)
                  
                  $
                  2,614
                  
                  $
                  513
                  
                  $
                  (1,252
                  )
                  $
                  1,875
  11
  **LIMCO-PIEDMONT
            INC. AND SUBSIDIARIES**
  **NOTES
            TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 Note
            8 -
            SegmentReporting(cont.)
 
 **Three
                      months ended September 30, 2006****MRO**
                  
                  **Parts**
                  
                  **Corporate**
                  
                  **Consolidated**(in
                      thousands)Revenue
                  
                  $
                  11,068
                  
                  $
                  3,409
                  
                  $
                  -
                  
                  $
                  14,477MRO
                      services cost
                  
                  
                  7,891
                  
                  
                  -
                  
                  
                  -
                  
                  
                  7,891Part
                      services cost
                  
                  
                  -
                  
                  
                  2,777
                  
                  
                  -
                  
                  
                  2,777Selling
                      and marketing
                  
                  
                  455
                  
                  
                  109
                  
                  
                  -
                  
                  
                  564General
                      and administrative
                  
                  
                  271
                  
                  
                  97
                  
                  
                  752
                  
                  
                  1,120Amortization
                      of intangibles
                  
                  
                  115
                  
                  
                  -
                  
                  
                  -
                  
                  
                  115Operating
                      income (expense)
                  
                  $
                  2,336
                  
                  $
                  426
                  
                  $
                  (752
                  )
                  $
                  2,010
  *c.
            The following presents long-lived assets as of:*
  **September
                      30, 2007****MRO**
                  
                  **Parts**
                  
                  **Corporate**
                  
                  **Consolidated**(in
                      thousands)Total
                      assets
                  
                  $
                  32,987
                  
                  $
                  3,420
                  
                  $
                  35,842
                  
                  $
                  72,249Capital
                      investments
                  
                  
                  1,377
                  
                  
                  -
                  
                  
                  3
                  
                  
                  1,380Depreciation
                      and amortization
                  
                  
                  795
                  
                  
                  1
                  
                  
                  
                  
                  
                  796
 
 **December
                      31, 2006****MRO**
                  
                  **Parts**
                  
                  **Corporate**
                  
                  **Consolidated**(in
                      thousands)Total
                      assets
                  
                  $
                  29,131
                  
                  $
                  3,542
                  
                  $
                  5,339
                  
                  $
                  38,012Capital
                      investments
                  
                  
                  358
                  
                  
                  -
                  
                  
                  -
                  
                  
                  358Depreciation
                      and amortization
                  
                  
                  1,016
                  
                  
                  2
                  
                  
                  -
                  
                  
                  1,018
 
 **Note
            9 - Recently Issued Accounting Standards**
  In
            September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” or SFAS
            157. Among other requirements, SFAS 157 defines fair value and establishes
            a
            framework for measuring fair value and also expands disclosure about
            the use of
            fair value to measure assets and liabilities. SFAS 157 is effective beginning
            the first fiscal year that begins after November 15, 2007. The Company is
            currently evaluating the impact of SFAS 157 on its financial position
            and
            results of operations.
  In
            February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
            Financial Assets and Financial Liabilities - Including an Amendment of
            FASB
            Statement No. 115" (SFAS No. 159). SFAS No. 159 establishes a fair value
            option
            permitting entities to elect the option to measure eligible financial
            instruments and certain other items at fair value on specified election
            dates.
            Unrealized gains and losses on items for which the fair value option
            has been
            elected will be reported in earnings. The fair value option may be applied
            on an
            instrument-by-instrument basis, with a few exceptions, is irrevocable
            and is
            applied only to entire instruments and not to portions of instruments.
            SFAS No.
            159 is effective as the beginning of the first fiscal year beginning
            after
            November 15, 2007, and should not be applied retrospectively to fiscal
            years
            beginning prior to the effective date. On the adoption date, an entity
            may elect
            the fair value option for eligible items existing at that date and the
            adjustment for the initial remeasurement of those items to fair value
            should be
            reported as a cumulative effect adjustment to the opening  balance of
            retained earnings. We are currently assessing whether to apply the provisions
            of
            SFAS No. 159 to eligible financial instruments in place on the adoption
            date and
            the related impact on our financial statements.
  12
  **LIMCO-PIEDMONT
            INC. AND SUBSIDIARIES**
  **NOTES
            TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
  **Note
              9 - Recently Issued Accounting Standards (cont.)**
 
 In
            September 2006, the Securities and Exchange Commission released Staff
            Accounting
            Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when
            Quantifying Misstatements in Current Year Financial Statements,” or SAB 108,
            which addresses how uncorrected errors in previous years should be considered
            when quantifying errors in current-year financial statements. SAB 108
            requires
            registrants to consider the effect of all carry over and reversing effects
            of
            prior-year misstatements when quantifying errors in current-year financial
            statements. SAB 108 does not change the Staff’s previous guidance on evaluating
            the materiality of errors. It allows registrants to record the effects
            of
            adopting SAB 108 guidance as a cumulative-effect adjustment to retained
            earnings. This adjustment must be reported in the annual financial statements
            for the first fiscal year ending after November 15, 2006. The initial
            adoption
            of SAB 108 did not have a material impact on the Company’s financial condition
            and results of operations.
  In
            July
            2006, the FASB issued FASB Interpretation No. 48, or FIN 48, “Accounting for
            Uncertainty in Income Taxes - an interpretation of FASB Statement No.
            109,”
which prescribes comprehensive guidelines for recognizing, measuring,
            presenting
            and disclosing in the financial statements tax positions taken or expected
            to be
            taken on tax returns. FIN 48, effective for fiscal years beginning after
            December 15, 2006, seeks to reduce the diversity in practice associated
            with
            certain aspects of the recognition and measurement related to accounting
            for
            income taxes. The adoption of FIN 48 during the first quarter of 2007,
            did not
            have an impact on the Company's financial position and results of
            operations.
  The
            Company recognizes accrued interest and penalties related to uncertain
            tax
            positions in income tax expense. At January 1, 2007, there were no amounts
            of
            unrecognized income tax benefits computed under FIN 48, nor were there
            any
            amounts of tax related interest or penalties recognized in the statements
            of
            operations. The Company’s federal and state tax returns are open to examination
            for years 2005-2006.
  13
 
 **Item
            2.**  **Management’s
            Discussion and Analysis of Financial Condition and Results of
            Operations**
  The
            following discussion of our results of operations should be read in conjunction
            with the financial statements and notes included elsewhere in this Quarterly
            Report on Form 10-Q. The discussion and analysis which follows may contain
            trend
            analysis and other forward-looking statements within the meaning of Section
            21E
            of the Securities Exchange Act of 1934 which reflect our current views
            with
            respect to future events and financial results. Words such as “anticipate,”
“expect,” “intend,” “plan,” “believe,” “seek,” “outlook” and “estimate” as well
            as similar words and phrases signify forward-looking statements. Our
            forward-looking statements are not guarantees of future results and conditions
            and important factors, risks and uncertainties may cause our actual results
            to
            differ materially from those expressed in our forward-looking statements.
            These
            risks are more fully described in the “Risk Factors” section of the Quarterly
            Report. We undertake no obligation to update publicly any forward-looking
            statements for any reason, even if new information becomes available
            or other
            events occur in the future *.*
  **Background**
  Prior
            to
            the consummation of our initial public offering in July 2007, we operated
            as a
            wholly-owned subsidiary of TAT Technologies Ltd. We were incorporated
            in
            Delaware on February 28, 2007 as a successor to Limco-Airepair, Inc.,
            which was
            incorporated as an Oklahoma corporation in 1995 upon the merger of three
            aerospace companies that had been acquired by TAT Technologies from 1992
            through
            1995. Prior to the consolidation of Limco-Airepair, Inc. into our company,
            it
            transferred all of its assets and liabilities associated with its Oklahoma
            operations to our wholly-owned subsidiary, Limco-Airepair Inc., a newly
            formed
            Delaware corporation.
  Prior
            to our acquisition of Piedmont Aviation in July 2005, our business was
            focused
            on providing MRO services for heat transfer components. With the acquisition
            of
            Piedmont, we expanded the scope of our MRO services to also include APUs,
            propellers and landing gears and added our parts services business.  We
            acquired Piedmont for approximately $20.2 million, which includes $5.9
            million
            in cash and the assumption of approximately $8.7 million of bank indebtedness
            and $5.6 million of other liabilities of Piedmont.
  **Overview**
  We
            provide a variety of services and products to the aerospace industry.
            We operate
            four *FAA* certified repair stations, which provide aircraft component MRO services
            for
            airlines, air cargo carriers, maintenance service cen-ters and the military.
            In
            conjunction with our MRO services, we also manufacture related OEM components
            for airplane manufacturers and other environmental control and cooling
            systems.
            Our parts services division offers parts services for commercial, regional
            and
            charter airlines and business aircraft owners.
  We
            specialize in the repair and overhaul of heat transfer components, APUs,
            propellers, landing gear and pneumatic ducting. We are licensed by Hamilton
            Sundstrand, a leading provider of aerospace products, to provide MRO
            services
            for all of their air-to-air heat transfer products, by Honeywell, a leading
            manufacturer of aerospace products and aerospace services provider, to
            provide
            MRO services for three of their APU models and by TAT Technologies to
            provide
            MRO services for their heat exchangers. Our propeller repair facility
            is an
            authorized service center for Hartzell and McCauley propellers. Our repair
            stations are certified by the FAA and the EASA. We also manufacture heat
            transfer equipment used in commercial, regional, business and military
            aircraft,
            complete environmental control systems and cooling systems for
            electronics.
  The
            pricing terms under our MRO contracts vary depending on the type of contract
            and
            its specific terms. Generally the types of contracts that we enter into
            are as
            follows:
 ·
                    time
                        and material contracts, in which we charge our customer a
                        price based on
                        the specific work to be
                        performed;
 ·
                    fixed
                        price per maintenance or service event contracts, in which
                        pre-negotiated
                        fixed prices are charged for specific repair and overhaul
                        or redesign
                        services; and
  14
  ·
                  fixed
                      price per component hour (or in the case of landing gear. the
                      number of
                      landing cycles) contracts in which pre-negotiated fixed prices
                      are charged
                      for any and all repair and overhaul service requirements during
                      the term
                      of the contract.
   Our
            parts
            services division provides inventory management and parts services for
            commercial, regional and charter airlines and business aircraft owners.
            We also
            maintain a small inventory of parts for resale.
  Our
            management believes that our revenues and sources of revenues are among
            the key
            performance indicators for our business. Our revenues from our two principal
            lines of business for the three and nine month periods ended September
            30, 2007
            and 2006 were as follows:
  **Three
                      months ended September 30,**
                  
                  **Nine
                      months ended September 30,****2007**
                  
                  **2006**
                  
                  **2007**
                  
                  **2006****Revenues**
                  
                  **% of Total****Revenues**
                  
                  **Revenues**
                  
                  **% of Total****Revenues**
                  
                  **Revenues**
                  
                  **% of Total****Revenues**
                  
                  **Revenues**
                  
                  **% of Total****Revenues**(in
                      thousands)Revenues:MRO
                      Services
                  
                  $
                  12,831
                  
                  
                  77.1
                  %
                  $
                  11,068
                  
                  
                  76.5
                  %
                  $
                  37,877
                  
                  
                  69.0
                  %
                  $
                  32,510
                  
                  
                  80.5
                  %Parts
                      services
                  
                  
                  3,813
                  
                  
                  22.9
                  %
                  
                  3,409
                  
                  
                  23.5
                  %
                  
                  17,022
                  
                  
                  31.0
                  %
                  
                  7,870
                  
                  
                  19.5
                  %Total
                      revenues
                  
                  $
                  16,644
                  
                  
                  100.0
                  %
                  $
                  14,477
                  
                  
                  100.0
                  %
                  $
                  54,899
                  
                  
                  100.0
                  %
                  $
                  40,380
                  
                  
                  100.0
                  %
 
 The
            following table reflects the geographic breakdown of our revenues for
            each of
            the three and nine month periods ended September 30, 2007 and 2006:
 **Three
                        months ended September 30,**
                    
                    **Nine
                        months ended September 30,****2007**
                    
                    **2006**
                    
                    **2007**
                    
                    **2006****Revenues**
                    
                    **% of Total****Revenues**
                    
                    **Revenues**
                    
                    **% of Total****Revenues**
                    
                    **Revenues**
                    
                    **% of Total****Revenues**
                    
                    **Revenues**
                    
                    **% of Total****Revenues**(in
                        thousands)North
                        America
                    
                    $
                    10,290
                    
                    
                    61.8
                    %
                    $
                    10,355
                    
                    
                    71.5
                    %
                    $
                    38,580
                    
                    
                    70.3
                    %
                    $
                    28,242
                    
                    
                    69.9
                    %Europe
                    
                    
                    4,608
                    
                    
                    27.7
                    %
                    
                    2,964
                    
                    
                    20.5
                    %
                    
                    11,540
                    
                    
                    21.0
                    %
                    
                    9,130
                    
                    
                    22.6
                    %Israel
                        and other
                    
                    
                    1,052
                    
                    
                    6.3
                    %
                    
                    47
                    
                    
                    0.3
                    %
                    
                    3,143
                    
                    
                    5.7
                    %
                    
                    1,145
                    
                    
                    2.9
                    %Asia
                    
                    
                    694
                    
                    
                    4.2
                    %
                    
                    1,111
                    
                    
                    7.7
                    %
                    
                    1,636
                    
                    
                    3.0
                    %
                    
                    1,863
                    
                    
                    4.6
                    %Total
                    
                    $
                    16,644
                    
                    
                    100.0
                    %
                    $
                    14,477
                    
                    
                    100.0
                    %
                    $
                    54,899
                    
                    
                    100.0
                    %
                    $
                    40,380
                    
                    
                    100.0
                    %
  Our
            cost
            of revenues for MRO services consists of component and material costs,
            direct
            labor costs, shipping expenses, overhead related to manufacturing and
            depreciation of manufacturing equipment. Our cost of revenues for parts
            services
            consists primarily of the cost of the parts and shipping expenses. Our
            gross
            margin is affected by the proportion of our revenues generated from MRO
            services
            (including the sale of OEM products) and parts services. Our revenues
            from MRO
            services generally have higher gross margins than our parts
            services.
  Selling
            and marketing expenses consist primarily of commission payments, compensation
            and related expenses of our sales teams, attendance at trade shows and
            advertising expenses and related costs for facilities and
            equipment.
  General
            and administrative expenses consist of compensation and related expenses
            for
            executive, finance, legal and administrative personnel, professional
            fees and
            other general corporate expenses and related costs for facilities and
            equipment.
  15
 
 **Critical
            Accounting Policies**
 
 The
            preparation of the financial statements in accordance with generally
            accepted
            accounting principles in the United States, or GAAP, requires us to make
            estimates and assumptions that affect the reported amounts of assets,
            liabilities, sales, costs and expenses and related disclosures. Though
            we
            evaluate our estimates and assumptions on an ongoing basis, our actual
            results
            may differ from these estimates.
  Certain
            of our accounting policies that we believe are the most important to
            the
            portrayal of our financial condition and results of operations and that
            require
            management's subjective judgments are described below to facilitate better
            understanding of our business activities. We base our judgments on our
            experience and assumptions that we believe are reasonable and applicable
            under
            the circumstances.
  *Revenue
            Recognition*
  Revenues
            from the sale of our services and products are recognized when persuasive
            evidence of an arrangement exists, delivery of the product has occurred,
            provided the collection of the resulting receivable is probable, the
            price is
            fixed or determinable and we no longer have any significant obligation
            with
            respect to such sale. We do not grant a right of return.
  Revenues
            from MRO services are recognized when customer-owned material is shipped
            back to
            the customer. Revenues from parts sales are recognized when the part
            is shipped
            to the customer and title passes to the customer.
  Revenues
            from maintenance contracts are recognized over the contract period in
            proportion
            to the costs expected to be incurred in performing services under the
            contract.
            We estimate the costs that are expected to be incurred based on our experience
            with the aggregate costs incurred and to be incurred on contracts of
            this
            nature. The costs incurred related to our maintenance contracts are not
            incurred
            on a straight line basis, as the timing to provide our maintenance services
            is
            dependent on when parts under these contracts require maintenance.
  *Goodwill,
            Other Intangible Assets and Long-Lived Assets*
  Goodwill
            represents the excess of the purchase price over the fair value of identifiable
            net assets acquired in business combinations. Of the $4.8 million of
            goodwill on
            our balance sheet as of September 30, 2007, approximately $4.3 million
            was a
            result of our acquisition of Piedmont. The identifiable intangible assets
            relating to the Piedmont acquisition, other than goodwill, included in
            our
            balance sheet are customer relationships and other intangible assets.
            The value
            we assigned to these intangible assets, using the income approach based
            on the
            present value of the cash flows attributable to each asset, was approximately
            $2.9 million. The amounts allocated to these intangible assets are being
            amortized on a straight-line basis over periods ranging from 0.3 to 10
            years.
  We
            review
            goodwill and other intangible assets for potential impairment annually
            and when
            events or changes in circumstances indicate the carrying value of the
            goodwill
            or the other intangible assets may be impaired. in which case we may
            obtain an
            appraisal from ** an
            independent valuation firm to determine the amount of impairment, if
            any. In
            addition to the possible use of an independent valuation firm, we perform
            internal valuation analyses and consider other publicly available market
            information. We determine fair value using widely accepted valuation
            techniques,
            including discounted cash flow and market multiple analyses. These types
            of
            analyses require us to make assumptions and estimates regarding industry
            economic factors and the profitability of future business strategies.
            It is our
            policy to conduct impairment testing based on our current business strategy
            in
            light of present industry and economic conditions, as well as future
            expectations. In the fourth quarter of fiscal 2006, we completed our
            annual
            impairment testing of goodwill using the methodology described in the
            notes to
            our consolidated financial statements, and determined there was no impairment
            of
            our goodwill. If actual results are not consistent with our assumptions
            and
            estimates, we may be exposed to a goodwill impairment charge.
  16
  *Income
            Taxes*
  We
            account for income taxes in accordance with Statement of Financial Accounting
            Standards No. 109, "Accounting for Income Taxes," ("SFAS No. 109"). We
            use the
            liability method of accounting for income taxes. Under this method, deferred
            tax
            assets and liabilities are determined based on temporary differences
            between the
            financial statement and tax bases of assets and liabilities and net operating
            loss and credit carryforwards using enacted tax rates in effect for the
            year in
            which the differences are expected to reverse. The effect on deferred
            tax assets
            and liabilities of a change in tax rates is recognized in income in the
            period
            that includes the enactment date. Valuation allowances are established
            when it
            is more likely than not that some portion of the deferred tax assets
            will not be
            realized. To the extent that our decisions and assumptions and historical
            reporting are determined not to be compliant with applicable tax laws
            we may be
            subject to adjustments in our reported income for tax purposes as well
            as
            interest and penalties.
  
 *Allowances
            for Doubtful Accounts*
  We
            perform ongoing credit evaluations of ** our
            customers' financial condition and we require collateral as deemed necessary.
            We
            maintain allowances for doubtful accounts for estimated losses resulting
            from
            the inability of our customers to make payments. In judging the adequacy
            of the
            allowance for doubtful accounts, we consider multiple factors including
            the
            aging of our receivables, historical bad debt experience and the general
            economic environment. Management applies considerable judgment in assessing
            the
            realization of receivables, including assessing the probability of collection
            and the current credit worthiness of each customer. If the financial
            condition
            of our customers were to deteriorate, resulting in an impairment of their
            ability to make payments, additional allowances may be required.
  *Inventories*
  Inventories
            are stated at the lower of cost or market. Cost is determined by the
            average
            cost and first-in, first-out (FIFO) methods. We write down obsolete or
            slow
            moving inventory in an amount equal to the difference between the cost
            of
            inventory and the estimated market value based upon assumptions about
            future
            demand, market conditions and sale forecasts. If actual market conditions
            are
            less favorable than we anticipate, additional inventory write-downs may
            be
            required.
  *Warranty
            Costs*
  We
            provide warranties for our products and services ranging from one to
            five years,
            which vary with respect to each contract and in accordance with the nature
            of
            each specific product. We estimate the costs that may be incurred under
            our
            warranty and record a liability in the amount of such costs at the time
            the
            product is shipped. We periodically assess the adequacy of our recorded
            warranty
            liabilities and adjust the amounts as necessary. As of September 30,
            2007 and
            December 31, 2006, the aggregate amount of our warranty costs was not
            material.
  17
  **Results
            of Operations**
  The
            following table sets forth our statements of operations as a percentage
            of
            revenues for the periods indicated:
 **Three
                          months ended**
                        **September
                          30,**
                      
                      **Nine
                          months ended**
                        **September
                          30,****2007**
                      
                      **2006**
                      
                      **2007**
                      
                      **2006**Revenue:MRO
                          services
                      
                      
                      77.1
                      %
                      
                      76.5
                      %
                      
                      69.0
                      %
                      
                      80.5
                      %Parts
                          services
                      
                      
                      22.9
                      
                      
                      23.5
                      
                      
                      31.0
                      
                      
                      19.5Total
                          revenue
                      
                      
                      100.0
                      
                      
                      100.0
                      
                      
                      100.0
                      
                      
                      100.0Costs
                          and operating expenses:MRO
                          services
                      
                      
                      56.1
                      
                      
                      54.5
                      
                      
                      47.8
                      
                      
                      59.5Parts
                          services
                      
                      
                      18.5
                      
                      
                      19.2
                      
                      
                      25.3
                      
                      
                      15.2Selling
                          and marketing
                      
                      
                      4.0
                      
                      
                      3.9
                      
                      
                      3.6
                      
                      
                      4.1General
                          and administrative
                      
                      
                      9.4
                      
                      
                      7.7
                      
                      
                      9.8
                      
                      
                      7.4Amortization
                          of intangibles
                      
                      
                      0.7
                      
                      
                      0.8
                      
                      
                      0.6
                      
                      
                      0.9Operating
                          income
                      
                      
                      11.3
                      
                      
                      13.9
                      
                      
                      12.9
                      
                      
                      12.9Financial
                          income (expense), net
                      
                      
                      0.5
                      
                      
                      (0.9
                      )
                      
                      (0.3
                      )
                      
                      (1.0
                      )Income
                          taxes
                      
                      
                      2.8
                      
                      
                      4.8
                      
                      
                      4.6
                      
                      
                      4.4Net
                          income
                      
                      
                      9.0
                      %
                      
                      8.2
                      %
                      
                      8.0
                      %
                      
                      7.5
                      %
 
 In
            addition to revenues and the sources of our revenues, our management
            team views
            our gross profit margin and the level of inventory compared to revenues
            as the
            key performance indicators in assessing our company’s financial condition and
            results of operations. Our management team believes that the upward trend
            in our
            revenues is reflective of an industry-wide increase in demand for MRO
            services,
            and we currently expect that this trend will continue for the foreseeable
            future. While our management team believes that demand for parts services
            will
            also continue to grow, this segment is subject to a high degree of volatility
            because of the potential impact of large one time parts purchases.
  **Three
            Months Ended September 30, 2007 Compared to the Three Months Ended September
            30,
            2006**
  *Revenues.* Total
            revenues increased by $2.2 million, or 15.0% to $16.6 million for the
            three
            months ended September 30, 2007 from $14.4 million for the three months
            ended
            September 30, 2006. The increase in revenues was primarily attributable
            to the
            growth in both MRO services revenues and parts services revenues.
  Revenues
            from MRO services, including OEM sales, increased by $1.8 million, or
            15.9% to
            $12.8 million for the three months ended September 30, 2007 from $11.1
            million
            for the three months ended September 30, 2006. The organic growth in
            MRO
            services revenues for the three months ended September 30, 2007, is a
            result of
            increased sales to historical customers and, to a lesser degree, sales
            to new
            customers. OEM product sales increased by $601,000 or 100.3% to $1.2
            million for
            the three months ended September 30, 2007 from $599,000 for the three
            months
            ended September 30, 2006, primarily as a result of additional sales to
            historical customers.
  Parts
            services revenues increased by $400,000, or 11.9% to $3.8 million for
            the three
            months ended September 30, 2007 from $3.4 million for the three months
            ended
            September 30, 2006. The growth in parts sales is attributable to increased
            purchases by existing customers. ****
  *Cost
            of revenues.* Cost
            of revenues increased by $1.8 million, or 16.5% to $12.4 million for
            the three
            months ended September 30, 2007 from $10.7 million for the three months
            ended
            September 30, 2006. Contributing to the increase in cost of revenues
            for MRO
            services was an increase in the costs of parts used for this activity,
            higher
            wages paid to our plant workers in an effort to reduce turnover and to
            attract
            new employees, and the mix of MRO services during the quarter. Cost of
            revenues
            for parts services increased by $306,000, or 11.0% to $3.1 million for
            the three
            months ended September 30, 2007 from $2.8 million for the three months
            ended
            September 30, 2006, principally as a result of our increased parts
            revenues.
  18
  *Selling
            and marketing expenses* .  Selling
            and marketing expenses increased by $109,000 or 19.3% to $673,000 for
            the three
            months ended September 30, 2007 from $564,000 for the three months ended
            September 30, 2006. Our selling and marketing expenses as a percentage
            of
            revenues increased to 4.0% for the three months ended September 30, 2007,
            from
            3.9% for the three months ended September 30, 2006 **.** The
            increase in selling and marketing expenses is primarily attributable
            to
            increased commissions paid as a result of our increased revenues in 2007.
  *General
            and administrative expenses.* General
            and administrative expenses increased by $432,000, or 38.6% to $1.6 million
            for
            the three months ended September 30, 2007 from $1.1 million for the three
            months
            ended September 30, 2006. The increase in general and administrative
            expenses is
            primarily attributable to a bonus payment of $330,000 related to the
            success of
            our initial public offering and $170,000 of stock based compensation
            expense.
            General and administrative expenses as a percentage of revenues increased
            to
            9.4% for the three months ended September 30, 2007 from 7.7% for the
            three
            months ended September 30, 2006, primarily as a result of the one time
            bonus
            payments and stock based compensation expenses.
  *Operating
            income* .  Our operating income decreased by $135,000, or 6.7% to $1.9 million
            for the three months ended September 30, 2007 from $2.0 million for the
            three
            months ended September 30, 2006. The decrease is attributable primarily
            to an
            increase in general and administrative expenses. The operating income
            of our MRO
            services segment increased by $278,000, or 11.9% to $2.6 million for
            the three
            months ended September 30, 2007 from $2.3 million for the three months
            ended
            September 30, 2006. The increase is attributable primarily to increased
            revenues. The operating income of our parts services segment increased
            by
            approximately $87,000, or 20.4% to $513,000 for the three months ended
            September
            30, 2007 from $ 426,000 for the three months ended September 30, 2006
            as a
            result of increased parts revenues.
  *Interest
            income.* Interest
            income increased by $26,000 or 10.6% to $271,000 (of which $233,000 was
            tax-exempt interest income) for the three months ended September 30,
            2007 from
            $245,000 for the three months ended September 30, 2006, principally as
            a result
            of an increase in the amount of funds held in interest bearing accounts
            and
            short auction rate tax exempt securities following our initial public
            offering.
            We expect that our interest income for the remainder of 2007 will increase
            as a
            result of the investment of a significant portion of the proceeds of
            our initial
            public offering in short term auction rate securities.
  *Interest
            expense.* Interest
            expense decreased by $194,000, or 52.1% to $178,000 for the three months
            ended
            September 30, 2007 from $372,000 for the three months ended September
            30, 2006.
            The decrease in interest expense reflects our repayment of our outstanding
            indebtedness with a portion of the proceeds of our initial public offering.
            We
            do not expect to incur any material interest expenses for the remainder
            of
            2007.
  *Income
            taxes.* Income
            taxes decreased by $158,000 or 22.7% to $538,000 for the three months
            ended
            September 30, 2007 from $696,000 for the three months ended September
            30, 2006.
            The decrease in income tax expense is primarily attributable to our receipt
            of
            $233,000 of tax-exempt interest income on our short-term investments
            and our
            determination that our overall effective tax rate in 2007 will be less
            than we
            previously estimated . Our effective tax rate was 27.3% for the three
            months
            ended September 30, 2007 compared to 37.0% for the three months ended
            September
            30, 2006. We expect that our effective annual tax rate will be approximately
            36
            %.
 19


**Nine
      Months Ended September 30, 2007 Compared to the Nine Months Ended September
      30,
      2006**





*Revenues.* Total
      revenues increased by $14.5 million, or 36.0% to $54.9 million for the nine
      months ended September 30, 2007 from $40.4 million for the nine months ended
      September 30, 2006. The increase in revenues was attributable to a $9.2 million
      increase in parts services revenues and a $5.4 million increase in MRO services
      revenues.




Revenues
      from MRO services, including OEM sales, increased by $5.4 million, or 16.5%
      to
      $37.8 million for the nine months ended September 30, 2007 from $32.5 million
      for the nine months ended September 30, 2006. The organic growth in MRO services
      revenues for the nine months ended September 30, 2007, is a result of increased
      sales to historical customers and, to a lesser degree, sales to new customers.
      OEM product sales increased by $ 1.7 million, or 77.3% to $3.9 million for
      the
      nine months ended September 30, 2007 from $2.2 million for the nine months
      ended
      September 30, 2006, primarily as a result of a large order from one
      customer.




Parts
      services revenues increased by $9.2 million, or 116.3% to $17.0 million for
      the
      nine months ended September 30, 2007 from $7.9 million for the nine months
      ended
      September 30, 2006. The growth in parts sales is attributable to increased
      purchases by both existing customers and new customers, including $4.0 million
      in purchases from a single customer in the nine months ended September 30,
      2007,
      of which $3.6 million was recorded in the six months ended June 30, 2007.




*Cost
      of revenues.* Cost
      of revenues increased by $9.9 million, or 33.0% to $40.1 million for the nine
      months ended September 30, 2007 from $30.2 million for the nine months ended
      September 30, 2006. Cost of revenues for MRO services increased by $2.2 million
      or 9.1% to $26.2 million for the nine months ended September 30, 2007 from
      $24.0
      million for the nine months ended September 30, 2006, primarily as a result
      of
      the growth in MRO services revenue. Cost of revenues for parts services
      increased by $7.8 million, or 126.3% to $13.9 million for the nine months ended
      September 30, 2007 from $6.1 million for the nine months ended September 30,
      2006, primarily as a result of our increased parts revenues.




*Selling
      and marketing expenses* .  Selling
      and marketing expenses increased by $318,000, or 19.2 % to $2.0 million for
      the
      nine months ended September 30, 2007 from $1.7 million for the nine months
      ended
      September 30, 2006. Our selling and marketing expenses as a percentage of
      revenues decreased to 3.6% for the nine months ended September 30, 2007, from
      4.1% for the nine months ended September 30, 2006. The increase in selling
      and
      marketing expenses is primarily attributable to increased commissions paid
      as a
      result of our increased revenues in 2007,however this increase was not
      incremental to our increased sales.




*General
      and administrative expenses.* General
      and administrative expenses increased by $2.4 million, or 80.0 % to $5.4 million
      for the nine months ended September 30, 2007 from $3.0 million for the nine
      months ended September 30, 2006. Among the factors causing the increase in
      general and administrative expenses were: bonus payments of $380,000 related
      to
      the success of our initial public offering, stock based compensation expenses
      of
      $170,000,increase in phantom option expenses of $325,000, and the increased
      scope of our operations. General and administrative expenses as a percentage
      of
      revenues increased to 9.8% for the nine months ended September 30, 2007 from
      7.4% for the nine months ended September 30, 2006.




*Operating
      income* .  Our
      operating income increased by $1.8 million, or 35.3% to $ 7.1 million for the
      nine months ended September 30, 2007 from $ 5.2 million for the nine months
      ended September 30, 2006 . The operating income of our MRO services segment
      increased by $ 3.2 million, or 54.2 % to $9.1 million for the nine months ended
      September 30, 2007 from $5.9 million for the nine months ended September 30,
      2006. The increase is attributable primarily to improved operating efficiencies
      and economies of scale. While operating income of our parts services segment
      increased by $1.3 million, or 117.9 % to $2.4 million for the nine months ended
      September 30, 2007 from $1.1 million for the nine months ended September 30,
      2006, the operating margin for this segment increased to 14.0% for the nine
      months ended September 30, 2007 from 13.9% for the nine months ended September
      30, 2006. ****




*Interest
      income.* Interest
      income increased by $98,000 or 22.1% to $542,000 for the nine months ended
      September 30, 2007 from $444,000 for the nine months ended September 30, 2006,
      principally as a result of the increase in the amount of funds held in interest
      bearing investments following our initial public offering.




20


*Interest
      expense.* Interest
      expense decreased by $137,000, or 16.0% to $719,000 for the nine months ended
      September 30, 2007 from $856,000 for the nine months ended September 30, 2006.
      The decrease in interest expense reflects our repayment of our outstanding
      indebtedness with a portion of the proceeds of our initial public offering.
      We
      do not expect to incur any material interest expenses for the remainder of
      2007.




*Income
      taxes.* Income
      taxes increased by $699,000, or 39.2% to $2.5 million for the nine months ended
      September 30, 2007 from $1.8 million for the nine months ended September 30,
      2006, principally as a result of our increased profitability. Our effective
      tax
      rate was 36.0% for the nine months ended September 30, 2007 compared to 37.0
      %
      for the nine months ended September 30, 2006.




**Liquidity
      and Capital Resources**




As
      of
      September 30, 2007, we had cash of $3.3 million, and short-term investments
      of
      $30.9 million, consisting primarily of auction rate tax exempt securities.
      Our
      total working capital was approximately $52.9 million. Our liquidity position
      resulted from the July 23, 2007, sale of 4,205,000 shares of common stock in
      our
      initial public offering from which we received net proceeds of approximately
      $42
      million.




In
      connection with our acquisition of Piedmont in July 2005, we assumed
      approximately $8.7 million in indebtedness and $5.6 million of other
      liabilities. We repaid the assumed indebtedness with the proceeds from loans
      of
      $6.0 million from each of Bank Leumi USA and TAT Technologies. The remaining
      proceeds of these loans, along with $3.0 million of our cash, were used to
      pay
      the approximately $5.3 million cash portion of the approximately $20.2 million
      purchase price and a portion of the assumed liabilities. The repayment of the
      remainder of the assumed liabilities was funded through cash flows from our
      subsequent operations.




We
      used a
      portion of the proceeds of our initial public offering to repay the remaining
      $4
      million that was outstanding under our loan from Bank Leumi USA and the $4
      million that was outstanding under our loans from TAT Technologies.




*Cash
      Flows*




The
      following table summarizes our cash flows for the periods
      presented:




**Nine
                months ended**
              **September
                30,****2007**
            
            **2006**(in
                thousands)Net
                cash provided by (used in) operating activities
            
            
            ($2,196
            )
            $
            2,892Net
                cash provided by (used in) investing activities
            
            
            (32,309
            )
            
            304Net
                cash provided by (used in) financing activities
            
            
            33,502
            
            
            (3,000
            )Net
                increase (decrease) in cash and cash equivalents
            
            
            (1,003
            )
            
            196Cash
                and cash equivalents at beginning of period
            
            
            4,309
            
            
            2,259Cash
                at end of period
            
            $
            3,306
            
            $
            2,455





Net
      cash
      used in operating activities was $2.2 million for the nine months ended
      September 30, 2007. This amount was primarily attributable to a $2.1 million
      increase in accounts receivable which grew in line with our revenue growth,
      a
      $1.8 million increase in inventories required to support the increase in MRO
      and
      parts services revenues, a $2.4 million decrease in accounts payable, and a
      $1.2
      million decrease in amounts payable to TAT Technologies for the purchase of
      heat
      transfer components, offset in part by $4.5 million in net income and
      $796,000 of depreciation and amortization expenses.




Net
      cash
      used in investing activities was $32.3 million for the nine months ended
      September 30, 2007. We used approximately $30.9 million of the proceeds of
      initial public offering for the purchase of auction rate bonds and $1.4 million
      for the purchase of property and equipment, including a brazier oven and other
      production machinery.




21


Net
      cash
      provided by financing activities was $33.5 million for the nine months ended
      September 30, 2007. This amount was primarily attributable to the net proceeds
      of **** $41.2
      million from our issuance of common stock in our initial public offering, offset
      in part by repayment of $4.0 million of short-term bank debt and the repayment
      of $4.0 million of long term debt owed to our parent company.




The
      following table summarizes our minimum contractual obligations and commercial
      commitments as of September 30, 2007 and the effect we expect them to have
      on
      our liquidity and cash flow in future periods:




**Payments
                Due by Period****Total**
            
            **Less
                than**
              **Year**
            
            **1-3**
              **Years**
            
            **3-5**
              **Years**
            
            **More**
              **than
                5**
              **Years**(in
                thousands)Operating
                lease obligations
            
            $
            588
            
            $
            171
            
            $
            300
            
            $
            117
            
            $
            —Deferred
                tax liability
            
            
            436
            
            
            —
            
            
            —
            
            
            —
            
            
            436Total
            
            $
            1,024
            
            $
            171
            
            $
            300
            
            $
            117
            
            $
            436





As
      of
      September 30, 2007, our principal commitments consisted of obligations
      outstanding under operating leases and our deferred tax liability. All of our
      long-term debt was repaid subsequent to June 30, 2007 with a portion of the
      proceeds of our initial public offering. We currently do not have significant
      capital spending or purchase commitments. In the last three years, we have
      experienced substantial increases in our expenditures as a result of the growth
      in our operations and personnel. We intend to increase our expenditures in
      the
      future consistent with our anticipated growth. We anticipate that our cash
      resources will be used primarily to fund our operating activities, as well
      as
      for capital expenditures.




We
      expect
      that our capital expenditures for the remainder of 2007 will total $350,000,
      primarily for expanded capabilities and capacity for our MRO services. We expect
      that our cash flow from operations will be sufficient to fund these capital
      expenditures.




Over
      the
      next 12 months, we expect cash flows from our operating activities, along with
      our existing cash and cash equivalents and marketable securities, to be
      sufficient to fund our operations. We intend to assess the need for a long-term
      line of credit, but do not believe that the current lack of an external source
      of long-term liquidity will have a material adverse effect on our business
      or
      results of operations.




Our
      future capital requirements will depend on many factors, including our rate
      of
      revenue growth, the expansion of our selling and marketing activities, costs
      associated with expansion into new markets, and the timing of the introduction
      of new products and services.




*Seasonality*




We
      believe that the growth of our business over the last two years has masked
      a
      historical seasonal trend in the MRO services sector. Historically, we have
      seen
      many airlines decrease their maintenance requirements in the peak air travel
      summer months and increase their maintenance requirements in the winter months
      when air travel is not as great.




*Off-balance
      sheet arrangements*




As
      of
      September 30, 2007, we had no off-balance sheet arrangements as defined in
      Item
      303(a)(4) of the SEC’s Regulation S-K.




22


**Recent
      Accounting Pronouncements**





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” or SFAS
      157. Among other requirements, SFAS 157 defines fair value and establishes
      a
      framework for measuring fair value and also expands disclosure about the use
      of
      fair value to measure assets and liabilities. SFAS 157 is effective beginning
      the first fiscal year that begins after November 15, 2007. The Company is
      currently evaluating the impact of SFAS 157 on our financial position and
      results of operations.




In
      February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
      Financial Assets and Financial Liabilities – Including an Amendment of FASB
      Statement No. 115" (SFAS No. 159). SFAS No. 159 establishes a fair value option
      permitting entities to elect the option to measure eligible financial
      instruments and certain other items at fair value on specified election dates.
      Unrealized gains and losses on items for which the fair value option has been
      elected will be reported in earnings. The fair value option may be applied
      on an
      instrument-by-instrument basis, with a few exceptions, is irrevocable and is
      applied only to entire instruments and not to portions of instruments. SFAS
      No.
      159 is effective as the beginning of the first fiscal year beginning after
      November 15, 2007, and should not be applied retrospectively to fiscal years
      beginning prior to the effective date. On the adoption date, an entity may
      elect
      the fair value option for eligible items existing at that date and the
      adjustment for the initial remeasurement of those items to fair value should
      be
      reported as a cumulative effect adjustment to the opening balance of retained
      earnings. We are currently assessing whether to apply the provisions of SFAS
      No.
      159 to eligible financial instruments in place on the adoption date and the
      related impact on our financial statements.




In
      September 2006, the Securities and Exchange Commission released Staff Accounting
      Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when
      Quantifying Misstatements in Current Year Financial Statements,” or SAB 108,
      which addresses how uncorrected errors in previous years should be considered
      when quantifying errors in current-year financial statements. SAB 108 requires
      registrants to consider the effect of all carry over and reversing effects
      of
      prior-year misstatements when quantifying errors in current-year financial
      statements. SAB 108 does not change the Staff’s previous guidance on evaluating
      the materiality of errors. It allows registrants to record the effects of
      adopting SAB 108 guidance as a cumulative-effect adjustment to retained
      earnings. This adjustment must be reported in the annual financial statements
      for the first fiscal year ending after November 15, 2006. The initial adoption
      of SAB 108 did not have a material impact on the Company’s financial condition
      and results of operation.




In
      July 2006, the FASB issued FASB Interpretation No. 48, or FIN 48, “Accounting
      for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109,”
which prescribes comprehensive guidelines for recognizing, measuring, presenting
      and disclosing in the financial statements tax positions taken or expected
      to be
      taken on tax returns. FIN 48, effective for fiscal years beginning after
      December 15, 2006, seeks to reduce the diversity in practice associated with
      certain aspects of the recognition and measurement related to accounting for
      income taxes. The adoption of FIN 48 during the first quarter of 2007, did
      not
      have an impact on the Company's financial position and results of
      operations.




**Item
      3.   Quantitative and Qualitative Disclosures About Market
      Risk**




**Foreign
      Exchange Risks**




Our
      exposure to foreign exchange risk primarily relates to our sales to offshore
      clients. We do not believe that we currently have any significant direct foreign
      exchange risk since such sales are denominated in dollars.




**Investment
      Risk**




We
      repaid
      our outstanding debt of $8 million as of June 30, 2007that was due to our bank
      and parent company with a portion of the proceeds of our initial public
      offering. We invested the remaining net proceeds of the offering in auction
      rate
      securities that are tax exempt. Our results of operations and cash flows will
      be
      subject to fluctuations
      due to changes in the interest rates applicable to our investments. We do not
      presently intend to use interest rate derivative instruments to manage our
      exposure to interest rate changes.




23




**Item
      4T.   Controls and Procedures**




Our
      management, including our chief executive officer and chief financial officer,
      evaluated the effectiveness of our disclosure controls and procedures (as
      defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered
      by
      this quarterly report on Form 10-Q. Based upon that evaluation, our chief
      executive officer and chief financial officer have concluded that, as of such
      date, our disclosure controls and procedures were effective to ensure that
      information required to be disclosed by our company in reports that we file
      under the Securities Exchange Act of 1934, as amended, is recorded, processed,
      summarized and reported within the time periods specified in the Securities
      and
      Exchange Commission’s rules and forms and that such information was made known
      to them by others within the company, as appropriate to allow timely decisions
      regarding required disclosure.




All
      internal control systems, no matter how well designed, have inherent
      limitations. Therefore, even those systems determined to be effective may not
      prevent or detect misstatements and can provide only reasonable assurance with
      respect to financial statement preparation and presentation. Also, projections
      of any evaluation of effectiveness to future periods are subject to the risk
      that controls may become inadequate because of changes in conditions, or that
      the degree of compliance with the policies or procedures may
      deteriorate.




**Changes
      in Internal Controls over Financial Reporting**




There
      were no changes to our internal controls over financial reporting that occurred
      during the period covered by this quarterly report on Form 10-Q that have
      materially affected, or are reasonably likely to materially affect, our internal
      controls over financial reporting.




24


**PART
      II - OTHER INFORMATION:**




**Item
      1.   Legal Proceedings**




None




**Item
      1A.   Risk Factors**




*Investing
      in our common stock involves a high degree of risk. You should consider
      carefully the risks described below, together with the financial and other
      information contained in this quarterly report, before you decide to invest
      in
      out . common stock. If any of the following risks actually occurs, our business,
      financial condition or results of operations would suffer. In that case, the
      trading price of our common stock would likely decline and you might lose all
      or
      part of your investment.*




**Risks
      Related to Our Business and Operations**




***Our
      revenues and earnings depend substantially upon conditions in the airline
      industry, and a significant or prolonged downturn in the airline industry could
      decrease demand for our services and products.***




Our
      revenues are principally derived from the provision of MRO services to airlines,
      air cargo carriers, MRO service centers and the military; and the provision
      of
      parts services for commercial, regional and charter airlines and business
      aircraft owners. Any downturn in the commercial aircraft industry could decrease
      demand for our services and products and negatively impact our financial
      condition. The commercial airline industry is cyclical and has historically
      been
      subject to fluctuations due to general economic and political conditions, such
      as fuel and labor costs, price competition, downturns in the global economy
      and
      national and international events.




In
      the
      aftermath of the September 11, 2001 terrorist attacks, passenger traffic on
      commercial flights was significantly lower than prior to the attacks. Most
      commercial airlines reduced their operating schedules, lowered fares and
      implemented cost reduction initiatives. In addition, war or armed hostilities
      or
      the fear of such events, could further exacerbate many of the problems
      experienced as a result of terrorist attacks. Future terrorist attacks, war
      or
      armed hostilities, the outbreak of SARS or other epidemic diseases such as
      avian
      influenza, or the fear of such events, could further negatively impact the
      airline industry. These factors, as well as increases in fuel costs, have
      resulted in large and, in some cases, continuing financial losses in the airline
      industry. Major carriers around the world have recently emerged from bankruptcy
      protection or are in the process of doing so. Financial losses and reduced
      schedules in the airline industry have resulted, and will continue to result,
      in
      reduced orders and delivery delays of new commercial aircraft, parking and
      retirement of older aircraft (eliminating those aircraft from maintenance needs)
      and delays in airlines’ purchases of aftermarket parts and service as
      maintenance is deferred. During periods of reduced airline profitability, some
      airlines may delay purchases of spare parts, preferring instead to deplete
      existing inventories. If demand for new aircraft and spare parts decreases,
      there would be a decrease in demand for certain of our products.




25


***The
      aerospace industry is subject to significant government regulation and
      oversight, and we may have to incur significant additional costs to comply
      with
      these regulations.***





The
      aerospace industry is highly regulated in the United States and in other
      countries. We must be certified or accepted by the FAA, the United States
      Department of Defense, the European Aviation Safety Agency, or EASA, and similar
      agencies in foreign countries and by individual OEMs in order to manufacture,
      sell and service parts used in aircraft. If any of our material certifications,
      authorizations or approvals are revoked or suspended, our operations will be
      significantly curtailed and we could be subjected to significant fines and
      penalties. In the future, new and more demanding government regulations may
      be
      adopted or industry oversight may be increased. We may have to incur significant
      additional costs to achieve compliance with new regulations or to reacquire
      a
      revoked or suspended license or approval, which could reduce our
      profitability.




***We
      compete with a number of established companies in all aspects of our business,
      many of which have significantly greater resources or capabilities than we
      do.***




The
      market for MRO services and parts services is highly competitive. Competition
      in
      the MRO market is based on price, quality, engineered solutions, ability to
      provide a broad range of services, turn-around time, and the ability to perform
      repairs and overhauls rapidly. Our primary MRO services competitors are the
      service divisions of OEMs, the in-house maintenance services of a number of
      commercial airlines and other independent service providers. For heat transfer
      component MRO services, our major competitors are the LORI Heat Transfer Center
      of Honeywell (Tulsa, Oklahoma) and SECAN-Honeywell (France). For APU, propeller
      and landing gear MRO services, our major competitors are Standard Aero Group
      Inc., Aerotech International Inc., Honeywell, Alameda Aerospace, Chromalloy,
      Messier-Dowty Aerospace (MD), AAR Corp., Hawker Pacific, APPH Ltd., Aero
      Precision Repair and Overhaul Company Inc, or APRO, Aircraft Propeller Service
      Inc, Pacific Propeller International LLC and H&H Propeller. For our OEM heat
      transfer equipment, our major competitors are other OEMs who manufacture heat
      transfer equipment, including the Hughes-Treitler division of Ametek Inc.,
      Lytron Inc., Hamilton Sundstrand and Honeywell.




The
      parts
      services industry is highly competitive and fragmented. Competition in this
      market is based on price, quality, prompt delivery and service. Competitors
      in
      this segment include original equipment manufacturers, the service divisions
      of
      large commercial airlines and other independent suppliers and distributors
      of
      parts.




A
      number
      of our competitors have inherent competitive advantages. For example, we compete
      with the service divisions of large OEMs who in some cases have design authority
      with respect to their OEM products and are able to derive significant brand
      recognition from their OEM manufacturing activities. We also compete with the
      in-house service divisions of large commercial airlines and there is a strong
      incentive for an airline to fully-utilize the services of its maintenance
      employees and facilities.




Further,
      our competitors may have additional competitive advantages, such
      as:




·
            the
                ability to adapt more quickly to changes in customer requirements
                and
                industry conditions or trends;




·
            greater
                access to capital;




·
            stronger
                relationships with customers and
                suppliers;




·
            greater
                name recognition; and




·
            access
                to superior technology and marketing
                resources.




If
      we are
      unable to overcome these competitive disadvantages, our business, financial
      condition and results of operations would be adversely affected.




26


***The
      loss of a significant MRO services customer would reduce demand for our services
      and reduce our sales.***




Because
      of the high degree of concentration in the airline industry, and the importance
      of a few large customers for our MRO services, our MRO business is exposed
      to a
      high degree of risk related to customer concentration. In the years ended
      December 31, 2005 and 2006 and the nine months ended September 30, 2007, our
      five largest MRO customers accounted for approximately 28.3%, 32.0% and 19.3%,
      respectively, of our MRO revenues. A loss of significant business from any
      of
      these customers would be harmful to our profitability.




***A
      reduced demand for replacement parts by one or more of our significant parts
      services customers could significantly reduce our parts services
      revenues.***




The
      profitability of our parts services business is driven by the needs of our
      customers whose demand for replacement parts is constantly fluctuating. Some
      of
      our customers may, from time to time, place single orders for a large amount
      of
      parts in conjunction with the overhaul of a significant portion of their active
      fleet. For example, in the nine months ended September 30, 2007, we received
      a
      substantial order from a single customer which accounted for $4.0 million of
      our
      revenues for the period. We do not expect the customer to place another order
      of
      similar size with us in the near future, if ever. As a result, this segment
      of
      our business is subject to a high degree of volatility due to the potential
      impact of large one-time parts purchases. A reduction in demand for parts by
      one
      or more of our significant clients would have an adverse affect on our operating
      results.




***We
      may be unable to identify attractive acquisition candidates, successfully
      integrate our acquired operations or realize the intended benefits of our
      acquisitions.***




One
      of
      our business strategies is to pursue targeted complementary business acquisition
      opportunities. Our business may be adversely affected if we cannot consummate
      acquisitions on satisfactory terms, or if we cannot effectively integrate
      acquired operations.




Any
      growth through acquisitions will be partially dependent upon the availability
      of
      suitable acquisition candidates at favorable prices and upon advantageous terms
      and conditions. We intend to pursue acquisitions that we believe will present
      opportunities consistent with our overall business strategy. However, we may
      not
      be able to find suitable acquisition candidates to purchase or may be unable
      to
      acquire desired businesses or assets on economically acceptable terms. We may
      not be able to raise the money necessary to complete future acquisitions. In
      addition, acquisitions involve risks that the businesses acquired will not
      perform in accordance with expectations and that business judgments concerning
      the value, strengths and weaknesses of businesses acquired will prove incorrect.
      Further, we cannot assure you that our acquisition strategies will be
      successfully received by customers or investors or achieve their intended
      benefits.




If
      we
      consummate an acquisition, our capitalization and results of operations may
      change significantly. Future acquisitions could result in the incurrence of
      additional debt and contingent liabilities and an increase in interest and
      amortization expenses or periodic impairment charges related to goodwill and
      other intangible assets as well as significant charges relating to integration
      costs.




In
      addition, we may not be able to successfully integrate any business we acquire
      into our existing business. The successful integration of new businesses depends
      on our ability to manage these new businesses and cut excess costs. The
      successful integration of future acquisitions may also require substantial
      attention from our senior management and the management of the acquired
      business, which could decrease the time that they have to service and attract
      customers and develop new products and services.




***We
      have fixed-price contracts with some of our customers and we bear the risk
      of
      costs in excess of our estimates.***




We
      have
      entered into multi-year, fixed-price contracts with some of our MRO and OEM
      customers. Pursuant to these contracts, we realize all the benefits or costs
      resulting from any increases or decreases in the cost of providing services
      to
      these customers. Most of our contracts do not permit us to recover for increases
      in raw material prices, taxes or labor costs. Any increase in these costs could
      increase the cost of operating our business and reduce our profitability.
      Factors such as inaccurate pricing and increases in the cost of labor, materials
      or overhead may result in cost over-runs and losses on those agreements. We
      may
      not succeed in obtaining an agreement of a customer to reprice a particular
      product, and we may not be able to recoup previous losses resulting from
      incomplete or inaccurate engineering data.




27


***Our
      U.S. government contracts contain requirements to implement security measures,
      unfavorable termination provisions and are subject to modification and audit.
      Consequently, we are subject to certain business risks as a result of supplying
      equipment and services to the U.S. government.***




Approximately
      15.8%, 9.1% and 6.7% of our revenues were related to MRO services provided
      to
      the U.S. government for the years ended December 31, 2005 and 2006 and for
      the
      nine months ended September 30, 2007, respectively. We are subject to risks
      particular to contracts with governmental authorities. These risks include
      the
      ability of the governmental authorities to unilaterally:




·
            suspend
                us from receiving new contracts pending resolution of alleged violations
                of procurement laws or regulations;




·
            terminate
                existing contracts, with or without cause, at any
                time;




·
            reduce
                the value of existing contracts;




·
            audit
                our contract-related costs and fees, including allocated indirect
                costs;
                and




·
            control
                or potentially prohibit the export of our
                products.




A
      decision by a governmental authority to take any or all of the actions listed
      above could materially reduce our sales and profitability. Most of our U.S.
      Government contracts can be terminated by the U.S. Government either for its
      convenience or if we default by failing to perform under the contract.
      Termination for convenience provisions provide only for our recovery of costs
      incurred or committed, settlement expenses and profit on the work completed
      prior to termination. In addition, under certain of our U.S. Government
      contracts, we are required to implement a number of security measures that
      must
      be maintained and if we are unable to maintain certain measures these contracts
      may be terminated and the U.S. Government may impose fines upon us.




***A
      decline in U.S. military spending could result in a reduction of the amount
      of
      products and services we sell to the U.S. Government.***




Future
      U.S. Department of Defense, or DOD, budgets could be negatively impacted by
      several factors, including but not limited to the U.S. Government’s budget
      deficits and spending priorities and the cost of sustaining the U.S. military
      presence and rebuilding operations in Iraq and Afghanistan, which could cause
      the DOD budget to remain unchanged or to decline. A prompt withdrawal from
      Iraq
      or Afghanistan may result in a significant decline in U.S. military
      expenditures, which could result in a reduction in the amount of our products
      and services provided to the various agencies and buying organizations of the
      U.S. Government.




***A
      portion of our revenue is derived from international sources, which exposes
      us
      to additional uncertainty.***




In
      the
      years ended December 31, 2005 and 2006 and the nine months ended September
      30,
      2007, approximately 36.3%, 27.1% and 29.7%, respectively, of our revenues were
      derived from providing services to clients located outside of the United States.
      This source of revenue is subject to various risks, including:




·
            governmental
                embargoes or foreign trade
                restrictions;




·
            changes
                in U.S. and foreign governmental
                regulations;




·
            changes
                in foreign exchange rates;




·
            tariffs;




·
            other
                trade barriers;




·
            political,
                economic and social instability;
                and


·
            difficulties
                in accounts receivable collections.




28




***We
      depend on our key executives, and may not be able to hire and retain additional
      key employees or successfully integrate new members of our team and the loss
      of
      a key employee could have a material adverse effect on our
      business.***




Our
      success will depend largely on our continued reliance on the experience and
      expertise of our senior management. Although we have entered into employment
      agreements with most members of our senior management, any of our senior
      managers may terminate his employment with us and seek employment with others
      who may seek his expertise. The loss of the expertise of any of our senior
      management through death, disability or termination of employment would have
      a
      material and adverse effect on our business, financial condition and results
      of
      operations. We are not the beneficiary of life or disability insurance covering
      any of our executives, key employees or other personnel.




Our
      ability to implement our business strategy will depend on our success in
      recruiting, retaining and successfully integrating our management team and
      other
      personnel. If we are unable to retain employees and to attract and integrate
      new
      members of our management team, key employees or other personnel, we may be
      unable to successfully implement our business strategy in a timely manner.
      If we
      are unable to do so or if we were to lose the services of our senior executives
      or key employees, it could have a material adverse effect on our business,
      financial condition and results of operations.




***Any
      interruption in the work force at our facilities could have a material adverse
      impact on our ability to keep our customers’ aircraft in
      service.***




We
      derive
      the majority of our sales from overhaul services for components delivered to
      us
      from time to time by our customers. Because we maintain a relatively small
      inventory of loaner replacement parts for our MRO services business which we
      allow our customers to use while their parts are being repaired, an interruption
      of our work force due to strikes, work stoppages, shortages of appropriately
      skilled production and professional workers or other interruption could have
      a
      material adverse impact on both our ability to keep our customers’ aircraft in
      service while we perform overhaul services and to maintain our customers’
satisfaction with our services.




***Our
      business and profitability are affected by the price and continuity of supply
      of
      certain component parts.***




We
      rely
      on Honeywell, Hamilton Sundstrand and TAT Technologies for parts for our MRO
      services and parts services business segments and in 2006 we entered into a
      five-year supply contract with Honeywell to purchase APU parts on an as-required
      basis. If we were unable to obtain adequate supplies of parts from Honeywell,
      Hamilton Sundstrand, TAT Technologies or other OEMs at commercially reasonable
      prices, our operations could be interrupted. Increased costs associated with
      supplied materials or components could increase our costs and reduce our
      profitability if we are unable to pass these cost increases on to our customers.
      We maintain a relatively small inventory of component parts for resale and
      our
      parts services business would suffer if the supply of replacement parts was
      reduced or terminated by our suppliers. There are other companies that may
      be
      able to supply us with necessary component parts. However, these potential
      suppliers would be required to undergo FAA, EASA and OEM certification, and
      this
      would make it difficult for us to change suppliers in a timely and
      cost-effective manner.




***We
      depend on our Oklahoma and North Carolina facilities, and any damage to these
      facilities would adversely impact our operations.***




We
      believe that our success to date has been, and future results of operations
      will
      be, dependent in large part upon our ability to provide MRO services and to
      manufacture and deliver OEM products promptly upon receipt of orders and to
      provide prompt and efficient service to our customers. As a result, any
      disruption of our day-to-day operations could have a material adverse effect
      on
      our business, customer relations and profitability. We rely on our Tulsa,
      Oklahoma and Kernersville and Winston-Salem, North Carolina facilities for
      the
      provision of our MRO services, the production of our OEM products and the
      provision of our parts services. A fire, flood, earthquake or other disaster
      or
      condition that significantly damaged or destroyed any of these facilities would
      have a material adverse effect on our operations.




29


***We
      have potential exposure to liabilities arising under environmental laws and
      regulations.***





Our
      business operations and facilities are subject to a number of federal, state,
      and local laws and regulations that govern the discharge of pollutants and
      hazardous substances into the air and water as well as the handling, storage
      and
      disposal of such materials and other environmental matters. Compliance with
      such
      laws as they relate to the handling, storage and disposal of hazardous
      substances is a significant obligation for us at each of our facilities. We
      would be subject to serious consequences, including fines and other sanctions,
      and limitations on our operations due to changes to, or revocations of, the
      environmental permits applicable to our facilities if we fail to comply. The
      adoption of new laws and regulations, stricter enforcement of existing laws
      and
      regulations, the discovery of previously unknown contamination or the imposition
      of new cleanup requirements could require us to incur costs and become subject
      to new or increased liabilities that could increase our operating costs and
      adversely affect the manner in which we conduct our business.




Under
      certain environmental laws, liability associated with investigation or
      remediation of hazardous substances can arise at a broad range of properties,
      including properties currently or formerly operated by us or our predecessors,
      as well as properties to which we sent hazardous substances or wastes for
      treatment, storage, or disposal. Costs and other obligations can arise from
      claims for toxic torts, natural resource and other damages, as well as the
      investigation and clean up of contamination at such properties. Under certain
      environmental laws, such liability may be imposed jointly and severally, so
      we
      may be responsible for more than our proportionate share and may even be
      responsible for the entire liability at issue. The extent of any such liability
      can be difficult to predict.




***We
      are exposed to potential liabilities arising from product liability and warranty
      claims.***




Our
      operations expose us to potential liabilities for personal injury or death
      as a
      result of the failure of an aircraft component that has been designed,
      manufactured, serviced or supplied by us. Based upon our experience in the
      industry, we believe that, in an effort to improve operating margins, some
      customers may, from time to time delay replacement of parts beyond their
      recommended lifetime, which could undermine aircraft safety and increase our
      risk of liability.




We
      cannot
      assure you that we will not experience any material product liability losses
      in
      the future, that we will not incur significant costs to defend such claims,
      that
      our insurance coverage will be adequate if claims were to arise or that we
      would
      be able to maintain insurance coverage in the future at an acceptable cost.
      A
      successful claim brought against us in excess of our available insurance
      coverage may have a material adverse effect on our business.




In
      addition, in the ordinary course of our business contractual disputes over
      warranties can arise. We may be subject to requests for cost sharing or pricing
      adjustments from our customers as a part of our commercial relationships with
      them, even though they have agreed to bear these risks.




***We
      use equipment that is not easily repaired or replaced, and therefore equipment
      failures could cause us to be unable to meet quality or delivery expectations
      of
      our customers.***




Many
      of
      our service and manufacturing processes are dependent on equipment that is
      not
      easily repaired or replaced. As a result, unexpected failures of this equipment
      could result in production delays or the manufacturing of defective products.
      Our ability to meet the expectations of our customers with respect to on-time
      delivery of repaired components or quality OEM products is critical. Our failure
      to meet the quality or delivery expectations of our customers could lead to
      the
      loss of one or more of our significant customers.




**Risks
      Related to Our Separation from TAT Technologies**




***TAT
      Technologies and its parent control the majority of the voting power of our
      shares of common stock and therefore, investors will not be able to control
      the
      outcome of any shareholder vote. This concentration of ownership could adversely
      affect the trading price of our common stock.***




TAT
      Technologies owns approximately 61.7% of our outstanding shares of common stocks
      and as a result, it and its parent, TAT Industries Ltd., a publicly traded
      company in Israel, are able to exercise considerable influence over our
      operations and business strategy and will be able to control the outcome of
      all
      matters involving shareholder approval.




30


For
      so
      long as TAT Technologies owns more than 50% of our shares of common stock,
      it,
      and TAT Industries indirectly, will have the power to approve all matters
      requiring approval of common shareholders, including the election of all members
      of our board of directors, appointing management. TAT Technologies will also
      exercise a controlling influence over our business and affairs, any
      determinations with respect to mergers or other business combinations involving
      us, including our acquisition or disposition of assets, and other aspects of
      our
      business and affairs. The directors elected by TAT Technologies will have the
      ability to control decisions affecting our capital structure, including issuing
      additional capital stock, establishing stock purchase programs and declaring
      dividends. So long as TAT Technologies remains a significant shareholder, this
      concentration of stock ownership may have the effect of delaying, preventing
      or
      deterring a change in control of our company, which could deprive other
      shareholders of an opportunity to receive a premium over the then-prevailing
      market price for their common stock as part of a transaction such as a proxy
      contest, tender offer, merger or other purchase of common stock. In addition,
      this concentration of stock ownership may adversely affect the trading price
      of
      our common stock because investors may perceive disadvantages in owning stock
      in
      a company with a significant shareholder.




The
      interests of TAT Technologies may differ from the interests of our other
      shareholders. For example, TAT Technologies could oppose a third party offer
      to
      acquire us that you might consider attractive, and the third party may not
      be
      able or willing to proceed unless TAT Technologies supports the offer. In
      addition, if our board of directors supports a transaction requiring an
      amendment to our certificate of incorporation, TAT Technologies will continue
      to
      be in a position to defeat any required shareholder approval of the proposed
      amendment. If our board of directors supports an acquisition of us by means
      of a
      merger or a similar transaction, the vote of TAT Technologies alone will be
      sufficient to approve or block the transaction under Delaware law. In each
      of
      these cases and in similar situations, our other shareholders may disagree
      with
      TAT Technologies as to whether the action opposed or supported by TAT
      Technologies is in the best interests of our shareholders.




We
      have
      entered into a number of agreements with TAT Technologies setting forth various
      matters governing our relationship with TAT Technologies. These agreements
      govern our ongoing relationship with TAT Technologies. We will not be able
      to
      unilaterally terminate these agreements or amend them in a manner we deem more
      favorable to us so long as TAT Technologies continues to control the voting
      power of our shares of common stock.




***Conflicts
      of interest may arise between TAT Technologies and us that could be resolved
      in
      a manner unfavorable to us.***




Conflicts
      of interest may arise between TAT Technologies and us in a number of areas
      relating to our ongoing relationships. Three of TAT Technologies’ directors and
      employees serve as directors of our company, and, while there are no present
      plans for Shaul Menachem to leave the employ of our company, TAT Technologies
      has agreed to employ Mr. Menachem upon the conclusion of his employment with
      our
      company. Areas in which conflicts of interest between TAT Technologies and
      us
      could arise include, but are not limited to, the following:




·
            *Cross
                directorships, employment and share ownership.*The
                ongoing relationships of certain of our directors and executive officers
                with TAT Technologies and/or their interests in the ordinary shares
                of TAT
                Technologies could create, or appear to create, conflicts of interest
                when
                directors and executive officers are faced with decisions that could
                have
                different implications for the two companies. For example, these
                decisions
                could relate to disagreements over the desirability of a potential
                acquisition opportunity, or a change in dividend
                policy.




·
            *Intercompany
                transactions.*We
                expect to continue to enter into transactions with TAT Technologies
                as
                part of our day-to-day business activities. Although the terms of
                any such
                transactions will be established based upon negotiations between
                employees
                of TAT Technologies and us, subject to the approval of the independent
                directors on our board or a committee of disinterested directors,
                there
                can be no assurance that the terms of any such transactions will
                be as
                favorable to us as may otherwise be obtained in arm’s-length negotiations
                with unaffiliated third parties.




31


·
            *Intercompany
                agreements.*We
                have entered into agreements with TAT Technologies pursuant to which
                it
                provides us with heat transfer components and engineering support
                for our
                MRO operations with respect to such components. We have also agreed
                with
                TAT Technologies that we will not, except in certain limited
                circumstances, compete with each other in the sale of OEM heat transfer
                components and the provision of MRO services for heat transfer components.
                The terms of these agreements were established while we were a
                wholly-owned subsidiary of TAT Technologies and were approved by
                the
                independent directors of our board. We have also entered into a
                registration rights agreement with TAT Technologies concerning the
                registration for resale of our common stock by them. Conflicts could
                arise
                in the interpretation or any extension or renegotiation of these
                existing
                agreements after this offering.




**Future
      sales or distributions of our shares of common stock by TAT Technologies could
      depress the market price for shares of our common stock.**




TAT
      Technologies may sell all or some of the shares of our common stock that it
      owns
      or distribute those shares to its shareholders. We have entered into a
      registration rights agreement with TAT Technologies granting it the right to
      require us to register for resale its shares of common stock under the
      Securities Act of 1933, as amended. Sales or distributions by TAT Technologies
      of substantial amounts of our shares of common stock in the public market or
      to
      its shareholders could adversely affect prevailing market prices for our shares
      of common stock. TAT Technologies is not subject to any contractual obligation
      that would prohibit it from selling, spinning off, splitting off or otherwise
      disposing of any of our shares of common stock, except that TAT Technologies
      has
      agreed not to sell, spin off, split off or otherwise dispose of any of our
      shares of common stock until July 18, 2008 without the prior written consent
      of
      Oppenheimer & Co., the lead underwriter of our initial public offering,
      subject to certain limited exceptions.




**Risks
      Related to Our Common Stock**




The
      market price for our shares of common stock are affected by a number of factors,
      including:




·
            period
                to period fluctuations in our results of
                operations;




·
            the
                announcement by us of new MRO services or
                acquisitions;




·
            regulatory
                developments;




·
            recruitment
                or departure of key personnel;




·
            the
                operating performance of our competitors;
                and




·
            industry-wide
                stock price fluctuations unrelated to the operating performance of
                us or
                our competitors.




In
      addition, the stock prices of many companies in aerospace industries have
      experienced wide fluctuations that often have been unrelated to the operating
      performance of those companies. These factors and price fluctuations may
      materially and adversely affect the market price of shares of common stock.
      In
      addition, if our future quarterly results are below the expectations of
      securities analysts or investors, the price of our common stock would likely
      decline. Share price fluctuations may be exaggerated if the trading volume
      of
      our common stock is too low.




**If
      we are unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley
      Act, or our internal controls over financial reporting are not effective, the
      reliability of our financial statements may be questioned and our stock price
      may suffer.**




Section
      404 of the Sarbanes-Oxley Act requires any company subject to the reporting
      requirements of the U.S. securities laws to do a comprehensive evaluation of
      its
      internal controls over financial reporting. To comply with this statute, we
      will
      be required to document and test our internal control procedures; our management
      will be required to assess and issue a report concerning our internal controls
      over financial reporting and our independent auditors will be required to
      evaluate, test and issue their opinion on our internal controls over financial
      reporting. In connection with our separation from TAT Technologies, we will
      need
      to begin the documentation and testing of our internal controls. Our compliance
      with Section 404 of the Sarbanes-Oxley Act will first be tested in connection
      with the filing of our annual report on Form 10-K for the fiscal year ending
      December 31, 2008. As a public company, we will be required to report, among
      other things, control deficiencies that constitute a “material weakness” or
      changes in internal controls that materially affect, or are reasonably likely
      to
      materially affect, internal controls over financial reporting. A “material
      weakness” is a significant deficiency, or combination of significant
      deficiencies, that results in more than a remote likelihood that a material
      misstatement of the annual or interim financial statements will not be prevented
      or detected.




32


If
      we
      fail to achieve and maintain the adequacy of our internal controls in accordance
      with applicable standards as then in effect and as supplemented or amended
      from
      time to time, we may be unable to conclude on an ongoing basis that we have
      effective internal controls over financial reporting in accordance with Section
      404. As a result we might be subject to sanctions or investigation by regulatory
      agencies such as the SEC and we may become involved in securities class action
      litigation that could divert management’s attention and harm our business.
      Moreover, effective internal controls are necessary for us to produce reliable
      financial reports. If we cannot produce reliable financial reports or otherwise
      maintain appropriate internal controls, our business, financial condition and
      results of operations could be harmed, investors could lose confidence in our
      reported financial information, the market price for our stock could decline
      significantly and we may be unable to obtain additional financing to operate
      and
      expand our business.




**Item
      2.   Unregistered Sales of Equity Securities and Use of
      Proceeds**




On
      July
      23, 2007, we completed an initial public offering of 5,060,000 shares of common
      stock at $11.00 per share though Oppenheimer & Co. and Stifel Nicolaus &
Company. We sold a total of 4,025,000 shares of common stock and our parent,
      TAT
      Technologies Ltd., sold 855,000 shares of common stock we received net proceeds
      of approximately $42 million.




As
      of
      September  30, 2007 we used $8.0 million of the proceeds of our initial
      public offering to repay indebtedness to Bank Leumi and our parent company,
      and
      $1.4 million for the purchase of property and equipment. The remaining net
      proceeds have been maintained as cash and cash equivalents or invested in
      short-term investment-grade auction rate securities that are tax exempt.




As
      of
      September 30, 2007, no proceeds were used to make direct or indirect
      payments to any of our non-employee directors, to persons owning 10% or more
      of
      our common stock or to any of our affiliates, except with respect to the
      repayment of $4 million of indebtedness to our parent company.




There
      were no purchases of our securities by us or any “affiliated purchaser” as
      defined in Rule 10b-18(a)(3) during the quarter ended September 30, 2007.




For
      more
      information on the use of proceeds from our initial public offering, see
“Liquidity and Capital Resources” and notes to our financial statements included
      in this report on Form 10-Q.




**Item
      6.   Exhibits**




**(a)**  **Exhibits**




**31.1**
            Certification
                by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.**31.2**
            Certification
                by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.**32.1**
            Certification
                by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As
                Adopted
                Pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.**32.2**
            Certification
                by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As
                Adopted
                Pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.




33




**SIGNATURES**




In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized..





LIMCO-PIEDMONT
                INC.(Registrant)/s/
                Shaul MenachemChief
                Executive Officer/s/
                Shabtai MoshiashviliChief
                Financial Officer





Date:
      November 12, 2007





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