UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
  FORM
10-Q
  x  Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended March 31, 2009
   ̈  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
South 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 
x
     No  ̈
  Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T ( 229.405 of this
chapter) during the preceeding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
   Yes 
 ̈
     No  ̈
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definition of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
  Large
      accelerated filer  ̈
                      Accelerated
      filer  ̈
                      Non-accelerated
      filer  ̈
                        (Do
      not check if a smaller reporting company)
                      Smaller
      Reporting Company x
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes  ̈ No x
  As of May
15, 2009 the Registrant had 13,205,000 shares outstanding.
 
 
  LIMCO-PIEDMONT
INC. AND SUBSIDIARIES
  INDEX
  PagePART
      I - FINANCIAL INFORMATION:Item
      1.
                                      Financial
      StatementsUnaudited
      Condensed Consolidated Balance SheetsMarch
      31, 2009 and December 31, 2008
                                      
                                      3Unaudited
      Condensed Consolidated Statements of OperationsThree
      month periods ended March 31, 2009 and 2008
                                      
                                      4Unaudited
      Statements of Changes in Shareholders’ Equity
                                      
                                      5Three
      month period ended March 31, 2009Unaudited
      Condensed Consolidated Statements of Cash FlowsThree
      months ended March 31, 2009 and 2008
                                      
                                      6Notes
      to Unaudited Condensed Consolidated Financial Statements
                                      
                                      7Item
      2.
                                      Management’s
      Discussion and Analysis of Financial Conditionand
      Results of Operations
                                      
                                      16Item
      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
                                      
                                      25Item
      2.
                                      Unregistered
      Sales of Equity Securities and Use of Proceeds
                                      
                                      25Item
      5.
                                      Other
      Information
                                      
                                      25Item
      6.
                                      Exhibits
                                      
                                      26SIGNATURES
                                      
                                      27
  1
  Forward-Looking
Statements
  The
following discussion of our financial condition and results of operations
reflects our current views with respect to future events and financial results
and should be read in conjunction with the financial statements and notes
included elsewhere in this Quarterly Report on Form 10-Q.  In addition
to historical information, this Quarterly Report on Form 10-Q contains
statements relating to our future results (including certain projections and
business trends) that are “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as amended (the “Securities Act”),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and are subject to the “safe harbor” created by those sections.
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. Factors that might cause such differences include,
but are not limited to, those discussed in the section entitled “Risk Factors”
set forth in Item 1A and elsewhere in our Annual Report on Form 10-K for the
year ended December 31, 2008 filed with the Securities and Exchange Commission
(“SEC”), and those detailed from time to time in our other filings with the
SEC.  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 .
  2
  LIMCO-PIEDMONT
INC. AND SUBSIDIARIES
 
 UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
 (in
thousands, except per share data)
 March
      31,
                        
                        
                        December
      31,2009
                        
                        
                        2008ASSETSCurrent
      Assets:Cash
      and cash equivalents
                        
                        $
                        10,311
                        
                        
                        $
                        21,336Marketable
      securities
                        
                        
                        22,309
                        
                        
                        
                        11,300Accounts
      receivable (net of allowance for doubtful accounts of $97 and $79 at March
      31, 2009 and December 31, 2008, respectively)
                        
                        
                        10,396
                        
                        
                        
                        11,820Inventories
                        
                        
                        19,645
                        
                        
                        
                        18,978Other
      accounts receivable and prepaid expenses
                        
                        
                        1,433
                        
                        
                        
                        1,326Total
      current assets
                        
                        
                        64,094
                        
                        
                        
                        64,760Property,
      plant and equipment, net
                        
                        
                        5,919
                        
                        
                        
                        6,023Intangible
      assets, net
                        
                        
                        1,329
                        
                        
                        
                        1,383Goodwill
                        
                        
                        4,780
                        
                        
                        
                        4,780Total
      assets
                        
                        $
                        76,122
                        
                        
                        $
                        76,946LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      Liabilities:Accounts
      payables
                        
                        $
                        4,677
                        
                        
                        $
                        5,378Parent
      company payables
                        
                        
                        2,925
                        
                        
                        
                        2,341Other
      accounts payable and accrued expenses
                        
                        
                        1,023
                        
                        
                        
                        1,764Total
      current liabilities
                        
                        
                        8,625
                        
                        
                        
                        9,483Long-Term
      Liabilities:Deferred
      income taxes
                        
                        
                        836
                        
                        
                        
                        835Total
      liabilities
                        
                        
                        9,461
                        
                        
                        
                        10,318Shareholders'
      Equity:Common
      stock, $0.01 par value; 25,000 sharesauthorized,
      13,205 shares issued and outstanding at March 31, 2009 and December
      31, 2008
                        
                        
                        132
                        
                        
                        
                        132Additional
      paid-in capital
                        
                        
                        49,469
                        
                        
                        
                        49,179Retained
      earnings
                        
                        
                        17,266
                        
                        
                        
                        17,462Accumulated
      other comprehensive loss
                        
                        
                        (206
                        )
                        
                        
                        (145
                        )Total
      shareholders' equity
                        
                        
                        66,661
                        
                        
                        
                        66,628Total
      liabilities and shareholders' equity
                        
                        $
                        76,122
                        
                        
                        $
                        76,946
 
 See notes
to unaudited condensed consolidated financial statements.
  3
  LIMCO-PIEDMONT
INC. AND SUBSIDIARIES
  UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (in
thousands, except per share data)
 
 Three months endedMarch 31,2009
                        
                        
                        2008RevenueMRO
      services
                        
                        $
                        11,484
                        
                        
                        $
                        12,985Parts
      services
                        
                        
                        2,637
                        
                        
                        
                        4,135Total
      revenue
                        
                        
                        14,121
                        
                        
                        
                        17,120Cost
      and operating expensesMRO
      services
                        
                        
                        9,493
                        
                        
                        
                        9,624Parts
      services
                        
                        
                        2,040
                        
                        
                        
                        3,306Selling
      and marketing
                        
                        
                        571
                        
                        
                        
                        666General
      and administrative
                        
                        
                        1,941
                        
                        
                        
                        2,010Relocation
      expenses
                        
                        
                        284
                        
                        
                        
                        -Amortization
      of intangibles
                        
                        
                        54
                        
                        
                        
                        109Operating
      income (loss)
                        
                        
                        (262
                        )
                        
                        
                        1,405Other
      income (expense)Interest
      income
                        
                        
                        151
                        
                        
                        
                        293Other
      income (expense)
                        
                        
                        -
                        
                        
                        
                        (118
                        )Total
      other income (expense)
                        
                        
                        151
                        
                        
                        
                        175Income
      (loss) before taxes
                        
                        
                        (111
                        )
                        
                        
                        1,580Provision
      for income taxes
                        
                        
                        85
                        
                        
                        
                        577Net
      income (loss)
                        
                        $
                        (196
                        )
                        
                        $
                        1,003Basic
      net income (loss) per share
                        
                        $
                        (0.01
                        )
                        
                        $
                        0.08Diluted
      net income (loss) per share
                        
                        $
                        (0.01
                        )
                        
                        $
                        0.08Basic
      shares outstanding
                        
                        
                        13,205
                        
                        
                        
                        13,205Diluted
      shares outstanding
                        
                        
                        13,205
                        
                        
                        
                        13,207
 
 See notes
to unaudited condensed consolidated financial statements.
  4
  LIMCO-PIEDMONT
INC. AND SUBSIDIARIES
 UNAUDITEDSTATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
 (in
thousands, except per share data)
 
 Common
                            Stock
                            Shares
                          
                          
                          Common
                            Stock
                          
                          
                          Additional
                            Paid- in
                            Capital
                          
                          
                          Retained
                            Earnings
                          
                          
                          Accum. Other
                            Comprehensive
                            Loss
                          
                          
                          Total
                            Comprehensive
                            Loss
                          
                          
                          Total
                            Shareholders’
                            EquityBalance
      at December 31, 2008
                          
                          
                          13,205
                          
                          
                          $
                          132
                          
                          
                          $
                          49,179
                          
                          
                          $
                          17,462
                          
                          
                          $
                          (145
                          )
                          
                          $
                          -
                          
                          
                          $
                          66,628Net
      loss for the period
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (196
                          )
                          
                          
                          -
                          
                          
                          
                          (196
                          )
                          
                          
                          (196
                          )Other
      comprehensive loss, net of tax
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          
                          
                          
                          
                          (61
                          )
                          
                          
                          (61
                          )
                          
                          
                          (61
                          )Share
      based compensation
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          290
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          290Balance
      at March 31, 2009
                          
                          
                          13,205
                          
                          
                          $
                          132
                          
                          
                          $
                          49,469
                          
                          
                          $
                          17,266
                          
                          
                          $
                          (206
                          )
                          
                          $
                          (257
                          )
                          
                          $
                          66,661
 
 See notes
to unaudited condensed consolidated financial statements.
  5
  LIMCO-PIEDMONT
INC. AND SUBSIDIARIES
  UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in
thousands)
 Three months ended March 31,2009
                        
                        
                        2008Cash
      flow from operating activities:Net
      income (loss)
                        
                        $
                        (196
                        )
                        
                        $
                        1,003Adjustment
      to reconcile net income (loss) to net cash provided by (used in)
      operating activities:Depreciation
      and amortization
                        
                        
                        319
                        
                        
                        
                        339Share
      based compensation expenses
                        
                        
                        290
                        
                        
                        
                        201Loss
      on sale of marketable securities
                        
                        
                        -
                        
                        
                        
                        118Changes
      in allowance for doubtful accounts
                        
                        
                        18
                        
                        
                        
                        (38
                        )Loss
      on sale of asset
                        
                        
                        4
                        
                        
                        
                        -Changes
      in certain operating assets and liabilities:(Increase)
      decrease in accounts receivable
                        
                        
                        1,406
                        
                        
                        
                        (1,650
                        )(Increase)Decrease
      in other accounts receivable and prepaid expenses
                        
                        
                        (66
                        )
                        
                        
                        652Increase
      in inventories
                        
                        
                        (667
                        )
                        
                        
                        (3,458
                        )Increase
      (decrease) accounts payable and other accrued expenses
                        
                        
                        (1,441
                        )
                        
                        
                        46Increase
      in Parent company account
                        
                        
                        584
                        
                        
                        
                        247Net
      cash provided by (used in) operating activities
                        
                        
                        251
                        
                        
                        
                        (2,540
                        )Cash
      flows from investing activities:Sales
      of investments and other assets
                        
                        
                        -
                        
                        
                        
                        5,683Purchase
      of investments and other assets
                        
                        
                        (11,111
                        )
                        
                        
                        -Purchases
      of property and equipment
                        
                        
                        (165
                        )
                        
                        
                        (715
                        )Net
      cash provided by (used in) investing activities
                        
                        
                        (11,276
                        )
                        
                        
                        4,968Cash
      flows from financing activities:Increase
      in checks issued in excess of bank balance
                        
                        
                        -
                        
                        
                        
                        893Net
      cash provided by (used in) financing activities
                        
                        
                        -
                        
                        
                        
                        893Increase
      (decrease) in cash and cash equivalents
                        
                        
                        (11,025
                        )
                        
                        
                        3,321Cash
      and cash equivalents at the beginning of period
                        
                        
                        21,336
                        
                        
                        
                        5,039Cash
      and cash equivalents at the end of the period
                        
                        $
                        10,311
                        
                        
                        $
                        8,360Cash
      paid during the year for :Income
      Taxes
                        
                        $
                        200
                        
                        
                        $
                        768
 
 See notes
to unaudited condensed consolidated financial statements.
  6
  LIMCO-PIEDMONT
INC. AND SUBSIDIARIES
 
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
  Note
1 - General
  a.  Limco-Piedmont
Inc. ("the Company", "we", or "our" ), a Delaware corporation, is a
majority-owned subsidiary, 62%, of TAT Technologies Ltd. (the
"Parent").  The Company 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.
  The
Company's primary operations are located in Tulsa, Oklahoma and Kernersville,
North Carolina.  On February 6, 2009, the Company’s Board of Directors
approved the relocation of the operations of the Company’s Tulsa, Oklahoma based
subsidiary, Limco-Airepair, Inc., to the location of its Piedmont Aviation
Component Services, Inc. subsidiary in Kernersville, North
Carolina.  The principal markets of the Company are Europe, the United
States and Asia.  The Company sells its products mainly to the
aircraft industry.
 
 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 Annual Report 10-K
filed with the Securities and Exchange Commission.  In the opinion of
the Company's management, the accompanying unaudited condensed consolidated
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 month period ended March 31, 2009 are not
necessarily indicative of the results to be expected for the year ending
December 31, 2009 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 -Marketable
Securities
  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 March 31,
2009, 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 shareholders’ equity classified as other comprehensive
income. Realized gains and losses and declines in market value judged to be
other than temporary, of which there were none for the period ended March 31,
2009 or March 31, 2008, are included in other income.  The unrealized
loss as of March 31, 2009 of $329,000 relates to corporate and municipal bonds
($206,000 after income taxes).   Interest and dividends are also
included in other income. Our short-term investments consist of auction rate
tax-exempt securities and corporate and government bonds with maturities with
one to four years. The Company’s investments in corporate and government bonds,
have maturities past one year, however, the Company classifies these investments
as available-for-sale and therefore has classified them as short-term
securities.  Should management determine that these securities were to
be held longer than one year then they would be classified as long-term
securities.
  7
 
 Auction
rate securities are 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 the need for 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. During the first three months
of the year the Company had no liquidations of variable rate
securities.  As of March 31, 2009 the Company had $2,250,000 in
auction rate tax-exempt securities.  The remaining balance will be
sold as the market allows.
 
 In September 2007, 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 adopted SFAS 157 during the first
quarter of 2008.  Although the adoption of SFAS 157 did not materially
impact our financial condition, results of operations, or cash flows, we are now
required to provide additional disclosures as part of our financial
statements.
  SFAS 157
establishes a three-tier fair value hierarchy, which prioritizes the inputs used
in measuring fair value. These tiers include: Level 1, defined as
observable inputs such as quoted prices in active markets; Level 2, defined as
inputs other than quoted prices in active markets that are either directly or
indirectly observable; and Level 3, defined as unobservable inputs in which
little or no market data exists, therefore requiring an entity to develop its
own assumptions.
  As of
March 31, 2009, the Company held certain assets that are required to be measured
at fair value on a recurring basis, including money market funds and
available-for-sale securities. The Company’s available-for-sale securities
include auction-rate securities which consist of bonds with an auction reset
feature whose underlying assets are Oklahoma state municipal bonds. As a result
of failed auctions, these securities are currently illiquid through the normal
auction process and quoted market prices and other observable market data are
not available or diminished. Accordingly, these investments were valued using
pricing models based on the net present value of estimated future cash flows as
of March 31, 2009. These securities were also compared, when possible, to other
observable market data with similar characteristics to the securities held by
the Company.
  8
  The
Company’s financial assets measured at fair value on a recurring basis subject
to the disclosure requirements of SFAS 157 at March 31, 2009 were as follows (in
thousands):
  Fair Value Measurements at Reporting Date UsingQuoted Prices
                        in Active
                        Markets for
                        Identical
                        Assets
                      
                      
                      Significant
                        Other
                        Observable
                        Inputs
                      
                      
                      Significant
                        Unobservable
                        Inputs
                      
                      
                      Total(Level 1)
                      
                      
                      (Level 2)
                      
                      
                      (Level 3)Assets:Money
      Market funds - included in cash and cash equivalents
                      
                      $
                      7,761
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      7,761Auction-rate
      securities
                      
                      
                      -
                      
                      
                      
                      2,250
                      
                      
                      
                      -
                      
                      
                      
                      2,250Corporate
      and Municipal bonds
                      
                      
                      20,059
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      20,059Total
                      
                      $
                      27,820
                      
                      
                      $
                      2,250
                      
                      
                      $
                      -
                      
                      
                      $
                      30,070
 
 Note
3 - Inventories
  Inventories
are composed of the following:
 
 March 31, 2009
                        
                        
                        December 31, 2008(in
      thousands)Raw
      material
                        
                        $
                        5,781
                        
                        
                        $
                        6,304Work
      in process
                        
                        
                        6,264
                        
                        
                        
                        5,423Spare
      parts assemblies
                        
                        
                        7,600
                        
                        
                        
                        7,251$
                        19,645
                        
                        
                        $
                        18,978
 
 Inventories
are shown net of allowances for obsolescence of $548,000 at March 31, 2009 and
December 31, 2008.
  Note
4 - Related Parties
  Transactions with related
parties:
 
 Three months ended
                                            March 31,2009
                                          
                                          
                                          2008(in
      thousands)Purchases
                                          
                                          $
                                          1,766
                                          
                                          
                                          $
                                          1,602
  9
 
 Historically,
the Company has purchased a majority of its cores for heat exchangers from its
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.  Heat exchangers not manufactured
by the Parent may be purchased from other vendors, including Hamilton
Sundstrand.
 
 Parent
company payables as of March 31, 2009 and December 31, 2008 were $2,925,000 and
$2,341,000 respectively. Purchases from the Parent include cores and related
products, insurance costs, and  management fee which is $50,000 per
quarter.   Parent company payables are unsecured and provide for
no interest payments.
 
 Note
5- Net Income (loss) Per Share
  The
consolidated statements of operations present basic and diluted net income
(loss) per share. Basic net income (loss) per share is computed by
dividing net income (loss) by the weighted-average number of common shares
outstanding during the period. Diluted net income (loss) per share considers the
potential effect of dilution on basic net income (loss) 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.   There are 432,000 and 383,000 options outstanding
that were anti-dilutive at March 31, 2009 and March 31, 2008,
respectively.
 
 The
following table reconciles basic shares outstanding to diluted shares
outstanding:
  Three months endedMarch 31,(in thousands)2009
                          
                          
                          2008Weighted
      average number of basic shares outstanding
                          
                          
                          13,205
                          
                          
                          
                          13,205Dilutive
      effect of stock options
                          
                          
                          -
                          
                          
                          
                          2Weighted
      average number of diluted shares outstanding
                          
                          
                          13,205
                          
                          
                          
                          13,207
 
 Note
6 - Employee Share Based Compensation
  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. The
options vest in three equal annual installments, except for 66,000 options that
vest in four equal semi-annual installments.  Options generally expire
five to ten years from date of grant.
  Compensation
expense attributable to outstanding stock options was $290,000 and
$201,000 for the three months ended March 31, 2009 and 2008,
respectively.  As of March 31, 2009, the total unrecognized
compensation cost related to non-vested stock awards was $1,113,000 and the
weighted average period over which the cost is expected to be recognized is
approximately 1.8 years.
  A summary
of our stock option plan as of March 31, 2009, is presented
below:
  10
  Options
                                
                                
                                Weighted
                                  average
                                  Exercise
                                  Price
                                
                                
                                Aggregate
                                  intrinsic
                                  value (1)
                                
                                
                                Weighted average
                                  contractual life
                                  remaining in
                                  years(in thousands)
                                
                                
                                
                                
                                
                                (in thousands)Outstanding
      at January 1, 2009
                                
                                
                                311
                                
                                
                                $
                                10.65
                                
                                
                                
                                -
                                
                                
                                
                                -Granted
                                
                                
                                230
                                
                                
                                $
                                2.16
                                
                                
                                $
                                32.20
                                
                                
                                
                                -Cancelled
                                
                                
                                109
                                
                                
                                $
                                11.29
                                
                                
                                
                                -
                                
                                
                                
                                -Outstanding
      at March 31, 2009
                                
                                
                                432
                                
                                
                                $
                                5.96
                                
                                
                                $
                                32.20
                                
                                
                                
                                3.66Exercisable
      at March 31, 2009
                                
                                
                                62
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                3.33Options
      expected to vest at March 31, 2009
                                
                                
                                354
  (1)
                  The
      intrinsic value of a stock option is the amount by which the market value
      of the underlying stock on March 31, 2009 exceeds the strike price of the
      option.
  There
were 230,000 stock options granted during the three months ended March 31,
2009.  These options had a weighted average grant date fair value of
$1.02.
  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
                              March 31, 2009Weighted
      average expected stock price volatility
                            
                            
                            56
                            %Weighted
      average expected option life (in years)
                            
                            
                            3.50Average
      risk free interest rate
                            
                            
                            2.87
                            %
 
 The
Company uses the Black-Scholes option pricing model to determine the weighted
average fair value of options. The volatility factor used in the Black-Scholes
option pricing model is based on historical stock price fluctuations. Due to the
relative short period of the time the Company has been public, the Company has
assumed a 0% forfeiture rate.  The expected term of options is based
on the simplified method as allowed under Accounting Bulletin (SAB) No. 107 and
110 issued by the SEC.  The simplified method assumes the options will
be exercised midway between the vesting date and the contractual term of the
option.  The Company is able to use the simplified method as the
options qualify as “plain vanilla” options as detailed by SAB No. 107 since
Limco does not have sufficient historical exercise data to provide a reasonable
basis to estimate expected term.  Expected dividend yield is based
upon Limco’s  historical and projected dividend activity and the risk
free interest rate is based upon US Treasury rates appropriate for the expected
term of the option.
 
 Note
7 - Segment
Reporting
  a.
                    The
      Company manages its business on a basis of two reportable segments since
      the acquisition of Piedmont on July 6, 2005.  The Company's
      reportable segments are as
follows:
  11
 
 ·
                  The
      maintenance, repair and overhaul (MRO) segment focuses on remanufacture,
      overhaul and repair of heat transfer equipment and other aircraft
      components and of repair of APUs, propellers and landing
      gears.
 
 ·
                  Parts
      segment (part of Piedmont's business) focuses on sales of parts of APUs,
      propellers and landing gears.
 
 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 the information that management uses for
analyzing the results. The figures are presented in consolidated method as
presented to management. Cost related to selling and marketing and general and
administrative are allocated based on revenues. This was a change made at the
end of the year ended December 31, 2008. The segment results for the three
months ended March 31, 2008 have been restated to conform with this allocating
method
 
 The
following financial information is a summary of the operating income of each
operational segment:
 
 Three months ended March 31, 2009MRO
                          
                          
                          Parts
                          
                          
                          Corporate
                          
                          
                          Consolidated(in
      thousands)Revenue
                          
                          $
                          11,484
                          
                          
                          $
                          2,637
                          
                          
                          $
                          -
                          
                          
                          $
                          14,121MRO
      services cost
                          
                          
                          9,493
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          9,493Part
      services cost
                          
                          
                          -
                          
                          
                          
                          2,040
                          
                          
                          
                          -
                          
                          
                          
                          2,040Selling
      and marketing
                          
                          
                          464
                          
                          
                          
                          107
                          
                          
                          
                          -
                          
                          
                          
                          571General
      and administrative
                          
                          
                          928
                          
                          
                          
                          214
                          
                          
                          
                          799
                          
                          
                          
                          1,941Relocation
      expenses
                          
                          
                          284
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          284Amortization
      of intangibles
                          
                          
                          54
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          54Operating
      income (loss)
                          
                          
                          261
                          
                          
                          $
                          276
                          
                          
                          $
                          (799
                          )
                          
                          $
                          (262
                          )
 
 Three months ended March 31, 2008MRO
                          
                          
                          Parts
                          
                          
                          Corporate
                          
                          
                          Consolidated(in
      thousands)Revenue
                          
                          $
                          12,985
                          
                          
                          $
                          4,135
                          
                          
                          $
                          -
                          
                          
                          $
                          17,120MRO
      services cost
                          
                          
                          9,624
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          9,624Part
      services cost
                          
                          
                          -
                          
                          
                          
                          3,306
                          
                          
                          
                          -
                          
                          
                          
                          3,306Selling
      and marketing
                          
                          
                          505
                          
                          
                          
                          161
                          
                          
                          
                          -
                          
                          
                          
                          666General
      and administrative
                          
                          
                          1,065
                          
                          
                          
                          339
                          
                          
                          
                          606
                          
                          
                          
                          2,010Amortization
      of intangibles
                          
                          
                          109
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          109Operating
      income (loss)
                          
                          $
                          1,682
                          
                          
                          $
                          329
                          
                          
                          $
                          (606
                          )
                          
                          $
                          1,405
  12
  The
following presents long-lived assets and goodwill by segment as
of:
  March 31, 2009MRO
                      
                      
                      Parts
                      
                      
                      Corporate
                      
                      
                      Consolidated(in
      thousands)Total
      assets
                      
                      $
                      36,035
                      
                      
                      $
                      7,467
                      
                      
                      $
                      32,620
                      
                      
                      $
                      76,122Capital
      Investments
                      
                      
                      165
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      165Depreciation
      and amortization
                      
                      
                      319
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      319Goodwill
                      
                      
                      4,780
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      4,780
 
 December 31, 2008MRO
                      
                      
                      Parts
                      
                      
                      Corporate
                      
                      
                      Consolidated(in
      thousands)Total
      assets
                      
                      $
                      39,488
                      
                      
                      $
                      7,118
                      
                      
                      $
                      30,340
                      
                      
                      $
                      76,946Capital
      Investments
                      
                      
                      1,697
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,697Depreciation
      and amortization
                      
                      
                      1,169
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,169Goodwill
                      
                      
                      4,780
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      4,780
 
 Note  8
- Recently Issued Accounting Standards
  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 for annual
periods beginning after November 15, 2007 and for certain provisions for annual
periods beginning after November 15, 2008, 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.  This
statement became applicable to the Company as of the year beginning January 1,
2008, and the Company did not elect to apply SFAS 159 to its financial assets
and liabilities.  Therefore the adoption of SFAS 159 has had no impact
on the Company’s financial position or results of operations.
 
 In
December 2007, the FASB issued SFAS No. 141(R), "Business Combinations" (SFAS
141(R)).  SFAS 141(R) expands the definition of transactions and
events that qualify as business combinations; requires that the acquired assets
and liabilities, including contingencies, be recorded at the fair value
determined on the acquisition date and changes thereafter reflected in revenue,
not goodwill; changes the recognition timing for restructuring costs; and
requires acquisition costs to be expensed as incurred.  Adoption of
SFAS 141(R) is required for annual periods beginning after December 15,
2008.  Early adoption and retroactive application of SFAS 141(R) to
fiscal years preceding the effective date are not permitted.  The
adoption of SFAS 141(R) did not have a material impact on our Consolidated
Financial Statements.
  13
 
 In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interest in
Consolidated Financial Statements"(SFAS
160).  SFAS 160 re-characterizes minority interests in consolidated
subsidiaries as non-controlling interests and requires the classification of
minority interests as a component of equity.  Under SFAS 160, a change
in control will be measured at fair value, with any gain or loss recognized in
earnings.  The effective date for SFAS 160 is for annual periods
beginning on or after December 15, 2008.  Early
adoption  and retroactive application of SFAS 160 to fiscal years
preceding the effective date are not permitted.  The adoption of
SFAS 160 did not have a material impact on our Consolidated Financial
Statements.
 
 In March
2008, the FASB issued SFAS No. 161 (SFAS 161), “Disclosures about Derivative
Instruments and Hedging Activities”, as an amendment to SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities. SFAS 161 requires that
objectives for using derivative instruments be disclosed in terms of underlying
risk and accounting designation. The fair value of derivative instruments and
their gains and losses will need to be presented in tabular format in order to
present a more complete picture of the effects of using derivative instruments.
SFAS 161 is effective for financial statements issued for fiscal years beginning
after November 15, 2008. The adoption of SFAS 161 did not have a material
impact on our Consolidated Financial Statements.
 
 In
January, 2009, the Financial Accounting Standards Board (“FASB”) approved FASB
Accounting Standards Codification (the (“Codification”), which is effective July
1, 2009.  Other than resolving certain minor inconsistencies in
current U.S. GAAP, the Codification is not supposed to change GAAP, but is
intended to make it easier to find and research GAAP applicable to a particular
transaction or specific accounting issue.  The Codification is a new
structure which takes accounting pronouncements and organizes them by
approximately 90 accounting topics.  We do not expect the Codification
to have a material impact on our financial position or results of
operations.
 
 Note  9
– Impairment of Long Lived Assets
  The
Company reviews long-lived assets, including intangible assets and goodwill, for
impairment annually or more frequently if changes in circumstances or the
occurrence of events suggest the remaining value may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to the future undiscounted cash flows expected to be
generated by the assets. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets.
 
 Note
10 – Income Tax
 
 On a
quarterly basis, we estimate what our effective tax rate will be for the full
fiscal year and record a quarterly income tax provision based on the anticipated
rate.  As the year progresses, we refine our estimate based on the facts
and circumstances by each tax jurisdiction.  For the quarter ended March
31, 2009 the Company recognized a loss before taxes but recorded income tax
expense for the same period.  The income tax expense was the result of a
discrete non tax deductible employee share based compensation from options
that have expired unexercised.  This generated a non tax deductible expense
of $290,000 during the quarter and the reversal of $19,000 of previously
recognized deferred tax assets.  As a result, during the quarter ended
March 31, 2009, the Company had taxable income of $179,000 which generated
tax expense of $66,000.
  14
 
 Note
11 – Consolidation of Facility
 
 In
February 2009, the Company announced that it would relocate the operations of
its Oklahoma subsidiary to the location of its Piedmont subsidiary in North
Carolina. The Company anticipates closing the Oklahoma operations by the
end of the fiscal year.  The goal of this relocation is to achieve
significant annual cost savings. The Company entered into a lease in February
2009 for a new facility in Kernersville, North Carolina of approximately
56,000 square feet, which will house its operations being relocated from
Oklahoma. The lease, which expires on November 1, 2011, provides for 2 renewal
options, each for a five year term. The lease provides for an annual rental fee
of $86,182.
 
 Note
12 – Commitment and Contingencies
 
 The
Company is engaged in a commercial dispute with Honeywell Aerospace
(“Honeywell”) arising out of allegations by Honeywell that the company
improperly resold Honeywell parts in breach of certain agreements between the
parties.  On May 1, 2009, Honeywell notified management that it will
terminate its agreements with the Company effective July 2, 2009 and demand
arbitration of its claims unless a mutually acceptable settlement is reached on
or before July 2, 2009.   Management believes that it has
meritorious defenses to Honeywell’s claims.  However, a failure to
successfully resolve this dispute could have a material adverse effect on the
Company’s business and prospects.
  
 Note
13 – Concentration of Credit Risk
 
 As of March 31, 2009 and December 31,
2008, the Company had one customer that accounted for 14.5% and 20% of its
accounts receivables respectively.
 
 Note
14-Subsequent Events
  On April
3, 2009, the Company and the Parent and LIMC Acquisition Company, a Delaware
corporation and a wholly owned Subsidiary of the Parent (“Merger Sub”) entered
into an Agreement and Plan of Merger (the “Merger Agreement”), whereby Merger
Sub will merge with and into the Company and the Company shall become a
wholly-owned subsidiary of the Parent (the “Merger”).  The Parent
presently owns 61.8% of the Company’s common stock.  At the effective
time of the Merger, each outstanding share of the Company’s common stock will be
converted automatically into the right to receive five tenths (.5) of an
ordinary share of the Parent.  At the effective time of the Merger,
all options to purchase the Company’s common stock that are outstanding
immediately prior to the effective time of the Merger will terminate. The Merger
is subject to customary closing conditions.
  On April
8, 2009 a petition was filed in the District Court of Tulsa County, State of
Oklahoma captioned “Chris Gassen, individually and on behalf of all others
similarly situated, Plaintiff v. Shmuel Fledel, Jacob Gesthalter, Michael Gorin,
Giora Inbar, Avraham Ortal, Eran Goren, Limco-Piedmont, Inc., and LIMC
Acquisition Company, Defendants.”  The action, which purports to be on
behalf of a class comprised of the public stockholders of the Company, seeks
relief against the Company and its Directors for alleged breaches of fiduciary
duty and other violations of state law in connection with the proposed merger of
LIMC Acquisition Company into the Company.  Plaintiff claims, among
other things, that the defendants are attempting to sell the Company by means of
an unfair process and for an unfair price and that defendants have failed to
disclose all material information concerning the merger.  Plaintiff is
seeking to enjoin the consummation of the merger, monetary damages, and an award
of costs, including attorneys’ fees.  The Company believes that the
action is without merit and intends to vigorously defend the
claims.
  15
  Item 2.   Management’s Discussion and Analysis
of Financial Condition and Results of Operations
  Background
  Prior to
our initial public offering on July 18, 2007, we operated as a wholly-owned
subsidiary of TAT Technologies, Inc. (the Parent). 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 the Parent from 1992 through 1995.
Prior to the consolidation of Limco-Airepair, Inc. into our company, the Company
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 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 gear and added our parts services business.
  Overview
  We
provide maintenance, repair and overhaul, or MRO, services and parts supply
services to the aerospace industry. Our FAA certified repair stations provide
aircraft component MRO services for airlines, air cargo carriers, maintenance
service centers and the military. We specialize in MRO services for components
of aircraft, such as heat transfer components, auxiliary power units, or APUs,
propellers, landing gear and pneumatic ducting. In conjunction with our MRO
services we are also an original equipment manufacturer, or OEM, of heat
transfer equipment for airplane manufacturers and other selected related
products. Our parts services division offers inventory management and parts
services for commercial, regional and charter airlines and business aircraft
owners.
  MRO
Services
  We
provide services for the components segment of the MRO services market. Our MRO
services segment includes the repair and overhaul of heat transfer components,
APUs, propellers, landing gear and pneumatic ducting, among other components.
Generally, manufacturer specifications, government regulations and military
maintenance regimens require that aircraft components undergo MRO servicing at
regular intervals or as necessary. Aircraft components typically require MRO
services, including repairs and installation of replacement units, after three
to five years of service or sooner if required. Aircraft manufacturers typically
provide warranties on new aircraft and their components and subsystems, which
may range from one to five years depending on the bargaining power of the
purchaser. Warranty claims are generally the responsibility of the OEM during
the warranty period. Our business opportunity usually begins upon the conclusion
of the warranty period for these components and subsystems.
  Our
repair stations are certified by the FAA and the European Aviation Safety
Agency, or EASA.  In conjunction with our MRO services, we also
manufacture heat transfer equipment used in commercial, regional, business and
military aircraft, complete environmental control systems and cooling systems
for electronics.
  Parts Services
  Our parts
services division provides a number of services for commercial, regional and
charter airlines and business aircraft owners, including inventory management
and parts services. We presently assist several of these customers with their
parts procurement needs by using our knowledge of the aircraft component
industry to quickly acquire necessary aircraft components in a cost-effective
manner. We have a knowledgeable and experienced staff of customer service
representatives and offer our customers 24 hour service and same day shipping.
We currently supply parts to approximately 500 commercial, regional and charter
airlines and business aircraft owners.
  16
  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 months ended March 31, 2009 and March 31, 2008
were as follows:
  Three Months Ended March 31,2009
                          
                          
                          2008Revenues
                          
                          
                          % of
                            Total
                            Revenues
                          
                          
                          Revenues
                          
                          
                          % of Total
                            Revenues(Revenues
      in thousands)Revenues:MRO
      Services
                          
                          $
                          11,484
                          
                          
                          
                          81.3
                          %
                          
                          $
                          12,985
                          
                          
                          
                          75.8
                          %Parts
      services
                          
                          
                          2,637
                          
                          
                          
                          18.7
                          %
                          
                          
                          4,135
                          
                          
                          
                          24.2
                          %Total
      revenues
                          
                          $
                          14,121
                          
                          
                          
                          100.0
                          %
                          
                          $
                          17,120
                          
                          
                          
                          100.0
                          %
  The
following table reflects the geographic breakdown of our revenues for each of
the three months  ended March 31, 2009 and 2008:
  Three Months Ended March 31,2009
                            
                            
                            2008Revenues
                            
                            
                            % of
                              Total
                              Revenues
                            
                            
                            Revenues
                            
                            
                            % of
                              Total
                              RevenuesRevenue
      in thousandsNorth
      America
                            
                            $
                            9,452
                            
                            
                            
                            66.9
                            %
                            
                            $
                            11,591
                            
                            
                            
                            67.7
                            %Europe
                            
                            
                            2,916
                            
                            
                            
                            20.7
                            %
                            
                            
                            3,303
                            
                            
                            
                            19.3
                            %Asia
                            
                            
                            495
                            
                            
                            
                            3.5
                            %
                            
                            
                            721
                            
                            
                            
                            4.2
                            %Other
                            
                            
                            1,258
                            
                            
                            
                            8.9
                            %
                            
                            
                            1,505
                            
                            
                            
                            8.8
                            %$
                            14,121
                            
                            
                            
                            100.0
                            %
                            
                            $
                            17,120
                            
                            
                            
                            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.
  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.  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.
  17
 
 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.  For a more detailed discussion of
our critical accounting policies we refer you to our 10-K for the year ended
December 31, 2008 and filed with the Securities and Exchange
Commission.
  Results
of Operations
  The
following table sets forth our statements of operations as a percentage of
revenues for the periods indicated:
  Three Months Ended March
                            31,2009
                          
                          
                          2008(Unaudited)Revenue:MRO
      services
                          
                          
                          81.3
                          %
                          
                          
                          75.8
                          %Parts
      services
                          
                          
                          18.7
                          %
                          
                          
                          24.2
                          %Total
      revenue
                          
                          
                          100.0
                          %
                          
                          
                          100.0
                          %Costs
      and operating expenses:MRO
      services
                          
                          
                          67.2
                          %
                          
                          
                          56.2
                          %Parts
      services
                          
                          
                          14.4
                          %
                          
                          
                          19.3
                          %Selling
      and marketing
                          
                          
                          4.0
                          %
                          
                          
                          3.9
                          %General
      and administrative
                          
                          
                          13.8
                          %
                          
                          
                          11.7
                          %Relocation
      expense
                          
                          
                          2.0
                          %
                          
                          
                          -Amortization
      of intangibles
                          
                          
                          0.4
                          %
                          
                          
                          0.6
                          %Operating
      income (loss)
                          
                          
                          (1.8
                          )%
                          
                          
                          8.2
                          %Other
      income (expense), net
                          
                          
                          1.0
                          %
                          
                          
                          1.0
                          %Income
      taxes
                          
                          
                          (0.7
                          )%
                          
                          
                          3.4
                          %Net
      income (loss)
                          
                          
                          (1.5
                          )%
                          
                          
                          5.9
                          %
 
  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.  The decrease in revenue is a result of
economic conditions leading to a decline in the aerospace industry and from
operational issues incurred at the Tulsa facility.
  18
 
 Three
Months Ended March 31, 2009 Compared to the Three Months Ended March 31,
2008
  For the three months ended March 31,Revenues
                              
                              2009
                              
                              2008(Revenue in thousands)MRO
      services
                              
                              
                              $
                              11,484
                              
                              
                              $
                              12,985Parts  services
                              
                              
                              
                              2,637
                              
                              
                              
                              4,135Total
      revenue
                              
                              
                              $
                              14,121
                              
                              
                              $
                              17,120
  Revenues.   Total
revenues decreased by $3.0 million, to $14.1 million for the three months ended
March 31, 2009 from $17.1 million for the three months ended March 31,
2008.  The decrease in revenues was primarily attributable to a
decline in the aerospace industry and from operational issues incurred at our
Tulsa facility.
  MRO
Revenues.  Revenues from MRO services decreased by $1.5
million, to $11.5 million for the three months ended March 31, 2009 from $13.0
million for the three months ended March 31, 2008.  The decline arises
from operational issues incurred at our Tulsa facility including parts
shortages and processing difficulties.
  Parts
Services.  Parts services revenues decreased by $1.5 million,
to $2.6 million for the three months ended March 31, 2009 from $4.1 million for
the three months ended March 31, 2008.   This decrease is due to
a decline in the overall market.
  Costs of  revenues and operating
                          expenses
                        
                        March 31, 2009
                        
                        
                        March 31, 2008(in thousands)MRO
      services
                        
                        $
                        9,493
                        
                        
                        $
                        9,624Parts  services
                        
                        
                        2,040
                        
                        
                        
                        3,306Total
      cost of revenues
                        
                        
                        11,533
                        
                        
                        
                        12,930Selling
      and marketing
                        
                        
                        571
                        
                        
                        
                        666General
      and administrative
                        
                        
                        1,941
                        
                        
                        
                        2,010Relocation
      expense
                        
                        
                        284
                        
                        
                        
                        -Amortization
      of intangibles
                        
                        
                        54
                        
                        
                        
                        109Total
      operating costs
                        
                        
                        14,383
                        
                        
                        
                        15,715Operating
      income (loss)
                        
                        $
                        (262
                        )
                        
                        $
                        1,405
  Cost of revenues.
  Cost of revenues decreased by $1.4 million, to $11.5 million for the
three months ended March 31, 2009 from $12.9 million for the three months ended
March 31, 2008. Despite the sales decrease of $3.0 million, cost of sales did
not decrease proportionately in MRO due to the fact that operating expenses
and labor costs are primarily fixed.  Cost of revenues for parts
services decreased by $1.3 million to $2.0 million for the three months ended
March 31, 2009 from $3.3 million for the three months ended March 31, 2008
primarily resulting from lower sales volumes.
  19
  Selling and marketing
expenses.  Selling and marketing expenses decreased by $95,000
to $571,000 for the three months ended March 31, 2009 from $666,000 for the
three months ended March 31, 2008. The decrease in selling and marketing
expenses is primarily attributable to a reduction in commissions paid on
existing customers MRO sales.
  General and administrative
expenses.   General and administrative costs decreased by
$69,000, to $1.9 million from $2.0 million in March 31, 2009 and March 31, 2008,
respectively.  The decline is attributable to lower insurance
premiums, lower bad debt expenses, and depreciation expense.
  Operating
income.  Our operating income decreased by $1.7 million to a
net loss position of ($262,000) for the three months ended March 31, 2009 from a
net income of $1,405,000 for the three months ended March 31,
2008.  The decrease is attributable primarily to lower sales volumes,
the relatively fixed nature of labor and other operating costs, as well as to
the relocation expenses consisting of accrued severance, training costs, and
building rental of the new facility.
  Other income and expense
                        
                        March 31, 2009
                        
                        
                        March 31, 2008(in
      thousands)Interest
      income
                        
                        $
                        151
                        
                        
                        $
                        293Other
      income and (expense)
                        
                        
                        —
                        
                        
                        
                        (118
                        )Provision
      for income taxes
                        
                        
                        85
                        
                        
                        
                        577Net
      income (loss)
                        
                        $
                        (196
                        )
                        
                        $
                        1,003
  Interest income.
  Interest income decreased by $142,000 to $151,000 for the three
months ended March 31, 2009 from $293,000 for the three months ended March 31,
2008 as a result of lower interest rates and investment balances.
  Other income and
expense.  The $118,000 expense for the three months ending
March 31, 2008 is attributable to a loss on sale of investments that did not
occur for the three months ended 2009.
  Income taxes.
 Income taxes decreased by $492,000, to $85,000 for the three months ended
March 31, 2009 from $577,000 for the three months ended March 31, 2008. The
decrease in income tax expense is primarily attributable to the decrease in
operating income.  The decrease was offset by a non tax
deductible expense of $290,000 recognized during the quarter and the reversal of
$19,000 relating to previously recognized deferred tax assets.  As a
result, during the quarter ended March 31, 2009, the Company had taxable income
of $179,000 which generated tax expense of $66,000.
 
 Liquidity
and Capital Resources
  On March
31, 2009, the Company’s total working capital was approximately $55.5 million,
compared to March 31, 2008 working capital of $55.3
million.   The change is primarily a result of timing differences
between our current asset and current liabilities.
  Cash
Flows
  The
following table summarizes our cash flows for the periods
presented:
  20
 
 For the three months ended March 31,2009
                            
                            
                            2008Net
      cash provided by (used in) operating activities
                            
                            $
                            251
                            
                            
                            $
                            (2,540
                            )Net
      cash provided by (used in) investing activities
                            
                            
                            (11,276
                            )
                            
                            
                            4,968Net
      cash provided by (used in) financing activities
                            
                            
                            —
                            
                            
                            
                            893Net
      increase (decrease) in cash and cash equivalents
                            
                            
                            (11,025
                            )
                            
                            
                            3,321Cash
      and cash equivalents at beginning of period
                            
                            
                            21,336
                            
                            
                            
                            5,039Cash
      at end of period
                            
                            $
                            10,311
                            
                            
                            $
                            8,360
  Net cash
provided by operating activities was $251,000 for the three months ending March
31, 2009. This amount was primarily attributable to a $1.4 million decrease in
accounts receivable due to lower sales Inventory increased $667,000 due to
increased purchases from the Parent to better enable the Company to be more
responsive in the MRO market. The decrease in accounts payable and other accrued
expenses of $1.4 million was due to lower material cost of sales that is volume
driven.
  Net cash
used for investing activities was $11.3 million for the three months ended March
31, 2009. We purchased approximately $11.1 million in corporate bonds and
municipal bonds having an average maturity of less than one year.  We
invested $165,000 for the purchase of property and equipment.
  The
following table summarizes our minimum contractual obligations and commercial
commitments as of March 31, 2009 and the effect we expect them to have on our
liquidity and cash flow in future periods:
  Payments Due by PeriodTotal
                        
                        
                        Less
                          than
                          Year
                        
                        
                        1-3
                          Years
                        
                        
                        3-5
                          Years
                        
                        
                        More
                          than 5
                          Years(in
      thousands)Operating
      lease obligations
                        
                        $
                        790
                        
                        
                        $
                        273
                        
                        
                        $
                        451
                        
                        
                        $
                        66
                        
                        
                        $
                        —Deferred
      tax liability
                        
                        
                        836
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        836Total
                        
                        $
                        1,636
                        
                        
                        $
                        273
                        
                        
                        $
                        451
                        
                        
                        $
                        66
                        
                        
                        $
                        836
 
 As of
March 31, 2009, our principal commitments consisted of obligations outstanding
under operating leases and our deferred tax liability. All of our long-term debt
was repaid during 2007 with a portion of the proceeds of our initial public
offering. 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
anticipate that our cash resources will be used primarily to fund our operating
activities, as well as for capital expenditures and acquisitions.
  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 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.
  21
  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.
  The
Company anticipates closing its Tulsa operations by the end of the fiscal year
2009, which will reduce its workforce by approximately 12%.  Based on
analysis done to date, the Company expects to achieve annual savings of
approximately $500,000 per year following the completion of the relocation and
to recognize approximately $2.4 million in pre-tax costs (substantially all of
which will result in cash expenditures) which will be partially offset by the
anticipated sale of the Company’s Tulsa building and land and the sale of
certain other assets.  These costs consist of approximately $550,000
in employee related expenses, approximately $1.2 million in buildout and new
equipment, approximately $450,000 in the physical move of the facility and the
remaining approximately $200,000 for training and contingencies.  The
Company has incurred $284,000 of costs relating to relocation, $60,000 which
represents amortization of one-time termination benefits, according to FASB
146.
  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.   This seasonal effect has been
offset by economic factors affecting the aerospace industry, resulting from the
current economic conditions.
  Off-balance
sheet arrangements
  As of
March 31, 2009, we had no off-balance sheet arrangements as defined in Item
303(a)(4) of the SEC’s Regulation S-K.
  Recent
Accounting Pronouncements
  For a
discussion of applicable new accounting pronouncements see Note 8 to our
Unaudited Condensed Consolidated Financial Statements.
  22
  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 September 30, 2007 that 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 corporate
and government bonds and 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 co-chief executive officers 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 co-chief
executive officers 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  Exchange Act 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
  On April 8, 2009 a petition was filed
in the District Court of Tulsa County, State of Oklahoma captioned “Chris
Gassen, individually and on behalf of all others similarly situated, Plaintiff
v. Shmuel Fledel, Jacob Gesthalter, Michael Gorin, Giora Inbar, Avraham Ortal,
Eran Goren, Limco-Piedmont, Inc., (the Company) and LIMC Acquisition Company,
Defendants.”  The action, which purports to be on behalf of a class
comprised of the public stockholders of the Company, seeks relief against the
Company and its Directors for alleged breaches of fiduciary duty and other
violations of state law in connection with the proposed merger of LIMC
Acquisition Company into the Company.  Plaintiff claims, among other
things, that the defendants are attempting to sell the Company by means of an
unfair process and for an unfair price and that defendants have failed to
disclose all material information concerning the merger.  Plaintiff is
seeking to enjoin the consummation of the merger, monetary damages, and an award
of costs, including attorneys’ fees.  The Company believes that the
action is without merit and intends to vigorously defend the claims
  Item 1A.   Risk
Factors
  There
have been no material changes to the risk factors disclosed under Part I, Item
1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December
31, 2008.
  Item 2.   Unregistered Sales of Equity
Securities and Use of Proceeds
  We sold
4,205,000 of our shares of common stock in our initial public offering on July
19, 2007.  The aggregate offering price of the shares sold was $46.3
million.  The total expenses of the offering were approximately $4.8
million.  None of such expenses were paid directly or indirectly to
directors, officers, or persons owning 10% or more of any class of equity
securities of our company or to our affiliates.  The net public
offering proceeds to us, after deducting the total expenses were approximately
$41.5 million.  Such proceeds have been used to repay approximately
$4.0 million in debt owed to the Parent and $4.0 million in debt owed to Bank
Leumi USA, and $2.2 million was used for the purchase of capital equipment and
inventory. The remaining proceeds have been invested in cash, cash equivalents
and short-term investments. As of March 31, 2009, we had $10.3 million in cash
and cash equivalents and $22.3 million in short-term investments.
 
 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
5:  Other Information
  The
Company is engaged in a commercial dispute with Honeywell Aerospace
(“Honeywell”) arising out of allegations by Honeywell that the company
improperly resold Honeywell parts in breach of certain agreements between the
parties.  On May 1, 2009, Honeywell notified management that it will
terminate its agreements with the Company effective July 2, 2009 and demand
arbitration of its claims unless a mutually acceptable settlement is reached on
or before July 2, 2009.  Management believes that it has meritorious
defenses to Honeywell’s claims.  However, a failure to successfully
resolve this dispute could have a material adverse effect on the Company’s
business and prospects.
  25
  Item 6.   Exhibits
  (a)   Exhibits
  31.1
                      
                      Certification
      by Co-Chief Executive Officers 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 Co-Chief Executive Officers 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.
  26
  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/ Robert KochCo-Chief
      Executive Officer/s/ Ehud NetiviCo-Chief
      Executive Officer/s/ Mary DowdyChief
      Financial Officer
  Date: May
15,
2009
  27