**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-Q**




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




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







Commission
      file number: 001-33604




**LIMCO-PIEDMONT
      INC.**


(Exact
      Name of Registrant as Specified in Its Charter)




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





**5304
      S. Lawton Ave.**


**Tulsa,
      Oklahoma, 74107**


(Address
      of Principal Executive Offices)


**(918)
      445-4300**


(Registrant’s
      Telephone Number, Including Area Code)




**N/A**


(Former
      Name, Former Address and Former Fiscal Year,


if
      Changed Since Last Report)




Indicate
      by check mark whether the registrant: (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.




Yes x   
       No o




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




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




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). YES o NO x




As
      of
      July 31, 2007 the Registrant had 13,205,000 shares outstanding.





**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**




INDEX




**Page**PART
                I - FINANCIAL INFORMATION:
            2Item
                1.
            Unaudited
                Condensed Consolidated Balance SheetsJune
                30, 2007 and December 31, 2006
            2Unaudited
                Condensed Consolidated Statements of IncomeSix
                and three months ended June 30, 2007 and 2006
            3Unaudited
                Condensed Consolidated Statements of Cash FlowsSix
                months ended June 30, 2007 and 2006
            4Notes
                to Unaudited Condensed Consolidated Financial Statements
            5-11Item
                2.
            Management’s
                Discussion and Analysis of Financial Conditionand
                Results of Operations
            12-20Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            20Item
                4T.
            Controls
                and Procedures
            20PART
                II - OTHER INFORMATION:
            21Item
                1.
            Legal
                Proceedings
            21Item
                1A.
            Risk
                Factors
            21-29Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            29Item
                3.
            Defaults
                Upon Senior Securities
            29Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            29Item
                5.
            Other
                Information
            29Item
                6.
            Exhibits
                and Reports on Form 8-K
            29SIGNATURES
            30


1


**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**





**UNAUDITED
      CONDENSED CONSOLIDATED BALANCE SHEETS**


(in
      thousands, except per share data)








**June
                30,**
              **2007**
            
            **December
                31,**
              **2006****ASSETS**Current
                Assets:Cash
                and cash equivalents
            
            $
            2,730
            
            $
            4,309Accounts
                receivables (net of allowance for doubtful accounts of $77 and $245
                at June 30, 2007 and December 31, 2006, respectively)
            
            
            10,658
            
            
            8,188Other
                accounts receivable and prepaid expenses
            
            
            691
            
            
            727Inventories
            
            
            15,418
            
            
            14,611Total
                current assets
            
            
            29,497
            
            
            27,835Property,
                Plant and Equipment, Net
            
            
            2,783
            
            
            2,920Intangible
                Assets, Net
            
            
            1,919
            
            
            2,183Goodwill
            
            
            4,780
            
            
            4,780Other
                Long-Term Assets
            
            
            1,373
            
            
            294Total
                assets
            
            $
            40,352
            
            $
            38,012**LIABILITIES
                AND SHAREHOLDERS' EQUITY**Current
                Liabilities:Checks
                issued in excess of bank balance
            
            $
            395
            
            $
            -Current
                maturities of long-term debt
            
            
            4,000
            
            
            4,000Current
                maturities of long-term debt, related party
            
            
            1,000
            
            
            -Accounts
                payables
            
            
            4,784
            
            
            6,525Parent
                company payables
            
            
            4,058
            
            
            3,122Other
                accounts payable and accrued expenses
            
            
            2,613
            
            
            2,838Total
                current liabilities
            
            
            16,850
            
            
            16,485Long-Term
                Liabilities:Long-term
                debt, related party
            
            
            3,000
            
            
            4,000Deferred
                income taxes
            
            
            436
            
            
            436Total
                long-term liabilities
            
            
            3,436
            
            
            4,436Total
                liabilities
            
            
            20,286
            
            
            20,921Commitments
                and contingenciesShareholders'
                Equity:Common
                stock, $0.01 par value; 25,000 shares
              authorized,
                9,000 shares issued and outstanding
            
            
            90
            
            
            90Additional
                paid-in capital
            
            
            7,446
            
            
            7,446Retained
                earnings
            
            
            12,530
            
            
            9,555Total
                shareholders' equity
            
            
            20,066
            
            
            17,091Total
                liabilities and shareholders' equity
            
            $
            40,352
            
            $
            38,012





See
      notes
      to unaudited condensed consolidated financial statements.


2


**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**




**UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF
      INCOME**


(in
      thousands, except per share data)





**Three
                months ended**
              **June
                30,**
            
            **Six
                months ended**
              **June
                30,**2007
            
            2006
            
            2007
            
            2006RevenueMRO
                services
            
            $
            12,606
            
            $
            11,315
            
            $
            25,046
            
            $
            21,442Parts
                services
            
            
            5,436
            
            
            2,337
            
            
            13,209
            
            
            4,461Total
                revenue
            
            
            18,042
            
            
            13,652
            
            
            38,255
            
            
            25,903Cost
                and operating expensesMRO
                services
            
            
            8,519
            
            
            8,463
            
            
            16,877
            
            
            16,134Parts
                services
            
            
            3,790
            
            
            1,796
            
            
            10,814
            
            
            3,363Selling
                and marketing
            
            
            662
            
            
            560
            
            
            1,302
            
            
            1,093General
                and administrative
            
            
            2,132
            
            
            1,077
            
            
            3,839
            
            
            1,875Amortization
                of intangibles
            
            
            118
            
            
            115
            
            
            236
            
            
            227Operating
                income
            
            
            2,821
            
            
            1,641
            
            
            5,187
            
            
            3,211Other
                income (expense)Interest
                income
            
            
            217
            
            
            160
            
            
            271
            
            
            197Interest
                expense
            
            
            (384
            )
            
            (305
            )
            
            (541
            )
            
            (484
            )Total
                other income (expense)
            
            
            (167
            )
            
            (145
            )
            
            (270
            )
            
            (287
            )Income
                before taxes
            
            
            2,654
            
            
            1,496
            
            
            4,917
            
            
            2,924Provision
                for income taxes
            
            
            1,089
            
            
            563
            
            
            1,942
            
            
            1,085Net
                income
            
            $
            1,565
            
            $
            933
            
            $
            2,975
            
            $
            1,839Basic
                and diluted net income per share
            
            
            0.17
            
            
            0.10
            
            
            0.33
            
            
            0.21Basic
                and diluted shares outstanding
            
            
            9,000
            
            
            9,000
            
            
            9,000
            
            
            9,000





See
      notes
      to unaudited condensed consolidated financial statements.


3


**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**




**UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**  (in
      thousands)








**Six
                Months ended June 30,**2007
            
            2006Net
                cash provided (used) by operating activities
            
            $
            (681
            )
            $
            1,379Cash
                flows from investing activities:Purchase
                of investment and other assets
            
            
            (68
            )
            
            (496
            )Purchases
                of property and equipment
            
            
            (146
            )
            
            (156
            )Net
                cash used in investing activities
            
            
            (214
            )
            
            (652
            )Cash
                flows from financing activities:Capitalized
                initial public offering
            
            
            (1,079
            )
            
            -Increase
                in checks issued in excessof
                bank balance
            
            
            395
            
            
            -Repayment
                of long-term loan
            
            
            -
            
            
            (1,000
            )Net
                cash used in financing activities
            
            
            (684
            )
            
            (1,000
            )Decrease
                in cash and cash equivalents
            
            
            (1,579
            )
            
            (273
            )Cash
                and cash equivalents at thebeginning
                of period
            
            
            4,309
            
            
            2,259Cash
                and cash equivalents at the end of period
            
            $
            2,730
            
            $
            1,986


Supplemental
                disclosure of cash activities:Cash
                paid during the period for:Interest
            
            $
            500
            
            $
            351Income
                taxes
            
            $
            1,745
            
            $
            1,159





See
      notes
      to unaudited condensed consolidated financial statements.


4


**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**




NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED
      FINANCIAL STATEMENTS








**Note
      1 - General**





*a.*
            *Description
                of Business:*




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





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


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





*b.*
            *Unaudited
                Interim Results:*





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





The
      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 - Inventories**





Inventories
      are composed of the following:





**June
                30,**
            
            **December
                31,**2007
            
            2006(in
                thousands)Raw
                material
            
            $
            5,290
            
            $
            5,399Work
                in process
            
            
            4,447
            
            
            3,347Spare
                parts assemblies
            
            
            5,681
            
            
            5,865$
            15,418
            
            $
            14,611


5


**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**




NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED
      FINANCIAL STATEMENTS





**Note
      3 - Related Parties**





*a.*
            *Transactions
                with related parties:*





**Six
                months ended June 30,**2007
            
            2006(in
                thousands)Purchases
            
            $
            1,215
            
            $
            1,527





Historically,
      the Company has purchased a majority of its cores for heat exchangers from
      its
      one supplier, its parent, TAT Technologies Ltd. (“Parent”). During January 2007,
      the Company entered into a manufacturing agreement in which the Company is
      required to purchase all cores required for its heat exchangers from the Parent
      through January 31, 2017. Any heat exchangers not manufactured by the Parent
      may
      be purchased from other outside vendors, including Hamilton
      Sundstrand.





Parent
      company payables as of June 30, 2007 and December 31, 2006 were $4,058,000
      and
      $3,122,000 respectively. Parent company payables are unsecured and provide
      for
      no interest payments.





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





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




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





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


6


**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**




NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED
      FINANCIAL STATEMENTS





**Note
      4 - Long-Term Debt**





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




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





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








**Note
      5 - Employee Share Based Compensation**





The
      Company entered into a share based compensation agreement with its CEO during
      August 2005. The compensation agreement is made up of 45,000 Phantom Stock
      options and stock options to be issued upon the completion of an IPO by the
      Company.





The
      Phantom Stock options have an exercise price of $6.37. At the date of exercise,
      the CEO will receive a cash payment for the difference between the exercise
      price and the average price of the Parent’s stock price for the 60 days
      preceding the exercise date. The Phantom Stock options expire on June 30, 2010.
      During the three and the six months ended June 30, 2007, the Company recorded
      compensation expense of $2,100 and $322,600, respectively. At June 30, 2007,
      5,000 Phantom Stock options remain outstanding which are fully vested.








**Note
      6 - Segment Reporting**





*a.*
            *Segment
                Activities Disclosure*:





The
      Company manages its business on a basis of two reportable segments as
      follows:




*·*  The
      repair and overhaul of heat transfer components, APUs, propellers, landing
      gear
      and pneumatic ducting.


*·*  The
      parts
      segment focuses on inventory management and parts services for commercial,
      regional and charter airlines and business aircraft owners.


7


**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**




NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED
      FINANCIAL STATEMENTS








**Note
      6 - Segment Reporting (cont.)**





The
      Company evaluates segment performance based on revenue and operating income.
      The
      operating income reported in our segments excludes corporate and other
      unallocated amounts. Although such amounts are excluded from the business
      segment results, they are included in reported consolidated earnings. Corporate
      and unallocated amounts include executive level expenses and expenses related
      to
      our accounting and finance, human resources and information technology
      departments.





*b.*
            *Operational
                segments*:





The
      following financial information is a summary of the operating income of each
      operational segment:





Six
                months ended June 30, 2007MRO
            
            Parts
            
            Corporate
            
            Consolidated(in
                thousands)Revenue
            
            $
            25,046
            
            $
            13,209
            
            $
            -
            
            $
            38,255MRO
                services cost
            
            
            16,877
            
            
            -
            
            
            -
            
            
            16,877Part
                services cost
            
            
            -
            
            
            10,814
            
            
            -
            
            
            10,814Selling
                and marketing
            
            
            1,017
            
            
            285
            
            
            -
            
            
            1,302General
                and administrative
            
            
            448
            
            
            232
            
            
            3,159
            
            
            3,839Amortization
                of intangibles
            
            
            236
            
            
            -
            
            
            -
            
            
            236Operating
                income
            
            $
            6,468
            
            $
            1,878
            
            $
            (3,159
            )
            $
            5,187





Six
                months ended June 30, 2006MRO
            
            Parts
            
            Corporate
            
            Consolidated(in
                thousands)Revenue
            
            $
            21,442
            
            $
            4,461
            
            $
            -
            
            $
            25,903MRO
                services cost
            
            
            16,134
            
            
            -
            
            
            -
            
            
            16,134Part
                services cost
            
            
            -
            
            
            3,363
            
            
            -
            
            
            3,363Selling
                and marketing
            
            
            893
            
            
            200
            
            
            -
            
            
            1,093General
                and administrative
            
            
            631
            
            
            226
            
            
            1,018
            
            
            1,875Amortization
                of intangibles
            
            
            227
            
            
            -
            
            
            -
            
            
            227Operating
                income
            
            $
            3,557
            
            $
            672
            
            $
            (1,018
            )
            $
            3,211





Three
                months ended June 30, 2007MRO
            
            Parts
            
            Corporate
            
            Consolidated(in
                thousands)Revenue
            
            $
            12,606
            
            $
            5,436
            
            $
            -
            
            $
            18,042MRO
                services cost
            
            
            8,519
            
            
            -
            
            
            -
            
            
            8,519Part
                services cost
            
            
            -
            
            
            3,790
            
            
            -
            
            
            3,790Selling
                and marketing
            
            
            553
            
            
            109
            
            
            -
            
            
            662General
                and administrative
            
            
            182
            
            
            95
            
            
            1,855
            
            
            2,132Amortization
                of intangibles
            
            
            118
            
            
            -
            
            
            -
            
            
            118Operating
                income
            
            $
            3,234
            
            $
            1,442
            
            $
            (1,855
            )
            $
            2,821


8


**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**




NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED
      FINANCIAL STATEMENTS








**Note
      6 - Segment Reporting (cont.)**





Three
                months ended June 30, 2006MRO
            
            Parts
            
            Corporate
            
            Consolidated(in
                thousands)Revenue
            
            $
            11,315
            
            $
            2,337
            
            $
            -
            
            $
            13,652MRO
                services cost
            
            
            8,463
            
            
            -
            
            
            -
            
            
            8,463Part
                services cost
            
            
            -
            
            
            1,796
            
            
            -
            
            
            1,796Selling
                and marketing
            
            
            479
            
            
            81
            
            
            -
            
            
            560General
                and administrative
            
            
            366
            
            
            104
            
            
            607
            
            
            1,077Amortization
                of intangibles
            
            
            115
            
            
            -
            
            
            -
            
            
            115Operating
                income
            
            $
            1,892
            
            $
            356
            
            $
            (607
            )
            $
            1,641





*c.*
            *The
                following presents long-lived assets as
                of:*





June
                30, 2007MRO
            
            Parts
            
            Corporate
            
            Consolidated(in
                thousands)Total
                assets
            
            $
            32,318
            
            $
            3,240
            
            $
            4,794
            
            $
            40,352Capital
                investments
            
            
            146
            
            
            -
            
            
            -
            
            
            146Depreciation
                and amortization
            
            
            520
            
            
            2
            
            
            -
            
            
            522








December
                31, 2006MRO
            
            Parts
            
            Corporate
            
            Consolidated(in
                thousands)Total
                assets
            
            $
            29,131
            
            $
            3,542
            
            $
            5,339
            
            $
            38,012Capital
                investments
            
            
            358
            
            
            -
            
            
            -
            
            
            358Depreciation
                and amortization
            
            
            1,016
            
            
            2
            
            
            -
            
            
            1,018








**Note
      7 - Recently Issued Accounting Standards**





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





In
      September 2006, the Securities and Exchange Commission released Staff Accounting
      Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when
      Quantifying Misstatements in Current Year Financial Statements,” or SAB 108,
      which addresses how


9




**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**




NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED
      FINANCIAL STATEMENTS








**Note
      7 - Recently Issued Accounting Standards (cont.)**





uncorrected
      errors in previous years should be considered when quantifying errors in
      current-year financial statements. SAB 108 requires registrants to consider
      the
      effect of all carry over and reversing effects of prior-year misstatements
      when
      quantifying errors in current-year financial statements. SAB 108 does not change
      the Staff’s previous guidance on evaluating the materiality of errors. It allows
      registrants to record the effects of adopting SAB 108 guidance as a
      cumulative-effect adjustment to retained earnings. This adjustment must be
      reported in the annual financial statements for the first fiscal year ending
      after November 15, 2006. The initial adoption of SAB 108 did not have a material
      impact on the Company’s financial condition and results of
      operation.





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





The
      Company does not expect that there will be any material changes to the estimated
      amount of its liability associated with uncertain tax positions through December
      31, 2007.





The
      Company recognizes accrued interest and penalties related to uncertain tax
      positions in income tax expense. At January 1, 2007, the Company did not accrue
      any amounts for the payment of tax related interest and there was no tax related
      interest or penalties recognized in the statements of operations. The Company’s
      federal and state tax returns are potentially open to examination for years
      2005-2006.








**Note
      8 - Subsequent Events**





On
      July
      23, 2007, the Company completed an initial public offering of 5,060,000 shares
      of common stock at $11.00 per share, including the exercise of the underwriter’s
      over allotment option. The Company sold 4,205,000 shares of common stock and
      the
      Company's Parent, TAT Technologies Ltd., sold 855,000 shares of common stock.
      Net proceeds to the Company were approximately $42 million. As a result of
      the
      offering, TAT Technologies Ltd, reduced its ownership interest in the Company
      to
      approximately 62%. In connection with the offering, the Company's President
      and
      CEO earned a cash bonus of approximately $330,000, which will be charged against
      earnings in the quarter ending September 30, 2007.


10


**LIMCO-PIEDMONT
      INC. AND SUBSIDIARIES**




**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS**








**Note
      8 - Subsequent Events (cont'd.)**





On
      July
      18, 2007, the Company issued options to certain of its employees and directors
      to purchase 404,250 shares of common stock with an exercise price equal to
      the
      IPO price of $11 per share. The options were granted under the Limco-Piedmont
      Incentive Compensation Plan.




11


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





The
      following discussion of our results of operations should be read in conjunction
      with the financial statements and notes included elsewhere in this Quarterly
      Report on Form 10-Q. The discussion and analysis which follows may contain
      trend
      analysis and other forward-looking statements within the meaning of Section
      21E
      of the Securities Exchange Act of 1934 which reflect our current views with
      respect to future events and financial results. Words such as “anticipate,”
“expect,” “intend,” “plan,” “believe,” “seek,” “outlook” and “estimate” as well
      as similar words and phrases signify forward-looking statements. Our
      forward-looking statements are not guarantees of future results and conditions
      and important factors, risks and uncertainties may cause our actual results
      to
      differ materially from those expressed in our forward-looking statements. These
      risks are more fully described in the “Risk Factors” section of the Quarterly
      Report. We undertake no obligation to update publicly any forward-looking
      statements for any reason, even if new information becomes available or other
      events occur in the future *.*




**Background**




Prior
      to
      the consummation of our initial public offering in July 2007, we operated as
      a
      wholly-owned subsidiary of TAT Technologies Ltd. We were incorporated in
      Delaware on February 28, 2007 as a successor to Limco-Airepair, Inc., which
      was
      incor-porated as an Oklahoma corporation in 1995 upon the merger of three
      aerospace companies that had been acquired by TAT Technologies from 1992 through
      1995. Prior to the consolidation of Limco-Airepair, Inc. into our company,
      it
      transferred all of its assets and liabilities associated with its Oklahoma
      operations to our wholly-owned subsidiary, Limco-Airepair Inc., a newly formed
      Delaware corporation.




Prior
      to
      our acquisition of Piedmont Aviation in July 2005, our business was focused
      on
      providing MRO services for heat transfer components. With the acquisition of
      Piedmont, we expanded the scope of our MRO services to also include APUs,
      propellers and landing gears and added our parts services business.




We
      acquired Piedmont for approximately $20.2 million, which includes $5.9 million
      in cash and the assumption of approximately $8.7 million of bank indebtedness
      and $5.6 million of other liabilities of Piedmont. The acquisition was accounted
      for using the purchase method of accounting as determined in FASB Statement
      No.
      141 and accordingly, the purchase price was allocated to the assets acquired
      and
      the liabilities assumed based on the estimated fair value at the date of
      acquisition. Among the assets acquired from Piedmont, we allocated $11.3 million
      of the purchase price to current assets, $4.8 million to goodwill, $1.9 million
      to customer relationships, $1.2 million to property and equipment, $653,000
      to
      non-compete agreements and $307,000 to other intangible assets.




**Overview**




We
      provide a variety of services and products to the aerospace industry. We operate
      four *FAA* certified
      repair stations, which provide aircraft component MRO services for airlines,
      air
      cargo carriers, maintenance service cen-ters and the military. In conjunction
      with our MRO services, we also manufacture related OEM components for airplane
      manufacturers and other environmental control and cooling systems. Our parts
      services division offers parts services for commercial, regional and charter
      airlines and business aircraft owners.




We
      specialize in the repair and overhaul of heat transfer components, APUs,
      propellers, landing gear and pneumatic ducting. We are licensed by Hamilton
      Sundstrand, a leading provider of aerospace products, to provide MRO services
      for all of their air-to-air heat transfer products, by Honeywell, a leading
      manufacturer of aerospace products and aerospace services provider, to provide
      MRO services for three of their APU models and by TAT Technologies to provide
      MRO services for their heat exchangers. Our propeller repair facility is an
      authorized service center for Hartzell and McCauley propellers. Our repair
      stations are certified by the FAA and the EASA. We also manufacture heat
      transfer equipment used in commercial, regional, business and military aircraft,
      com-plete environmental control systems and cooling systems for
      electronics.




The
      pricing terms under our MRO contracts vary depending on the type of contract
      and
      its specific terms. Generally the types of contracts that we enter into are
      as
      follows:




·
            time
                and material contracts, in which we charge our customer a price based
                on
                the specific work to be performed;




12




·
            fixed
                price per maintenance or service event contracts, in which pre-negotiated
                fixed prices are charged for specific repair and overhaul or redesign
                services; and




·
            fixed
                price per component hour (or in the case of landing gear. the number
                of
                landing cycles) contracts in which pre-negotiated fixed prices are
                charged
                for any and all repair and overhaul service requirements during the
                term
                of the contract.




Our
      parts
      services division provides inventory management and parts services for
      commercial, regional and charter airlines and business aircraft owners. We
      also
      maintain a small inventory of parts for resale.




Our
      management believes that our revenues and sources of revenues are among the
      key
      performance indicators for our business. Our revenues from our two principal
      lines of business for the six month periods ended June 30, 2007 and 2006 and
      the
      three month periods ended June 30, 2007 and 2006 were as follows:




**Three
                Months Ended June 30,**
            
            **Six
                Months Ended June 30,****2007**
            
            **2006**
            
            **2007**
            
            **2006****Revenues**
            
            **%
                of**
              **Total
                Revenues**
            
            **Revenues**
            
            **%
                of Total Revenues**
            
            **Revenues**
            
            **%
                of Total Revenues**
            
            **Revenues**
            
            **%
                of Total Revenues**(Revenues
                in thousands)Revenues:MRO
                Services
            
            $
            12,606
            
            
            69.9
            %
            $
            11,315
            
            
            82.9
            %
            $
            25,046
            
            
            65.5
            %
            $
            21,442
            
            
            82.8
            %Parts
                services
            
            
            5,436
            
            
            30.1
            %
            
            2,337
            
            
            17.1
            %
            
            13,209
            
            
            34.5
            %
            
            4,461
            
            
            17.2
            %Total
                revenues
            
            $
            18,042
            
            
            100.0
            %
            $
            13,652
            
            
            100.0
            %
            $
            38,255
            
            
            100.0
            %
            $
            25,903
            
            
            100.0
            %




The
      following table reflects the geographic breakdown of our revenues for each
      of
      the six month periods ended June 30, 2007 and 2006 and the three month periods
      ended June 30, 2006 and 2007:




**Three
                Months Ended June 30,**
            
            **Six
                Months Ended June 30,****2007**
            
            **2006**
            
            **2007**
            
            **2006****Revenues**
            
            **%
                of Total Revenues**
            
            **Revenues**
            
            **%
                of Total Revenues**
            
            **Revenues**
            
            **%
                of Total Revenues**
            
            **Revenues**
            
            **%
                of Total Revenues**(Revenues
                in thousands)North
                America
            
            $
            13,082
            
            
            72.5
            %
            $
            9,190
            
            
            67.3
            %
            $
            28,290
            
            
            74.8
            %
            $
            17,887
            
            
            69.1
            %Europe
            
            
            3,290
            
            
            18.2
            %
            
            3,343
            
            
            24.5
            %
            
            6,932
            
            
            18.1
            %
            
            6,167
            
            
            23.8
            %Israel
                and other
            
            
            1,155
            
            
            6.4
            %
            
            674
            
            
            4.9
            %
            
            2,090
            
            
            5.4
            %
            
            1,096
            
            
            4.2
            %Asia
            
            
            515
            
            
            2.9
            %
            
            445
            
            
            3.3
            %
            
            943
            
            
            2.5
            %
            
            753
            
            
            2.9
            %$
            18,042
            
            
            100.0
            %
            $
            13.652
            
            
            100.0
            %
            $
            38,255
            
            
            100.0
            %
            $
            25,903
            
            
            100.0
            %





Our
      cost
      of revenues for MRO services consists of component and material costs, direct
      labor costs, shipping expenses. overhead related to manufacturing and
      depreciation of manufacturing equipment. Our cost of revenues for parts services
      consists primarily of the cost of the parts and shipping expenses. Our gross
      margin is affected by the proportion of our revenues generated from MRO services
      (including the sale of OEM products) and parts services. Our revenues from
      MRO
      services generally have higher gross margins than our parts
      services.




Selling
      and marketing expenses consist primarily of commission pay-ments, compensation
      and related expenses of our sales teams, attendance at trade shows and
      advertising expenses and related costs for facilities and
      equipment.




General
      and administrative expenses consist of compensation and related expenses for
      executive, finance, legal and administrative personnel, professional fees and
      other general corporate expenses and related costs for facilities and
      equipment.


13


**Critical
      Accounting Policies**




The
      preparation of the financial statements in accordance with generally accepted
      accounting principles in the United States, or GAAP, requires us to make
      estimates and assumptions that affect the reported amounts of assets,
      liabilities, sales, costs and expenses and related disclosures. Though we
      evaluate our estimates and assumptions on an ongoing basis, our actual results
      may differ from these estimates.




Certain
      of our accounting policies that we believe are the most important to the
      portrayal of our financial condition and results of operations and that require
      management's subjective judgments are described below to facilitate better
      understanding of our business activities. We base our judgments on our
      experience and assump-tions that we believe are reasonable and applicable under
      the circumstances.




*Revenue
      recognition*




Revenues
      from the sale of our services and products are recognized when persuasive
      evidence of an arrange-ment exists, delivery of the product has occurred.
      provided the collection of the resulting receivable is probable, the price
      is
      fixed or determinable and we no longer have any significant obligation with
      respect to such sale. We do not grant a right of return.




Revenues
      from MRO services are recognized when customer-owned material is shipped back
      to
      the customer. Revenues from parts sales are recognized when the part is shipped
      to the customer and title passes to the customer.




Revenues
      from maintenance contracts are recognized over the contract period in proportion
      to the costs expected to be incurred in performing services under the contract.
      We estimate the costs that are expected to be incurred based on our experience
      with the aggregate costs incurred and to be incurred on contracts of this
      nature. The costs incurred related to our maintenance contracts are not incurred
      on a straight line basis, as the timing to provide our maintenance services
      is
      dependent on when parts under these contracts require maintenance.




*Goodwill,
      Other Intangible Assets and Long-Lived Assets*




Goodwill
      represents the excess of the purchase price over the fair value of identifiable
      net assets acquired in business combinations. Of the $4.8 million of goodwill
      on
      our balance sheet as of June 30, 2007, approximately $4.3 million was a result
      of our acquisition of Piedmont. The identifiable intangible assets relating
      to
      the Piedmont acquisition, other than goodwill, included in our balance sheet
      are
      customer relationships and other intangible assets. The value we assigned to
      these intangible assets, using the income approach based on the present value
      of
      the cash flows attributable to each asset, was approximately $2.9 million.
      The
      amounts allocated to these intangible assets are being amortized on a
      straight-line basis over periods ranging from ** 0.3
      to 10
      years.




We
      review
      goodwill and other intangible assets for potential impairment annually and
      when
      events or changes in circumstances indicate the carrying value of the goodwill
      or the other intangible assets may be impaired. in which case we may obtain
      an
      appraisal from ** an
      independent valuation firm to determine the amount of impairment, if any. In
      addition to the possible use of an independent valuation firm, we perform
      internal valua-tion analyses and consider other publicly available market
      information. We determine fair value using widely accepted valuation techniques,
      including discounted cash flow and market multiple analyses. These types of
      analyses require us to make assumptions and estimates regarding industry
      economic factors and the profitability of future business strategies. It is
      our
      policy to conduct impairment testing based on our current business strategy
      in
      light of present industry and economic conditions, as well as future
      expectations. In the fourth quarter of fiscal 2006, we completed our annual
      impairment testing of goodwill using the methodology described in the notes
      to
      our consolidated financial statements, and determined there was no impairment
      of
      our goodwill. If actual results are not consistent with our assumptions and
      estimates, we may be exposed to a goodwill impairment charge.




*Income
      Taxes*




We
      account for income taxes in accordance with Statement of Financial Accounting
      Standards No. 109, "Accounting for Income Taxes," ("SFAS No. 109"). We use
      the
      liability method of accounting for income taxes. Under this method, deferred
      tax
      assets and liabilities are determined based on temporary differences between
      the
      financial statement and tax bases of assets and liabilities and net operating
      loss and credit carryforwards using enacted tax rates in effect for the year
      in
      which the differences are expected to reverse. The effect on deferred tax assets
      and liabilities of a change in tax rates is recognized in income in the period
      that includes the enactment date. Valuation allowances are established when
      it
      is more likely than not that some portion of the deferred tax assets will not
      be
      realized. To the extent that our decisions and assumptions and historical
      reporting are determined not to be compliant with applicable tax laws we may
      be
      subject to adjustments in our reported income for tax purposes as well as
      interest and penalties.


14




*Allowances
      for Doubtful Accounts*




We
      perform ongoing credit evaluations of ** our
      customers' financial condition and we require collateral as deemed necessary.
      We
      maintain allowances for doubtful accounts for estimated losses resulting from
      the inability of our customers to make payments. In judging the adequacy of
      the
      allowance for doubtful accounts, we consider multiple factors including the
      aging of our receivables, historical bad debt experience and the general
      economic environment. Management applies considerable judgment in assessing
      the
      realization of receivables, including assessing the probability of collection
      and the current credit worthiness of each customer. If the financial condition
      of our customers were to deteriorate, resulting in an impairment of their
      ability to make payments, additional allowances may be required.




*Inventories*




Inventories
      are stated at the lower of cost or market. Cost is determined by the average
      cost and first-in, first-out (FIFO) methods. We write down obsolete or slow
      moving inventory in an amount equal to the difference between the cost of
      inventory and the estimated market value based upon assumptions about future
      demand, mar-ket conditions and sale forecasts. If actual market conditions
      are
      less favorable than we anticipate, additional inventory write-downs may be
      required.




*Warranty
      Costs*




We
      provide warranties for our products and services ranging from one to five years,
      which vary with respect to each contract and in accordance with the nature
      of
      each specific product. We estimate the costs that may be incurred under our
      warranty and record a liability in the amount of such costs at the time the
      product is shipped. We periodically assess the adequacy of our recorded warranty
      liabilities and adjust the amounts as necessary. As of June 30, 2007 and
      December 31, 2006, the aggregate amount of our warranty costs was not
      material.




**Results
      of Operations**




The
      following table sets forth our statements of operations as a percentage of
      revenues for the periods indicated:




**Three
                Months Ended June 30,**
            
            **Six
                Months Ended June 30,****2007**
            
            **2006**
            
            **2007**
            
            **2006****(Unaudited)**Revenue:MRO
                services
            
            
            69.9
            %
            
            82.9
            %
            
            65.5
            %
            
            82.8
            %Parts
                services
            
            
            30.1
            
            
            17.1
            
            
            34.5
            
            
            17.2Total
                revenue
            
            
            100.0
            
            
            100.0
            
            
            100.0
            
            
            100.0Costs
                and operating expenses:MRO
                services
            
            
            47.2
            
            
            62.0
            
            
            44.1
            
            
            62.3Parts
                services
            
            
            21.0
            
            
            13.2
            
            
            28.3
            
            
            13.0Selling
                and marketing
            
            
            3.7
            
            
            4.1
            
            
            3.4
            
            
            4.2General
                and administrative
            
            
            11.8
            
            
            7.9
            
            
            10.0
            
            
            7.2Amortization
                of intangibles
            
            
            0.7
            
            
            0.8
            
            
            0.6
            
            
            0.9Operating
                income
            
            
            15.6
            
            
            12.0
            
            
            13.6
            
            
            12.4Financial
                expense, net
            
            
            1.0
            
            
            1.1
            
            
            0.7
            
            
            1.1Income
                taxes
            
            
            6.0
            
            
            4.1
            
            
            5.1
            
            
            4.2Net
                income
            
            
            8.6
            %
            
            6.8
            %
            
            7.8
            %
            
            7.1
            %





In
      addition to revenues and the sources of our revenues, our management team views
      our gross profit margin and the level of inventory compared to revenues as
      the
      key performance indicators in assessing our company’s financial condition and
      results of operations. Our management team believes that the upward trend in
      our
      revenues is reflective of an industry-wide increase in demand for MRO services,
      and we currently expect that this trend will continue for the foreseeable
      future. While our management team believes that demand for parts sevices will
      also continue to grow, this segment is subject to a high degree of volatility
      because of the potential impact of large one time parts purchases.




15




**Three
      Months Ended June 30, 2007 Compared to the Three Months June 30,
      2006**




*Revenues.* Total
      revenues increased by $4.4 million, or 32.2 % to $18.0 million for the three
      months ended June 30, 2007 from $13.6 million for the three months ended June
      30, 2006. The increase in revenues was primarily attributable to the growth
      in
      both parts services and MRO services revenues.




Revenues
      from MRO services, including OEM sales, increased by $1.3 million, or 11.4%
      to
      $12.6 million for the three months ended June 30, 2007 from $11.3 million for
      the three months ended June 30, 2006. The organic growth in MRO services
      revenues for the three months ended June 30, 2007, is a result of increased
      sales to historical customers and, to a lesser degree, sales to new customers.
      OEM product sales increased by $83,000, or 9.1% to  $1.0
      million for the three months ended June 30, 2007 from $917,000 for the three
      months ended June 30, 2006, primarily as a result of additional sales to
      historical customers.




Parts
      services revenues increased by $3.1 million, or 132.6% to $5.4 million for
      the
      three months ended June 30, 2007 from $2.3 million for the three months ended
      June 30, 2006. The growth in parts sales is attributable to increased purchases
      by existing customers and purchases by new customers. ****




*Cost
      of revenues.* Cost
      of revenues increased by $2.1 million, or 20.0% to $12.3 million for the three
      months ended June 30, 2007 from $10.3 million for the three months ended June
      30, 2006. Cost of revenues for parts services increased by $2.0 million, or
      111.0% to $ 3.8 million for the three months ended June 30, 2007 from $1.8
      million for the three months ended June 30, 2006, principally as a result of
      our
      increased parts revenues.




*Selling
      and marketing expenses* .  Selling
      and marketing expenses increased by $102,000 or 18.2% to $662,000 for the three
      months ended June 30, 2007 from $560,000 **** for
      the
      three months ended June 30, 2006. Our selling and marketing expenses as a
      percentage of revenues decreased to 3.7% for the three months ended June 30,
      2007, from 4.1% for the three months ended June 30, 2006 **** as
      a
      result of our increased revenues **.**




*General
      and administrative expenses.* General
      and administrative expenses increased by $1.1 million, or 98.0% to $2.1million
      for the three months ended June 30, 2007 from $1.1 million for the three months
      ended June 30, 2006.  The
      increase in general and administrative expenses is primarily attributable to
      $2,000 of stock based compensation expense, bonus payments of $188,000 accrued
      for 2007, and costs associated with the AS 9100 (a quality standard used by
      the
      aerospace industry) certification of our Oklahoma facility and the increase
      in
      the scope of our operations **.** General
      and administrative expenses as a percentage of revenues increased to 11.8%
      for
      the three months ended June 30, 2007 from 7.9% for the three months ended June
      30, 2006, primarily as a result of stock based compensation expenses, personnel
      costs and professional fees




*Operating
      income* .  Our
      operating income increased by $1.2 million, or 71.9% to $2.8 million for the
      three months ended June 30, 2007 from $1.6 million for the three months ended
      June 30, 2006 .
      The operating income of our MRO services segment increased by $1.3 million,
      or
      67.0% to $3.2 million for the three months ended June 30, 2007 from $1.9 million
      for the three months ended June 30, 2006. The increase is attributable primarily
      to improved operating efficiencies and economies of scale. The operating income
      of our parts services segment increased by approximately $1.1 million, or 305.1
      % to $1.4 million for the three months ended June 30, 2007 from $356,000 for
      the
      three months ended June 30, 2006 as a result of increased parts revenues.




*Interest
      income.* Interest
      income increased by $57,000 or 35.6% to $217,000 for the three months ended
      June
      30, 2007 from $160,000 for the three months ended June 30, 2006, principally
      as
      a result of an increase in the amount of funds held in interest bearing
      accounts. We expect that our interest income for the remainder of 2007 will
      increase as a result of the investment of a portion of the proceeds of our
      initial public offering in interest bearing accounts.




*Interest
      expense.* Interest
      expense increased by $79,000, or 25.9% to $384,000 for the three months ended
      June 30, 2007 from $305,000 for the three months ended June 30, 2006. The
      increase in interest expense reflects an increase in the prevailing interest
      rates for our then existing variable rate long-term debt. We do not expect
      to
      incur any material interest expenses for the remainder of 2007 as a result
      of
      our repayment of our oustanding indebtedness from the proceeds of our initial
      public offering.




16




*Income
      taxes.* Income
      taxes increased by $526,000 or 93.4 % to $1.1 million for the three months
      ended
      June 30, 2007 from $563,000 for the three months ended June 30, 2006,
      principally as a result of our increased profitability. Our effective tax rate
      exceeded the federal statutory rate for each period primarily due to state
      income taxes.




**Six
      Months Ended June 30, 2007 Compared to the Six Months June 30,
      2006**




*Revenues.* Total
      revenues increased by $12.4 million, or 47.7% to $38.3 million for the six
      months ended June 30, 2007 from $25.9 million for the six months ended June
      30,
      2006. The increase in revenues was attributable to the growth of $8.7 million
      in
      services and $3.6 million in MRO services revenues.




Revenues
      from MRO services, including OEM sales, increased by $3.6 million, or 16.8%
      to
      $25.0 million for the six months ended June 30, 2007 from $21.4 million for
      the
      six months ended June 30, 2006. The organic growth in MRO services revenues
      for
      the six months ended June 30, 2007, is a result of increased sales to historical
      customers and, to a lesser degree, sales to new customers. OEM product sales
      increased by $900,000, or 55.0% to $2.5 million for the six months ended June
      30, 2007 from $1.6 million for the six months ended June 30, 2006, primarily
      as
      a result of a large order from Boeing Corporation.




Parts
      services revenues increased by $8.7 million, or 196.1% to $13.2 million for
      the
      six months ended June 30, 2007 from $4.5 million for the six months ended June
      30, 2006. The growth in parts sales is attributable to increased purchases
      by
      existing customers and purchases by new customers, including $3.6 million in
      purchases from a single customer in the six months ended June 30, 2007. We
      do
      not expect that this customer will account for substantial revenues during
      the
      remainder of 2007.




*Cost
      of revenues.* Cost
      of revenues increased by $8.2 million, or 42.0% to $27.7 million for the six
      months ended June 30, 2007 from $19.5 million for the six months ended June
      30,
      2006. Cost of revenues for MRO services increased by $783,000 or 4.6 % to $16.9
      million for the six months ended June 30, 2007 from $16.1 million for the six
      months ended June 30, 2006, primarily as a result of the growth in MRO services
      revenue. Cost of revenues for parts services increased by $7.5 million, or
      221.6
      % to $10.8 million for the six months ended June 30, 2007 from $3.4 million
      for
      the six months ended June 30, 2006, principally as a result of our increased
      parts revenues.




*Selling
      and marketing expenses* .  Selling
      and marketing expenses increased by $209,000, or 19.1% to 1.3 million for the
      six months ended June 30, 2007 from $1.1 million for the six months ended June
      30, 2006. Our selling and marketing expenses as a percentage of revenues
      decreased to 3.4 % for the six months ended June 30, 2007, from 4.2% for the
      six
      months ended June 30, 2006.




*General
      and administrative expenses.* General
      and administrative expenses increased by $2.0 million, or 104.7% to $ 3.8
      million for the six months ended June 30, 2007 from $1.9 million for the six
      months ended June 30, 2006. The increase in general and administrative expenses
      is primarily attributable to $323,000 of stock based compensation expense,
      bonus
      payments of $293,000 accrued for 2007, costs associated with the AS 9100 (a
      quality standard used by the aerospace industry) certification of our Oklahoma
      facility and the increased scope of our operations. General and administrative
      expenses as a percentage of revenues increased to 10.0% for the six months
      ended
      June 30, 2007 from 7.2 % for the six months ended June 30, 2006, primarily
      as a
      result of stock based compensation expenses, personnel costs and professional
      fees incurred in preparing to becom a public company.




*Operating
      income* .  Our
      operating income increased $2.0 million, or 61.5% to $5.2 million for the six
      months ended June 30, 2007 from $3.2 million for the six months ended June
      30,
      2006 .
      The operating income of our MRO services segment increased by $2.9 million,
      or
      81.8% to $6.5 million for the six months ended June 30, 2007 from $3.6 million
      for the six months ended June 30, 2006. The increase is attributable primarily
      to improved operating efficiencies and economies of scale. While operating
      income of our parts services segment increased by $1.2 million, or 179.5% to
      $1.9 million for the six months ended June 30, 2007 from $672,000 for the six
      months ended June 30, 2006, the operating margin for this segment decreased
      to
      14.2% for the six months ended June 30, 2007 from 15.1% for the six months
      ended
      June 30, 2006, as a result of a one time discount to a significant
      customer. ****




*Interest
      income.* Interest
      income increased by $74,000 or 37.6% to $271,000 for the six months ended
      June 30, 2007 from $197,000 for the six months ended June 30, 2006,
      principally as a result of an increase in the amount of funds held in interest
      bearing accounts.




17




*Interest
      expense.* Interest
      expense increased by $57,000, or 11.8% to $541,000 for the six months ended
      June
      30, 2007 from $484,000 for the six months ended June 30, 2006. The increase
      in
      interest expense reflects an increase in the prevailing interest rates for
      our
      then existing variable rate long-term debt.




*Income
      taxes.* Income
      taxes increased by $ 857,000, or 79.0% to $1.9 million for the six months ended
      June 30, 2007 from $1.1 million for the six months ended June 30, 2006,
      principally as a result of our increased profitability. Our effective tax rate
      exceeded the federal statutory reate for each period primarily due to state
      income taxes.




**Liquidity
      and Capital Resources**




As
      of
      June 30, 2007, we had cash and cash equivalents of approximately $2.7 million and
      working capital of approximately $12.6 million.  On
      July
      23, 2007, we received net proceeds of approximately $42 million from our sale
      of
      4,205,000 shares of common stock in our initial public offering.




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




We
      used a
      portion of the proceeds of our initial public offering to repay the remaining
      $4
      million that was outstanding under our loan from Bank Leumi USA pursuant to
      which we paid annual interest of Libor + 1.3% (6.65% at June 30, 2007). As
      part
      of the Piedmont acquisition, we also entered into two $3.0 million loans with
      TAT Technologies for an aggregate of $6.0 million. We also repaid the $4 million
      that was outstanding under these two loans with a portion of the proceeds of
      our
      initial public offering. We paid interest of Libor + 3% compounded annually
      (8.35% at June 30, 2007) on one loan and fixed annual interest of 7.25% on
      the
      second.




As
      of
      June 30, 2007, we are in compliance with all applicable financial
      covenants.




*Cash
      Flows*




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




**Six
                Months Ended**
              **June
                30,****2007**
            
            **2006****(Unaudited)**(in
                thousands)Net
                cash provided by (used in) operating activities
            
            $
            (681
            )
            $
            1,379Net
                cash used in  investing activities
            
            
            (214
            )
            
            (652
            )Net
                cash used in financing activities
            
            
            (684
            )
            
            (1,000
            )Net
                decrease in cash and cash equivalents
            
            
            (1,579
            )
            
            (273
            )Cash
                and cash equivalents at beginning of period
            
            
            4,309
            
            
            2,259Cash
                and cash equivalents at end of period
            
            $
            2,730
            
            $
            1,986





Net
      cash
      used in operating activities was $681,000 for the six months ended June 30,
      2007. This amount was primarily attributable to a $2.5 million increase in
      accounts receivable which grew in line with our revenue growth, a $807,000
      increase in inventories required to support the increase in MRO and parts
      services revenues, and a $1.7 million decrease in accounts payable, offset
      in
      part by $3.0 million in net income and a $936,000 increase in amounts
      payable to TAT Technologies for the purchase of heat transfer
      components,.




Net
      cash
      used in investing activities was $214,000 for the six months ended June 30,
      2007. All of the cash used in investing activities was for the purchase of
      property and equipment.




Net
      cash
      used in financing activities was $684,000 for the six months ended June 30,
      2007. This was attributable to expenditures on our IPO of $1.1 million, offset
      by $395,000 of checks issued in excess of the related bank balance.




18





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




**Payments
                Due by Period****Total**
            
            **Less
                than Year**
            
            **1-3
                Years**
            
            **3-5
                Years**
            
            **More
                than 5 Years**(in
                thousands)Long-term
                debt obligations (1)
            
            $
            8,000
            
            $
            8,000
            
            $
            -
            
            $
            -
            
            $
            -Operating
                lease obligations
            
            
            633
            
            
            173
            
            
            400
            
            
            60
            
            
            -Deferred
                tax liability
            
            
            436
            
            
            -
            
            
            -
            
            
            -
            
            
            436Estimated
                long-term loan interest(2)
            
            
            25
            
            
            25
            
            
            -
            
            
            -
            
            
            -Total
            
            $
            9,094
            
            $
            8,198
            
            $
            400
            
            $
            60
            
            $
            436





__________


(1)
      We
      repaid all of our long-term obligations with a portion of the proceeds from
      our
      initial public offering.


(2)
      Estimates for variable rate notes are based on the rate in effect at June 30,
      2007.




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




We
      expect
      that our capital expenditures for the remainder of 2007 will total $400,000,
      primarily for expanded capabilities and capacity for our MRO services. We expect
      that our cash flow from operations will be sufficient to fund these capital
      expenditures.




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




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




*Seasonality*




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




*Off-balance
      sheet arrangements*




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




**Recent
      Accounting Pronouncements**




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





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




19




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





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




**Foreign
      Exchange Risks**





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




**Investment
      Risk**




We
      repaid
      our outstanding debt of $8 million as of June 30, 2007 with a portion of the
      proceeds of our initial public offering. We invested the remaining net proceeds
      of the offering in short-term money market instruments, and as a result, 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.




**Item
      4T.** **Controls and Procedures**




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




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




**Changes
      in Internal Controls over Financial Reporting**




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


20




**PART
      II -
      OTHER INFORMATION:**




**Item
      1.** **Legal
      Proceedings**




None




**Item
      1A.** **Risk
      Factors**




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




**Risks
      Related to Our Business and Operations**




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




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




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




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




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


21




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




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




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




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




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




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




•  greater
      access to capital;




•  stronger
      relationships with customers and suppliers;




•  greater
      name recognition; and




•  access
      to
      superior technology and marketing resources.




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




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




Because
      of the high degree of concentration in the airline industry, and the importance
      of a few large customers for our MRO services, our MRO business is exposed
      to a
      high degree of risk related to customer concentration. In the years ended
      December 31, 2005 and 2006 and the six months ended June 30, 2007, our five
      largest MRO customers accounted for approximately 28.3%, 32.0% and 22.5%,
      respectively, of our MRO revenues. A loss of significant business from any
      of
      these customers would be harmful to our profitability.




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




The
      profitability of our parts services business is driven by the needs of our
      customers whose demand for replacement parts is constantly fluctuating. Some
      of
      our customers may, from time to time, place single orders for a large amount
      of
      parts in conjunction with the overhaul of a significant portion of their active
      fleet. For example, in the six months ended June 30, 2007, we received a
      substantial order from a single customer which accounted for $2.9 million of
      our
      revenues for the period. We do not expect the customer to place another order
      of
      similar size with us in the near future, if ever. As a result, this segment
      of
      our business is subject to a high degree of volatility due to the potential
      impact of large one-time parts purchases. A reduction in demand for parts by
      one
      or more of our significant clients would have an adverse affect on our operating
      results.


22




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




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




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




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




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




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




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




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




Approximately
      15.8%, 9.1% and 1.3% of our revenues were related to MRO services provided
      to
      the U.S. government for the year ended December 31, 2005 and 2006 and for the
      six months ended June 30, 2007, respectively. We are subject to risks particular
      to contracts with governmental authorities. These risks include the ability
      of
      the governmental authorities to unilaterally:




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




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




•  reduce
      the value of existing contracts;




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




•  control
      or potentially prohibit the export of our products.




23




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




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




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




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




In
      the
      years ended December 31, 2005 and 2006 and the six months ended June 30, 2007,
      approximately 36.3%, 27.1% and 26.0%, respectively, of our revenues were derived
      from providing services to clients located outside of the United States. This
      source of revenue is subject to various risks, including:




•  governmental
      embargoes or foreign trade restrictions;




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




•  changes
      in foreign exchange rates;




•  tariffs;




•  other
      trade barriers;




•  political,
      economic and social instability; and




•  difficulties
      in accounts receivable collections.




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




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




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




24




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




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




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




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




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




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




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




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




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




25




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




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




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




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




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




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






**Risks
      Related to Establishing Our Company as Separate from TAT
      Technologies**




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




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




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




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




26




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






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




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




•
              *Cross
                  directorships, employment and share ownership.*The
                  ongoing relationships of certain of our directors and executive
                  officers
                  with TAT Technologies and/or their interests in the ordinary shares
                  of TAT
                  Technologies could create, or appear to create, conflicts of interest
                  when
                  directors and executive officers are faced with decisions that
                  could have
                  different implications for the two companies. For example, these
                  decisions
                  could relate to disagreements over the desirability of a potential
                  acquisition opportunity, or a change in dividend
                  policy.
 
 •
              *Intercompany transactions.*We
                expect to continue to enter into transactions with TAT Technologies
                as
                part of our day-to-day business activities. Although the terms of
                any such
                transactions will be established based upon negotiations between
                employees
                of TAT Technologies and us, subject to the approval of the independent
                directors on our board or a committee of disinterested directors,
                there
                can be no assurance that the terms of any such transactions will
                be as
                favorable to us as may otherwise be obtained in arm’s-length negotiations
                with unaffiliated third parties.
 
 •
              *Intercompany
                  agreements.*We
                  have entered into agreements with TAT Technologies pursuant to
                  which it
                  provides us with heat transfer components and engineering support
                  for our
                  MRO operations with respect to such components. We have also agreed
                  with
                  TAT Technologies that we will not, except in certain limited
                  circumstances, compete with each other in the sale of OEM heat
                  transfer
                  components and the provision of MRO services for heat transfer
                  components.
                  The terms of these agreements were established while we were a
                  wholly-owned subsidiary of TAT Technologies and were approved by
                  the
                  independent directors of our board. We have also entered into a
                  registration rights agreement with TAT Technologies concerning
                  the
                  registration for resale of our common stock by them. Conflicts
                  could arise
                  in the interpretation or any extension or renegotiation of these
                  existing
                  agreements after this
                  offering.




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




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




27




**Risks
      Related to Our Common Stock**




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




•  period
      to
      period fluctuations in our results of operations;




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




•  regulatory
      developments;




•  recruitment
      or departure of key personnel;




•  the
      operating performance of our competitors; and




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




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




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




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




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




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




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




**Item
      3.** **Defaults Upon Senior
      Securities**




None


28




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




None




**Item
      5.** **Other
      Information**




None




**Item
      6.** **Exhibits and Reports
      on Form 8-K**




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




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




**(b)**  Reports
      on Form 8-K filed during the quarter for which this report is
      filed:




None.


29




**SIGNATURES**




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


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




Date:
      August 14, 2007


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