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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 September 30, 2010



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

For the transition period from  to

0-13763

(Commission file No.)





TECHNOLOGY RESEARCH CORPORATION

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|FLORIDA                                                        |  | 59-2095002                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. employer identification no.)

5250-140th Avenue
North Clearwater, Florida 33760

(Address of principal executive offices)

(727) 535-0572

(Registrants telephone number, including area code)





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

Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).    Yes  x    No   ̈

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company filer. See definitions of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | Smaller reporting company |  | x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

The aggregate number of shares of the Registrants Common Stock, $.51 par value, outstanding on September 30, 2010, was
6,621,058.









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FORM 10-Q

TABLE OF CONTENTS



|                               |  |                                                                                                                    |    |                                                                                       |   |  |    | 
|------------------------------ |  | ------------------------------------------------------------------------------------------------------------------ | -- | ------------------------------------------------------------------------------------- | - |  | -- | 
|PART I  FINANCIAL INFORMATION |  |                                                                                                                    |    |                                                                                      
|                               |  |                                                                                                                    |   
|                               |  | Item 1.                                                                                                            |    | Financial Statements (Unaudited)                                                      |   |  | 3  | 
|                               |  | Condensed Consolidated Balance Sheets                                                                              |    |                                                                                       | 3 | 
|                               |  | Condensed Consolidated Statements of Income                                                                        |    |                                                                                       | 4 | 
|                               |  | Condensed Consolidated Statements of Cash Flows                                                                    |    |                                                                                       | 5 | 
|                               |  | Notes to the Condensed Consolidated Financial Statements                                                           |    |                                                                                       | 6 | 
|                               |  | Item 2.                                                                                                            |    | Managements Discussion and Analysis of Financial Condition and Results of
Operations |   |  | 12 | 
|                               |  | Item 3.                                                                                                            |    | Quantitative and Qualitative Disclosures About Market Risk                            |   |  | 17 | 
|                               |  | Item 4.                                                                                                            |    | Controls and Procedures                                                               |   |  | 17 | 
|                               | 
|PART II  OTHER INFORMATION    |  |                                                                                                                    |    |                                                                                      
|                               |  |                                                                                                                    |   
|                               |  | Item 1.                                                                                                            |    | Legal Proceedings                                                                     |   |  | 18 | 
|                               |  | Item 1A.                                                                                                           |    | Risk Factors                                                                          |   |  | 18 | 
|                               |  | Item 6.                                                                                                            |    | Exhibits                                                                              |   |  | 18 | 
|                               |  |                                                                                                                   
|                               |  | Exhibit 31.1 
 Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 |    |                                                                                       |   | 
|                               |  |                                                                                                                   
|                               |  | Exhibit 31.2 
 Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 |    |                                                                                       |   | 
|                               |  |                                                                                                                   
|                               |  | Exhibit 32.1 
 Certification of Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 |    |                                                                                       |   | 
|                               |  |                                                                                                                   
|                               |  | Exhibit 32.2 
 Certification of Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 |    |                                                                                       |   | 
|                               | 
|SIGNATURES                     |  |                                                                                                                    | 18 |                                                                                      



2



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PART I 
FINANCIAL INFORMATION



|Item 1. | Financial Statements.
|------- | ---------------------

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except share data)



|                                                                                                                                                                                                                          |  |                   |        |   |               |  |        |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------ | - | ------------- |  | ------ | -
|                                                                                                                                                                                                                          |  | September 30,2010 |        |   | March 31,2010 | 
|ASSETS                                                                                                                                                                                                                    |  | (Unaudited)       |        |   |               | 
|                                                                                                                                                                                                                          |  |                  
|Current assets:                                                                                                                                                                                                           |  |                   |        |   |               |  |        |  
|Cash and cash equivalents                                                                                                                                                                                                 |  | $                 | 9,264  |   |               |  | 8,216  |  
|Trade and other accounts receivable, net of allowance for doubtful accounts of $30 at September 30, 2010 and $38 at
March 31, 2010                                                                                        |  |                   | 4,334  |   |               |  | 4,400  |  
|Income taxes receivable (note 8)                                                                                                                                                                                          |  |                   |       |   |               |  | 29     |  
|Inventories (notes 3 and 4)                                                                                                                                                                                               |  |                   | 7,510  |   |               |  | 7,315  |  
|Deferred income taxes (note 8)                                                                                                                                                                                            |  |                   | 881    |   |               |  | 729    |  
|Prepaid expenses and other current assets                                                                                                                                                                                 |  |                   | 232    |   |               |  | 299    |  
|                                                                                                                                                                                                                          |  |                   |        |   |               |  |        |  
|Total current assets                                                                                                                                                                                                      |  |                   | 22,221 |   |               |  | 20,988 |  
|Property, plant and equipment, net of accumulated depreciation of $10,921 at September 30, 2010 and $10,532 at
March 31, 2010                                                                                             |  |                   | 3,067  |   |               |  | 3,123  |  
|Intangible assets, net of accumulated amortization of $1,421 at September 30, 2010 and $238 at March 31,
2010                                                                                                             |  |                   | 2,746  |   |               |  | 3,929  |  
|Goodwill                                                                                                                                                                                                                  |  |                   | 4,402  |   |               |  | 4,402  |  
|Other assets                                                                                                                                                                                                              |  |                   | 33     |   |               |  | 33     |  
|                                                                                                                                                                                                                          |  |                   |        |   |               |  |        |  
|Total assets                                                                                                                                                                                                              |  | $                 | 32,469 |   |               |  | 32,475 |  
|                                                                                                                                                                                                                          |  |                   |        |   |               |  |        |  
|                                                                                                                                                                                                                          |  |                  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                      |  |                   |        |   |               |  |        |  
|Current liabilities:                                                                                                                                                                                                      |  |                   |        |   |               |  |        |  
|Trade accounts payable                                                                                                                                                                                                    |  | $                 | 881    |   |               |  | 1,423  |  
|Accrued expenses                                                                                                                                                                                                          |  |                   | 1,295  |   |               |  | 1,720  |  
|Accrued dividends                                                                                                                                                                                                         |  |                   | 135    |   |               |  | 134    |  
|Income taxes payable (note 8)                                                                                                                                                                                             |  |                   | 368    |   |               |  |       |  
|                                                                                                                                                                                                                          |  |                   |        |   |               |  |        |  
|Total current liabilities                                                                                                                                                                                                 |  |                   | 2,679  |   |               |  | 3,277  |  
|                                                                                                                                                                                                                          |  |                  
|Income taxes payable (note 8)                                                                                                                                                                                             |  |                   | 442    |   |               |  | 303    |  
|Deferred income taxes (note 8)                                                                                                                                                                                            |  |                   | 946    |   |               |  | 1,397  |  
|Patco earn-out (note 3)                                                                                                                                                                                                   |  |                   | 738    |   |               |  | 738    |  
|                                                                                                                                                                                                                          |  |                   |        |   |               |  |        |  
|Total liabilities                                                                                                                                                                                                         |  |                   | 4,805  |   |               |  | 5,715  |  
|                                                                                                                                                                                                                          |  |                   |        |   |               |  |        |  
|                                                                                                                                                                                                                          |  |                  
|Stockholders equity (note 9):                                                                                                                                                                                            |  |                   |        |   |               |  |        |  
|Common stock $0.51 par value; 10,000,000 shares authorized, 6,644,343 shares issued and 6,621,058 shares outstanding at
September 30, 2010 and 6,629,405 shares issued and 6,603,620 shares outstanding at March 31, 2010 |  |                   | 3,389  |   |               |  | 3,379  |  
|Additional paid-in capital                                                                                                                                                                                                |  |                   | 12,827 |   |               |  | 12,570 |  
|Retained earnings                                                                                                                                                                                                         |  |                   | 11,504 |   |               |  | 10,867 |  
|Common stock held in treasury, 25,785 shares at cost                                                                                                                                                                      |  |                   | (56    | ) |               |  | (56    | )
|                                                                                                                                                                                                                          |  |                   |        |   |               |  |        |  
|Total stockholders equity                                                                                                                                                                                                |  |                   | 27,664 |   |               |  | 26,760 |  
|                                                                                                                                                                                                                          |  |                   |        |   |               |  |        |  
|Total liabilities and stockholders equity                                                                                                                                                                                |  | $                 | 32,469 |   |               |  | 32,475 |  
|                                                                                                                                                                                                                          |  |                   |        |   |               |  |        |  

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



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TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Unaudited)

(In thousands, except share and per share data)



|                             |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|---------------------------- |  | -------------------------------- | --------- |  | ------------------------------ |  | --------- | ---- |  | - | --------- |  |  |  | --------- | 
|                             |  | Three Months Ended September 30, |           |  | Six Months Ended September 30, | 
|                             |  | 2010                             |           |  | 2009                           |  |           | 2010 |  |   | 2009      | 
|Revenue:                     |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|Commercial                   |  | $                                | 4,161     |  |                                |  | 3,679     |      |  | $ | 8,492     |  |  |  | 7,044     | 
|Military                     |  |                                  | 4,880     |  |                                |  | 5,901     |      |  |   | 10,891    |  |  |  | 12,109    | 
|Royalty                      |  |                                  | 137       |  |                                |  | 47        |      |  |   | 227       |  |  |  | 173       | 
|                             |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|Total revenue                |  |                                  | 9,178     |  |                                |  | 9,627     |      |  |   | 19,610    |  |  |  | 19,326    | 
|Cost of sales                |  |                                  | 5,869     |  |                                |  | 5,721     |      |  |   | 12,050    |  |  |  | 11,370    | 
|                             |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|Gross profit                 |  |                                  | 3,309     |  |                                |  | 3,906     |      |  |   | 7,560     |  |  |  | 7,956     | 
|                             |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|                             |  |                                  |           | 
|Operating expenses:          |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|Selling and marketing        |  |                                  | 579       |  |                                |  | 608       |      |  |   | 1,251     |  |  |  | 1,280     | 
|General and administrative   |  |                                  | 1,551     |  |                                |  | 994       |      |  |   | 3,356     |  |  |  | 1,998     | 
|Research and development     |  |                                  | 813       |  |                                |  | 658       |      |  |   | 1,746     |  |  |  | 1,331     | 
|                             |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|Total operating expenses     |  |                                  | 2,943     |  |                                |  | 2,260     |      |  |   | 6,353     |  |  |  | 4,609     | 
|                             |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|Income from operations       |  |                                  | 366       |  |                                |  | 1,646     |      |  |   | 1,207     |  |  |  | 3,347     | 
|                             |  |                                  |           | 
|Other income, net            |  |                                  |          |  |                                |  | 2         |      |  |   | 1         |  |  |  | 5         | 
|                             |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|Income before income taxes   |  |                                  | 366       |  |                                |  | 1,648     |      |  |   | 1,208     |  |  |  | 3,352     | 
|Income tax expense           |  |                                  | 51        |  |                                |  | 431       |      |  |   | 302       |  |  |  | 920       | 
|                             |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|Net income                   |  | $                                | 315       |  |                                |  | 1,217     |      |  | $ | 906       |  |  |  | 2,432     | 
|                             |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|                             |  |                                  |           | 
|Earnings per share - basic   |  | $                                | 0.05      |  |                                |  | 0.20      |      |  | $ | 0.14      |  |  |  | 0.41      | 
|                             |  |                                  |           | 
|Earnings per share - diluted |  | $                                | 0.05      |  |                                |  | 0.20      |      |  | $ | 0.13      |  |  |  | 0.40      | 
|                             |  |                                  |           | 
|Shares outstanding - basic   |  |                                  | 6,605,419 |  |                                |  | 5,891,828 |      |  |   | 6,602,680 |  |  |  | 5,891,828 | 
|                             |  |                                  |           | 
|Shares outstanding - diluted |  |                                  | 6,870,316 |  |                                |  | 5,985,691 |      |  |   | 6,894,575 |  |  |  | 5,944,280 | 

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



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TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)



|                                                                                  |  |                                |       |   |      |  |        |  
|--------------------------------------------------------------------------------- |  | ------------------------------ | ----- | - | ---- |  | ------ | -
|                                                                                  |  | Six Months Ended September 30, |      
|                                                                                  |  | 2010                           |       |   | 2009 | 
|Cash flows from operating activities:                                             |  |                                |       |   |      |  |        |  
|Net income                                                                        |  | $                              | 906   |   |      |  | 2,432  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                |       |   |      |  |        |  
|Accretion of interest on short-term investments                                   |  |                                |      |   |      |  | (8     | )
|Bad debt expense                                                                  |  |                                | (6    | ) |      |  |       |  
|Depreciation                                                                      |  |                                | 515   |   |      |  | 523    |  
|Loss on disposal of property and equipment                                        |  |                                | 3     |   |      |  | 143    |  
|Amortization of intangible assets                                                 |  |                                | 1,183 |   |      |  | 29     |  
|Stock compensation expense                                                        |  |                                | 232   |   |      |  | 250    |  
|Deferred income taxes                                                             |  |                                | (603  | ) |      |  | (268   | )
|Changes in operating assets and liabilities:                                      |  |                                |       |   |      |  |        |  
|Trade and other accounts receivable, net                                          |  |                                | 72    |   |      |  | (49    | )
|Inventories, net                                                                  |  |                                | (195  | ) |      |  | 1,707  |  
|Prepaid expenses and other current assets                                         |  |                                | 67    |   |      |  | 85     |  
|Trade accounts payable                                                            |  |                                | (542  | ) |      |  | 42     |  
|Accrued expenses                                                                  |  |                                | (424  | ) |      |  | 85     |  
|Income taxes                                                                      |  |                                | 536   |   |      |  | 589    |  
|                                                                                  |  |                                |       |   |      |  |        |  
|Net cash provided by operating activities                                         |  |                                | 1,744 |   |      |  | 5,560  |  
|                                                                                  |  |                                |       |   |      |  |        |  
|                                                                                  |  |                               
|Cash flows from investing activities:                                             |  |                                |       |   |      |  |        |  
|Maturities of short-term investments                                              |  |                                |      |   |      |  | 3,000  |  
|Purchase of short-term investments                                                |  |                                |      |   |      |  | (3,994 | )
|Purchases of property and equipment                                               |  |                                | (462  | ) |      |  | (213   | )
|                                                                                  |  |                                |       |   |      |  |        |  
|Net cash used in investing activities                                             |  |                                | (462  | ) |      |  | (1,207 | )
|                                                                                  |  |                                |       |   |      |  |        |  
|                                                                                  |  |                               
|Cash flows from financing activities:                                             |  |                                |       |   |      |  |        |  
|Proceeds from the exercise of stock options                                       |  |                                | 35    |   |      |  | 2      |  
|Cash dividends paid                                                               |  |                                | (269  | ) |      |  | (241   | )
|                                                                                  |  |                                |       |   |      |  |        |  
|Net cash used in financing activities                                             |  |                                | (234  | ) |      |  | (239   | )
|                                                                                  |  |                                |       |   |      |  |        |  
|Net increase in cash and cash equivalents                                         |  |                                | 1,048 |   |      |  | 4,114  |  
|Cash and cash equivalents at beginning of period                                  |  |                                | 8,216 |   |      |  | 2,954  |  
|                                                                                  |  |                                |       |   |      |  |        |  
|Cash and cash equivalents at end of period                                        |  | $                              | 9,264 |   |      |  | 7,068  |  
|                                                                                  |  |                                |       |   |      |  |        |  

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



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TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(In thousands, except share data)

1. Basis of Presentation:

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

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

2. Earnings Per Share:

In accordance with the relevant accounting guidance for computing earnings per share, unvested share-based payment awards that contain rights to receive non-forfeitable dividends (whether paid or unpaid)
are participating securities, and should be included in the two-class method of computing earnings per share. As of April 1, 2009, we implemented the accounting guidance which required us to treat unvested shares of restricted stock as
participating securities in accordance with the two-class method in the calculation of both basic and diluted earnings per share.

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



|                                                                                |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|------------------------------------------------------------------------------- |  | -------------------------------- | --------- |  | ------------------------------ |  | --------- | ---- |  | - | --------- |  |  |  | --------- | 
|                                                                                |  | Three months ended September 30, |           |  | Six months ended September 30, | 
|                                                                                |  | 2010                             |           |  | 2009                           |  |           | 2010 |  |   | 2009      | 
|Reconciliation of undistributed earnings:                                       |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|Net income available to common shareholders                                     |  | $                                | 315       |  |                                |  | 1,217     |      |  | $ | 906       |  |  |  | 2,432     | 
|Less: dividends on common stock                                                 |  |                                  | 133       |  |                                |  | 118       |      |  |   | 266       |  |  |  | 237       | 
|Less: dividends on unvested participating securities                            |  |                                  | 2         |  |                                |  | 2         |      |  |   | 3         |  |  |  | 4         | 
|                                                                                |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|Undistributed earnings (1)                                                      |  | $                                | 180       |  |                                |  | 1,097     |      |  | $ | 637       |  |  |  | 2,191     | 
|                                                                                |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|                                                                                |  |                                 
|                                                                                |  | Three months ended September 30, |           |  | Six months ended September 30, | 
|                                                                                |  | 2010                             |           |  | 2009                           |  |           | 2010 |  |   | 2009      | 
|Basic earnings per share computation:                                           |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|Net income available to common shareholders                                     |  | $                                | 315       |  |                                |  | 1,217     |      |  | $ | 906       |  |  |  | 2,432     | 
|Less: dividend equivalents on unvested participating securities                 |  |                                  | 2         |  |                                |  | 2         |      |  |   | 3         |  |  |  | 4         | 
|Less: undistributed earnings allocated to unvested participating securities (1) |  |                                  | 2         |  |                                |  | 20        |      |  |   | 8         |  |  |  | 39        | 
|                                                                                |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|Undistributed earnings allocated to common shareholders                         |  | $                                | 311       |  |                                |  | 1,195     |      |  | $ | 895       |  |  |  | 2,389     | 
|EPS Denominator:                                                                |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|Weighted average shares outstanding for basic earnings per share                |  |                                  | 6,605,419 |  |                                |  | 5,891,828 |      |  |   | 6,602,680 |  |  |  | 5,891,828 | 
|Basic earnings per common share                                                 |  | $                                | 0.05      |  |                                |  | 0.20      |      |  | $ | 0.14      |  |  |  | 0.41      | 
|                                                                                |  |                                 
|                                                                                |  | Three months ended September 30, |           |  | Six months ended September 30, | 
|                                                                                |  | 2010                             |           |  | 2009                           |  |           | 2010 |  |   | 2009      | 
|Diluted earnings per common share computation:(1)                               |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|Net income available to common shareholders                                     |  | $                                | 315       |  |                                |  | 1,217     |      |  | $ | 906       |  |  |  | 2,432     | 
|Less: dividend equivalents on unvested participating securities                 |  |                                  | 2         |  |                                |  | 2         |      |  |   | 3         |  |  |  | 4         | 
|Less: undistributed earnings allocated to unvested participating securities     |  |                                  | 2         |  |                                |  | 20        |      |  |   | 8         |  |  |  | 39        | 
|                                                                                |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|Undistributed earnings allocated to common shareholders                         |  | $                                | 311       |  |                                |  | 1,195     |      |  | $ | 895       |  |  |  | 2,389     | 



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|                                                                        |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|----------------------------------------------------------------------- |  | -------------------------------- | --------- |  | ------------------------------ |  | --------- | ---- |  | - | --------- |  |  |  | --------- | 
|                                                                        |  |                                 
|                                                                        |  | Three months ended September 30, |           |  | Six months ended September 30, | 
|                                                                        |  | 2010                             |           |  | 2009                           |  |           | 2010 |  |   | 2009      | 
|EPS Denominator:                                                        |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|Weighted average shares outstanding for basic earnings per share        |  |                                  | 6,605,419 |  |                                |  | 5,891,828 |      |  |   | 6,602,680 |  |  |  | 5,891,828 | 
|Dilutive common shares issuable upon exercise of stock options (2)      |  |                                  | 220,912   |  |                                |  | 49,643    |      |  |   | 247,666   |  |  |  | 17,271    | 
|Dilutive unvested common shares associated with restricted stock awards |  |                                  | 43,985    |  |                                |  | 44,220    |      |  |   | 44,229    |  |  |  | 35,181    | 
|                                                                        |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|Weighted average shares outstandingdiluted                             |  |                                  | 6,870,316 |  |                                |  | 5,985,691 |      |  |   | 6,894,575 |  |  |  | 5,944,280 | 
|                                                                        |  |                                  |           |  |                                |  |           |      |  |   |           |  |  |  |           | 
|Diluted earnings per common share                                       |  | $                                | 0.05      |  |                                |  | 0.20      |      |  | $ | 0.13      |  |  |  | 0.40      | 



|(1) | For the three and six months ended September 30, 2010, 83,146 shares of restricted unvested stock are considered participating securities. For the three and six
months ended September 30, 2009, 106,999 shares of unvested outstanding shares restricted stock were considered participating securities. The undistributed earnings are allocated to both common shares and unvested participating securities in
computing the earnings per share under the two-class method.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | For both the three-month and six-month periods ended September 30, 2010, options to purchase 335,100 shares of common stock were considered anti-dilutive
for the purposes of calculating earnings per share. For the three-month and six-month periods ended September 30, 2009 options to purchase 704,643 and 654,643 shares of common stock, respectively, were considered anti-dilutive for the
purposes of calculating earnings per share.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3. Acquisition:

On March 31, 2010, we completed an acquisition of all of the common stock of Patco Electronics, Inc. in exchange for $5.0 million in
cash, 674,950 shares of our common stock and contingent cash payments if certain revenue targets are met for either or both of the two years after the closing of the transaction. Included in the purchase price of the Patco acquisition is $0.7
million, the present value of the contingent cash payments that could be paid as additional earn-out payments based upon our best estimate of Patcos future sales of its battery products. Patco designs and manufactures battery management tools
for secondary or re-chargeable batteries in several battery chemistries, including lead acid and lithium ion. Patcos product solutions support customers in military, commercial and industrial sectors. Additionally, we incurred approximately
$0.5 million of transaction costs, recorded in the year ended March 31, 2010, consisting primarily of brokers commissions and professional service fees associated with the Patco acquisition.

The allocation of the purchase price is based upon estimates of the assets and liabilities acquired in accordance with the relevant
accounting guidance. The acquisition of Patco is based on managements consideration of past and expected future performance as well as the potential strategic fit with our long-term goals. The expected long-term growth, market position and
expected synergies to be generated by Patco are the primary factors which gave rise to an acquisition price which resulted in the recognition of goodwill. As a result of adjustments to the purchase price allocation, both goodwill and deferred tax
liabilities have been reduced $1.1 million effective March 31, 2010.



|                                                                                            |  |  |        |   |  |   |       | 
|------------------------------------------------------------------------------------------- |  |  | ------ | - |  | - | ----- | 
|Cash                                                                                        |  |  |        |   |  | $ | 5,000 | 
|Common stock  674,950 shares valued at the $4.82 closing price March 31, 2010 (discounted) |  |  |        |   |  |   | 2,426 | 
|Present value of contingent consideration                                                   |  |  |        |   |  |   | 738   | 
|                                                                                            |  |  |        |   |  |   |       | 
|Total purchase price                                                                        |  |  |        |   |  | $ | 8,164 | 
|                                                                                            |  |  |        |   |  |   |       | 
|The allocation of the aggregate purchase price of this acquisition is as follows:           |  |  |        |   |  |   |       | 
|Goodwill                                                                                    |  |  |        |   |  | $ | 4,402 | 
|Identifiable intangible assets                                                              |  |  |        |   |  |   | 3,584 | 
|Net assets acquired:                                                                        |  |  |        |   |  |   |       | 
|Cash                                                                                        |  |  | 207    |   |  |   |       | 
|Accounts receivable                                                                         |  |  | 275    |   |  |   |       | 
|Inventory                                                                                   |  |  | 1,048  |   |  |   |       | 
|Fixed assets                                                                                |  |  | 506    |   |  |   |       | 
|Other assets                                                                                |  |  | 27     |   |  |   |       | 
|Liabilities assumed                                                                         |  |  | (396   | ) |  |   |       | 
|Deferred tax liabilities on Patco basis differences                                         |  |  | (1,489 | ) |  |   |       | 
|                                                                                            |  |  |        |   |  |   |       | 
|Net assets acquired                                                                         |  |  |        |   |  |   | 178   | 
|                                                                                            |  |  |        |   |  |   |       | 
|                                                                                            |  |  |        |   |  | $ | 8,164 | 
|                                                                                            |  |  |        |   |  |   |       | 

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



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Unaudited pro forma
results of operations assuming the acquisition was consummated at the beginning of 2010 and 2009 are presented below. The proforma financial information presented below represents our historical results combined with those of Patco for the periods
presented, adjusted for specific factually supportable items such as amortization of intangible assets. The pro forma results of operations do not include the costs of integration and are not necessarily indicative of either future results of
operations or results that would have been achieved if the acquisition had been consummated at the beginning of the periods presented below.



|                                           |  |                                  |       |  |                                |   |        |      |  |   |        |  |  |   |        | 
|------------------------------------------ |  | -------------------------------- | ----- |  | ------------------------------ | - | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|                                           |  | Three months ended September 30, |       |  | Six months ended September 30, |  
|(unaudited)                                |  | 2010                             |       |  | 2009                           |   |        | 2010 |  |   | 2009   | 
|Total revenue                              |  | $                                | 9,178 |  |                                | $ | 11,368 |      |  | $ | 19,610 |  |  | $ | 22,426 | 
|Net income                                 |  |                                  | 315   |  |                                |   | 1,472  |      |  |   | 906    |  |  |   | 2,829  | 
|Earnings per share                         |  |                                  |       |  |                                |   |        |      |  |   |        |  |  |   |        | 
|Basic                                      |  | $                                | 0.05  |  |                                |   | 0.22   |      |  | $ | 0.14   |  |  |   | 0.43   | 
|Diluted                                    |  |                                  | 0.05  |  |                                |   | 0.22   |      |  |   | 0.13   |  |  |   | 0.43   | 
|Weighted average common shares outstanding |  |                                  |       |  |                                |   |        |      |  |   |        |  |  |   |        | 
|Basic                                      |  |                                  | 6,605 |  |                                |   | 6,566  |      |  |   | 6,603  |  |  |   | 6,566  | 
|Diluted                                    |  |                                  | 6,870 |  |                                |   | 6,661  |      |  |   | 6,895  |  |  |   | 6,619  | 

4. Inventories:

Inventories consist of the following:



|                |  |                    |       |  |                |  |       | 
|--------------- |  | ------------------ | ----- |  | -------------- |  | ----- | 
|                |  | September 30, 2010 |       |  | March 31, 2010 | 
|Raw materials   |  | $                  | 5,794 |  |                |  | 4,871 | 
|Work-in-process |  |                    | 282   |  |                |  | 336   | 
|Finished goods  |  |                    | 1,434 |  |                |  | 2,108 | 
|                |  |                    |       |  |                |  |       | 
|Total           |  | $                  | 7,510 |  |                |  | 7,315 | 
|                |  |                    |       |  |                |  |       | 

5. Intangible Assets

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



|                                      |  |       |       |  |                         |   |       |     |  |   |             |  |  |  |             | 
|------------------------------------- |  | ----- | ----- |  | ----------------------- | - | ----- | --- |  | - | ----------- |  |  |  | ----------- | 
|                                      |  | Asset |       |  | AccumulatedAmortization |   |       | Net |  |   | Useful Life | 
|Employment / non-compete agreements   |  | $     | 1,780 |  |                         | $ | 303   |     |  | $ | 1,477       |  |  |  | 3 -5 years  | 
|Trade name, trade secrets, trademarks |  |       | 1,060 |  |                         |   | 105   |     |  |   | 955         |  |  |  | 1 -10 years | 
|Backlog orders                        |  |       | 759   |  |                         |   | 759   |     |  |   |            |  |  |  | 1 year      | 
|Patents and developed technology      |  |       | 501   |  |                         |   | 221   |     |  |   | 280         |  |  |  | 10 years    | 
|Customer relationships                |  |       | 67    |  |                         |   | 33    |     |  |   | 34          |  |  |  | 9 years     | 
|                                      |  |       |       |  |                         |   |       |     |  |   |             |  |  |  |             | 
|Total intangible assets               |  | $     | 4,167 |  |                         | $ | 1,421 |     |  | $ | 2,746       |  |  |  |             | 
|                                      |  |       |       |  |                         |   |       |     |  |   |             |  |  |  |             | 
|Goodwill (a)                          |  | $     | 4,402 |  |                         |   |       |     |  | $ | 4,402       |  |  |  |             | 
|                                      |  |       |       |  |                         |   |       |     |  |   |             |  |  |  |             | 

Intangible assets as of March 31, 2010 were as follows:



|                                      |  |       |       |  |                         |   |     |     |  |   |             |  |  |  |             | 
|------------------------------------- |  | ----- | ----- |  | ----------------------- | - | --- | --- |  | - | ----------- |  |  |  | ----------- | 
|                                      |  | Asset |       |  | AccumulatedAmortization |   |     | Net |  |   | Useful Life | 
|Employment / non-compete agreements   |  | $     | 1,780 |  |                         | $ | 7   |     |  | $ | 1,773       |  |  |  | 3 -5 years  | 
|Trade name, trade secrets, trademarks |  |       | 1,060 |  |                         |   | 6   |     |  |   | 1,054       |  |  |  | 1 -10 years | 
|Backlog orders                        |  |       | 759   |  |                         |   | 0   |     |  |   | 759         |  |  |  | 1 year      | 
|Patents and developed technology      |  |       | 501   |  |                         |   | 196 |     |  |   | 305         |  |  |  | 10 years    | 
|Customer relationships                |  |       | 67    |  |                         |   | 29  |     |  |   | 38          |  |  |  | 9 years     | 
|                                      |  |       |       |  |                         |   |     |     |  |   |             |  |  |  |             | 
|Total intangible assets               |  | $     | 4,167 |  |                         | $ | 238 |     |  | $ | 3,929       |  |  |  |             | 
|                                      |  |       |       |  |                         |   |     |     |  |   |             |  |  |  |             | 
|Goodwill (a)                          |  | $     | 4,402 |  |                         |   |     |     |  | $ | 4,402       |  |  |  |             | 
|                                      |  |       |       |  |                         |   |     |     |  |   |             |  |  |  |             | 



|(a) | See footnote 3  Acquisition.
|--- | -----------------------------



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6. Warranty:

We generally provide a one year warranty period for all of our products. We also provide coverage on certain of our surge products
for downstream damage of products not manufactured by us. Our warranty provision represents managements best estimate of probable liabilities, calculated as a function of sales volume and historical repair experience for each
product under warranty. In September 2009, we increased the warranty reserve by $100 to cover potential claims arising from production problems at one of our foreign contract manufacturers. As of September 30, 2010, no claims have been
filed against this additional reserve. A roll-forward of the activity in our warranty liability, included in accrued expenses, for the three months and six months ended September 30, 2010 and 2009 is as follows:



|                  |  |                                  |     |   |                                |  |     |      |  |   |      |   |  |  |      |  
|----------------- |  | -------------------------------- | --- | - | ------------------------------ |  | --- | ---- |  | - | ---- | - |  |  | ---- | -
|                  |  | Three months ended September 30, |     |   | Six months ended September 30, | 
|                  |  | 2010                             |     |   | 2009                           |  |     | 2010 |  |   | 2009 |  
|Beginning balance |  | $                                | 236 |   |                                |  | 162 |      |  | $ | 237  |   |  |  | 164  |  
|Warranty expense  |  |                                  | 55  |   |                                |  | 153 |      |  |   | 84   |   |  |  | 195  |  
|Warranty claims   |  |                                  | (55 | ) |                                |  | (75 | )    |  |   | (85  | ) |  |  | (119 | )
|                  |  |                                  |     |   |                                |  |     |      |  |   |      |   |  |  |      |  
|Ending balance    |  | $                                | 236 |   |                                |  | 240 |      |  | $ | 236  |   |  |  | 240  |  

7. Debt:

Effective September 30, 2009, we entered into the First Amendment to Amended and Restated Loan Agreement (the Loan
Agreement) and Promissory Note dated that same date (the Replacement Note) with Wachovia Bank, N.A. (Wachovia), our current institutional lender. The Replacement Note provided for an interest rate on our line of
credit equal to the 30-day London Interbank Offering Rate (LIBOR) Market Index Rate plus 2.10%, through December 31, 2009. Thereafter, the interest rate is reset quarterly as follows:



|                                |  |                                         
|------------------------------- |  | ----------------------------------------
|If Funded Debt/EBITDA Ratio is: |  | The LIBOR Spread (basis points) will be:
|                                | 
|< 1.50:1.00                     |  | 210                                     
|3 1.50:1.00 < 2.00:1.00         |  | 240                                     
|3 2.00:1.00                     |  | 270                                     

As a result, effective
for the quarter beginning on January 1, 2010 and continuing thereafter, the interest rate on the Replacement Note was reset at a rate equal to the LIBOR Market Interest Rate plus the applicable LIBOR Spread for such quarter. The Loan
Agreement extends the maturity date of our Wachovia credit facility until September 30, 2011.

The Loan Agreement reduced
our existing $6.0 million credit facility to $3.0 million. As of September 30 and March 31, 2010, we had no borrowings on this credit facility. The revolving line of credit can be used for acquisitions, working capital and
general corporate purposes. Revolving loans may be borrowed, repaid and re-borrowed until September 30, 2011, at which time all amounts borrowed must be repaid. Our Loan Agreement with Wachovia obligates us to pay a customary unused
facility fee for a credit facility of this size. The revolving loans under the Loan Agreement are secured by a continuing security interest in most of our key assets, including accounts and notes receivable, inventory, investments, demand deposit
accounts maintained with our lender and 65% of the voting stock of Technology Research Corporation/Honduras, S.A. DE C.V, our wholly-owned subsidiary.

We have no off-balance sheet arrangements and no debt relationships other than noted above.

8. Income taxes:

Our effective income tax rate was 13.9% and 26.2% for the three months ended September 30, 2010 and 2009, respectively. For
the six months ended September 30, 2010 and 2009, our effective income tax rate was 25.0% and 27.4%, respectively. The effective income tax rate is based on the estimated income for the year and the composition of this income from the U.S. and
from our subsidiary in Honduras. The income tax rate on income earned from Honduras is zero due to a tax holiday and, therefore, the effective rate is lower than the U.S. statutory rate due to the mix of income earned in the U.S. versus
income earned in Honduras. The lower current period rate reflects a higher percentage of income earned in Honduras this year.

Pursuant to the accounting for uncertainty in income taxes accounting guidance, we must recognize the tax benefit from an uncertain tax
position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such uncertain
tax positions are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. To the extent we prevail in matters for which accruals have been established or are required to pay
amounts in excess of accruals, our effective tax rate in a given financial statement period could be affected.



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As of September
30, 2010, we have unrecognized tax benefits of $461, of which $19 is included in current income taxes payable and $442 is included in noncurrent income taxes payable. As of March 31, 2010, we had unrecognized tax benefits of $321, of which $18
was included in income taxes receivable and $303 was included in noncurrent income taxes payable. During the three months ended September 30, 2010 and 2009, we recorded $67 and $139, respectively, of unrecognized tax benefits primarily related
to transfer pricing. Interest expense related to uncertain tax positions amounted to $1 and $1 for the three months ended both September 30, 2010 and 2009. During the six month periods ended September 30, 2010 and 2009, we recorded $139
and $218, respectively, of unrecognized tax benefits primarily related to transfer pricing. Interest expense related to uncertain tax positions amount to $1 for the six months ended both September 30, 2010 and 2009. Total accrued interest at
September 30, 2010 and March 31, 2010 was $18 and $10, respectively, and was included in income taxes receivable. There are no accrued penalties. It is our policy to recognize interest and penalties in the provision for income taxes.

A reconciliation of unrecognized tax benefits is as follows:



|                                                             |  |                                  |     |  |                                |  |     |      |  |   |      |  |  |  |     | 
|------------------------------------------------------------ |  | -------------------------------- | --- |  | ------------------------------ |  | --- | ---- |  | - | ---- |  |  |  | --- | 
|                                                             |  | Three months ended September 30, |     |  | Six months ended September 30, | 
|                                                             |  | 2010                             |     |  | 2009                           |  |     | 2010 |  |   | 2009 | 
|Beginning balance                                            |  | $                                | 393 |  |                                |  | 206 |      |  | $ | 321  |  |  |  | 127 | 
|Additions based on tax positions related to the current year |  |                                  | 1   |  |                                |  | 1   |      |  |   | 1    |  |  |  | 1   | 
|Additions for tax positions of prior years                   |  |                                  | 67  |  |                                |  | 139 |      |  |   | 139  |  |  |  | 218 | 
|                                                             |  |                                  |     |  |                                |  |     |      |  |   |      |  |  |  |     | 
|Ending balance                                               |  | $                                | 461 |  |                                |  | 346 |      |  | $ | 461  |  |  |  | 346 | 
|                                                             |  |                                  |     |  |                                |  |     |      |  |   |      |  |  |  |     | 

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

9. Stock-Based Compensation:

For purposes of determining the variables used in the calculation of stock compensation expense under current accounting guidance, we perform an analysis of current market data and historical company data
to calculate an estimate of implied volatility, the expected term of the option and the expected forfeiture rate. We use these estimates as variables in the Black-Scholes option pricing model. Depending upon the number of stock options granted, any
fluctuations in these calculations could have a material effect on the results presented in our Condensed Consolidated Statements of Income. In addition, any differences between estimated forfeitures and actual forfeitures could also have a material
impact on our consolidated financial statements.

Stock compensation expense of $128 and $123, respectively, was included
in the Condensed Consolidated Statements of Income for the three months ended September 30, 2010 and 2009. Stock compensation expense of $232 and $250, respectively, was included in the Condensed Consolidated Statements of Income for
the six month periods ended September 30, 2010 and 2009.

Cash received from the exercise of stock options under all
share-based payment arrangements for the three months ended September 30, 2010 and 2009 was $27 and $2, respectively. Cash received from the exercise of stock options under all share-based payment arrangements for the six months
ended September 30, 2010 and 2009 was $35 and $2, respectively. Currently, we expect to utilize available registered shares when share-based awards are issued.

Stock Option Plans

We have adopted stock plans that provide for the grant
of equity based awards to employees and directors, including incentive stock options, non-qualified stock options and restricted stock awards (non-vested shares) of our common stock (the Plans). Employee stock
options generally vest over a three year period and, until March 2008, director stock options vested over a two-year period. Beginning in March 2008 when directors were granted stock options for the fiscal 2009 year, our director options also
vest over a three- year period. The exercise price of incentive stock options granted under the Plans will not be less than 100% of the fair market value of shares of common stock on the date of grant. For any participant owning stock
representing more than 10% of the voting power of all classes of our stock, the exercise price will not be less than 110% of the fair market value of the shares of common stock on the date of grant. The term of stock options may not exceed ten
years. Non-qualified stock options will be granted at the fair market value on the date of grant.

Our 1993
Incentive Stock Option Plan and our 1993 Amended and Restated Non-Qualified Stock Option Plan have expired, and no options will be granted from these plans in the future.

On March 24, 2000, our Board of Directors adopted the 2000 Long Term Incentive Plan and it was approved by our stockholders in August 2000 at our annual meeting of Stockholders. The 2000 Long
Term Incentive Plan provides for the grant of incentive stock options within the meaning of Section 422 of the Internal Revenue Code to employees and non-qualified stock options to either our employees or directors. The 2000 Long Term
Incentive Plan also allows for the grant of restricted stock awards (non-vested shares) to officers and directors.



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On June 24, 2008,
our Board of Directors approved the Amended and Restated 2000 Long Term Incentive Plan and it was approved by our stockholders on August 27, 2008 at our annual meeting. The Amended and Restated 2000 Long Term Incentive Plan provides for the
grant of incentive stock options within the meaning of Section 422 of the Internal Revenue Code to employees and non-qualified stock options to either our employees or directors. The Amended and Restated 2000 Long Term Incentive Plan also
allows for the grant of restricted stock awards (non-vested shares) to either our employees or directors. A total of 500,000 additional shares of our common stock have been reserved for issuance under the Amended and Restated 2000 Long Term
Incentive Plan. A total of 1.6 million shares of our common stock have been reserved for issuance under the Amended and Restated 2000 Long Term Incentive Plan, of which 299,117 shares remain available for awards as of September 30, 2010.

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



|                                     |  |                          |         |   |                    |  |         |                                       |  |   |                              |   |  |                                          |       |  |  |  |      | 
|------------------------------------ |  | ------------------------ | ------- | - | ------------------ |  | ------- | ------------------------------------- |  | - | ---------------------------- | - |  | ---------------------------------------- | ----- |  |  |  | ---- | 
|                                     |  | Sharesavailablefor grant |         |   | Optionsoutstanding |  |         | Aggregateintrinsicvalue(in thousands) |  |   | Weightedaverageexerciseprice |   |  | Weightedaverageremainingcontractual life |      
|Balance as of March 31, 2010         |  |                          | 376,885 |   |                    |  | 910,118 |                                       |  | $ | 1,457                        |   |  | $                                        | 4.39  |  |  |  | 6.94 | 
|Options granted                      |  |                          | (83,300 | ) |                    |  | 83,300  |                                       |  |   | 5                            |   |  |                                          | 4.64  |  |  |  |     | 
|Options canceled                     |  |                          | 18,888  |   |                    |  | (18,888 | )                                     |  |   | (43                          | ) |  |                                          | 1.70  |  |  |  |     | 
|Options expired                      |  |                          | 1,800   |   |                    |  | (1,800  | )                                     |  |   |                             |   |  |                                          | 12.34 |  |  |  |     | 
|Options exercised                    |  |                          |        |   |                    |  | (19,223 | )                                     |  |   | (55                          | ) |  |                                          | 1.83  |  |  |  |     | 
|Restricted stock grants              |  |                          | (19,600 | ) |                    |  |        |                                       |  |   |                             |   |  |                                          |      |  |  |  |      | 
|Restricted stock canceled            |  |                          | 4,444   |   |                    |  |        |                                       |  |   |                             |   |  |                                          |      |  |  |  |      | 
|                                     |  |                          |         |   |                    |  |         |                                       |  |   |                              |   |  |                                          |       |  |  |  |      | 
|Balance as of September 30, 2010     |  |                          | 299,117 |   |                    |  | 953,507 |                                       |  | $ | 822                          |   |  | $                                        | 4.50  |  |  |  | 6.69 | 
|                                     |  |                          |         |   |                    |  |         |                                       |  |   |                              |   |  |                                          |       |  |  |  |      | 
|Exercisable as of September 30, 2010 |  |                          |         |   |                    |  | 682,774 |                                       |  | $ | 463                          |   |  | $                                        | 5.14  |  |  |  | 5.99 | 
|                                     |  |                          |         |   |                    |  |         |                                       |  |   |                              |   |  |                                          |       |  |  |  |      | 

The weighted average grant date fair value of options granted during the six months ended
September 30, 2010 was $2.43 per share. The total intrinsic value of options exercised during the six months ended September 30, 2010 was $55. There were no options granted or exercised during the six months ended September 30, 2009.

As of September 30, 2010, there was $308 of unrecognized compensation cost related to non-vested stock options that is
expected to be recognized over a weighted average period of 1.9 years. The total fair value of stock options vested during the six months ended September 30, 2010 and 2009 was $145 and $166, respectively.

We estimated the fair value of stock-based payment awards on the date of grant using the Black-Scholes option pricing model, which is
impacted by our stock price as well as assumptions regarding several subjective variables including our expected stock price volatility over the term of the awards, actual and projected employee option exercise experience, the risk free interest
rate and expected dividends. The estimated expected term of options that have been granted was based on historical option exercise trends. Estimated volatility was based on historical volatility over the expected term and the risk free interest
rate was based on U.S. Treasury Bills similar to the expected term. The expected dividend yield was based on our experience with paying dividends over the past 12 months. We are also required to estimate forfeitures at the time of the
grant and to revise these estimates in later periods if actual forfeitures differ from those estimates. Historical data was used to estimate pre-vesting forfeitures and record stock-based compensation expense only for those awards that are
expected to vest.

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



|                                         |  |                                  |            |                                |      |     |      |  |            |      |  |    
|---------------------------------------- |  | -------------------------------- | ---------- | ------------------------------ | ---- | --- | ---- |  | ---------- | ---- |  | ---
|                                         |  | Three months ended September 30, |            | Six months ended September 30,
|                                         |  | 2010                             |            |                                | 2009 |     | 2010 |  |            | 2009
|Weighted-average expected dividend yield |  |                                  | 1.86       | %                              |      | N/A |      |  | 2.02       | %    |  | N/A
|Weighted-average risk free interest rate |  |                                  | 2.02       | %                              |      | N/A |      |  | 2.51       | %    |  | N/A
|Weighted-average expected volatility     |  |                                  | 61.41      | %                              |      | N/A |      |  | 61.78      | %    |  | N/A
|Weighted-average expected life           |  |                                  | 7.26 years |                                |      | N/A |      |  | 7.22 years |      |  | N/A

We granted 81,999
shares of restricted stock awards (non-vested shares) in December 2008 at a grant date fair value of $1.70 per share and 25,000 shares of restricted stock awards (non-vested shares) in February 2009 at a grant date fair value of $1.90 per share. In
June 2010, we granted 19,600 shares of restricted stock awards at a grant date fair value of $5.10 per share. The shares have a three-year vesting period. As of September 30, 2010, 83,146 shares of restricted stock are non-vested and remain
outstanding.



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As of September
30, 2010, there was $163 of total unrecognized compensation cost related to non-vested restricted stock awards that is expected to be recognized over a weighted average period of 2.05 years. During the six month period ended
September 30, 2010, 2,500 of the restricted shares that are issued and outstanding became vested.

The following table
summarizes activity in our restricted shares during the period from April 1 through September 30, 2010:



|                                            |  |        |        |   |                                       |   |      | 
|------------------------------------------- |  | ------ | ------ | - | ------------------------------------- | - | ---- | 
|                                            |  | Shares |        |   | Weighted-averageGrant-Date
Fair Value |  
|Non-vested balance at March 31, 2010        |  |        | 70,490 |   |                                       | $ | 1.75 | 
|Restricted stock granted                    |  |        | 19,600 |   |                                       |   | 5.14 | 
|Restricted stock vested                     |  |        | (2,500 | ) |                                       |   |      | 
|Restricted stock forfeited                  |  |        | (4,444 | ) |                                       |   |      | 
|                                            |  |        |        |   |                                       |   |      | 
|Non-vested balance as of September 30, 2010 |  |        | 83,146 |   |                                       | $ | 2.53 | 
|                                            |  |        |        |   |                                       |   |      | 

10. Litigation

We are involved in various claims and legal actions arising in the ordinary course of business. In our opinion, the ultimate disposition of these matters will not have a material adverse
effect on its financial condition, result of operations or cash flows.

11. New Accounting Standards

In October 2009, the FASB issued new accounting guidance for revenue recognition with multiple deliverables. This guidance impacts
the determination of when the individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting. Additionally, this new accounting guidance modifies the manner in which the transaction consideration is
allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration. The new guidance is effective for us prospectively for revenue arrangements entered into or materially
modified beginning in the first quarter of fiscal 2011. This accounting guidance did not have a significant impact on our consolidated financial statements.

In October 2009, the FASB issued new guidance for the accounting for certain revenue arrangements that include software elements. This new guidance amends the scope of pre-existing software revenue
guidance by removing from the guidance non-software components of tangible products and certain software components of tangible products. This new guidance is effective for us prospectively for revenue arrangements entered into or materially
modified beginning in the first quarter of fiscal 2011. The adoption of this guidance did not have a significant impact on the Companys consolidated financial statements.

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



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|------- | --------------------------------------------------------------------------------------

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

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This interim
report on Form 10-Q contains forward-looking statements, which are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934. Any forward-looking
statements made herein are based on our current expectations, involve a number of risks and uncertainties and should not be considered as guarantees of future performance. Such statements may be identified by terminology such as
may, will, should, expects, scheduled, plans, intends, anticipates, believes, estimates, potential, or
continue, or the negative of such terms, or other comparable terminology. These statements are only predictions, and actual events as well as results may differ materially.

The identification of certain statements as forward-looking is not intended to mean that other statements not specifically
identified are not forward-looking. Forward-looking statements include, but are not limited to, statements that relate to our future revenue, product development, demand, acceptance and market share, competitiveness, gross margins, levels of
research and development (R & D), outsourcing plans and operating expenses, tax expenses, our managements plans and objectives for our current and future operations, the levels of customer spending or R & D activities, general
economic conditions and the sufficiency of



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financial resources to support future operations, and capital expenditures. Such statements are based on current expectations and are subject to risks, uncertainties, and changes in condition,
significance, value and effect, including those discussed below under the heading Risk Factors within the section of this report entitled Managements Discussion and Analysis of Financial Condition and Results of
Operations and other documents we file from time to time with the Securities and Exchange Commission (SEC), such as our last filed Annual Report on Form 10-K for the fiscal year ended March 31, 2010, our
quarterly reports on Form 10-Q, and our current reports on Form 8-K. Such risks, uncertainties and changes in condition, significance, value and effect could cause our actual results to differ materially from those expressed herein and in ways not
readily foreseeable. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are based on information currently and reasonably known to us. We undertake no obligation to
release the results of any revisions to these forward-looking statements, which may be made to reflect events or circumstances which occur after the date hereof or to reflect the occurrence or effect of anticipated or unanticipated events.

Actual results could, however, differ materially from those projected or assumed in any of our forward-looking
statements within this report. Our future financial condition and results of operations, as well as our operational and financial expectations, are subject to inherent risks and uncertainties. See Part II, Item 1A, entitled
Risk Factors.

OVERVIEW

Technology Research Corporation is a recognized leader in providing cost effective engineered solutions for
applications involving power management and control, intelligent battery systems technology and electrical safety products based on our proven ground fault sensing and Fire Shield® technology. These products are designed, manufactured and distributed to the consumer, commercial and industrial markets worldwide. The Company also supplies
power monitors and control equipment to the United States Military and its prime contractors.

TRC was incorporated in Florida
in 1981. Our principal offices are located at 5250-140th Avenue North, Clearwater, Florida 33760, our telephone number is (727) 535-0572 and our website can be accessed at www.trci.net. Information contained or referenced on
our website is not incorporated by reference into, and does not form a part of, this Quarterly Report on Form 10-Q.

In fiscal
2010, we undertook a strategic planning process that included a comprehensive review of our existing products, customers and the markets in which we compete over a strategic planning horizon of three years. During this process, it became evident
that many of the current markets for electrical safety products in which we compete are mature, with limited opportunities for growth in the future. In order for us to achieve sustainable long-term growth, and increase shareholder value, management
believes we must move into markets that allow for higher margins and less commoditization. We intend to continue to focus resources on our key market sectors: military, transportation/specialty vehicle, and industrial/commercial markets. These
markets have many of the same needs and will allow us to converge much of our development talent to product platforms that will serve each of these markets. We will continue to take advantage of our positions in the mature military mobile generator
set and ground fault sensing markets which should generate substantial cash flow over the next three years. This cash flow will help us transition the business to include higher-growth markets that will sustain revenue growth in future years as the
markets for our electrical safety products mature. We have undertaken a number of initiatives to lower costs, improve asset turnover and reduce our risk. These initiatives include, but are not limited to, (i) simplifying our product line,
(ii) designing standard product platforms, (iii) expanding the utilization of our operations in Honduras, and (iv) developing new designs and operations software to improve quality, accelerate product development and reduce the cost
of our redesigned products.

Over our three-year strategic horizon, our plan is to be a profitable niche player in the power
management and power storage markets with projected double-digit growth rates. Management believes this will require us to develop skills to migrate from an electromechanical ground fault company to a microprocessor-based developer of power products
that serve our military, transportation/specialty vehicle, and industrial markets. We intend to develop or acquire skills that focus on four key technologies to drive growth. These include:



| |  |  | Products that convert Alternating Current (AC) to Direct Current (DC) and convert DC to AC;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | Converting AC power into DC power while optimizing the life of the batteries being charged;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | Developing intelligence and communications products through the use of microprocessor based technology; and
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | Power management and distribution technologies.
| | - |  | -----------------------------------------------

On March 31, 2010, we completed an acquisition of all of the common stock of Patco Electronics, Inc., a Titusville, Florida based company (Patco). Patco designs and manufactures battery
management tools for secondary or re-chargeable batteries in several battery chemistries, including lead acid and lithium ion. Patcos product solutions support customers in military, commercial and industrial sectors. The acquisition of Patco
greatly enhances our ability to convert AC power into DC current that optimizes the life of the batteries being charged, thereby enabling us to take advantage of one of the four technologies identified in our strategic plan to drive business growth.
For its calendar year ended December 31, 2009, Patco revenue was approximately $6 million and its net income was approximately $1.7 million.



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We plan
to pursue our operating strategy; however, actual results could differ materially from those projected or assumed in any of our forward-looking statements within this report. Our future financial condition and results of
operations, as well as our operational and financial expectations, are subject to inherent risks and uncertainties. Some, but not all, of the factors impacting these risks and uncertainties are in the section entitled Risk
Factors, set forth in our Annual Report on Form 10-K for the fiscal year ended March 31, 2010.

Revenue for the
three months and six months ended September 30, 2010 decreased $0.4 million and increased $0.3 million, respectively, compared with the comparable periods of the prior year. Commercial revenue increased by $0.5 million for the three months and
$1.4 million for the six months ended September 30, 2010 over the comparable periods of the prior year. Military revenue decreased by $1.0 million and $1.2 million for the three month and six month periods ended September 30, 2010 from the
comparable periods of the prior year. The increase in commercial revenue was principally a result of recovery from the impact of the recession on several of our major markets last year. The decrease in military revenue for the three month and six
month periods ended September 30, 2010 was primarily due to an accelerated delivery schedule from our largest customer in the prior year that has now returned to historical levels.

Gross profit decreased $0.6 million and $0.4 million for the three month and six month periods from the prior year comparable periods,
respectively due to the decline in the favorable shift in the mix of military and commercial business. Operating expenses were up for the three month and six months periods ended September 30, 2010 compared with the comparable periods ended
September 30, 2009 due to the inclusion of Patcos expenses, amortization of expenses incurred for certain intangible assets acquired in the Patco acquisition and new product development expenses. Net income for the three month and six
month periods ended September 30, 2010 decreased $0.9 million and $1.5 million, respectively, when compared to the comparable periods last year. Diluted earnings per share is $0.05 for the quarter and $0.13 for the six months ended
September 30, 2010 compared with diluted earnings per share of $0.20 and $0.40, respectively, for the three month and six month periods ended September 30, 2009.

RESULTS OF OPERATIONS

Revenuefor
the second quarter ended September 30, 2010 and 2009 was $9.2 million and $9.6 million, respectively. Commercial revenue increased by $0.5 million while military revenue decreased by a net of $1.0 million, which consisted of a
decrease of $2.3 million for existing customers, offset by $1.3 million of Patco revenue. The increase in commercial revenue was principally a result of the softening of the impact of the recession on several of our major markets. The decrease in
military revenue was primarily due to an accelerated delivery schedule from our largest customer in the prior year that has now returned to historical levels. Revenue for the six-month period ended September 30, 2010 was $19.6 million compared
to $19.3 million reported in the same period of the prior year, an increase of 1.5%. For the six month period ended September 30, 2010, commercial revenue increased $1.5 million while military revenue decreased $1.2 million.

Gross profitdecreased $0.6 million, or 15.3%, to $3.3 million for the quarter ended September 30, 2010 as
compared to the same period in the prior year as a result of reduced revenue as well as a less favorable mix of higher margin military business as compared to lower margin commercial business. Gross profit decreased $0.4 million or 5.0% to $7.6
million for the six months ended September 30, 2010 compared to the same period in the prior year, due primarily to a less favorable mix of higher margin military business as compared to lower margin commercial business.

Selling and marketing expense of $0.6 million, or 6.3% of revenue was unchanged for the quarter ended September 30,
2010, as compared to the prior year quarter. For the six month periods ended both September 30, 2010 and 2009, selling and marketing expense was $1.3 million. As a percentage of revenue, selling and marketing expense decreased to 6.4% from the
6.6% of revenue from the prior year period. Patcos selling and marketing expenses for the three-month and six-month periods this year were insignificant.

General and administrativeexpense of $1.6 million, or 16.9% of revenue for the quarter ended September 30, 2010, increased from $1.0 million, or 10.3% of revenue as compared to
the quarter ended September 30, 2009. The increase of $0.6 million in the quarter is primarily due to $0.5 million of amortization expense related to the Patco acquisition. The 6.3 percentage point increase in general and administrative
expense as a percent of revenue for the three month period ended September 30, 2010, as compared to the three month period ended September 30, 2009, primarily results from the higher expenses compared to slightly higher revenue for the
current period. For the six months ended September 30, 2010, general and administrative expense of $3.4 million, or 17.1% of revenue, was $1.4 million higher than the $2.0 million or 10.3% of revenue for the prior year. The increase is due
primarily to $1.2 million of amortization expense related to the Patco acquisition.

Research and developmentexpense was $0.8 million, or 8.9% of revenue, for the quarter ended September 30, 2010, an increase of $0.1 million from $0.7 million or 6.8% of revenue for the second quarter of fiscal 2009. The increase is mainly attributable to
Patcos engineering expenses of $0.1 million for the quarter. For the six months ended September 30, 2010, research and development expense was $1.7 million, or 8.9% of revenue, compared to 1.3 million, or 6.9% of revenue, for the
same period last year. The increase is due to Patcos engineering costs and to increased spending on product development this year.



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Income tax
expensewas $0.1 million for the quarter ended September 30, 2010, compared with an expense of $0.4 million for the three months ended September 30, 2009. For the six months ended September 30, 2010, income tax expense
was $0.3 million compared to $0.9 million for the same period last year. Income tax expense as a percentage of income before taxes was 13.9% and 25.0% for the quarter and six months ended September 30, 2010, as compared to 26.2% and 27.4% for
the quarter and six months ended September 30, 2009. Our effective tax rate varies based primarily on the mix of income before income taxes derived from our subsidiary in Honduras, which is not subject to income taxes, and the balance
of income before income taxes, which is subject to U.S. income taxes. At each reporting period, we make our best estimate of the effective tax rate expected for the full fiscal year and apply that rate to the current year-to-date
income before income taxes. Any difference between the current and preceding estimated effective tax rate expected for the full fiscal year is reflected as an adjustment in the current quarters income tax expense. In accordance with
current accounting guidance, we do not record deferred income taxes on the foreign undistributed earnings of an investment in a foreign subsidiary that is essentially permanent in duration. If circumstances change, and it becomes apparent that
some or all of the undistributed earnings of our subsidiary will be remitted in the foreseeable future, but U.S. income taxes have not been recognized, we will record as an expense of the current period the U.S. income taxes attributed to
that remittance.

Net incomefor the quarter ended September 30, 2010 was $0.3 million, compared
to $1.2 million in the same quarter last year. The basic and diluted earnings per share was $0.05 for the quarter ended September 30, 2010, compared to a basic and diluted earnings per share of $0.20 for the
same quarter last year. The net income for the six-month period ended September 30, 2010 was $0.9 million, compared to net income of $2.4 million for the same period in the prior year. The basic and diluted earnings per share was $0.14 and
$0.13, respectively, for the six-month period ended September 30, 2010, compared to basic and diluted earnings per share of $0.41 and $0.40, respectively, for the same period of the prior year.

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents increased from $8.2 million as of March 31, 2010 to $9.3 million as of September 30, 2010. Cash provided by operating activities was $1.7 million, cash used in
investing activities was $0.5 million and cash used in financing activities was $0.2 million resulting in a total increase in cash of $1.1 million for the six-month period ended June 30, 2010.

Cash provided by operating activities primarily resulted from net income of $0.9 million, amortization expense related to the Patco
acquisition of $1.2 million, depreciation expense of $0.5 million and stock compensation expense of $0.2 million, partially offset by a decrease in accounts payable of $0.5 million, in accrued expenses of $0.4 million and an increase in
inventories of $0.2 million. Cash used in investing activities was due to purchase of property and equipment and cash used in financing activities was due to the payment of quarterly dividends.

Effective as of September 30, 2009, we entered into the Loan Agreement and Replacement Note with Wachovia, our current institutional
lender. The Replacement Note provides for an interest rate equal to the 30-day London Interbank Offering Rate (LIBOR) Market Index Rate plus 2.10%, through December 31, 2009. Thereafter, the interest rate will be
reset quarterly. As a result, effective for the quarter beginning on January 1, 2010 and continuing thereafter, the interest rate on the Replacement Note was reset at a rate equal to the LIBOR Market Interest Rate plus the applicable LIBOR
Spread for such quarter as follows:



|                                |  |                                         
|------------------------------- |  | ----------------------------------------
|If Funded Debt/EBITDA Ratio is: |  | The LIBOR Spread (basis points) will be:
|                                | 
|< 1.50:1.00                     |  | 210                                     
|3 1.50:1.00 < 2.00:1.00         |  | 240                                     
|3 2.00:1.00                     |  | 270                                     

The revolving line of
credit can be used for acquisitions, working capital and general corporate purposes. Revolving loans may be borrowed, repaid and re-borrowed until September 30, 2011, at which time all amounts borrowed must be repaid. The Loan
Agreement obligates us to pay a customary unused facility fee for a credit facility of this size. The revolving loans under the Loan Agreement are secured by a continuing security interest in most of our key assets including accounts and notes
receivable, inventory, investments, demand deposit accounts maintained with our lender and 65% of the voting stock of our Honduran subsidiary, which require us to maintain certain financial ratios. As of September 30, 2010 and March 31,
2010, we had no borrowings on our Wachovia credit facility.

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

OFF-BALANCE SHEET ARRANGEMENTS

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



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NEW ACCOUNTING
STANDARDS

See Note 11  New Accounting Standards to the Condensed Consolidated Financial Statements
for a discussion of recent accounting standards.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements and related disclosures, in conformity with United States generally accepted accounting
principles, requires management to make judgments, assumptions and estimates that affect the amounts reported. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below.

A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires
management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following
attributes: (i) we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and (ii) different estimates that we could reasonably have used, or changes in the estimates
actually used resulting from events that could be reasonably foreseen as likely to have a material effect on our financial condition or results of operations.

Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on
historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment
changes. These changes have historically been minor and have been included in the consolidated financial statements once known. In addition, we are periodically faced with uncertainties, the outcomes of which are not
within our control and will not be known for prolonged periods of time. These uncertainties are discussed in the section above entitled Disclosure Regarding Forward-Looking Statements and in section Item 1A above, entitled Risk
Factors. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, we believe that our consolidated financial statements are fairly
stated in accordance with United States generally accepted accounting principles and present a meaningful presentation of our financial condition and results of operations.

We believe that the following are critical accounting policies:

Revenue Recognition/Allowance for Doubtful Accounts. We recognize revenue from commercial customers when an order has been received and accepted, pricing is fixed, delivery has occurred
and title to the product has passed and collectability is reasonably assured. Title generally passes upon shipment to the customer; however, in a limited number of cases, title passes upon receipt of shipment by the customer. We
have no installation obligation subsequent to product shipment. Similarly, revenue from sales to distributors is recognized as title passes to them without additional involvement or obligation. Collection of receivables related to
distributor sales is not contingent upon subsequent sales to third parties. Royalty revenue is recognized as reported by licensees.

We may enter into government contracts that fall within the scope of FASB ASC Topic 912-605, Contractors-Federal Government Revenue Recognition. Currently we do not have any
transactions being accounted for within the scope of FASB ASC Topic 912-605. We may enter into government contracts that fall within the scope of FASB ASC Topic 605-35, Revenue Recognition, Construction-Type and Production-Type
Contracts. For government contracts within the scope of FASB Topic 605-35, we record revenue under a units-of-delivery model with revenue and costs equal to the average unit value times the number of units delivered. Any
estimated loss on an overall contract would be recognized in the period determined in accordance with FASB ASC Topic 605-35. We have not experienced past losses on government contracts.

We record an allowance for estimated losses resulting from the inability of customers to make timely payments of amounts due on
account of product purchases. We assess the credit worthiness of our customers based on multiple sources of information, including publicly available credit data, subscription based credit reports, trade association data, and
analyzes factors such as historical bad debt experience, changes in customer payment terms or payment patterns, credit risk related to industry and geographical location and economic trends. This assessment requires significant judgment. If the
financial condition of our customers were to worsen, additional write-offs could be required, resulting in write-offs not included in our current allowance for doubtful accounts.

Inventories. Because of the lead times required to obtain certain raw materials, we must maintain sufficient quantities on
hand to meet expected product demand for each of our many products. If actual demand is much lower than forecasted, we may not be able to dispose of our inventory at or above our cost. We write down our inventory for estimated excess and
obsolete amounts to the lower of cost or market. We review the reasonableness of our estimates each quarter (or more frequently). A write-down is established for inventory that has had no activity for long periods of time or for which
management believes is no longer salable. This write-down is reviewed and approved by the senior management team. In the future, based on our quarterly analysis, if we estimate that any remaining write-down for obsolescence is inadequate, we may
need to adjust it. At present, based on our analysis, we believe the write-down amount is properly valued for the inventory held by us.



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Income
Taxes. Significant management judgment is required in developing our provision for income taxes, including the determination of any accrual for tax contingencies, any foreign withholding taxes or any United States income taxes on
undistributed earnings of the foreign subsidiary, deferred tax assets and liabilities and any valuation allowances that might be required to be applied against the deferred tax assets. It is managements intention to reinvest future
undistributed earnings of our foreign subsidiary and thereby indefinitely postpone their repatriation.

We apply the
Comparable Profits Method for transfer pricing to determine the amounts our subsidiary charges to the parent.

Warranty. We generally provide a one year warranty period for our products. We also provide coverage on certain
of our surge products for downstream damage of products not manufactured by us. Our warranty provision represents our estimate of probable liabilities, calculated as a function of sales volume and historical repair
experience for each product under warranty. Our warranty accrual represents our estimate of our liability for warranty repairs that we will incur over the warranty period.

Impairment of Long-Lived Assets. We review long-lived assets for possible impairment of carrying value whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with the relevant accounting guidance. In evaluating the fair value and future benefit of our assets, management performs
an analysis of the anticipated undiscounted future net cash flows to be derived from the use of individual assets over their remaining amortization period. If the carrying amount of an asset exceeds its anticipated undiscounted cash
flows, we recognize an impairment loss equal to the difference between its carrying value and its fair value.

Goodwill, representing the excess of acquisition costs over the fair value of net assets of acquired businesses, is not amortized but is
reviewed for impairment at least annually and written down only in the periods in which it is determined that the recorded value is greater than its fair value. For the purposes of performing this impairment test, our business segments are our
reporting units. The fair values of those reporting units, to which goodwill has been assigned, is compared with their recorded values. If recorded values are less than the fair values, no impairment is indicated. Since adoption, no impairment
losses have been recorded.

Share-Based Compensation. Share-based compensation cost is measured at the
grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period of the award. Determining the appropriate fair value model and calculating the fair value of stock-based awards at the grant
date requires judgment, including estimating stock price volatility and expected option life. If actual forfeitures differ significantly from our estimates, adjustments to compensation cost may be required in future periods.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk.
|------- | -----------------------------------------------------------

We do not engage in investing in or trading market risk sensitive instruments. We also do not purchase, for investing, hedging, or for purposes other than trading, instruments that are
likely to expose us to market risk, whether interest rate, foreign currency exchange, commodity price or equity price risk, except as noted in the following paragraph. We have not entered into any forward or futures contracts, purchased any
options or entered into any interest rate swaps. Additionally, we do not currently engage in foreign currency hedging transactions to manage exposure for transactions denominated in currencies other than U.S. dollars.

As of September 30, 2010, we have no long-term debt. If we borrow under our Wachovia credit facility, our borrowing costs will
be affected by changes in interest rates. We also have exposure to changes in interest rates from investments in held-to-maturity securities. With our current level and term of investments, a 1% change in the market rate of interest
would result in a change in interest income of approximately $100 on an annual basis.



|Item 4. | Controls and Procedures.
|------- | ------------------------

Disclosure
Controls and Procedures

As of the end of the period covered by this interim report on Form 10-Q, we carried out,
under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer (the Certifying Officers), an evaluation of the effectiveness of our disclosure controls and
procedures (as the term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended). Based on this evaluation, the Certifying Officers have concluded that our disclosure controls
and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission rules and forms and are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial
Reporting

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



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PART II  OTHER
INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------

We are involved in various claims and legal actions arising in the ordinary course of business. In our opinion, the
ultimate disposition of these matters will not have a material adverse effect on our financial condition, result of operations or cash flows.



|Item 1A. | Risk Factors.
|-------- | -------------

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



|Item 6. | Exhibits.
|------- | ---------

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

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

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

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

SIGNATURES

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



|                 |  |  |  |                                 |  |                                             
|---------------- |  |  |  | ------------------------------- |  | --------------------------------------------
|                 |  |  |  | TECHNOLOGY RESEARCH CORPORATION
|                 |  | 
|November 8, 2010 |  |  |  | By: /s/ Owen Farren            
|                 |  |  |  |                                 |  | Owen Farren                                 
|                 |  |  |  |                                 |  | President and Chief Executive Officer       
|                 |  |  |  |                                 |  | (Principal Executive Officer)               
|                 |  | 
|November 8, 2010 |  |  |  | By: /s/ Robert D. Woltil       
|                 |  |  |  |                                 |  | Robert D. Woltil                            
|                 |  |  |  |                                 |  | Chief Financial Officer                     
|                 |  |  |  |                                 |  | (Principal Financial and Accounting Officer)



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