10-K

UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

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Form 10-K

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þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934 

For the fiscal year ended March 31, 2007

OR

o TRANSITION REPORT PURSUANT TO SECTION  13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934 

For the transition period ___________ to ___________

Commission file number 0-13763
 

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)

Securities registered pursuant to Section 12(b) of the Exchange Act:  None

Securities registered pursuant to Section 12(g) of the Exchange Act:

Common Stock, Par Value $.51 Per Share

(Title of Class) 

 Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:  Yes o  No þ

 Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o  No þ

 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 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  þ   No o

 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

 Indicate by check mark whether Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” is Rule 12b-2 of the Exchange Act. (Check one):

 Large accelerated filer o  Accelerated filer o  Non-accelerated filer þ

             &# 160;     

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

 The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, as of September 29, 2006, was $24,137,097 based upon the $4.25 closing sale price for the Registrant's Common Stock on the NASDAQ National Market System on such date.  We have excluded shares of voting and non-voting stock held by executive officers, directors and holders of more than 5% of our common stock from this calculation because such persons or institutions may be deemed affiliates.  This determination of affiliate status is not necessarily a conclusive determination of such status for other purposes.

 As of May 31, 2007, there were 5,888,828 shares of the Registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

 Portions of the Registrant's definitive proxy statement related to its 2007 Annual Meeting of Stockholders to be held on August 30, 2007 are incorporated by reference into Part III of this Form 10-K.

TECHNOLOGY RESEARCH CORPORATION 

FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS 

PART I
	Item 1.     Business
	Item 1A.  Risk Factors
	Item 1B.  Unresolved Staff Comments
	Item 2.     Properties
	Item 3.     Legal Proceedings
	Item 4.     Submission of Matters to a Vote of Security Holders
PART II
	Item 5.     Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
	Item 6.     Selected Financial Data.
	Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A.  Quantitative and Qualitative Disclosures About Market Risk
	Item 8.     Financial Statements and Supplementary Data
	Item 9.     Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
	Item 9A.  Controls and Procedures
	Item 9B.  Other Information
PART III
	Item 10.   Directors, Executive Officers, and Corporate Governance
	Item 11.   Executive Compensation
	Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
	Item 13.   Certain Relationships, Related Transactions, and Director Independence
	Item 14.   Principal Accounting Fees and Services
PART IV
	Item 15.   Exhibits, Financial Statement Schedules
SIGNATURES
Exhibit 21— Subsidiaries of Technology Research Corporation
Exhibit 23 — Consent of Independent Registered Public Accounting Firm
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

 As used in this Annual Report on Form 10-K, “we”, “our”, “us”, the “Company” and “TRC” all refer to Technology Research Corporation and its subsidiary unless the context otherwise requires.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

 This Annual Report on Form 10-K contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934, and 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.  

 In evaluating these statements, you should specifically consider the information described in the “Risk Factors” and other documents we file from time to time with the Securities and Exchange Commission such as our quarterly reports on Form 10-Q and our current reports on Form 8-K. Other key factors include, but are not limited to, the acceptance of any new products, such as Fire Shield®, the effective utilization of our Honduran manufacturing facility and Far East contract manufacturers, changes in manufacturing efficiencies, the impact of competitive products and pricing and interruptions of or cancellation of existing orders or contracts.  We cannot provide any assurance that predicted future results, levels of activity, performance or goals will be achieved, and we disclaim any obligation to revise any forward-looking statements subsequent to events or circumstances or the occurrence of unanticipated events.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and of information currently and reasonably known.  All references to fiscal years apply to our fiscal years, which ended March 31, 2007, March 31, 2006, and March 31, 2005.

PART I

ITEM 1.  BUSINESS

OVERVIEW

 Technology Research Corporation is an internationally recognized leader in the design, manufacture and marketing of electrical safety products that save lives, protect people against serious injury from electrical shock and/or prevent electrical fires in the home and workplace.  Based on our core technology in ground fault sensing and leakage current detection, our products are designed to meet the needs of the consumer, commercial and industrial markets worldwide.  TRC also designs and supplies power monitoring and control equipment to the United States military and its prime contractors for its tactical vehicles, naval vessels and mobile electric generators.

 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 Annual Report on Form 10-K.

 Our operating strategy is based on these key objectives:

• to strengthen our current markets and channels of distribution with new proprietary products;
• to broaden the number of applications within target markets by developing products for these applications;
• to identify and pursue strategic acquisitions that will be accretive to earnings;
• to improve profitability and customer satisfaction through ongoing continuous improvement programs and benchmarking all aspects of TRC’s business with best practices;
• to invest in the education of employees to enable then to have the tools to more effectively grow the business and improve business productivity.

 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 set forth below in the section entitled “Risk Factors.”

 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.

 We file reports with the Securities and Exchange Commission (“SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K.  Copies of our reports filed with the SEC may be obtained by the public at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C.  20549, or by calling the SEC at 1-800-SEC-0330.  The information provided on our website is not part of this report, and is therefore not incorporated by reference unless such information is otherwise specifically referenced elsewhere in this report.

GENERAL

 We make available free of charge through our website at www.trci.net, via a link to the SEC’s website at www.sec.gov, our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after such materials are electronically filed with, or furnished to, the SEC. You may also obtain free copies of these materials by contacting our Director of Investor Relations, Scott J. Loucks, at our mailing address of 5250 - 140th Avenue North, Clearwater, Florida 33760, telephone (727) 535-0572.

 Revenues (in thousands) contributed by commercial and military products and royalties from license agreements are as follows:

Year ended March 31,		Commercial	%		Military	%		Royalties	%		Total
2007	$	26,471	69.7	$	11,521	30.3	$	-	0.0	$	37,992
2006		32,250	70.7		13,370	29.3		-	0.0		45,620
2005		27,022	68.5		12,269	31.1		142	0.4		39,433
2004		11,942	49.1		12,304	50.6		91	0.3		24,337
2003		10,255	57.7		7,386	41.6		121	0.7		17,762

 Our backlog of unshipped orders at March 31, 2007 was approximately $9.4 million, as compared to approximately $12.4 million as of March 31, 2006.  This backlog consists of approximately 42% of commercial product orders and approximately 58% of military product orders, all of which are expected to ship within the year ended March 31, 2008.  Our unshipped backlog orders include orders for products where written customer requests have been accepted and the delivery of products is anticipated within the next 12 months.  Our policy is to make adjustments to our backlog to reflect, among other things, customer delivery date changes as well as order cancellations.  We schedule production based upon purchase orders in backlog and our customer’s delivery requirements.  Generally, our orders may be changed, rescheduled or cancelled with limited penalties prior to shipment.  Our backlog at any particular date is not necessarily indicative of business volumes or actual revenue levels for any succeeding period.

Commercial Products and Markets

 Core Commercial Products.  Our core commercial business was developed out of the demand for the following Underwriters Laboratories (“UL”) classifications of ground fault protective devices:  Ground Fault Circuit Interrupters (“GFCI”); Equipment Leakage Current Interrupters (“ELCI”); Portable Residual Current Devices (“PRCD”); and Leakage Current Detection Interrupters (“LCDI”). 

 Ground fault protective devices help protect against the hazards of fire and electrical shock that result when water comes in contact with electrically “live” conductors or when faulty electrical grounding is found in old or damaged extension cords, appliance cords, house wiring and electrical equipment.  The demand for our commercial products has resulted from the National Electrical Code (“NEC”) requirements, UL product standards and voluntary efforts by industry to improve the electrical safety of commercial products.

 Electrical safety is compromised when a ground fault occurs, which is a condition where electric current finds an abnormal path to ground, such as when a power tool comes in contact with water while plugged into a live outlet or when it is damaged in such a way as to cause internal wiring to come in contact with exposed metal parts allowing electricity to pass through the user of that power tool.  Upon such occurrence, the entire device can become as electrically alive as the power line to which it is attached.  If a person is touching such a live device while grounded (by being in contact with the ground or, for example, a metal pipe, gas pipe, drain or any attached metal device), that person can be seriously or fatally injured by electric shock.  Fuses or circuit breakers do not provide adequate protection against such shock, because the amount of current necessary to injure or kill a human or animal is far below the level of current required for a fuse to blow or a circuit breaker to trip.

 Our GFCI, ELCI and PRCD are all ground fault devices providing protection from dangerous electrical shock by sensing leakage of electricity and cutting off power.  Ground fault devices are currently available in three types: circuit breaker, receptacle and portable.  We specialize in the portable types of these products.  Ground fault devices constantly monitor electric current, and as long as the amount of current returning from the device is equal to the amount that is directed to the device, the GFCI performs no activities.  Conversely, if there is less current coming back than there is flowing into the device, some portion must be taking a path through a foreign body, thereby creating a hazard.  Upon recognizing that condition, the ground fault device terminates the flow of electricity instantaneously.  Ground fault devices range in rating from 120V/15A to 600V/80A (the largest are from our unique HD-PRO family of products).  These devices have various consumer, commercial and military applications.

 Our LCDI devices are intended to reduce the risk of electrical fires by disconnecting power when sensing current leakage between conductors of power cords.  Our Fire Shield® product lines are approved in the UL classification of LCDIs.  Several years ago, both government and industry research into the major causes of fire led to a search for new, cost-effective methods to prevent electrical fires.  In response to this need, we developed and patented Fire Shield®, a product designed to prevent fires caused by damaged or aging appliance power supply cords and extension cords, which have been identified as a leading cause of electrical fires.

 In June 1999, we announced major enhancements to our Fire Shield® line of appliance power supply cords that added a higher degree of safety against fire and electric shock for two wire appliances.  These new capabilities have significant safety benefits to the consumer.  These enhancements are based on feedback from the industry and from the staff of the United States Consumer Product Safety Commission (“CPSC”) on the need to protect not only the power cord, but also the internal wiring of the appliance.

 The latest annual statistics from the CPSC indicate that extension cords, power strips, toaster/toaster ovens, power cords on appliances and household wiring are responsible for over $450 million in residential fire damage, 180 lives lost and 950 injuries.  We believe that our Fire Shield® technology will continue to advance as a valued technology for electrical safety and fire protection in the OEM and consumer marketplaces.  We believe the addition of surge protection within these devices will even further enhance the value of our products.

 Our Fire Shield® technology currently addresses four distinct market applications: (i) the Fire Shield® Power Surge Strip - a consumer product; (ii) the Fire Shield® Safety Circuit - an OEM product; (iii) the Fire Shield® Power Cord - an OEM product; and (iv) the Fire Shield® Safety Extension Cord - a consumer product.

 We will continue to sell the finished good products to the consumer and institutional markets.  We expect lower revenues for the Room Air Conditioner market in fiscal 2008 as we focus on a limited number of customers and explore opportunities for licensing our intellectual property to service the market.

 Our line of Surge Guard™ and Surge Guard Plus™ products are designed to meet the rigorous requirements of the recreational vehicle (“RV”) market.  These products provide power protection and have both OEM and after-market applications.  In addition, we developed the Surge Guard Automatic Transfer Switch, which incorporates a transfer switch into the functionality of the Surge Guard products, thus eliminating the need for two separate products. 

 In April, 2006, we announced the consummation of an asset purchase agreement with Automated Engineering Corporation (AEC), a manufacturer of electrical safety and communications equipment for the RV market.  The acquisition complemented our existing RV business by allowing us to offer electrical safety solutions to a broader range of RV manufacturers.  The integration of AEC has been progressing as expected and is contributing to our revenues in the RV market.

Cable Protection and Management Products

 Our line of Cable Protection and Management products, including Yellow Jacket and Black Jacket Cable Protectors, Electriduct Cable Protectors, Erig Cable Management and Drag Strip Connector Protectors are designed to meet the rigorous requirements of commercial/industrial and institutional markets.  These products provide protection for electrical, fluid and telecommunication cables.

Research, Development and Engineering

 We place substantial emphasis on new product development and believe that continued investment in product development is required to maintain and improve our competitive position.  Our product development activities emphasize new proprietary products, enhancement of existing products and process technologies.  Our research and development and product development activities occur in Clearwater, Florida.  Our Engineering Department is engaged in designing and developing new commercial and military products and improving existing products to meet the needs of our customers.

 In connection with our efforts to develop new products, our ground fault sensing and leakage current detection products continue to be more widely accepted in the marketplace.  Accordingly, we will continue to modify existing and/or design new products to compete in these new markets.

 We spent $2.0 million in each of fiscal 2007, 2006 and 2005 on research, development and engineering activities, and we anticipate spending levels to be between 5% to 6% of revenues in fiscal 2008.  All engineering activities are expensed as incurred.

Marketing, Sales and Distribution

 Our products are sold throughout the world, primarily through an in-house sales force, through product licensing agreements and sales and marketing agreements.  We will continue to market existing and new products through these channels.  In addition, we are looking for other viable channels through which to market our products.  We rely heavily upon the marketing skills and experience, as well as the business experience, of our management personnel in marketing our products.

 We complement our sales and marketing activities through the use of additional distributors and sales representative organizations.  Our internal distribution division, TRC Distribution, is supported by approximately 30 independent sales representatives who sell to over 1,500 electrical, industrial and safety distributors.  The majority of our sales, however, are made through our in-house sales force.  We exhibit our products at numerous trade shows, which have resulted in new commercial markets including the recreational vehicle industry and the appliance industry.

 We also market through OEMs, both domestically and internationally, that sell our products as a component of an end user product or under their own brand names (“private label”).  We continue to implement a “value add” upgrade strategy, which provides a finished product to those who private label our products and who are currently only receiving subassembly modules.  Our plastic and receptacle molding capabilities are a key factor in providing “value add” upgrades to our customers.

 Commercial/Industrial Markets. We market and sell our GFCI, ELCI (including the heavy duty HD-PRO products), LCDI and our cable protection and management products to the commercial/industrial market.  This market is served through over 1,500 electrical and safety distributors and a number of catalogers. We also private label products for a number of industry leaders to help penetrate this market.

 Consumer/Retail Markets. We currently market and sell various portable GFCI, LCDI and other specialty products to the consumer market.  We have placed some products with major retailers, primarily Wal-Mart, Home Depot, Meijers, Fry’s Electronics and Ace Hardware, as well as with many independent retailers.  Our products are also being offered through magazines, catalogs and E-commerce retailers.  We continue to have success selling our aftermarket RV Surge Guard products through retailers such as Camping World and distributors.

 In fiscal 2007, we continued our growth and marketing in niche markets such as in the college and university segment of the consumer market with our Fire Shield® LCDI products.  A number of colleges and universities are either mandating, or strongly suggesting the use of LCDI protected extension cords and surge strips on campus.

 Original Equipment Manufacturers (OEMs).  We also sell products to OEMs, both domestically and internationally, that sell our products as a component of an end user product. We primarily sell GFCI, ELCI, LCDI and RV Surge Guard and Surge Guard Plus products to this market. The OEM market can also be significantly impacted by new and revised product standards as outlined below:

 Impact of New and Revised Product Standards.  The NEC requires ground fault protection on many applications, which are enforced by OSHA and local government building codes and adhered to by most manufacturers.  We presently focus our marketing efforts in certain spot markets, which have developed in response to NEC imposed requirements.  The NEC requirements are often incorporated into UL product standards.

 In July 2001, a requirement was added to the NEC for cord fire prevention on room air conditioners.  Because of this change in the NEC, UL Standard 484 for room air conditioners was revised to reflect this change and became effective in August 2005.  This requires that room air conditioners be provided with either LDCI or Arc Fault Circuit Interrupter (“AFCI”) protected cord sets by their manufacturers.  We believe that our Fire Shield® cord set will provide manufacturers of room air conditioners with the best solution for this requirement.

 In addition, Article 625 of the NEC requires electric vehicle (“EV”) charging systems to include a system that will protect people against serious electric shock in the event of a ground fault.  We have shipped product to the majority of the major automobile manufacturers in support of their small EV production builds, and we are actively involved with various standards and safety bodies, relating to the electric vehicle, on a worldwide basis.  Sales for our EV safety products remain relatively low due to the small number of electric vehicles produced.  Improvements in battery technology along with mandates from individual states for zero emission vehicles, will determine whether this will be a viable market in the future.

 A requirement was added to the NEC to take effect on January 1, 2005 for GFCI protection on all electrically operated vending machines.  In response to the change in the code, UL has changed their standards to require GFCI protection on all electrically operated vending machines.  The effective date was April 1, 2007.  We have received orders and have begun delivery for the vending machine market.

 License Agreements.  From time to time, we enter into license and sales and marketing agreements concerning our portable GFCI, ELCI and LCDIs products.  These agreements are intended to assist our market penetration into those areas where it would be difficult for us to compete on a direct basis.

Military Products and Markets

 We design and manufacture products for sale to the military engine generator set controls market.  Our expertise in this area is well known, and our performance in product quality and delivery to the United States military and its prime contractors have resulted in our being recognized as a leader in this industry.  The Defense Logistics Agency established a program rating system for its suppliers in 1995 for product quality, packaging and on-time deliveries, and since its inception and for the twelfth straight year, we have been honored as a Best Value Medalist for the highest rating Gold Category, which signifies our commitment to military contract performance.

 We are currently a supplier of control equipment used in engine generator systems purchased by the United States military and its prime contractors.  The term “control equipment” refers to the electrical controls used to control the electrical power output of the generating systems.  In general, the controls monitor and regulate the operation of engine generator mobile electric generating system sets.  Electric generating systems are basic to all branches of the military, and demand is generally less volatile than products utilized in armaments and missiles.  Sales are made either directly to the government for support parts or to prime contractors for new production electric generator sets which incorporate our products.  We are a qualified supplier for more than 50 control equipment products as required by the Department of Defense and serve as a supplier of the following types of control equipment, among others: protective relays and relay assemblies, instrumentation transducer controls, fault locating panel indicators, current transformer assemblies for current sensing control and instrumentation, motor operated circuit breaker assemblies and electrical load board and voltage change board assemblies.  These products are also furnished for spare parts support for existent systems in the military inventory.

 In 1989, we completed the redesign of the control equipment related to the 5/10/15/30/60KW Tactical Quiet Generator (“TQG”) Systems programs.  We are currently actively supplying these parts to DRS Technologies, Inc. (“DRS”) , which is the prime contractor.  In addition, we are also supplying to DRS control equipment related to the 3KW TQG systems program which first began in November 1998.  Sales to DRS were $7.0 million in fiscal 2007 and $6.1 million in fiscal 2006, an increase of 9%.  We also supply products for maintenance and spare parts support directly to the U.S. military.  Direct U.S. military sales, which include these products and those mentioned below, decreased from $6.1 million in fiscal 2006 to $3.6 million in fiscal 2007, a decrease of 41%.  Military revenues, other than to DRS and direct sales to the U.S. military, were $.9 million in fiscal 2007, up from $.8 million in fiscal 2006, an increase of 12%.

 We furnish various types of A.C. power monitors to the military for its U.S. Navy vessels.  These monitors provide system protection for the electrical distribution systems that are used on all classes of U.S. Navy surface vessels, such as minesweepers, destroyers, guided missile cruisers and aircraft carriers in addition to other types of naval vessels.  The monitors meet the environmental and stringent U.S. Navy high shock, vibration and endurance testing requirements, and they are furnished for new vessel production, retrofit upgrades and existing vessel replacement parts support.

 In addition, we provide both A.C. and D.C. power monitoring systems, which include voltage regulators, power transformers, A.C. over current and short circuit protection monitor assemblies and current sensing transformers for the military's armored-tracked vehicles.  These products must pass highly accelerated stress screening and vehicle road testing at the Aberdeen Proving Grounds of the United States Department of Defense.

 Our panel mount GFCI is the only GFCI device that is approved and qualified by the Department of Defense for use on its mobile-tactical generating systems.

 Our contracts with the U.S. Government are on a fixed-price bid basis.  As with all fixed-price contracts, whether government or commercial, we may not be able to negotiate higher prices to cover losses should unexpected manufacturing costs be incurred.

 All government contracts contain a provision that allows for cancellation by the government “for convenience.”  However, the government must pay for costs incurred and a percentage of profits expected if a contract is canceled.  Contract disputes may arise which could result in a suspension of such contract or a reduction in the amounts claimed.

Testing and Qualification

 A number of our commercial products must be tested and approved by UL or an approved testing laboratory.  UL publishes certain “Standards of Safety” which various types of products must meet and requires that specific tests be undertaken to ascertain whether the products meet the prescribed standards.  If a product passes these tests, it receives UL approval.  Once our products have been initially tested and qualified by UL, they are subject to regular field checks and quarterly reviews and evaluations.  UL may withdraw its approval for such products if they fail to pass these tests and if prompt corrective action is not taken.  Our portable electrical safety products have received UL approval.  In addition, certain of our portable GFCI and ELCI products have successfully undergone similar testing procedures conducted by comparable governmental testing facilities in Europe, Canada and Japan.

 Our military products are subject to testing and qualification standards imposed by the U. S. Government.  We have established a quality control system, which has been qualified by the United States Department of Defense to operate under the requirements of a particular specification (MIL-I-45208).  To the extent we design a product that we believe meets those specifications, we submit the product to the responsible government-testing laboratory.  Upon issue of the qualification approval and source listing, the product is rarely subject to re-qualification; however, the U. S. Government may disqualify a product if it is subject to frequent or excessive operational failures.  In addition, our governmental contracts provide that the current specifications and requirements could be changed at any time, which could require us to redesign our existing products or to develop new products which would have to be submitted for testing and qualification prior to their approval for purchase by the military or its prime contractors.  Certain contracts also require witness testing and acceptance by government inspectors prior to shipment of the product.

 Our wholly-owned foreign subsidiary, TRC/Honduras S.A. de C.V., is an ISO 2000 certified manufacturing facility and an approved supplier to several major corporations, and holds UL, Canadian Standards Association (“CSA”) and the German standards association, Verband Deutsher Elektrotechniker (“VDE”), approvals.

Environmental Regulations

 Our operations involve the use of hazardous and toxic materials and are subject to federal, state and local laws governing the use, storage and handling of such materials.  We fall under the Conditionally Exempt Small Quantity Generators Rule as defined by the Environmental Protection Agency (“EPA”) due to the small amounts of hazardous waste that we generate each year, and the cost of disposing such materials is not material to our financial condition, results of operations or cash flows.  We believe that we are in general compliance with these regulations and that we have obtained all necessary permits to operate our business.

Design and Manufacturing

 We currently design almost all of the products that we produce and generally will not undertake special design work for customers unless we receive a contract or purchase order to produce the resulting products.  A significant number of our commercial and military electronic products are specialized in that they combine both electronic and magnetic features in design and production.

 The business of an electronics manufacturer primarily involves assembly of component parts.  We do, however, manufacture our transformers and magnetic products.  The manufacture of such products primarily involves the winding of wire around magnetic ferrite cores.  We mold most of our own plastic parts for our commercial product lines at our manufacturing facility in Honduras.  The remainder of the products that we manufacture is assembled from component parts that are produced or distributed by other companies.

 Our wholly-owned subsidiary, TRC/Honduras, S.A. de C.V., manufactures most of our high-volume products sold in the U.S.  TRC/Honduras, S.A. de C.V. leases 58,000 square feet of property which is located in ZIP San Jose, a free trade zone and industrial park, located in San Pedro Sula, Honduras.  The benefits of being located in a free trade zone include no Honduran duties on imported raw materials or equipment, no sales or export tax on exported finished product, no federal income tax for any profits generated by the subsidiary, and various other benefits.

 In fiscal 2004 and 2005, we engaged contract manufacturers to expand our manufacturing capability for our emerging room air conditioning products in the same geographical areas as those of the room air conditioning manufacturers, whether it be in the Far East or in Honduras.  We believe that these outsourcing arrangements provide us more flexibilities to scale our operations up or down in a more timely and cost effective manner, enabling us to respond to the seasonal nature of some of our commercial products.  Although we believe that we have selected reputable providers, it is possible that one or more of these providers could fail to perform as we expect, and such failure could have an adverse impact on our business.  In addition, the expanded role of outsource providers has required us to implement changes to our management processes, including the adoption of new procedures to effectively manage performance risks in monitoring our manufacturing and marketing procedures.  Any delay or failure in monitoring our outsourcing arrangements could affect our customer relationships and have a negative effect on our operating results and financial condition.  We believe that we have effective mechanisms in place to manage these risks associated with our outsourcing relationships.

 We utilize our Honduran subsidiary and Asian contract manufacturers to provide quality products to customers at our most competitive prices.

 We continue to manufacture our military products and distribute certain of our commercial products, which are manufactured off-shore, through our 43,000 square foot facility in Clearwater, Florida.

Patents and Trademarks

 Our policy is to seek patents on inventions relating to new or enhanced products and processes developed as part of our ongoing research, engineering, manufacturing and support activities.  We seek to protect our products and technologies primarily through patents, trade secrecy measures, copyrights, trademark registrations, licensing restrictions, confidentiality agreements and other contractual arrangements that are designed to protect our proprietary information.  No assurances can be given that others will not independently develop competitive technology that is not covered by our intellectual property rights or that any measures that we take to protect our proprietary products will be effective. We currently own and hold patents in the U.S. and in several other countries throughout the world related to our Fire Shield® technologies.  We have also filed other patent applications and are awaiting action on those applications.  The issuance of patents with respect thereto will complement our core technology and products.  Our U.S. patents are valid for either 20 years from filing or 17 years from date of issue in the United States.  The term of our patents in all other countries vary from 15 to 20 years.  There can be no assurance that pending patent applications or other application that may be filed will result in issued patents, or that any issued patents will survive challenges to their validity.

 The lives of certain patents, related to our GFCI devices, have expired, and others will expire within the next few years.  We are unable to predict how that might affect our business.  We believe that the success of our business depends on our technical and engineering expertise, marketing and service abilities of our employees.  Nevertheless, we own patents and have a policy of seeking patents when appropriate on inventions concerning new products and improvements as part of our ongoing research, development and manufacturing activities.  Furthermore, although we vigorously protect our patents, there can be no assurance that others will not independently develop similar products, duplicate our products or design around the patents issued to us or that foreign intellectual property laws will protect our intellectual property rights in any foreign country. 

 On February 25, 2003, we were issued a patent for a protection system for devices connected to an alternating current electrical power supply.  The patent relates to technology that provides additional user safety intended for application on electrical appliances and equipment such as small hand tools and kitchen appliances (e.g. toasters, toaster ovens, steam irons, coffee makers, etc.)  In addition to electric shock protection, the technology also provides the ability to detect and prevent a variety of potentially hazardous electrical conditions such as excessive heat, flame, electrical insulation breakdowns and pressure buildups.  When such hazardous conditions occur, the power supply is shut off, and an audible and/or visual alarm is activated.

 We have registered our TRC® trademark with the U.S. Patent and Trademark Office.  Our Shock Shield®, Electra Shield® and Fire Shield® brand names are also our registered trademarks.

 Patent and other proprietary rights infringement claims are common in our industry.  Our industry is commonly exposed to claims and litigation involving patent and other intellectual property rights, including claims for indemnification arising out of contractual arrangements with customers.  Litigation is often necessary to enforce patent rights or other intellectual property rights.

 On January 3, 2007, we announced that Technology Research Corporation and Tower Manufacturing Corporation had settled, on mutually agreeable terms, their civil actions, filed in the United States District Court for the Middle District of Florida and the United States District Court for the District of Rhode Island, respectively.  Under the terms of the settlement, both cases were dismissed and royalty-bearing cross licensing arrangements have been entered into under Tower’s 5,943,199 patent and TRC’s 6,292,337 patent, with the net effect for each party’s past sales resulting in TRC receiving $3.2 million paid over a two year period. 

 On April 11, 2007, we announced that we had asserted a counterclaim in the U.S. District Court for the Central District of California against Shanghai ELE Manufacturing Corporation ("Shanghai ELE") for infringement of Tour U.S. Patent No. 6,292,337 ("the '337 patent").  The '337 patent underlies our Fire Shield® technology for cord fire prevention.  The counterclaim asserts that Shanghai ELE's Leakage Current Detectors and Interrupters (LCDIs), among other things, infringe the '337 patent and seeks monetary damages against Shanghai ELE for past infringement of the '337 patent.  The counterclaim also asks the Court to permanently enjoin Shanghai ELE from future infringement of the '337 patent.  On February 16, 2007, Shanghai ELE Manufacturing Corporation ("ELE") filed a lawsuit against TRC in the Central District of California alleging that TRC's United States Patent No. 6,292,337 is invalid and not infringed by ELE. TRC filed a counterclaim alleging that the patent is valid and is infringed by ELE. The '337 patent covers TRC's Fireshield technology for the prevention of power cord fires.  In addition, TRC filed a motion to transfer the action to the United States District Court for the Middle District of Florida, where TRC is headquartered.  On May 18, 2007, Judge R. Gary Klausner granted TRC's motion and transferred the action to the Middle District of Florida.  TRC intends to vigorously pursue its claim of patent infringement against ELE in this new venue.

 We had previously written a letter to Shanghai ELE requesting that they cease all infringing activity relating to the '337 patent.  In response, Shanghai ELE filed a declaratory judgment action against us in the U.S. District Court for the Central District of California, seeking a declaration that it does not infringe and that the patent is invalid.  We filed our Answer and Counterclaim in the action, stating that the '337 patent is valid and asserting our infringement counterclaim against Shanghai ELE.

Major Customers and Exports

 Significant customers who accounted for 10% or more of our revenues, and aggregate exports were:

		Years ended March 31,
		(In thousands)
Customer		2007	2006	2005
U.S. Military (direct sales)	$	3,623	6,110	6,368
DRS Technologies, Inc., a U.S. Government      Prime Contractor		7,000	6,425	5,003
Total revenues for major customers	$	10,623	12,535	11,371
Exports:
Africa	$	2	-	-
Australia		9	1	5
Canada		243	24	25
Europe		2,866	2,080	2,239
Far East		5,146	10,598	6,293
Mexico		639	556	-
Middle East		29	3	26
South America		22	583	7
Total exports	$	8,956	13,845	8,595

 Our military product sales are primarily to military procurement logistic agencies for field service support on previously shipped military equipment and to OEM prime contractors of electric generators.  In fiscal 2007, military revenues were approximately 30% of total revenues, compared to approximately 29% in fiscal 2006.  Year to year direct sales to the U.S. military were down approximately 41%, sales to DRS were up approximately 9%, and overall, military revenues were down approximately 15%.  Direct U.S. military revenues accounted for approximately 10% of our total revenues while DRS accounted for approximately 18% of our total revenues for fiscal 2007, as compared to approximately 13% and 14%, respectively, for fiscal 2006.

 Our exports were down 35% in fiscal 2007, as compared to the prior year, primarily due to lower RAC product shipments to customers located in the Far East.

 We offer our customers no specific product liability protection except with regard to those customers that are specifically named as “Broad Form Vendors” under our product liability coverage.  We do extend protection to purchasers in the event there is a claimed patent infringement that pertains to our portion of the final product that is purchased.  We also carry product and general liability insurance for protection in such cases.

Competition

 Our commercial and military business is highly competitive.

 In the commercial market, we have significant competition.  As a result, we may not be able to maintain current profit margins due to price erosion.  We believe, however, that product knowledge, patented technology, ability to respond quickly to customer requirements, positive customer relations, technical background, industry experience and implementation of our global manufacturing strategy and cost reduction efforts are major operational areas where we are able to effectively compete. 

 In the military market, we must compete with other companies, some being larger and some smaller than we are and acting as suppliers of similar products to prime government contractors.  We believe that knowledge of the procurement process, engineering and technical support, price and delivery are major competitive factors in the military market.  We believe that we have competitive strengths in all of these areas due to senior management's involvement in the government procurement process and experience in the design engineering requirements for military equipment.  A substantial portion of spare parts procurement is set aside for small business concerns, which are defined in general as entities that do not exceed 750 employees.  Because we are classified as a small business concern, we qualify for such set aside procurements for which larger competitors are not qualified.  The entry barriers to the military market are significant because of the need, in most cases, for products to pass government tests and qualifications.

Employees

 As of March 31, 2007, we employed 94 persons on a full time basis at our headquarters in Clearwater, Florida and 335 persons at our Honduran subsidiary.  Due to the seasonality of the RAC market and depending on future RAC production requirements placed on our Honduran facility, the number of personnel may vary significantly from the first half of our fiscal year compared to the second half of the fiscal year. 

 None of our employees are represented by a collective bargaining unit, and we consider our relations with our employees to be stable.  While we believe we have established good relations with the local labor force in both the United States and Honduras, our reliance upon a foreign manufacturing facility subjects us to risks inherent in international operations.  Competition for management, technical, manufacturing, sales and support personnel is intense, and there can be no assurance that we will be successful in attracting or retaining such personnel.

Other Cautionary Statements

 See the discussion of risks in the section of this Form 10-K entitled “Item 1A. Risk Factors.” 

Executive Officers

 Set forth below is information related to our executive officers and their ages as of June 29, 2007.

Name	Age	Position
Robert S. Wiggins	77	Chairman of the Board (Previous President, Chief Executive Officer and Secretary)
Owen Farren	56	Director, President and Chief Executive Officer
Raymond B. Wood	72	Director, Senior Vice President and Director of Government Operations and Marketing
Barry H. Black	60	Vice President of Finance, Chief Financial Officer and Secretary

 Robert S. Wiggins has been a Director of the Company and Chairman of the Board since March 1988.  He was the Chief Executive Officer of the Company from August 2006 through January 2007 and previously from March 1988 through August 2005.  From 1974 to 1987, he was Chairman, Chief Executive Officer and President of Paradyne Corporation, Largo, Florida, a data communications company.  Mr. Wiggins served as a consultant for Paradyne from 1987 to March 1988.  In addition, he spent three years with GTE Information Systems Division as a Vice President and 13 years in various sales and product development managerial positions with IBM Corporation.  Mr. Wiggins earned his MA degree in mathematics from the University of Florida, and his BA degree from the University of Florida, majoring in mathematics with a minor in economics.

 Owen Farren has been a Director of the Company since February 2007 and President & CEO since January 2007.  Prior to joining the Company he was the President of StratEx an interim management and turnaround firm from 2002.  From 1990 to 2002 he worked at SL Industries (AMEX:SLI) a power electronics and motion control company where he had been Chairman, President & CEO.  From 1983 until 1990 he worked for Simco Company, a static control company and a unit of Illinois Tool Works Inc. (NYSE:ITW), where he had been President.  Mr. Farren has an MBA in Finance and a BS in Marketing both from Indiana University.

 Raymond B. Wood, a founder of the Company, has been a Director of the Company and Senior Vice President and Director of Government Operations and Marketing of the Company since its inception in 1981.  From 1974 to 1981, he was Manager of Engine Generator Component Marketing for Square D Company.  He was employed by Electromagnetic Industries, Inc. for 17 years prior to its acquisition by Square D Company. During this time, he held the position of General Manager of Electromagnetic Industries of Georgia Inc., the systems manufacturing plant for military products such as diesel generating systems, generators, controls, semi-trailers, etc. Previous assignments included service as Project and Design Engineer for military products produced by Electromagnetic Industries Inc.  Mr. Wood is a charter member of the industries association, Electrical Generating Systems Association (“EGSA”), has served on its Board of Directors and has been the Chairman of the Government Liaison Committee for over 30 years.  Mr. Wood is also a member of the U.S. Naval Institute and the National Defense Industrial Association.  For over 40 years, he has been involved in design, manufacture and qualification conformance evaluation for listing by the Department of Defense, marketing and product application concerning control and measurement of electric power for Mobile Ground Power Military Engine Generator Systems, and electrical power controls for Naval Shipboard and Military Armored Tracked Vehicle application.  During such period, Mr. Wood has had extensive experience with the military procurement, contract administration, engineering and test qualifying locations, as well as with the government prime contractors to the Department of Defense.  Mr. Wood has served on numerous ad hoc committees for military engine generator specification review requirements and is frequently consulted for solutions to problems encountered with military engine generator systems by both the military and prime contractors to the Department of Defense.

 Barry H. Black has been Vice President of Finance and Chief Financial Officer of the Company since January 2006 and was appointed as Secretary in March 2007.  From 1997 to 2006 he was Vice President and Corporate Controller of Paradyne Networks, Inc.  From 1981 through 1997, Mr. Black held various senior financial management positions with Paradyne Corporation and AT&T Paradyne.  Mr. Black has a Bachelor of Arts in Economics from Bowdoin College, a Masters of Science in Accounting from Northeastern University and a Masters of Science in Taxation from Bentley College.

ITEM 1A.  RISK FACTORS 

 Stockholders and investors should carefully consider the risk factors described below, together with the other information contained in this Annual Report, before making any investment decision with respect to our securities.  The risks and uncertainties described below are not the only ones we face.  If any of the following risks occur, our business, financial condition, or results of operation could be significantly impacted and the trading price of our common stock could decline: 

 Failure to achieve our operating strategy.  We have adopted the following strategic objectives:

• to strengthen our current markets and channels of distribution with new proprietary products;
• to broaden the number of applications within target markets by developing products for these applications;
• to identify and pursue strategic acquisitions that will be accretive to earnings;
• to improve profitability and customer satisfaction through ongoing continuous improvement programs and benchmarking all aspects of TRC’s business with best practices;
• to invest in the education of employees to enable then to have the tools to more effectively grow the business and improve business productivity.

 Any or all of these objectives may not be realized or, if realized, may not result in increased revenue, profitability or market presence.  Executing our strategy may also place a strain on our production, information technology systems and other resources. 

 Inability to finance our growth and meet our capital requirements.  Our ability to continue the growth of our business requires a large amount of working capital.  If we are unable to fund this growth, we may not be able to compete effectively.  Our requirement for capital depends on the market’s acceptance of our products, the growth of our marketing effort, our ability to expand our customer base, our need for additional capital equipment to adopt new manufacturing methods and new products and for future acquisitions.  We cannot be sure that additional financing, if needed, will be available or if such financing will be on favorable terms.  Without access to these additional funds, we may not be able to remain competitive.

 Unavailability and cost increases in raw materials and components.  Raw materials and components constitute a significant portion of our cost of goods.  Factors that are largely beyond our control, such as movements in commodity prices for the specific materials required, may affect the future cost of raw materials and components.  As an example, our products require a substantial amount of plastic. Because the primary resource used in manufactured plastics is petroleum, the cost and availability of plastic varies to a great extent with the price of petroleum.  We have experienced increases in prices of plastic, as well as steel, aluminum and especially copper, which could continue in fiscal 2008.

 In addition, the inability of our suppliers to timely deliver raw materials or components could be disruptive and costly.  If we are unable to obtain raw materials on a timely basis at an affordable cost or if we experience any significant delays or interruptions of supply, our financial results could be significantly impacted.

 Dependence upon a limited number of key suppliers.  We purchase a significant volume of products from contract manufacturers in China.  In fiscal 2007, for example, our purchases from Chinese vendors were more than $7 million.  The purchase price for these products is set in U.S. dollars.  If the exchange rate between the U.S. dollar and Chinese yuan changes so that the yuan appreciates significantly against the dollar, the cost of building our products could increase significantly.  We anticipate that outsource providers will play key roles in our manufacturing operations.  Although we aim at selecting reputable providers, it is possible that one or more of these providers could fail to perform as we expect and such failure could have an adverse impact on our business.  Because of this expanded role of our outsource providers, we will need to monitor the performance of these suppliers, adopt new procedures to deal with and manage the performance of these outsource providers.  Any delay or failure in the implementation of our operational changes and monitoring of these relationships could adversely affect our customer relationships and/or have a negative effect on our operating results.

 The loss of or significant decrease in sales to large customers.  We must receive a continuous flow of new orders from our large customers.  Failure to obtain anticipated orders or delays or cancellations of orders or significant pressure to reduce prices from key customers could have a material adverse effect on us.  In addition, as a result of the desire to more closely manage inventory levels, there is a growing trend in business, especially in our commercial markets, to make purchases on a “just-in-time” basis.  This requires us to shorten our lead time for production in certain cases and more closely anticipate demand, which could in the future require the carrying of additional inventories or require additional expenses to expedite delivery.

 Long-term contracts may not be renewed.  We currently have contracts with the U.S. military to provide control equipment used in engine generator systems. These contracts currently run through 2012.  We also are a key supplier of control equipment to DRS, a prime contractor with the U.S. military.  As a result of the war in Iraq demand for these military products has remained strong.  If the war ends or significantly winds down or if our contracts with the military expire and are not renewed, demand for these products could be greatly reduced.

 We may face cancellations, reductions or delays in our product orders that could adversely affect our operating results.  From time to time we receive commercial orders from customers that require us to manufacture products on short notice and have such products available for shipment, even though the order may be reduced, cancelled or delayed.  Some orders may be designed to meet the unique needs of a particular customer.  As a result, changes, delays or cancellations of orders could result in an inventory of unsaleable products and possible inventory write-downs that could adversely affect our operating results.

 Adverse changes in the operations of global manufacturing facilities.  We manufacture a significant number of products in Honduras and obtain a significant proportion of the raw materials and sub-assembly components used in the manufacturing of our products outside the United States.  International operations are subject to risks including, among others:

• labor unrest;
• political instability;
• lack of developed infrastructure;
• longer payment cycles and greater difficulty in collecting accounts;
• import and export duties and quotas;
• changes in domestic and international customs and tariffs;
• unexpected changes in regulatory environments;
• difficulty in complying with a variety of foreign laws;
• difficulty in obtaining distribution and support;
• potentially adverse tax consequences; and
• changes in exchange rates between the U.S. dollar and the foreign currency.

 Labor in Honduras has historically been readily available and at lower cost than available in most other nations; however, we cannot be assured that labor will continue to be available in Honduras at costs consistent with historical levels.  A substantial increase in labor costs could have a material adverse effect on our results of operation.

  Interruptions in manufacturing operations.  Approximately 70% of our revenues are derived from products manufactured or assembled at our manufacturing facility in Honduras and by contract manufacturers located in China.  These manufacturing operations, as well as our manufacturing plant in Clearwater, Florida, are subject to hazards that could result in material damage to any such facilities.  Such damage to or prolonged interruption in the operations of such facilities for repairs, labor disruption, hurricanes, typhoons or other reasons, could have a material adverse effect on us.  In addition, our contract manufacturing agreements can be terminated on short notice.  If our contract manufacturers located in China are unable or unwilling to manufacture and deliver products to enable us to meet the delivery schedules and quality that we require, we could be forced to seek additional suppliers, thereby resulting in further delays and additional expenses in shipping products to our customers.

 Infringement or loss of proprietary rights.  We believe that our rights in owned and licensed names are of increasing importance to our business success and that our ability to create demand for our products is dependent to a large extent on our ability to exploit these trademarks, such as our Fire Shield® brand name.  There can be no assurance as to the breadth or degree of protection that these trademarks may afford us, or that we will be able to successfully leverage our trademarks in the future.  The costs associated with protecting our intellectual property rights, including litigation costs, may be material.  We also cannot be sure that we will be able to successfully assert our intellectual property rights or that these rights will not be invalidated, circumvented or challenged.  Any inability to do so, particularly with respect to names in which we have made significant capital investments, or a successful intellectual property challenge or infringement proceeding against us, could have a material adverse effect on us.

 Our success also depends in part on our proprietary technology and patent rights.  If we fail to adequately protect this technology and our patent rights, we may lose our competitive position or face significant expense to protect or enforce our intellectual property rights.  We intend to continue to protect our proprietary technology through patents, copyrights and trade secrets.  Despite this intention, we may not be successful in achieving adequate protection.  Claims allowed on any of our patents may not be sufficiently broad to protect our technology and any patents issued to us also may be challenged, invalidated or circumvented.  With respect to our pending applications for patents, there can be no assurance that we will be successful in obtaining patents from these applications.

 Our industry is characterized by frequent claims regarding patents and intellectual property rights and resulting litigation arising from disputes over the scope of these rights.  On February 16, 2007, Shanghai ELE Manufacturing Corporation (“ELE”) filed a declaratory judgment action against us in the Central District of California alleging that our United States Patent No. 6,292,337 (“the 337 patent”) is invalid and not infringed by ELE. We had previously written a letter to ELE requesting that they cease all infringing activity relating to the '337 patent.  In April 2007 we filed a counterclaim against ELE  asserting that the patent is valid, that ELE's Leakage Current Detectors and Interrupters (LCDIs), among other things, infringe the '337 patent.  We are also seeking monetary damages against ELE for past infringement of the '337 patent. The '337 patent underlies our Fire Shield® technology for cord fire prevention. We filed a motion to transfer the ELE action to the United States District Court for the Middle District of Florida, where we are headquartered.  On May 18, 2007, Judge R. Gary Klausner granted our motion and transferred the action to the Middle District of Florida.  We intend to vigorously pursue our patent infringement claims but there can be no assurance that we will be able to resolve this dispute under terms and conditions that would not have an adverse affect on our business or our financial results.

 Loss of patent protection could impact our operating results.  We currently hold patents on several products, the main patent being the ‘337 patent underlying our Fire Shield ® technology for cord fire prevention.  This patent provides legal protection against competitors who could unlawfully copy our technology.  Once these patents expire, competitors will be able to legally utilize our technology and competition could increase, resulting in lower prices in the marketplace.  If we are unable to develop new patented technologies we may be unable to maintain our profit margins and we could lose our technological advantage in the marketplace.

 Seasonality.  Our business can vary significantly from quarter to quarter.  This seasonality may also result in cash outlays or additional interest expense due to an increased need to borrow funds to maintain sufficient working capital to support such increased demand.

 Competition from companies that produce similar products.  The markets for our products are highly competitive.  We believe that competition is based upon several factors, including price, quality, access to retail shelf space, product features and enhancements, brand names, new product introductions, marketing support and distribution systems.  We compete with established companies, a number of which have substantially greater facilities, personnel, financial and other resources.  Some competitors may be willing to reduce prices and accept lower profit margins to compete with us.  As a result of this competition, we could lose market share and sales, or be forced to reduce our prices to meet competition.  In such cases, we could be required to write down our inventory to market value.

 Additionally, our current products could become obsolete as a result of new customer demands or competitors’ new products.  For example, our products could become unmarketable as a result of a new product that provides superior performance at a lower cost.  If we cannot adapt to these competitive challenges, we may not be able to effectively compete.

 Newly acquired businesses or product lines.  We may acquire partial or full ownership in businesses or may acquire rights to market and distribute particular products or lines of products.  The acquisition of a business or of the rights to market specific products or use specific product names may involve a financial commitment, either in the form of cash or stock consideration.  There is no guarantee that the acquired businesses or product lines will contribute positively to earnings.  The anticipated synergies may not materialize, cost savings may be less than expected, sales of products may not meet expectations, and acquired businesses may carry unexpected liabilities.  Because we have a small management team, we may not be able to effectively assimilate the operations, technologies, personnel and products from the acquired company or our management team may be diverted from our other business concerns.

 Dependence on new products. Rapid technological changes in our industry subject us to increased pressure to develop technological advances in our products. We believe that our future success depends in part upon our ability to develop and offer new products with improved capabilities and add additional features and adaptations of our existing products for new uses. If new products have reliability or quality problems, our performance may be impacted by reduced orders, higher manufacturing costs, additional service and warranty expenses. Our failure to complete commercialization of these products in a timely manner could result in unanticipated costs and inventory obsolescence, which would adversely affect our financial results.

 Volatility of our stock price.  In recent years, the price of our common stock has fluctuated greatly.  The price of our common stock could continue to be volatile and fluctuate in response to a variety of factors including, but not limited to, the following:

• general and global economic fluctuation;
• quarter-to-quarter variations in our operating results;
• material differences in revenue or earnings from levels expected by investors;
• announcements of restructurings, technological innovations, reductions in force, departure of key employees, consolidations of operations or introduction of new products;
• development in, or claims relating to, patent or other proprietary rights;
• success or failure of our new and existing products;
• disruptions with key customers or suppliers; or
• political, economic or environmental events occurring globally.

 Government regulations could adversely impact our operations.  Throughout the world, most federal, state, provincial and local authorities require Underwriters Laboratory, Inc. or other safety regulation certification prior to marketing electrical products in those jurisdictions.  Most of our products have such certifications; however, there can be no assurance that our products will continue to meet such specifications.  Many foreign, federal, state and local governments also have enacted laws and regulations that govern the labeling and packaging of products and limit the sale of product containing certain materials deemed to be environmentally sensitive.  A determination that our products are not in compliance with such rules and regulations could result in the imposition of fines or an award of damages to private litigants.

 Our business and results of operations could be impacted by the implementation of Sarbanes Oxley.  Under current rules, we will be required to complete our initial assessment of the adequacy of internal control over financial reporting under Section 404 of the Sarbanes Oxley Act of 2002 as of March 31, 2008.  We also must include in our assessment, a report detailing management’s assessment of the effectiveness of our internal control over financial reporting as well as the operating effectiveness of our internal control over financial reporting.  If we are unable to complete our assessment as required, or if upon completion of our assessment material weaknesses are uncovered and reported, investors could lose confidence in the reliability of our financial statements, which in turn, could result in the decrease in value of our common stock.  Although we will devote significant resources into developing the required documentation and perform the required testing, there can be no assurance that we will be able to comply with all of Section 404’s requirements.

 Additionally, our independent registered public accounting firm must also attest to and report on management’s assessment of the effectiveness of our internal control over financial reporting as well as the operating effectiveness of our internal control over financial reporting as of March 31, 2009.  If we are unable to effectively complete our assessment or if our internal control over financial reporting is not designed or operating effectively, our independent registered public accounting firm may either disclaim an opinion or may issue a qualified opinion as to the effectiveness of our internal control over financial reporting.  If this should occur, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements, which in turn, could cause a decline in the market price of our common stock.

 The risks listed above are not the only risks that we face.  Additional risks that are not yet known or that we believe to be immaterial may also impair business operations.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

 Not applicable.

ITEM 2.  PROPERTIES

 Our executive offices and U.S. manufacturing facility are located on 4.7 acres of leased land in the St. Petersburg-Clearwater Airport Industrial Park.  The lease, with options, extends until 2021 and is subject to certain price escalation provisions every five years.  This leased land is adequate to enable us to expand this facility to 60,000 square feet.  The present facility provides a total of 43,000 square feet, including 10,000 square feet of offices and engineering areas, as well as 23,000 square feet of production area and 10,000 square feet of warehouse space.

 Our wholly-owned subsidiary in Honduras, TRC Honduras S.A. de C.V., leases 58,000 square feet of building space from ZIP San Jose, an industrial park located in San Pedro Sula, Honduras.  These facilities include 10,000 square feet of office area, as well as 30,000 square feet of production area and 18,000 square feet of warehouse space.  TRC Honduras S.A. de C.V. produces the majority of our commercial products.

ITEM 3.  LEGAL PROCEEDINGS

 On August 3, 2005, we filed a lawsuit in the United States District Court, Middle District of Florida, Tampa Division, against Tower Manufacturing Corporation, of Providence, R. I., alleging willful infringement of U.S. Patent No. 6,292,337, which underlies our Fire Shield® technology for cord fire prevention.  We alleged in the lawsuit that the Tower LCDI, found on portable room air conditioners, infringes our Fire Shield® patent.  As described in the Complaint, we sought injunctive relief, damages for infringement, lost profits, and any other relief deemed just by the Court.  Tower Manufacturing Corporation filed a counterclaim alleging an antitrust violation and for tortious interference with contract. 

 On September 13, 2005, we added Fedders Corporation (NYSE-FJC), a global manufacturer of air treatment products, including room air conditioners, as a defendant in the previously filed lawsuit against Tower Manufacturing Corporation.  The amended complaint alleged that the Tower LCDI, found on the Fedders room air conditioners, also infringes our Fire Shield® patent. 

 On May 11, 2006, we received notice that a complaint had been filed against us by Tower Manufacturing Corporation in the United States District Court for the District of Rhode Island, alleging infringement of its patent on a Mini Appliance Leakage Current Interrupter, No. 5,943,199.  Tower sought an injunction and monetary damages. 

 In September 2006, a Markman Hearing was conducted before Judge Richard A. Lazzara, United States District Court, Middle District of Florida, for the purpose of patent claim construction in preparation for the trial relating to our infringement allegations against Tower Manufacturing Corporation.

 On October 6, 2006, our attorneys filed a request with the United States Patent and Trademark Office (PTO) for an ex parte reexamination of the claims in Tower's   Mini Appliance Leakage Current Interrupter patent.  The Requests asked the PTO to invalidate the claims of Tower's patent based on prior art contained within the request.  In view of this, on October 10, 2006, our attorneys filed a motion in the Rhode Island District Court requesting the Court to stay the case pending the outcome of the ex parte reexamination request that was submitted to the PTO.  In a separate order on October 10, 2006, Judge Ernest C. Torres, United States District Court for the District of Rhode Island, ordered a nonbinding settlement mediation in this matter.  The judge in the Middle District of Florida action subsequently ordered nonbinding mediation as well.

 On December 29, 2006, we entered into a Settlement Agreement with Tower Manufacturing Corporation (“Tower”).  Under the Settlement Agreement, the civil actions filed by both us and Tower, including Fedders Corporation, were dismissed.  Under the terms of the settlement agreement we are to receive $3.2 million paid over a two year period.  We and Tower have also entered into a cross licensing agreement of the patents that were the subject of the lawsuits for the period they remain valid and enforceable.

 On February 16, 2007, Shanghai ELE Manufacturing Corporation (“ELE”) filed a declaratory judgment action against us in the Central District of California alleging that our United States Patent No. 6,292,337 (“the 337 patent”) is invalid and not infringed by ELE. We had previously written a letter to ELE requesting that they cease all infringing activity relating to the '337 patent.  In April we filed a counterclaim against ELE  asserting that the patent is valid, that ELE's Leakage Current Detectors and Interrupters (LCDIs), among other things, infringe the '337 patent.  We are also seeking monetary damages against ELE for past infringement of the '337 patent. The '337 patent underlies our Fire Shield® technology for cord fire prevention.   We filed a motion to transfer the ELE action to the United States District Court for the Middle District of Florida, where we are headquartered.  On May 18, 2007, Judge R. Gary Klausner granted our motion and transferred the action to the Middle District of Florida.  We intend to vigorously pursue our claim of patent infringement against ELE in this new venue. 

 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 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended March 31, 2007.

PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 Our common stock is registered under Section 12(g) of the Securities Exchange Act of 1934 and quoted on the National Market System of the NASDAQ stock market, to which we gained admittance in December 1984, under the symbol “TRCI”.  In November 1995, NASDAQ approved our application for listing on the National Market System.  The following tables set forth a range of high and low market prices for our common stock for the fiscal years ended March 31, 2007 and 2006 as reported on the NASDAQ National Market, and the dividends declared with respect to each quarter ended within such years.

Fiscal Year Ended		High	Low		Cash Dividends
March 31, 2007:
First quarter	$	7.57	4.65	$	0.015
Second quarter		5.49	3.94		0.020
Third quarter		5.43	3.80		0.020
Fourth quarter		5.35	4.18		0.020
				$	0.075
March 31, 2006:
First quarter	$	5.95	4.28	$	0.015
Second quarter		5.54	3.65		0.015
Third quarter		4.51	3.26		0.015
Fourth quarter		8.72	4.51		0.015
				$	0.060

 As of May 31, 2007, the approximate number of stockholders of record was 312.  This number does not include any adjustment for stockholders beneficially owning common stock held of record by any institutional fiduciary, which we believe to represent approximately an additional 3,383 stockholders.

 Our authorized capital stock, as of May 31, 2007, consisted of 10,000,000 shares of common stock, par value $.51, of which 5,888,828 shares were outstanding.

Dividends

 The payment of dividends on our common stock is within the discretion of our Board of Directors.  In fiscal year 2007, we paid a quarterly cash dividend of $.015 per share for our first quarter and $.02 per share for the three remaining quarters.  Dividends of $.075 per share were paid by us in fiscal 2007 and $.06 per share for fiscal 2006.

Securities Authorized for Issuance Under Equity Compensation Plans

 In April 2006, we granted a total of 23,370 shares of restricted stock to eleven members of our senior management team as stock awards under our 2000 Long Term Incentive Plan.  Each stock award was limited in amount at the time of grant to 25% of the grantee’s target incentive bonus for our 2007 fiscal year.  Under the terms of these restricted stock awards, the grantee had to be an active employee on April 30, 2007 and achieve a performance condition that was based upon certain gross profit margin targets that we established for the year ended March 31, 2007.  As of March 31, 2007, none of the performance targets were met and, as a result, all 23, 370 shares granted under these stock awards were forfeited and the shares cancelled.

 Information regarding our equity compensation plans and the securities authorized for issuance thereunder is set forth in Item 12 below.

Performance Graph

 The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities and Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate such information by reference into such filing.

 The following performance graph compares the changes from March 31, 2001 through March 31, 2006, in the cumulative total value of $100 hypothetically invested in (i) the Company's common stock; (ii) the Nasdaq Composite; and (iii) the Wilshire Electrical Components & Equipment Index.

Stock Repurchase Program

 We did not repurchase any equity securities during the year ended March 31, 2007.  On June 28, 2006, the Board of Directors terminated the Stock Repurchase Program.

ITEM 6.  SELECTED FINANCIAL DATA

 The following selected consolidated balance sheet data as of March 31, 2007 and 2006 and operating results for the years ended March 31, 2007, 2006, and 2005 is derived from our consolidated financial statements which are included elsewhere in this Form 10-K.  The selected consolidated balance sheet data as of March 2005, 2004 and 2003 and operating results for the years ended March 31, 2004 and 2003 are derived from audited consolidated financial statements which are not included in this Form 10-K.  You should read the selected financial data in conjunction with “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data.”

		Years ended March 31,
		2007		2006		2005		2004	2003
					(In thousands)
Revenues	$	37,992		45,620		39,433		24,337	17,762
Cost of sales		29,368		34,978		29,618		14,831	11,896
Gross profit		8,624		10,642		9,815		9,506	5,866
Operating expenses		10,000		7,922		7,172		5,684	4,448
Income (loss) from operations		(1,376	)	2,720		2,643		3,822	1,418
Interest expense		(182	)	(255	)	(48	)	-	(1	)
Other income		3,264		32		29		15	7
		3,082		(223	)	(19	)	15	6
Income before income taxes		1,706		2,497		2,624		3,837	1,424
Income tax expense		244		746		1,378		1,161	409
Net income	$	1,462		1,751		1,246		2,676	1,015
Earnings per share:
Basic	$	0.25		0.30		0.22		0.48	0.19
Diluted	$	0.25		0.30		0.21		0.46	0.19
Shares outstanding:
Basic		5,884		5,786		5,755		5,589	5,438
Diluted		5,907		5,834		5,954		5,828	5,482
Consolidated Balance Sheet Data:
Cash and cash equivalents and investments	$	3,969		3,107		1,302		5,968	2,530
Working capital		16,032		15,393		13,602		12,611	8,873
Total assets		28,279		29,144		32,177		18,572	13,836
Long-term debt		2,000		2,000		2,350		-	-
Total debt		3,000		3,000		5,350		-	-
Total stockholders' equity		19,725		18,158		16,440		15,452	12,077
Cash dividends paid		0.075		0.06		0.06		0.06	0.045

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Summary

 In fiscal 2007, our revenues decreased $7.6 million or 16.7% compared with fiscal 2006.  Our commercial business declined 17.9% during fiscal 2007 mostly due to a sharp drop in our RAC business, and our military business also declined 13.8% from prior year levels.  Our gross profit also dropped $2.0 million.  Approximately $1.4 million of this decline was from write-downs of inventory to market value principally resulting from a decline in demand and selling price for RAC products due to competition from off-shore, low cost manufacturers.  The reduction in gross profit from lower revenues was largely offset by a more favorable mix of sales of higher margin products.  Operating expenses increased $2.1 million from fiscal 2006 levels, largely due to higher professional fees (mostly due to our lawsuit against Tower Manufacturing Corporation) and compensation related costs.  Other income (expense), net, improved $3.3 million from an expense of $.2 million to income of $3.1 million.  The $3.2 million settlement of the lawsuit with Tower Manufacturing Corporation was the reason for this significant improvement in other income.  In fiscal 2007 cash and investments increased $.9 million from fiscal 2006 levels.

Overview

 We are an internationally recognized leader in the design, manufacture and sale of electrical safety products.  We market and sell our products through several channels of distribution including our in-house sales force, retail, distribution, domestic and international OEMs and third party sales representation organizations.

 We recognize revenues from equipment sales when evidence of a sales arrangement exists, pricing is fixed or determinable, delivery, including title passage has taken place, and collectibility from the customer is reasonably assured.  Amounts billed to customers in sales transactions related to shipping and handling are classified as product revenues.  Royalty revenues are recognized when we have delivered technical specifications and performed required services under the related agreement. During fiscal 2007 our sales of RAC products were reduced from prior years’ levels because of increased competition.  Our military revenues also declined due to lack of available funding in the U.S. budget late in the government’s fiscal year.

 Our gross margins are affected by many different factors including competitive price pressures, product mix, differences in manufacturing volumes, changes in the cost of raw materials, charges for excess or obsolete inventory, and costs of warranty repairs.  We generally provide a one-year warranty on product sales.  We believe that our accrued warranty reserve is adequate to cover the cost of future warranty work on products we have sold.  During fiscal 2007, we wrote down the carrying value of our inventory to market value by $1.4 million which significantly impacted our gross margins.  These adjustments to market value mainly resulted from reduced demand for our RAC products due to increasing competition from off-shore, low-cost manufacturers.

 Selling and marketing expenses include salaries, bonuses, commissions and related employee expenses for sales personnel, advertising, promotional and trade show expenses, travel, consulting fees, and facilities expense.

 General and administrative expenses consist of salaries, bonuses and related employee expenses, travel, consulting fees, facilities expense, legal and audit, charge offs of bad debts and board of director fees.

 Research and development expenses principally include salaries for engineers and technical support staff, consulting, outside testing service fees, maintenance contracts on software, and depreciation of engineering equipment.

 Our operating expenses increased significantly over the past year.  Much of this increase was for legal expenses related to our lawsuit against Tower Manufacturing Corporation that was initiated in the fiscal 2006 year.  Along with professional fees the most significant reason for operating expense increases was for salary and wage related expense.

Results of Operations

    The following table summarizes our operating results as a percentage of revenues for each of the periods shown:

	Years ended March 31,
	2007	2006	2005	2004	2003
Revenues:
Commercial	69.7%	70.7%	68.5%	49.1%	57.7%
Military	30.3%	29.3%	31.1%	50.6%	41.6%
Royalties	-	-	0.4%	0.3%	0.7%
Total revenues	100.0%	100.0%	100.0%	100.0%	100.0%
Cost of sales	77.3%	76.7%	75.1%	60.9%	67.0%
Gross profit	22.7%	23.3%	24.9%	39.1%	33.0%
Operating expenses:
Selling and marketing	7.6%	5.8%	6.5%	9.8%	10.4%
General and administrative	12.8%	7.3%	6.5%	7.9%	7.5%
Research and development	5.3%	4.3%	5.2%	5.7%	6.9%
Business restructuring charges	0.4%
Other	0.2%	-	-	-	0.2%
Total operating expenses	26.3%	17.4%	18.2%	23.4%	25.0%
Income (loss) from operations	(3.6)%	5.9%	6.7%	15.7%	8.0%
Interest expense	(0.5)%	(0.6)%	(0.1)%	-	-
Other income	8.6%	0.1%	0.1%	-	-
	8.1%	(0.5)%	0.0%	-	-
Income before income taxes	4.5%	5.5%	6.7%	15.7%	8.0%
Income tax expense	0.6%	1.6%	3.5%	4.7%	2.3%
Net income	3.9%	3.8%	3.2%	11.0%	5.7%

Fiscal 2007 and 2006 Comparison

 Revenues for fiscal 2007 decreased $7.6 million, or 16.7% to $38.0 million from $45.6 million for the prior fiscal year.  Commercial revenues decreased $5.8 million largely due to a sharp decrease in RAC revenues.  Military revenues declined $1.8 million or 13.8% to $11.5 million from $13.4 million in fiscal 2006.  The decline in commercial revenue was principally a result of declining RAC revenues due to competition from off-shore, low cost manufacturers.  The decrease in military revenues was largely attributable to the lack of available funding late in the government’s fiscal year.  In fiscal 2008, we expect RAC revenues to continue at current levels reducing quarterly commercial revenues to approximately fourth quarter fiscal 2007 run rates.  Military revenues are anticipated to ramp up in fiscal 2008 without government budget restrictions to recent prior years’ levels.

 Gross profit decreased $2.0 million to $8.6 million for fiscal 2007 from $10.6 million for fiscal 2006.  The lower fiscal 2007 gross profit was primarily due to the $7.6 million decrease in revenues and to $1.4 million in write-downs of inventory principally due to a decline in demand and selling price for RAC products due to competition from off-shore, low cost manufacturers.  Gross profit as a percentage of revenues declined .6% from 23.3% for the fiscal 2006 year to 22.7% in fiscal 2007.  This decline in gross profit as a percent of revenues was primarily due to the write downs of RAC inventory as discussed above.  Without this write-down in inventory, gross profit would have increased approximately 3.7% largely due to a sales mix of higher margin products.

 Selling and marketing expense of $2.9 million, or 7.6% of revenues, increased $.3 million for fiscal 2007 from $2.6 million, or 5.8% of revenues in fiscal 2006.  The $.3 million increase over the prior year period was primarily due to increases in compensation expense  of $.1 million, professional fees of $.1 million and travel of $.1 million.  Selling and marketing expense as a percent of revenues increased 1.8% principally due to the $7.6 million decrease in revenues in fiscal 2007 as well as the $.3 million increase in selling and marketing expenses.  We expect selling and marketing expense to decline slightly in fiscal 2008 but to increase as a percent of revenues due to the impact of lower RAC revenues for the full year.

 General and administrative expense was $4.8 million, or 12.8% of revenues, for fiscal 2007, compared with $3.3 million, or 7.3% of revenues, for fiscal 2006, an increase of $1.5 million, or 45.7%.  The increase over the prior year was principally due to $.9 million in higher professional fees mostly due to the Tower lawsuit, $.4 million in higher compensation related expenses, $.2 million in higher write offs of bad debts, and $.1 million in higher amortization of intangible expenses.  General and administrative expense as a percent of revenues increased 5.5% from 7.3% in fiscal 2006 to 12.8% in fiscal 2007.  This increase is primarily due to the higher legal, compensation, bad debts, and amortization of intangibles expense as well as the $7.6 million decrease in revenues in fiscal 2007.  We expect general and administrative expenses to decline in fiscal 2008 but with expected lower RAC revenues for fiscal 2008 we expect general and administrative expenses to be approximately 11% as a percentage of revenues.

 Research and development expense was $2.0 million of expense in both fiscal 2007 and fiscal 2006.  Research and development expense was 5.3% as a percent of revenues for the fiscal year ended March 31, 2007 compared with 4.3% for the fiscal year ended March 31, 2006.  The 1.0% increase is due to the $7.6 million decrease in revenues in fiscal 2006.  We expect research and development expense as a percent of revenues to remain approximately the same in fiscal 2008 compared with fiscal 2007.

 Restructuring charges were $.1 million in expense in fiscal 2007 versus $0 for fiscal 2006.  In March 2007, we reduced our U.S. workforce by approximately 12% in order to adjust our cost structure to be more competitive due to the loss of RAC revenues.  There were no comparable restructuring charges in fiscal 2006.

 Other operating expenses consisted of $.1 million or .2% of revenues in fiscal 2007 compared with $0 in fiscal 2006. Other operating expense consisted of a write-down in assets to fair market value.

 Other income (expense), net was $3.1 million in income in fiscal 2007 versus $.2 million in expense in fiscal 2006, an increase in income of $3.3 million.  The increase in other income was primarily attributable to the patent infringement lawsuit settlement of $3.2 million that was recorded in the third quarter.  In addition, interest expense declined from the prior year due to lower loan balances outstanding.

 Income tax expense decreased $.5 million to $.2 million of expense for fiscal 2007 from $.7 million in fiscal 2006.  The decrease was principally due to higher income tax expense in fiscal 2006 resulting from a deemed dividend from our Honduran subsidiary to the U.S. parent company under Sections 951 and 956 of the Internal Revenue Code that resulted from borrowings under our joint line of credit with our Honduran subsidiary. Fiscal 2006 income taxes were reduced by the reversal of a tax accrual in the amount of $.1 million in the fourth quarter of fiscal 2006 as a result of concluding an audit by the Internal Revenue Service for the fiscal 2004 year.  Income tax expense as a percent of income before income taxes was 14.3% for fiscal 2007, compared with 29.9% in fiscal 2006.

 Historically our effective tax rate has varied based on the mix of income before income taxes derived from our Honduran subsidiary, which had not been subject to income taxes, and the balance of income before income taxes, which is subject to income taxes.  Our Honduran subsidiary is profitable which decreases our effective tax rate.  In fiscal 2005 and 2006 the earnings from foreign operations were taxable as deemed dividends to the parent company due to borrowings under our revolving credit agreement that were secured by the assets of the Honduran subsidiary.  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 SFAS 109, Accounting for Income Taxes, prior to fiscal 2005 we did not record deferred income taxes on the foreign undistributed earnings of an investment in a foreign subsidiary that are essentially permanent in duration.  We expect our effective income tax rate to be between 25-30% in fiscal 2008.

 Net income was $1.5 million for fiscal 2007, compared with $1.8 million reported in fiscal 2006, a decrease of $.3 million.  Lower fiscal 2007 revenues and gross profit and higher fiscal 2007 operating expenses were largely offset by the $3.2 million settlement of the patent infringement lawsuit and the lower income tax provision when compared with fiscal 2006.

Fiscal 2006 and 2005 Comparison

 Revenues for fiscal 2006 increased $6.2 million, or 15.7% to $45.6 million from $39.4 million for the prior fiscal year.  Commercial revenues, including RAC revenues, increased $5.2 million reflecting solid growth in most channels of distribution in both domestic and international markets.  Military revenues increased $1.1 million or 9% to $13.4 million from $12.3 million in fiscal 2005.  Royalty income declined $.1 million to zero income in fiscal 2006.  The decline in royalty income was due to non-recurring royalties which were recorded in the prior year not repeated in fiscal 2006.

 Gross profit increased $.8 million to $10.6 million for the fiscal year ended March 31, 2006 from $9.8 million for the fiscal year ended March 31, 2005.  The higher gross profit in fiscal 2006 was due to the $6.2 million increase in revenues partially offset by lower margins on RAC sales as a result of competitive pressure, a less favorable product mix and price increases from vendors.  Gross profit as a percentage of revenues declined 1.6% from 24.9% for the fiscal 2005 year to 23.3% in fiscal 2006.  This decline in gross profit as a percent of revenues was also due to the lower margins on RAC sales, the more unfavorable product mix in fiscal 2006, and price increases from vendors.

 Selling and marketing expense of $2.6 million, or 5.8% of revenues, increased $.1 million for fiscal 2006, compared with $2.5 million, or 6.5% of revenues, for fiscal 2005.  The $.1 million increase over the comparable period was primarily due to increases in compensation expense in fiscal 2006.  Selling and marketing expense as a percent of revenues declined .7% principally due to the $6.2 million increase in revenues in fiscal 2006.  We expect selling and marketing expense as a percent of revenues to remain approximately the same in fiscal 2007 as in fiscal 2006.

 General and administrative expense was $3.3 million, or 7.3% of revenues, for fiscal 2006, compared with $2.6 million, or 6.5% of revenues, for fiscal 2005, an increase of $.7 million, or 28.3%.  The increase over the prior year was principally due to $.4 million in higher legal expense, of which $.3 million is a result of the Tower lawsuit, $.1 million in higher compensation, and $.1 million in higher consulting fees.  General and administrative expense as a percent of revenues increased  .8%  from 6.5% in fiscal 2005 to 7.3% in fiscal 2006.  This increase is primarily due to the higher legal, compensation and consulting fees partially offset by the $6.2 million increase in revenues in fiscal 2006.

 Research and development expense was $2.0 million of expense in both fiscal 2006 and fiscal 2005.  Research and development expense was 4.3% as a percent of revenues for the fiscal year ended March 31, 2006 compared with 5.2% for the fiscal year ended March 31, 2005.  The .9% decrease is due to the $6.2 million increase in revenues in fiscal 2006.  We expect research and development expense as a percent of revenues to remain approximately the same in fiscal 2007 compared with fiscal 2006.

 Other expense was $.2 million in expense in fiscal 2006, an increase of $.2 million in expense from fiscal 2005.  The increase was principally due to interest expense related to the higher level of borrowings on our line of credit for the entire fiscal 2006 year, whereas in fiscal 2005, we had lower debt at the beginning of the fiscal year.  We expect to have decreased debt in fiscal 2007 compared to fiscal 2006.

 Income tax expense decreased $.7 million to $.7 million of expense for the fiscal year ended March 31, 2006 from $1.4 million for the fiscal year ended March 31, 2005.  The decrease was principally due to higher income tax expense in fiscal 2005 resulting from 1) a deemed dividend from our Honduran subsidiary to the U.S. parent company under Sections 951 and 956 of the Internal Revenue Code that resulted from borrowings under our joint line of credit with our Honduran subsidiary and 2) deferred income taxes recorded on pre-fiscal 2005 Honduran earnings due to inability to assert the indefinite reversal criteria of APB 23.  The income tax impact in fiscal 2005 was approximately $.3 million higher due recording deferred income taxes on pre-fiscal 2005 Honduran earnings.  The Company was able to reassert the indefinite reversal criteria for Honduran earnings within the fourth quarter of fiscal 2006, which decreased income taxes by approximately $.1 million.  Income taxes also decreased in fiscal 2006 due to the reversal of a tax accrual in the amount of $.1 million in the fourth quarter of fiscal 2006 as a result of concluding an audit by the Internal Revenue Service for the fiscal 2004 year.  Income tax expense as a percent of income before income taxes was 29.9% for fiscal 2006, compared with 52.5% in fiscal 2005.  The higher percentage of income tax expense as a percent of income before income taxes in fiscal 2005 is primarily due to deferred income taxes recorded on pre-fiscal 2005 Honduran earnings due to inability to assert the indefinite reversal criteria of APB 23.

 Historically our effective tax rate has varied based on the mix of income before income taxes derived from our Honduran subsidiary, which had not been subject to income taxes, and the balance of income before income taxes, which is subject to income taxes.  Our Honduran subsidiary is profitable which decreased our effective tax rate in years prior to fiscal 2005.  In fiscal 2005 and 2006 the earnings from foreign operations were taxable as deemed dividends to the parent company due to borrowings under our revolving credit agreement that were secured by the assets of the Honduran subsidiary.  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 SFAS 109, Accounting for Income Taxes, we do not record deferred income taxes on the foreign undistributed earnings of an investment in a foreign subsidiary that are essentially permanent in duration.  

 The circumstances that triggered the taxation of foreign earnings are no longer in effect.  As it is management’s intent to reinvest future undistributed earnings of our foreign subsidiary and thereby indefinitely postpone their repatriation, our effective income tax rate was lower in fiscal 2007.

 Net income was $1.8 million for fiscal 2006, compared with $1.2 million reported in fiscal 2005, an increase of $.5 million.  Higher fiscal 2006 gross profit and the lower tax provision discussed above were partially offset by higher operating expense and higher interest expense when compared with fiscal 2005.

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 collectibility 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, revenues from sales to distributors are 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.

 We may enter into government contracts that fall within the scope of Statement of Position 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts (SOP 81-1) (“non-standard” products) or fall outside the scope of SOP 81-1 (“standard” products).  For government contracts within the scope of SOP 81-1, we record revenue under a units of delivery model with revenues 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 SOP 81-1.  For government contracts outside the scope of SOP 81-1, we record revenue the same as for commercial customers discussed above and would record a loss in the event the costs to fulfill a government contract are in excess of the associated revenues.  We have not experienced past losses on government contracts, and currently, we do not have any transactions being accounted for within the scope of SOP 81-1.

 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 reserve is established for inventory that has had no activity for long periods of time or for which management believes is no longer salable.  This reserve is reviewed and approved by the senior management team.  In the future, based on our quarterly analysis, if we estimate that any remaining reserve for obsolescence is either inadequate or in excess of the inventory reserve required, we may need to adjust it.  At present, based on our analysis, we believe the reserve is properly valued for the inventory held by us.

 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 had been management’s intention to reinvest undistributed earnings of our foreign subsidiary and thereby indefinitely postpone their repatriation.  Accordingly, prior to fiscal 2005 no provision had been made for foreign withholding taxes or United States income taxes which would become payable if undistributed earnings of our foreign subsidiary are paid to us as dividends.  In fiscal 2005 and fiscal 2006, pursuant to Sections 951 and 956 of the Internal Revenue Code, approximately $3.3 million of current year and prior undistributed earnings of our Honduran subsidiary were deemed dividends to the parent company and subject to U.S. income tax.  Accordingly a provision was recorded for all of the taxes attributable to these deemed dividends in fiscal 2005 and fiscal 2006. The circumstances that triggered the taxation of our foreign earnings no longer exist and it is our 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 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 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 Statement of Financial Accounting Standards No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.  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.

 The discussion below contains forward-looking statements about our expectations of what could happen in the future.  Forward-looking statements involve uncertainties and risk and our actual results could differ materially from the results anticipated by our forward-looking statements due to many known and unknown factors, including but not limited to those previously discussed in “Risk Factors” and elsewhere in this report.  See also the cautionary notice regarding forward-looking statements at the beginning of this Form 10-K under the heading “Disclosures Regarding Forward-Looking Statements.”

 You should read the following discussion and analysis in conjunction with “Item 6. Selected Financial Data” and “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.

Liquidity and Capital Resources

 As of March 31, 2007, our cash and cash equivalents increased $0.9 million to $3.5 million from the March 31, 2006 balance of $2.6 million.  The three components of this increase were cash provided by operating activities of $2.2 million, cash used in investing activities of $1.0 million and cash used in financing activities of $0.3 million.

 Cash provided by operating activities primarily resulted from net income of $1.5 million, depreciation of $1.1 million, a decrease in trade accounts receivable of $3.6 million, partially offset by a decrease in accounts payable of $1.8 million, a decrease in income taxes payable of $0.6 million, and an increase in other receivable of $1.7 million, net deferred tax assets of $.6 million and inventories of $.4 million.  The decrease in accounts receivable was primarily due to lower revenues in the fourth quarter compared to the prior year.  The decrease in accounts payable was principally due to bringing our balances with vendors to a more current position.  The increase in other receivables and other assets was due to the patent infringement lawsuit settlement of $3.2 million of which we received the first payment of $1.5 million after the end of our third fiscal quarter and $1.7 million will be received over a two-year period.  The decrease in income taxes payable reflects payments in federal and state income tax amounts owed to the Government based on our earnings.  The increase in net deferred tax assets reflects the increase in temporary differences between book and tax deductible items.

 Cash used in investing activities was due to cash of $.3 million used to acquire certain assets related to the acquisition of a recreational vehicle product line business from Automated Engineering Corporation and dB Technologies, Inc. along with cash of $.7 million paid for purchases of property, plant and equipment.

 Cash used in financing activities was primarily due to dividends paid of $.4 million.

 The maturity date of the revolving credit agreement with our institutional lender is September 30, 2008.  The agreement provides for borrowings up to $6.0 million.  We have the option of borrowing at the lender’s prime rate of interest minus 100 basis points or the 30-day London Interbank Offering Rate (“LIBOR”) plus 160 basis points.  We are currently borrowing under the LIBOR option (6.96% as of March 31, 2007).  The loan is collateralized with a perfected first security interest which attaches to all of our accounts receivable and inventories, and a blanket security interest attaching to all of our assets, and requires us to maintain certain financial ratios.  As of March 31, 2007 and March 31, 2006, we had $3.0 million in outstanding borrowings, of which $1.0 million was recorded as current portion of long-term debt and $2.0 million was recorded as long-term debt, less current portion.  We are in compliance with the financial covenants under the revolving credit agreement as of March 31, 2007.

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

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

Contractual Obligations

 We have entered into several operating leases as well as purchase commitments for inventory.  Additionally, we have both long and short-term debt as of March 31, 2007.  Future minimum payments under these commitments as of March 31, 2007 (in thousands) are as follows:

		Payments due by period
Contractual Obligations		Total	Less than 1 year	1-3 years	3-5 years	More than 5 years
Operating lease obligations	$	367	254	99	14	-
Purchase obligations		5,453	5,453	-	-	-
Payments due on long-term debt		3,000	1,000	2,000	-	-
Interest due on long-term debt		313	209	104	-	-
Total		9,133	6,916	2,203	14	-

 The payments due on long-term debt in the above table represent repayments of principal but not the associated interest, which will vary with the changes in market interest rates and the principal balance.  At March 31, 2007, the interest rate being paid on our outstanding debt was at 6.96%.  Interest due on long-term debt in the above table has been calculated based on the interest rate as of March 31, 2007 of 6.96% and assuming that the March 31, 2007 principal amount of the debt remains outstanding until the scheduled maturity of the debt.

New Accounting Standards

 In December 2004, the FASB issued SFAS No. 123(R) - Accounting for Stock-Based Compensation.  SFAS No. 123(R) is a revision of SFAS No. 123 and supersedes APB Opinion No. 25, Accounting for Stock issued to Employees, and its related implementation guidance.  This statement establishes standards for the accounting for transactions in which an entity exchanges its equity for goods and services.  It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair market value of the entity's equity instruments or that may be settled by the issuance of those equity instruments.  The statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award.  That cost is recognized over the period during which an employee is required to provide service in exchange for the award.  This statement is effective as of the beginning of the first annual period that begins after December 15, 2005.  The application of SFAS No. 123(R) resulted in a charge to our Consolidated Statement of Operations of approximately $.1 million for our fiscal year ended March 31, 2007.  This charge will increase as additional stock-based awards are granted in the future.

 On May 25, 2005, in response to the published accounting standard referenced above, our Board of Directors approved accelerating the vesting of all out-of-the-money, unvested stock options held by current employees, including executive officers and directors, effective May 26, 2005.  An option was considered out-of-the-money if the stated option exercise price was greater than the closing price, $5.07, of our common stock on the effective date.

 In May 2005, the FASB issued SFAS No. 154 - Accounting Changes and Error Corrections.  This statement replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle.  This statement provides guidance on the accounting for and reporting of accounting changes and error corrections.  It establishes, unless impracticable, retrospective application as the required method of reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle.  This statement also provides guidance on determining whether retrospective application is impracticable.  The correction of an error in previously issued financial statements is not an accounting change.  However, the reporting of an error correction involves adjustments to previously issued financial statements similar to those generally applicable to reporting an accounting change retrospectively.  Therefore, the reporting of a correction of an error by restating previously issued financial statements is also addressed by this statement.  This statement is effective for accounting changes and corrections of error made in fiscal years beginning after December 15, 2005.  The application of SFAS No. 154 did not have a material effect on our financial condition, results of operations or cash flows.

In February 2006, The FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140.  This statement amends FASB Statements No. 133, Accounting for Derivative Instruments and Hedging Activities, and No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.  This Statement resolves issues addressed in Statement 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interests in Securitized Financial Assets.  This Statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006.  The application of SFAS No. 155 is not expected to have a material effect on our financial condition, results of operations or cash flows.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS No. 157).  SFAS No. 157 establishes a single definition of fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements.  We are currently evaluating whether SFAS No. 157 will result in a change to our fair value measurements.  The measurement and disclosure requirements are effective for us beginning in the first quarter of fiscal 2009.

In September 2006, the FASB issued FASB Interpretation Number 48 (FIN 48), “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109.”  The interpretation contains a two step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109.  The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any.  The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement.  The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006.  We are in the process of evaluating the impact this statement will have on our fiscal 2008 consolidated financial statements.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB 108), which became effective for our fiscal year ended March 31, 2007.  SAB No. 108 describes the approach that should be used to quantify the materiality of a misstatement and provides guidance for correcting prior year errors.  SAB 108 requires quantification of financial statement misstatements based on the effects of the misstatements on the consolidated statement of income and the consolidated balance sheet and related financial statement disclosures.  The adoption of SAB 108 did not have an impact on our fiscal 2007 consolidated financial statements.

In June 2006, the FASB ratified the Emerging Issues Task Force (“EITF”) consensus on Issue No. 06-03, “How Taxes Collected from Customers and Remitted to Government Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)” (“EITF No. 06-03”).  We are required to adopt the provisions of EITF No. 06-03 with the fiscal year beginning April 1, 2007.  We do not expect the provisions of EITF No. 06-03 to have a material impact on our fiscal 2008 consolidated financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Liabilities” (“SFAS No. 159”).  SFAS 159 allows companies to make an election to carry certain eligible financial assets and liabilities at fair value, even if fair value measurement has not historically been required for such assets and liabilities under U.S. GAAP.  The provisions of SFAS No. 159 are effective for our fiscal year 2009.  We are currently assessing the impact SFAS No. 159 may have on our consolidated financial statements.

ITEM 7A.  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 March 31, 2007, we have both short and long-term debt. Our loans are subject to changes in interest rates.  With our current level of debt, a 1% change in the market rate of interest would result in a change in our annual interest expense of $30 thousand.  Additionally, the rate of interest is based on either the lender’s prime rate or on the 30-day London Interbank Offering Rate at our option.  We 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 $5 thousand on an annual basis.  Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 The Consolidated Financial Statements and Schedule required by this Item are set forth on the pages indicated at Item 15(a).

Consolidated Financial Statements
	Page
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements	F-1
Consolidated Balance Sheets as of March 31, 2007 and 2006	F-2
Consolidated Statements of Operations for the years ended March 31, 2007, 2006 and 2005	F-3
Consolidated Statements of Stockholders' Equity for the years ended March 31, 2007, 2006 and 2005	F-4
Consolidated Statements of Cash Flows for the years ended March 31, 2007, 2006 and 2005	F-5
Notes to Consolidated Financial Statements	F-6 thru F-23
Consolidated Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts	F-24

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 None.

ITEM 9A.  CONTROLS AND PROCEDURES

 As of the end of the period covered by this Annual Report, 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 were effective.

 Further, there were no changes in our internal control over financial reporting during our fourth fiscal quarter that materially affected, or are reasonably likely to materially affect,  internal control over financial reporting, except that the material weakness related to accounting for income taxes that existed as of March 31, 2006 was remediated.  During our fourth fiscal quarter, the Company took steps to remediate this control deficiency, including obtaining third party tax consulting resources to assist in accounting for complex issues concerning international tax laws.

ITEM 9B.  OTHER INFORMATION

 None.

PART III

 Certain information required by Part III is incorporated by reference from our definitive proxy statement (the “Proxy Statement”) for the 2007 annual meeting of stockholders, pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, which we will file not later than 120 days after the end of the fiscal year covered by this Report.  With the exception of the information expressly incorporated by reference from the Proxy Statement, the Proxy Statement is not to be deemed filed as a part of this Report.

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

 The information required by this Item 10 is contained in our definitive Proxy Statement under the heading “Proposal No. 1 - Election of Directors” for the Annual Meeting of Stockholders scheduled to be held on August 30, 2007 and incorporated herein by reference.

 Information required by this item relating to our executive officers is contained under the caption “Executive Officers” in Part I of this Annual Report on From 10-K and is incorporated herein by reference.

 Information relating to our directors and Section 16(a) beneficial ownership reporting compliance is incorporated herein by reference to our 2007 proxy statement for the Annual meeting of Stockholders scheduled to be held on August 30, 2007.

 Information related to our audit committee and the designation of our audit committee financial expert is contained in our 2007 proxy statement and is incorporated by reference.

Family Relationships

No family relationships exist between any of our directors and executive officers.  There are no arrangements or understandings between any director and any other person concerning service or nomination as a director.

Code of Ethics

 We have adopted a written code of ethics that applies to our principal executive officers, principal financial officer, principal accounting officer or controller or persons serving similar functions.  We have also adopted a code of ethics that applies to all employees, officers and directors of TRC.  Our Code of Ethics is publicly available on the corporate governance page of our website at www.trci.net and is filed as an exhibit to this Annual Report on Form 10-K.  To the extent required by law, any amendments to, or waivers from, any provision of the Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer or Comptroller will promptly be disclosed to the public.  To the extent permitted by such legal requirements, we intend to make such public disclosure by posting the relevant material on our website in accordance with SEC rules.  Copies of the code may be obtained free of charge from our website or by requesting a copy from our Director of Investor Relations, Scott J. Loucks, at our mailing address of 5250 140th Avenue N., Clearwater, FL  33760.

ITEM 11.  EXECUTIVE COMPENSATION

 The information required in Item 11 is incorporated into Part III of this Annual Report on Form 10-K by reference to our definitive Proxy Statement under the heading “Executive Compensation and Other Information” for the Annual Meeting of Stockholders scheduled to be held on August 30, 2007.

 The Compensation Committee Report and related information that is incorporated by reference shall not be deemed to be “soliciting material” or “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, as amended, unless we specifically incorporate such information by reference into such filing.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 The information required in Item 12 is incorporated into Part III of this Annual Report on Form 10-K by reference to our 2007 Proxy Statement under the heading “Security Ownership of Certain Beneficial Owners and Management” scheduled to be held on August 30, 2007.

Equity Compensation Plan Table

 The table below provides information about the common stock that may be issued to our directors, officers and employees under all of our existing equity compensation plans as of March 31, 2007.

					(c)  Number of
					Securities Remaining
		(a)  Number of			Available for
		Securities to be			Future Issuance
		Issued Upon		(b)  Weighted-	Under Equity
		Exercise of		Average Exercise	Compensation
		Outstanding		Price of Outstanding	Plans (Excluding
		Options, Warrants		Options, Warrants	Securities in
Plan Category		and Rights		andRights	Column (a)
Equity compensation plans approved by stockholders	(1)	3,117	$	1.63	-
	(2)	1,000		1.63	-
	(3)	340,818		9.19	403,850
Totals		344,935		9.10	403,850
(1)  Technology Research Corporation 1993 Incentive Stock Option Plan. (2)  Technology Research Corporation 1993 Amended and Restated Non-Qualified Stock Option Plan. (3)  Technology Research Corporation 2000 Long Term Incentive Plan.

ITEM 13.  CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 The information required in Item 13 is incorporated into Part III of this Annual Report on Form 10-K by reference to our 2007 Proxy Statement under the heading “Certain Relationships, Related Transactions, and Director Independence” for the Annual Meeting of Stockholders scheduled to be held on August 30, 2007.

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

 The information required in Item 14 is incorporated into Part III of this Annual Report on Form 10-K by reference to our 2007 Proxy Statement under the heading “Relationship with Independent Registered Public Accounting Firm” for the Annual Meeting of Stockholders scheduled to be held on August 30, 2007.

PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) List of documents filed as part of this Report.

 (1) All financial statements.

Index to Financial Statements	Page
Consolidated Financial Statements	F-1
Consolidated Balance Sheets as of March 31, 2007 and 2006	F-2
Consolidated Statements of Operations for the years ended March 31, 2007, 2006 and 2005	F-3
Consolidated Statements of Stockholders' Equity for the years ended March 31, 2007, 2006 and 2005	F-4
Consolidated Statements of Cash Flows for the years ended March 31, 2007, 2006 and 2005	F-5
Notes to Consolidated Financial Statements	F-6 thru F-23

 (2) Financial Statement Schedules.

Schedule II - Valuation and Qualifying Accounts   F-24

All other schedules have been omitted because the required information is included in the Consolidated Financial Statements or the notes thereto, or is not applicable or required.

 (3) Exhibits.

Exhibit No.	Description
3.1	Articles of Incorporation and By-Laws. (1)
3.2	Amended Articles of Incorporation dated September 24, 1990. (2)
3.3	Amended Articles of Incorporation dated September 24, 1996. (2)
3.4	Amended Articles of Incorporation dated August 21, 2003. (2)
10.1	$3,000,000 Revolving Credit Agreement, dated December 14, 1999, between the Company and SouthTrust Bank.  Incorporated by reference to TRC's Annual Report on Form 10-KSB for the year ended March 31, 2000.
10.2	The 2000 Long Term Incentive Plan effective August 24, 2000. Incorporated by reference to TRC's Annual Report on Form 10-KSB for the year ended March 31, 2000. (3)
10.3	Amendment to 2000 Long Term Incentive Plan to increase the number of shares from 300,000 to 600,000 effective August 21, 2003.  Incorporated by reference to TRC's Annual Report on Form 10-KSB for the year ended March 31, 2003. (3)
10.4	Amendment to 2000 Long Term Incentive Plan to increase the number of shares from 600,000 to 1,100,000 effective August 24, 2004.  Incorporated by reference to TRC's Annual Report on Form 10-KSB for the year ended March 31, 2004. (3)
10.5	License Agreement, dated March 24, 2002, between the Company and Tecumseh Products Company granting use of the Company's Fire Shield® technology to be integrated into a protective product for Refrigeration and Air Conditioning Systems against electric faults.  Incorporated by reference to TRC's Annual Report on Form 10-KSB  for the year ended March 31, 2002.
10.6	Amended Revolving Credit Agreement, dated December 20, 2004, between the Company and its subsidiary and SouthTrust Bank, increasing the amount available to borrow from $3,000,000 to $6,000,000 and extending the maturity date to December 14, 2006.  Incorporated by reference to TRC's Annual Report on Form 10-KSB for the year ended March 31, 2005.
10.7	Change of Control Agreement between the Company and its Chief Financial Officer, Barry H. Black, dated January, 2006, filed with and as part of the Registrant's Form 10-Q for the period ended December 31, 2005. (3)
10.8	Form of Individual Director Indemnification Agreement. (3)
10.9	Form of  Non-Qualified Stock Option Grant under the Company's 2000 Long Term Incentive Plan. (3)
10.10	Form of Qualified Stock Option Grant under the Company's 2000 Long Term Incentive Plan. (3)
14.1	Code of Conduct.  Incorporated by reference to TRC's Annual Report on Form 10-KSB  for the year ended March 31, 2005.
14.2	Code of Ethics for Principal Executive, Financial and Accounting Officers.  Incorporated by reference to TRC's Annual Report on Form 10-KSB for the year ended March 31, 2005.
21	Subsidiaries of the Registrant.  Filed herewith.
23	Consent of Independent Registered Public Accounting Firm.  Filed herewith.
31.1	Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.  Filed herewith.
31.2	Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.  Filed herewith.
32.1	Certification of Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002.  Filed herewith.
32.2	Certification of Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002.  Filed herewith.

______________________
⁽¹⁾  Previously filed with and as part of the Registrant's Registration Statement on Form S-1 (No. 33-24647).

⁽²⁾  Previously filed with and as part of the Registrant's Annual Report on Form 10-KSB.

⁽³⁾  Management contracts and compensatory plans or arrangements required to be filed as an Exhibit pursuant to Item 15(b) of Form 10-K.

 

SIGNATURES

 In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TECHNOLOGY RESEARCH CORPORATION

By:       /s/ Owen Farren                               

                 Owen Farren

                 President and Chief Executive Officer

                (Principal Executive Officer)

Date:     June 27, 2007

 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant in the capacities indicated and on the dates indicated:

Signature	Title	Date
/s/  Owen Farren	President and Chief Executive Officer	June 27, 2007
Owen Farren	(Principal Executive Officer)
/s/  Barry H. Black	Vice President of Finance, Chief Financial Officer and Secretary	June 27, 2007
Barry H. Black	(Principal Financial and Accounting Officer)
/s/  Raymond B. Wood	Director and Senior Vice President of Government Operations	June 27, 2007
Raymond B. Wood	and Marketing
/s/  Robert S. Wiggins	Chairman of the Board	June 27, 2007
Robert S. Wiggins
/s/  Gerry Chastelet	Director	June 27, 2007
Gerry Chastelet
	Director
Patrick M. Murphy
/s/  Edmund F. Murphy, Jr.	Director	June 27, 2007
Edmund F. Murphy, Jr.
/s/  David F. Walker	Director	June 27, 2007
David F. Walker

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARY

Consolidated Financial Statements

 Index

	Page
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Financial Statements:
Consolidated Balance Sheets as of March 31, 2007 and 2006	F-2
Consolidated Statements of Operations for the years ended March 31, 2007, 2006 and 2005	F-3
Consolidated Statements of Stockholders' Equity for the years ended March 31, 2007, 2006, and 2005	F-4
Consolidated Statements of Cash Flows for the years ended March 31, 2007, 2006 and 2005	F-5
Notes to Consolidated Financial Statements	F-6
Consolidated Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts	F-24

Report of Independent Registered Public Accounting Firm

The Board of Directors

Technology Research Corporation:

We have audited the consolidated financial statements of Technology Research Corporation and subsidiary as listed in the accompanying index.  In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index.  These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Technology Research Corporation and subsidiary as of March 31, 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 2007, in conformity with U.S. generally accepted accounting principles.  Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As discussed in Note 1(l) to the consolidated financial statements, the Company changed its method of accounting for stock-based compensation upon adoption of Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment,” applying the modified prospective method.

/s/  KPMG LLP

Tampa, Florida

June 27, 2007

Certified Public Accountants

F-1

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARY

  Consolidated Balance Sheets

March 31, 2007 and 2006

(In thousands, except share data)

ASSETS		2007	2006
Current assets:
Cash and cash equivalents	$	3,471	2,607
Short-term investments		498	500
Trade and other accounts receivable, net of allowance for
doubtful accounts of $273 in 2007 and $78 in 2006 (note 5)		6,950	10,730
Other receivable - current portion		884	-
Inventories, net (notes 2 and 5)		9,294	9,633
Deferred income taxes (note 6)		999	455
Prepaid expenses and other current assets		351	210
Total current assets		22,447	24,135
Property, plant and equipment, net of accumulated depreciation of
$10,472 and $9,346 (note 3)		4,412	4,939
Other receivable - less current portion		850	-
Intangible asset, net of accumulated amortization of $59 and $0, respectively		523	-
Other assets		47	70
Total assets	$	28,279	29,144

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (note 5)	$	1,000		1,000
Trade accounts payable		3,027		4,850
Accrued expenses		1,409		1,323
Accrued dividends		133		101
Income taxes payable		846		1,468
Total current liabilities		6,415		8,742
Long-term debt, less current portion (note 5)		2,000		2,000
Deferred income taxes (note 6)		139		244
Total liabilities		8,554		10,986
Stockholders' equity:
Common stock $0.51 par value; 10,000,000 shares authorized,
5,910,328 shares and 5,848,649 shares issued, and
5,888,828 shares and 5,827,149 shares outstanding		3,014		2,983
Additional paid-in capital		9,287		8,770
Retained earnings		7,464		6,445
Common stock held in treasury, 21,500 shares at cost		(40	)	(40	)
Total stockholders' equity		19,725		18,158
Total liabilities and stockholders' equity	$	28,279		29,144

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

F-2

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARY

  Consolidated Statements of Operations

Years ended March 31, 2007, 2006 and 2005

(In thousands, except share data)

		2007		2006		2005
Revenues (note 9):
Commercial	$	26,471		32,250		27,022
Military		11,521		13,370		12,269
Royalties		-		-		142
Total revenues		37,992		45,620		39,433
Cost of sales		29,368		34,978		29,618
Gross profit		8,624		10,642		9,815
Operating expenses:
Selling and marketing		2,906		2,640		2,546
General and administrative		4,847		3,327		2,593
Research and development		2,026		1,955		2,034
Business restructuring charges		138		-		-
Other		83		-		(1	)
Total operating expenses		10,000		7,922		7,172
Income (loss) from operations		(1,376	)	2,720		2,643
Interest expense		(182	)	(255	)	(48	)
Other income		3,264		32		29
		3,082		(223	)	(19	)
Income before income taxes		1,706		2,497		2,624
Income tax expense (note 6)		244		746		1,378
Net income	$	1,462		1,751		1,246
Earnings per share - basic	$	.25		0.30		0.22
Earnings per share - diluted	$	.25		0.30		0.21
Shares outstanding - basic		5,884,083		5,786,129		5,754,816
Shares outstanding - diluted		5,906,563		5,833,947		5,954,068

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

F-3

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARY

Consolidated Statements of Stockholders' Equity

Years ended March 31, 2007, 2006 and 2005

(In thousands, except share data)

				Additional				Total
	Common stock			paid-in	Retained		Treasury	stockholders'
	Shares		Amount	capital	earnings		stock	equity
Balances as of March 31, 2004:	5,728,258	$	2,932	8,417	4,142		(40)	15,451
Dividends - $0.06 per share	-		-	-	(346	)	-	(346	)
Net income	-		-	-	1,246		-	1,246
Tax benefit related to exercise
of stock options	-		-	15	-		-	15
Exercise of stock options	45,617		23	51	-		-	74
Balances as of March 31, 2005:	5,773,875		2,955	8,483	5,042		(40)	16,440
Dividends - $0.06 per share	-		-	-	(348	)	-	(348	)
Net income	-		-	-	1,751		-	1,751
Stock compensation expense	-		-	38	-		-	38
Tax benefit related to exercise
of stock options	-		-	51	-		-	51
Exercise of stock options	53,274		28	198	-		-	226
Balances as of March 31, 2006:	5,827,149		2,983	8,770	6,445		(40)	18,158
Dividends - $0.075 per share	-		-	-	(443	)	-	(443	)
Net income	-		-	-	1,462		-	1,462
Stock compensation expense	-		-	144	-		-	144
Tax benefit related to exercise
of stock options	-		-	5	-		-	5
Exercise of stock options	10,000		5	47	-		-	52
Issuance of shares in connection
with acquisition (note 14)	51,679		26	321	-		-	347
Balances as of March 31, 2007:	5,888,828	$	3,014	9,287	7,464		(40)	19,725

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

F-4

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARY

Consolidated Statements of Cash Flows

Years ended March 31, 2007, 2006 and 2005

(In thousands)

		2007		2006		2005
Cash flows from operating activities:
Net income	$	1,462		1,751		1,246
Adjustments to reconcile net income to net cash         provided by (used in) operating activities:
Accretion on short-term investments		(17	)	(13	)	-
Change in allowance for doubtful accounts		195		(94	)	141
Note receivable received as partial settlement of lawsuit		(1,734	)	-		-
Depreciation		1,126		1,255		948
In-process research and development		17		-		-
Amortization of intangible assets		59		-		-
Stock compensation expense		144		38		-
Deferred income taxes		(649	)	(371	)	164
Loss (gain) on disposal of assets		83		-		(1	)
Changes in operating assets and liabilities,        net of effects of acquisition:
Trade and other accounts receivable		3,585		2,479		(9,835	)
Inventories, net		418		1,828		(5,827	)
Prepaid expenses and other current assets		(141	)	305		(309	)
Other assets		23		26		(57	)
Trade accounts payable		(1,823	)	(3,121	)	6,423
Accrued expenses		86		(5	)	561
Income taxes payable		(622	)	859		178
Deferred revenue		-		-		(40	)
Net cash provided by (used in) operating activities		2,212		4,937		(6,408	)
Cash flows from investing activities:
Maturities of short-term investments		1,309		-		-
Purchases of short-term investments		(1,290	)	-		(487	)
Acquisition of business		(331	)	-		-
Capital expenditures		(682	)	(725	)	(3,351	)
Net cash used in investing activities		(994	)	(725	)	(3,838	)
Cash flows from financing activities:
Borrowings of short-term debt		3,000		10		5,350
Repayments of short and long-term debt		(3,000	)	(2,360	)	-
Proceeds from the exercise of stock options		52		226		74
Tax benefit of stock option exercised		5		51		15
Cash dividend paid		(411	)	(347	)	(346	)
Net cash provided by (used in) financing activities		(354	)	(2,420	)	5,093
Net increase (decrease) in cash and cash equivalents		864		1,792		(5,153	)
Cash and cash equivalents at beginning of year		2,607		815		5,968
Cash and cash equivalents at end of year	$	3,471		2,607		815
Supplemental cash flow information:
Cash paid for interest	$	124		228		37
Cash paid for income taxes	$	1,510		207		1,037
Supplemental schedule of noncash investment activities:
The Company purchased a Recreational Vehicle
product line business from Automated Engineering
Corporation.  In conjunction with the acquisition, cash
and non cash consideration was provided as follows:
Cash paid to seller	$	279		-		-
Cash paid for acquisition costs	$	52		-		-
Common stock issued to seller, 51,679 shares	$	347		-		-
Assets acquired	$	678

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

F-5

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARY

Notes to the Consolidated Financial Statements

March 31, 2007, 2006 and 2005

(In thousands, except share data)

(1)  Summary of Significant Accounting Policies

(a)  Description of Business

Technology Research Corporation and subsidiary (the “Company”) is an internationally recognized leader in the design, manufacture and marketing of electrical safety products that save lives, protect people against serious injury from electrical shock and/or prevent electrical fires in the home and workplace.  Based on its core technology in ground fault sensing, the Company's products are designed to meet the needs of 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, primarily for use on mobile electric generators.  The Company's corporate headquarters are located in Clearwater, Florida.  The Company incorporated TRC Honduras, S.A. de C.V., a wholly owned subsidiary, for the purpose of manufacturing the Company's high volume products in Honduras.  The Company primarily sells its products direct to the customer, through retail stores, to original equipment manufacturers and through electrical distributors involved in a variety of industries and to governmental entities. The Company performs credit evaluations of all new customers and generally does not require collateral.  The Company's customers are located throughout the world.  See note 9 for further information on major customers.  The Company also licenses its technology for use by others in exchange for a royalty or product purchases.

(b)  Use of Estimates

The preparation of the consolidated financial statements requires management to make estimates and assumptions relating to the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

(c)  Principles of Consolidation

The consolidated financial statements include the financial statements of Technology Research Corporation and its wholly owned subsidiary, TRC Honduras, S.A. de C.V. All significant intercompany balances and transactions have been eliminated in consolidation.

(d)  Cash Equivalents

Cash equivalents amounted to $2,065 and $34 as of March 31, 2007 and 2006, respectively, and consisted of money market accounts.  For purposes of the consolidated statements of cash flows, the Company considers all short-term investments with original maturities of three months or less to be cash equivalents.

(e)  Short-term Investments

The value of the short-term investment totaled $498 as of March 31, 2007, consisting of corporate securities in the amount of $3 and original cost plus accrued interest on U.S. Treasury Bills in the amount of $495.  The Company considers all of its short-term investments to be held-to-maturity, and therefore, are recorded at amortized cost.

F-6

TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARY

Notes to the Consolidated Financial Statements

March 31, 2007, 2006 and 2005

(In thousands, except share data)

(f) Revenue Recognition/Allowance for Doubtful Accounts

The Company recognizes 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 collectibility 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.

The Company may enter into government contracts that fall within the scope of Statement of Position 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts (SOP 81-1) (“non-standard” products) or fall outside the scope of SOP 81-1 (“standard” products).  For government contracts within the scope of SOP 81-1, the Company records revenue under a units of delivery model with revenues 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 SOP 81-1.  For government contracts outside the scope of SOP 81-1, the Company records revenue the same as for commercial customers discussed above and would record a loss in the event the costs to fulfill a government contract are in excess of the associated revenues.  The Company has not experienced past losses on government contracts, and in fiscal 2007, the Company does not have any transactions being accounted for within the scope of SOP 81-1.

The Company records an allowance for estimated losses resulting from the inability of customers to make timely payments of amounts due on account of product purchases.  The Company assesses the credit worthiness of its 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 its customers were to worsen, additional write-offs could be required, resulting in write-offs not included in the Company's current allowance for doubtful accounts.

(g)  Concentration of Credit Risk

The Company maintains most of its short-term investments in U.S. Treasury Bills.

The Company sells products to customers throughout the world and in many markets including retail, distribution, OEM, and directly to consumers.  Customers are reviewed for creditworthiness, and the Company maintains an allowance for anticipated losses.  The Company had one customer with an accounts receivable balance equal to more than 10% of net accounts receivable at the end of the Company's fiscal 2007 year. 

One Far East contract manufacturers supplied the Company with 19% of our total inventory purchases in fiscal 2007.  In fiscal 2006, two Far East contract manufacturers supplied the Company with greater than 10% of our total inventory purchases, one at 12% and the other at 13%.

(h)  Inventories

Inventories are stated at the lower of cost or market.  Market represents net realizable value.  Cost is determined using the first-in, first-out method. 

F-7

TECHNOLOGY RESEARCH CORPORATION

 AND SUBSIDIARY

Notes to the Consolidated Financial Statements

March 31, 2007, 2006 and 2005

(In thousands, except share data)

(i) Property, Plant, and Equipment

Property, plant, and equipment are stated at cost.  Depreciation is calculated on the straight-line half-year method over the estimated useful lives of the assets. 

(j)  Impairment or Disposal of Long-Lived Assets

The Company reviews 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 Statement of Financial Accounting Standards No. 144 (“Accounting for Impairment or Disposal of Long-Lived Assets”).  In evaluating the fair value and future benefit of the Company's 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, the Company recognizes an impairment loss equal to the difference between its carrying value and its fair value.

(k)  Income Taxes

Income taxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(l)  Stock-Based Compensation 

As of April 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123R, Share-Based Payment, (“SFAS 123R”) for its share-based compensation plans.  Previously, the Company accounted for these plans under the principles of Accounting Principles Board Opinion No. 25, Accounting for Stock issued to Employees (“APB 25”) and related interpretations and disclosure requirements set by Statement of Financial Accounting Standard No. 123, Accounting for Stock-Based Compensation (“SFAS 123”), as amended by Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure.

Following the principles of APB 25, no compensation expense was recognized in earnings for the Company’s stock options, except for the acceleration of vesting of options for a former officer of the Company in September 2005 and reflected in the financial results for the fiscal year ended March 31, 2006.  The pro forma effects on net income and earnings per share resulting from the stock options were disclosed in a footnote to the financial statements.  Under SFAS 123R, share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense in earnings over the requisite service period.

The Company adopted SFAS 123R using the modified prospective transition method.  Under this method, prior periods are not restated to reflect the impact of SFAS 123R.  Under SFAS 123R, companies are required to estimate the fair value of share-based payment awards on the date of grant using an option pricing model.  The Company adopted the Black Scholes model to estimate the fair value of options.  The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company’s Consolidated Statements of Operations.

F-8

TECHNOLOGY RESEARCH CORPORATION

 AND SUBSIDIARY

Notes to the Consolidated Financial Statements

March 31, 2007, 2006 and 2005

(In thousands, except share data)

The following table illustrates the impact on net income and earnings per share as if the Company had followed SFAS 123 and utilized its fair-value recognition provisions for all of its share-based compensation awards for the fiscal years ended March 31, 2006 and 2005 (in thousands, except per share data):

		Years ended March 31,
		2006		2005
Net income - as reported	$	1,751		1,246
Add:  Total stock-based employee compensation expense
included in the determination of reported net income,
net of related income taxes of $8 and $0 respectively.		31		-
Deduct:  Total stock-based employee compensation expense
determined under fair value based method for all
awards, net of related income taxes of $344 and
$213, respectively.		(1,374	)	(852	)
Net income - pro forma	$	408		394
Basic earnings per share:
As reported	$	0.30		0.22
Pro forma	$	0.07		0.07
Diluted earnings per share
As reported	$	0.30		0.21
Pro forma	$	0.07		0.07

The implementation of SFAS 123R had no impact on the Company’s cash position.  Stock compensation expense of $144 resulting from the implementation of SFAS 123R was included in 2007 consolidated statements of operations.  The consolidated statement of cash flows for the fiscal year ended March 31, 2007, includes an adjustment to reconcile net income to net cash provided by operating activities of $144 due to this non-cash stock compensation expense.

Cash received from the exercises of stock options under all share-based payment arrangements for the fiscal year ended March 31, 2007, 2006 and 2005 was $52, $226 and $74, respectively.  Currently, the Company expects to utilize available registered shares when share-based awards are issued.

On May 24, 2005, in contemplation of the implementation of SFAS 123R, the Company’s Board of Directors approved the acceleration in the vesting of all out-of-the-money, unvested stock options held by current employees, including executive officers and directors, effective May 25, 2005.  An option was considered to be out-of-the-money if, on the effective date, the stated option exercise price was greater than the closing price of the Company’s common stock on May 25th, $5.07 per share.  As a result of this action, unvested options to purchase approximately 449,000 shares became exercisable.

The decision to accelerate vesting of these options was made primarily to avoid recognizing compensation cost in the Company’s future financial statements upon the effectiveness of SFAS 123R.  It was estimated that the maximum future compensation cost that was avoided based upon the Company’s implementation date for SFAS 123R of April 1, 2006 was approximately $642.  The Company reported the avoided future compensation cost in the fiscal year 2006 financial statements in a pro-forma footnote disclosure, as permitted under the transition guidance provided by the Financial Accounting Standards Board.  The vesting acceleration did not result in the recognition of any compensation expense in operations for the fiscal year ended March 31, 2006.

F-9

TECHNOLOGY RESEARCH CORPORATION

 AND SUBSIDIARY

Notes to the Consolidated Financial Statements

March 31, 2007, 2006 and 2005

(In thousands, except share data)

(m)  Earnings Per Share

Basic earnings per share have been computed by dividing net earnings by the weighted average number of common shares outstanding.

Diluted earnings per share have been computed by dividing net earnings by the weighted average number of common and common equivalent shares outstanding.  The weighted average common and common equivalent shares outstanding figure has been adjusted to include the number of shares that would have been outstanding if the stock options had been exercised, at the average market price of the period, with the proceeds being used to buy shares from the market (i.e. the treasury stock method).

The table below reconciles the calculation of basic and diluted earnings per share:

	Years ended March 31,
		2007	2006	2005
Net income	$	1,462	1,751	1,246
Weighted average shares outstanding - basic		5,884,083	5,786,129	5,754,816
Dilutive common shares issuable upon exercise of stock options		22,480	47,818	199,252
Weighted average shares outstanding - diluted		5,906,563	5,833,947	5,954,068
Earnings per common share:
Basic	$	0.25	0.30	0.22
Diluted	$	0.25	0.30	0.21

For the fiscal year ended March 31, 2007, options to purchase 261,900 shares were considered anti-dilutive for the purposes of calculating earnings per share.  For the fiscal year ended March 31, 2006, options to purchase 497,876 shares of common stock were considered anti-dilutive for purposes of calculating earnings per share.  For the fiscal year ended March 31, 2005, options to purchase 245,400 shares of common stock were considered anti-dilutive for purposes of calculating earnings per share.

(n)  Recently Issued Accounting Standards

In December 2004, the FASB issued SFAS No. 123(R) - Accounting for Stock-Based Compensation.  SFAS No. 123(R) is a revision of SFAS No. 123 and supersedes APB Opinion No. 25, Accounting for Stock issued to Employees, and its related implementation guidance.  This statement establishes standards for the accounting for transactions in which an entity exchanges its equity for goods and services.  It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair market value of the entity's equity instruments or that may be settled by the issuance of those equity instruments.  The statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award.  That cost is recognized over the period during which an employee is required to provide service in exchange for the award.  This statement is effective as of the beginning of the first annual period that begins after December 15, 2005.  The application of SFAS No. 123R resulted in a charge to the Company's Consolidated Statement of Operations of approximately $.1 million for the fiscal year ended March 31, 2007.  This charge will increase as additional stock-based awards are granted in the future.

F-10

TECHNOLOGY RESEARCH CORPORATION

 AND SUBSIDIARY

Notes to the Consolidated Financial Statements

March 31, 2007, 2006 and 2005

(In thousands, except share data)

On May 24, 2005, in response to the published accounting standard referenced above, the Company's Board of Directors approved accelerating the vesting of all out-of-the-money, unvested stock options held by current employees, including executive officers and directors, effective May 25, 2005.  An option was considered out-of-the-money if the stated option exercise price was greater than the closing price, $5.07, of our common stock on the effective date.

In May 2005, the FASB issued SFAS No. 154 - Accounting Changes and Error Corrections.  This statement replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle.  This statement provides guidance on the accounting for and reporting of accounting changes and error corrections.  It establishes, unless impracticable, retrospective application as the required method of reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle.  This statement also provides guidance on determining whether retrospective application is impracticable.  The correction of an error in previously issued financial statements is not an accounting change.  However, the reporting of an error correction involves adjustments to previously issued financial statements similar to those generally applicable to reporting an accounting change retrospectively.  Therefore, the reporting of a correction of an error by restating previously issued financial statements is also addressed by this statement.  This statement is effective for accounting changes and corrections of error made in fiscal years beginning after December 15, 2005.  The application of SFAS No. 154 did not have an effect on the Company's financial condition, results of operations or cash flows.

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140.  This statement amends FASB Statements No. 133, Accounting for Derivative Instruments and Hedging Activities, and No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.  This Statement resolves issues addressed in Statement 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interests in Securitized Financial Assets.  This Statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006.  The Company does not currently have financial instruments within the scope of the standard, and therefore, the application of SFAS No. 155 is not expected to have an effect on the Company's fiscal 2008 financial condition, results of operations or cash flows.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS No. 157).  SFAS No. 157 establishes a single definition of fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements.  The Company is currently evaluating whether SFAS No. 157 will result in a change to its fair value measurements.  The measurement and disclosure requirements are effective for the Company beginning in the first quarter of fiscal 2009.

In September 2006, the FASB issued FASB Interpretation Number 48 (FIN 48), “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109.”  The interpretation contains a two step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109.  The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any.  The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement.  The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006.  The Company is in the process of evaluating the impact this statement will have on its fiscal 2008 consolidated financial statements.

F-11

TECHNOLOGY RESEARCH CORPORATION

 AND SUBSIDIARY

Notes to the Consolidated Financial Statements

March 31, 2007, 2006 and 2005

(In thousands, except share data)

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB 108), which will be effective for the Company’s fiscal year ending March 31, 2007.  SAB No. 108 describes the approach that should be used to quantify the materiality of a misstatement and provides guidance for correcting prior year errors.  SAB 108 requires quantification of financial statement misstatements based on the effects of the misstatements on the consolidated statement of income and the consolidated balance sheet and related financial statement disclosures. The adoption of SAB 108 did not have an impact on the Company's fiscal 2007 consolidated financial statements.

In June 2006, the FASB ratified the Emerging Issues Task Force (“EITF”) consensus on Issue No. 06-03, “How Taxes Collected from Customers and Remitted to Government Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)” (“EITF No. 06-03”).  The Company is required to adopt the provisions of EITF No. 06-03 with the fiscal year beginning April 1, 2007.  The Company does not expect the provisions of EITF No. 06-03 to have a material impact on the Company’s fiscal 2008 consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Liabilities” (“SFAS No. 159”).  SFAS 159 allows companies to make an election to carry certain eligible financial assets and liabilities at fair value, even if fair value measurement has not historically been required for such assets and liabilities under U.S. GAAP.  The provisions of SFAS No. 159 are effective for the Company’s fiscal year beginning April 1, 2008.  The Company is currently assessing the impact SFAS No. 159 may have on its consolidated financial statements.

(o)  Advertising Expenses

The Company accounts for advertising expenditures as expense in the period incurred.  For the fiscal years ended March 31, 2007, 2006, and 2005, advertising expenses were $134, $127 and $145, respectively.

(p)  Fair Value of Financial Instruments

The fair value of short-term investments, trade and other accounts receivable, trade accounts payable, accrued expenses, accrued dividends and income taxes payable approximates their book value due to their short-term nature.  The fair value of long-term debt also approximates its book value because the variable interest rate appropriately reflects the interest rate the Company expects for similar debt of comparable maturity.

(2)  Inventories

Inventories at March 31, 2007 and 2006 consist of the following:

		2007	2006
Raw materials	$	6,102	6,618
Work-in-process		461	449
Finished goods		2,731	2,566
Total	$	9,294	9,633

F-12

TECHNOLOGY RESEARCH CORPORATION

 AND SUBSIDIARY

Notes to the Consolidated Financial Statements

March 31, 2007, 2006 and 2005

(In thousands, except share data)

Approximately 45% and 38% of inventories were located in Honduras as of March 31, 2007 and 2006, respectively.  In March 2007, the Company recorded a write-down of inventory in the amount of $704 and a loss due to non-cancellable commitments in the amount of $69, and in September 2006, the Company recorded a write-down of inventory in the amount of $468.  Approximately $1.1 million of the annual charge for the write-down in inventory was required due to a decline in the selling price and a reduction in demand due to increased competition for our RAC products being sold to the Chinese air conditioner manufacturers.  The remainder of the annual charge is principally due to the write down to market value of existing inventory that is being sold to domestic customers.

(3)  Property, Plant and Equipment

Property, plant and equipment as of March 31, 2007 and 2006 consists of:

		2007	2006	Estimated useful lives
Building and improvements	$	1,640	1,640	20 years
Machinery and equipment		13,244	12,645	5 - 15 years
		14,884	14,285
Less: Accumulated depreciation		10,472	9,346
	$	4,412	4,939

Approximately 29% and 30% of property, plant and equipment was located in Honduras as of March 31, 2007 and 2006, respectively.

(4)  Warranty

The Company generally provides a one year warranty period for all of its products.  The Company also provides coverage on certain of its surge products for “downstream” damage of products not manufactured by the Company.  The Company's 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.  A roll-forward of the activity in the Company's warranty liability, included in accrued expenses, for the fiscal years ended March 31, 2007, 2006 and 2005 is as follows:

		Years ended March 31,
		2007		2006		2005
Beginning balance	$	111		310		20
Warranty expense		67		475		354
Warranty claims		(88	)	(674	)	(64	)
Ending balance	$	90		111		310

F-13

TECHNOLOGY RESEARCH CORPORATION

 AND SUBSIDIARY

Notes to the Consolidated Financial Statements

March 31, 2007, 2006 and 2005

(In thousands, except share data)

(5)  Debt

The maturity date of the revolving credit agreement with the Company's institutional lender is September 30, 2008.  The agreement provides for borrowings up to $6.0 million.  The Company has the option of borrowing at the lender's prime rate of interest minus 100 basis points or the 30-day London Interbank Offering Rate (“LIBOR”) plus 160 basis points.  The Company is currently borrowing under the LIBOR option (6.96% as of March 31, 2007).  The loan is collateralized with a perfected first security interest which attaches to all of the Company's accounts receivable and inventories, and a blanket security interest attaching to all of its assets, and requires the Company to maintain certain financial ratios.  As of March 31, 2007 and March 31, 2006, the Company had $3.0 million in outstanding borrowings, of which $1.0 million was recorded as current portion of long-term debt and $2.0 million was recorded as long-term debt, less current portion.

The Company has no off-balance sheet arrangements and no debt relationships other than noted above.

(6)  Income Taxes

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of March 31, 2007 and 2006 are presented below:

		2007		2006
Deferred tax assets:
Accounts receivable, principally due to allowance for doubtful accounts	$	90		28
Inventories, principally due to a different cost basis for financial        reporting purposes and additional costs inventoried for tax purposes		815		343
Stock-based compensation		36		-
Accrued expenses		138		117
Total gross deferred tax assets		1,079		488
Deferred tax liabilities:
Property, plant and equipment, principally due to differences in depreciation		(139	)	(244	)
Prepaid expenses		(80	)	(33	)
Total gross deferred tax liability		(219	)	(277	)
Net deferred tax assets	$	860		211

Net deferred tax assets included in the accompanying consolidated balance sheets as of March 31, 2007 and 2006 are as follows:

		2007		2006
Deferred income taxes, current asset	$	999		455
Deferred income taxes, noncurrent liability		(139	)	(244	)
	$	860		211

Management assesses the likelihood that the deferred tax assets will be realized which is dependent upon the generation of taxable income during the periods in which those temporary differences become deductible.  Management considers historical taxable income, the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.  Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes the Company will realize the benefits of these deductible differences at March 31, 2007.

F-14

TECHNOLOGY RESEARCH CORPORATION

 AND SUBSIDIARY

Notes to the Consolidated Financial Statements

March 31, 2007, 2006 and 2005

(In thousands, except share data)

Income tax expense (benefit) for the years ended March 31, 2007, 2006, and 2005 consists of:

		2007		2006		2005
Current:
Federal	$	825		1,070		1,160
State		68		47		54
		893		1,117		1,214
Deferred:
Federal		(601	)	(366	)	170
State		(48	)	(5	)	(6	)
		(649	)	(371	)	164
	$	244		746		1,378

Income tax expense for the years ended March 31, 2007, 2006 and 2005 differs from the amounts computed by applying the Federal income tax rate of 34% to income before income taxes as a result of the following:

		2007		2006		2005
Computed expected tax expense	$	580		849		892
Increase (reduction) in income taxes resulting from:
Foreign earnings for which no income taxes have been provided		(256	)	(47	)	-
Deferred taxes on prior years' foreign earnings		-		-		433
State income taxes, net of Federal income tax effect		13		28		31
Change in tax contingency accrual		-		(83	)	-
Domestic production activities deduction		(60	)	-		-
Other		(33	)	(1	)	22
	$	244		746		1,378

The operating results of the foreign manufacturing subsidiary are not subject to foreign tax as it is operating under an indefinite tax holiday granted on January 7, 2002 by the Honduran Secretary of Industry and Commerce.  Prior to January 7, 2002, the subsidiary operated under a 20-year tax holiday.  The foreign operations generated income of approximately $708 in 2007, $1,147 in 2006, and $983 in 2005.  In March 2007, the Company determined that during fiscal years March 31, 2005 and 2006 it had inadvertently triggered additional U.S. taxable income and an income tax liability due to its borrowings under the Company’s joint line of credit with its Honduran subsidiary.  In April 2007, the Company filed amended income tax returns and paid additional income taxes for the years ended March 31, 2005 and 2006.  In June 2007, the Company filed restated financial statements with the SEC.  At March 31, 2007 no income taxes have been provided on $708 of Honduras earnings in fiscal 2007 and on $251 of Honduras earnings in the fourth quarter of fiscal 2006.

The total amount of undistributed earnings of the foreign subsidiary for income tax purposes was approximately $959 at March 31, 2007.  It is the Company's intention to reinvest undistributed earnings of its foreign subsidiary and thereby indefinitely postpone its remittance.  Accordingly, no provision has been made for foreign withholding taxes or United States income taxes which may become payable if undistributed earnings of the foreign subsidiary were paid as dividends to the Company.  It is not practicable to calculate the unrecognized deferred tax liability on those earnings.

F-15

TECHNOLOGY RESEARCH CORPORATION

 AND SUBSIDIARY

Notes to the Consolidated Financial Statements

March 31, 2007, 2006 and 2005

(In thousands, except share data)

(7)  Stock Options and Grants

The Company has 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 of Company common stock (the “Plans”).  Employee stock options generally vest over a three-year period and director stock options vest over a two-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 Company stock, the exercise price will not be less than 110% of the fair market value of the shares on the date of grant.  The term of options may not exceed ten years.  Except in highly unusual circumstances, non-qualified stock options will be granted at the fair market value on the date of grant.

The Company's 1993 Incentive Stock Option Plan and the Company's 1993 Amended and Restated Non-Qualified Stock Option Plan have expired, and no options will be granted from these plans in the future.  Certain options under these plans, however, are still outstanding and can be exercised in the future.

The Company’s 1996 Stock Option Performance Plan provided for the grant of incentive stock options within the meaning of Section 422 of the Internal Revenue Code and non-qualified stock options to employees.  A total of 400,000 shares of common stock were reserved for issuance under this plan.  The 1996 Stock Option Performance Plan was terminated on July 1, 2006.  A total of 150,000 shares available for grant expired, and a total of 210,976 options outstanding expired unexercised.  No shares will be granted from this plan in the future, and no shares are available for exercise.

On March 24, 2000, the Company's Board of Directors adopted the 2000 Long Term Incentive Plan and it was approved by the Company's stockholders in August 2000 at its annual meeting.  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 employees or directors of the Company.  The 2000 Long Term Incentive Plan also allows for the grant of restricted stock awards to officers and directors.  A total of 1.1 million shares of common stock have been reserved for issuance under the 2000 Long Term Incentive Plan, of which 403,850 remain available for awards as of March 31, 2007.

F-16

TECHNOLOGY RESEARCH CORPORATION

 AND SUBSIDIARY

Notes to the Consolidated Financial Statements

March 31, 2007, 2006 and 2005

(In thousands, except share data)

The table below summarizes activity in the Plans for the fiscal years ended March 31, 2007, 2006 and 2005:

				Aggregate(1)	Weighted	Weighted
	Shares			intrinsic	average	average
	available	Restricted	Options	value	exercise	remaining
	for grant	Stock	outstanding	(in thousands)	price	contractual life
Balance as of March 31, 2004	188,850		681,469		$ 7.10
Options authorized	500,000		-		-
Options granted	(63,500)		63,500		$ 6.24
Options canceled	18,500		(18,500)		$11.25
Options exercised	-		(45,617)	$ 370	$ 1.63
Balance as of March 31, 2005	643,850		680,852		$ 7.27
Options granted	(40,000)		40,000		$ 6.72
Options canceled	-		(126,667)		$ 5.90
Options exercised	-		(53,274)	$ 147	$ 4.23
Balance as of March 31, 2006	603,850		540,911	$ 745	$ 7.86	5.05
Options expired	(150,000)		-		$ 5.13
Options granted	(50,000)		50,000		$ 5.17	9.67
Restricted stock grants	(23,370)	23,370	-
Options canceled	-		(235,976)		$ 5.59
Restricted stock forfeited	23,370	(23,370)	-
Options exercised	-		(10,000)	$   13	$ 5.17
Balance as of March 31, 2007	403,850	0	344,935	$ 107	$ 9.10	7.44
Exercisable as of March 31, 2007			289,935	$ 107	$ 9.72	7.06
_______________________________
Footnote: (1)  The aggregate intrinsic value represents the total pretax intrinsic value, based on the Company’s closing stock price of $7.27 as of March 31, 2006 and of $4.92 as of March 31, 2007 and on the dates options were granted or exercised, which would have been received by the option holders had all option holders exercised their options as of that date, including only those options that are in-the-money.

In April 2006, the Company granted a total of 23,370 shares of restricted stock to eleven members of its senior management team as stock awards under the Company’s 2000 Long Term Incentive Plan.  Each stock award was limited in amount at the time of grant to 25% of the grantee’s target incentive bonus for the Company’s 2007 fiscal year.  Under the terms of these restricted stock awards, the grantee had to be an active employee on April 30, 2007 and achieve a performance condition that was based upon certain gross profit margin targets that the Company established for the year ended March 31, 2007.  As of March 31, 2007, none of the performance targets were met and, as a result, all 23, 370 shares granted under these stock awards were forfeited and the shares cancelled.

The weighted average grant date fair value of options granted during the fiscal years ended March 31, 2007, 2006 and 2005 was $3.75 per share, $5.00 per share and $4.82 per share, respectively.  The total intrinsic value of options exercised during the fiscal years ended March 31, 2007, 2006 and 2005 was $13, $147 and $370, respectively.

F-17

TECHNOLOGY RESEARCH CORPORATION

 AND SUBSIDIARY

Notes to the Consolidated Financial Statements

March 31, 2007, 2006 and 2005

(In thousands, except share data)

As of March 31, 2007, there was $243 of unrecognized compensation cost related to non-vested stock options that is expected to be recognized over a weighted average period of 1.5 years.  The total fair value of stock options vested during the fiscal years ended March 31, 2007, 2006 and 2005 was $118, $1.7 million and $1.1 million, respectively.

The Company 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 the Company’s stock price as well as assumptions regarding several subjective variables including the Company’s 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 the Company’s experience with paying dividends over the past 12 months.  The Company is 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 per share weighted average exercise price of stock options granted during 2007, 2006 and 2005 was $5.17, $6.72 and $6.24, respectively, on the date of grant using the Black-Scholes option pricing model, with the following assumptions:

	Years Ended March 31,
	2007	2006	2005
Expected dividend yield	1.12-1.32%	1.19%	0.94%
Risk free interest rate	4.76-5.05%	4.32-4.79%	4.16%
Expected volatility	88.29-90.36%	96.34%	97.65
Expected life	6.46-7.19 years	6.42 years	7.07 years

As of March 31, 2007, the range of exercise prices and weighted average remaining contractual life of options outstanding and exercisable was as follows:

		Options Outstanding				Options Exercisable
	Range of exercise prices	Number of outstanding as of March 31, 2007	Weighted average remaining contractual life(years)		Weighted average exercise price	Number exercisable as of March 31, 2007		Weighted average exercise price
$	1.50 - 1.63	9,117	3.6	$	1.56	9,117	$	1.56
$	1.64 - 1.80	23,918	4.8		1.76	23,918		1.76
$	1.81 - 4.87	10,000	8.8		4.87	10,000		4.87
$	4.88 - 5.17	60,000	9.2		5.02	30,000		5.10
$	5.18 - 8.30	50,000	8.7		7.27	25,000		7.72
$	8.31 - 12.34	191,900	7.0		12.34	191,900		12.34
		344,935	7.4	$	9.10	289,935	$	9.72

The Company has also reserved 32,667 shares of its common stock for issuance to employees or prospective employees at the discretion of the Board of Directors of which 16,033 shares are available for future issue.  There were no such shares issued during the years ended March 31, 2007, 2006 or 2005.

F-18

TECHNOLOGY RESEARCH CORPORATION

 AND SUBSIDIARY

Notes to the Consolidated Financial Statements

March 31, 2007, 2006 and 2005

(In thousands, except share data)

(8)  Leases

The Company leases the land on which its operating facility is located in Clearwater, Florida.  This operating lease was for a period of 20 years through August 2001 with options to renew for two additional ten-year periods.  The Company utilized the first ten-year option and extended the lease through August 2011.  The lease provides for rent adjustments every five years.  The Company is responsible for payment of taxes, insurance and maintenance.  In the event the Company elects to terminate the lease, title to all structures on the land reverts to the lessor.

The Company's subsidiary leases its operating facility in Honduras.  The initial operating lease was for five years through February 2002, and since then, has been extended on a yearly basis through February 2008.  In addition, the Company's subsidiary entered into a three-year lease in February 2005 for additional warehouse space in Honduras at the same location.

Future minimum lease payments under non-cancelable operating leases as of March 31, 2007 are: 

Year ending March 31,
2008	$	254
2009		33
2010		33
2011		33
2012		14
Thereafter		-
Total minimum lease payments	$	367

Rental expense for all operating leases was approximately $254 in 2007, $275 in 2006 and $239 in 2005.

(9)  Major Customers

The Company operates in one business segment - the design, development, manufacture and marketing of electronic control and measurement devices for the distribution of electric power.  The Company only reports sales and standard gross profit by market (commercial and military), no allocations of manufacturing variances and other costs of operations or assets are made to the markets.  Sales by market are:

		Years ended March 31,
		(In thousands)
Customer		2007	2006	2005
U.S. Military (direct sales)	$	3,623	6,110	6,368
DRS Technologies, Inc., a U.S. Government Prime Contractor		7,000	6,425	5,003
Total revenues for major customers	$	10,623	12,535	11,371
Exports:
Africa	$	2	-	-
Australia		9	1	5
Canada		243	24	25
Europe		2,866	2,080	2,239
Far East		5,146	10,598	6,293
Mexico		639	556	-
Middle East		29	3	26
South America		22	583	7
Total exports	$	8,956	13,845	8,595

F-19

TECHNOLOGY RESEARCH CORPORATION

AND SUBSIDIARY

Notes to the Consolidated Financial Statements

March 31, 2007, 2006 and 2005

(In thousands, except share data)

(10)  Benefit Plan

The Company's 401(k) plan covers all employees with three months of service who are at least 21 years old.  The Company matches employee contributions dollar-for-dollar up to $400.  Total Company contributions were approximately $30 in 2007, $27 in 2006 and $28 in 2005.

(11)  Litigation

On August 3, 2005, the Company filed a lawsuit in the United States District Court, Middle District of Florida, Tampa Division, against Tower Manufacturing Corporation, of Providence, R. I., alleging willful infringement of U.S. Patent No. 6,292,337, which underlies its Fire Shield® technology for cord fire prevention.  The Company alleged in the lawsuit that the Tower LCDI, found on portable room air conditioners, infringes its Fire Shield® patent.  As described in the Complaint, the Company sought injunctive relief, damages for infringement, lost profits, and any other relief deemed just by the Court.  Tower Manufacturing Corporation filed a counterclaim alleging an antitrust violation and for tortuous interference with contract. 

On September 13, 2005, the Company added Fedders Corporation (NYSE-FJC), a global manufacturer of air treatment products, including room air conditioners, as a defendant in the previously filed lawsuit against Tower Manufacturing Corporation.  The amended complaint alleged that the Tower LCDI, found on the Fedders room air conditioners, also infringes the Company's Fire Shield® patent. 

On May 11, 2006, the Company received notice that a complaint had been filed against the Company by Tower Manufacturing Corporation in the United States District Court for the District of Rhode Island, alleging infringement of its patent on a Mini Appliance Leakage Current Interrupter, No. 5,943,199.  Tower sought an injunction and monetary damages.

In September 2006, a Markman Hearing was conducted before Judge Richard A. Lazzara, United States District Court, Middle District of Florida, for the purpose of patent claim construction interpretation in preparation for the trial relating to the Company’s infringement allegations against Tower Manufacturing Corporation.

On October 6, 2006, the Company’s attorneys filed a request with the United States Patent and Trademark Office (PTO) for an ex parte reexamination of the claims in Tower's Mini Appliance Leakage Current Interrupter patent.  The Requests asked the PTO to invalidate the claims of Tower's patent based on prior art contained within the request.  In view of this, on October 10, 2006, the Company’s attorneys filed a motion in the Rhode Island Federal District Court requesting the Court to stay the case pending the outcome of the ex parte reexamination request that was submitted to the PTO.  In a separate ruling on October 10, 2006, Judge Ernest C. Torres, United States District Court for the District of Rhode Island, ordered a nonbinding settlement mediation in this matter. The judge in the Middle District of Florida action subsequently ordered nonbinding mediation as well.

On December 29, 2006, the Company entered into a Settlement Agreement with Tower Manufacturing Corporation (“Tower”).  Under the Settlement Agreement, the civil actions filed by both the Company and Tower, including Fedders Corporation, were dismissed. Under the terms of the Settlement Agreement the Company is to receive $3.2 million paid over a two year period. The settlement is included in other income in the fiscal 2007 consolidated statement of operations.  The Company and Tower have also entered into a cross licensing agreement of the patents that were the subject of the lawsuits for the period they remain valid and enforceable. 

F-20

TECHNOLOGY RESEARCH CORPORATION

AND SUBSIDIARY

Notes to the Consolidated Financial Statements

March 31, 2007, 2006 and 2005

(In thousands, except share data)

On February 16, 2007, Shanghai ELE Manufacturing Corporation (“ELE”) filed a declaratory judgment action against the Company in the Central District of California alleging that the Company’s United States Patent No. 6,292,337 (“the 337 patent”) is invalid and not infringed by ELE. The Company had previously written a letter to ELE requesting that they cease all infringing activity relating to the '337 patent.  In April the Company filed a counterclaim against ELE  asserting that the patent is valid, that ELE's Leakage Current Detectors and Interrupters (LCDIs), among other things, infringe the '337 patent. The Company is also seeking monetary damages against ELE for past infringement of the '337 patent. The '337 patent underlies the Company’s Fire Shield® technology for cord fire prevention. The Company filed a motion to transfer the ELE action to the United States District Court for the Middle District of Florida, where the Company is headquartered.  On May 18, 2007, Judge R. Gary Klausner granted the Company’s motion and transferred the action to the Middle District of Florida.  The Company intends to vigorously pursue its claim of patent infringement against ELE in this new venue. 

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

(12)  Stock Repurchase Plan

On December 9, 1999, the Company’s board of directors approved a plan for the Company to buy back up to 500,000 shares of the Company stock on the open market.  Through the year ended March 31, 2007, the Company has repurchased 21,500 shares at a cost of $40.  On June 28, 2006, the Company's board of directors terminated the Company's stock repurchase program.

(13)  Selected Quarterly Financial Data (Unaudited)

Information (unaudited) related to operating revenue, operating income, net income and earnings per share, by quarter, for the years ended March 31, 2007 and 2006 are:

		First quarter	Second quarter		Third quarter	Fourth quarter
Year ended March 31, 2007:
Revenues	$	10,615	9,705		8,818	8,854
Gross profit		2,429	1,966		2,363	1,865
Income (loss) from operations		64	(421	)	10	(1,029	)
Net income (loss)		20	(431	)	2,389	(495	)
Basic earnings (loss) per share		0.00	(0.07	)	0.41	(0.08	)
Diluted earnings (loss) per share		0.00	(0.07	)	0.40	(0.08	)

		First quarter	Second quarter		Third quarter	Fourth quarter
Year ended March 31, 2006:
Revenues	$	10,577	8,662		11,354	15,027
Gross profit		2,293	1,779		2,852	3,717
Income (loss) from operations		431	(276	)	1,082	1,482
Net income (loss)		254	(220	)	665	1,052
Basic earnings (loss) per share		0.04	(0.04	)	0.11	0.18
Diluted earnings (loss) per share		0.04	(0.04	)	0.11	0.18

F-21

TECHNOLOGY RESEARCH CORPORATION

AND SUBSIDIARY

Notes to the Consolidated Financial Statements

March 31, 2007, 2006 and 2005

(In thousands, except share data)

(14)  Acquisition

On April 28, 2006, the Company purchased a Recreational Vehicle (RV) product line business from Automated Engineering Corporation (“AEC”) and its underlying intellectual property owned by dB Technologies, Inc. and its founder, David Bailey.  The acquisition complements the Company’s existing RV business by allowing the Company to offer electrical safety solutions to a broader range of RV manufacturers.  The networking capabilities of the acquired product line business is intended to improve the Company's position in marketing electronic communications in recreational vehicles.  The acquisition has been accounted for under the purchase method of accounting, which results in recognition of approximately $599 in intangible assets. The purchase price consisted of:

Cash paid to seller	$279
Cash paid for acquisition costs	52
Common stock issued to seller, 51,679 shares	347
Total	$678

The common stock issued was valued at $6.72 per share based on the average of the closing prices during the 5 trading days surrounding the April 26, 2006 announcement of the acquisition.  An additional 22,148 shares of common stock have been issued on a contingent basis and are being held in escrow to be earned and released from escrow if post-acquisition sales of acquired RV products reach agreed upon targets through April 2009.  If all 22,148 contingent shares are earned, their value, based on the $6.72 average market value, would be $149.  The value of these shares will be calculated and added to the cost of the acquisition at the time they are earned and the value of the intangible assets will increase accordingly at such time.  As of March 31, 2007 no contingent shares have been earned.  The purchase price was allocated as follows:

			Estimated useful lives
Inventories	$	79	N/A
Total tangible assets acquired		79
Intangible assets:
Developed technology		417	10 years
Patents		84	10 years
Purchased customer relationships		67	9 years
Trademarks		6	1 year
Covenant not-to-compete		8	5 years
In-process research and development		17	*
Total intangible assets acquired		599
Total	$	678
*  Written-off during the first quarter of fiscal 2007 and reported in research and development.

Total amortization expense related to the above for the fiscal year ended March 31, 2007 was $59.  It is estimated that amortization expense related to these intangible assets will amount to $60 for fiscal 2008, $59 for fiscal 2009 thru 2011, $58 for 2012 thru 2015, and $55 for 2016 and beyond.

F-22

TECHNOLOGY RESEARCH CORPORATION

AND SUBSIDIARY

Notes to the Consolidated Financial Statements

March 31, 2007, 2006 and 2005

(In thousands, except share data)

The following unaudited pro-forma summary presents the consolidated results of operations of the Company as if the acquisition had occurred April 1, 2005.  This presentation is for informational purposes only and does not purport to be indicative of what would have occurred had the acquisition been made as of these dates or of results which may occur in the future.

		Years ended March 31,
		(In thousands)
		2007	2006
Revenues	$	38,043	46,022
Net income		1,464	1,768
Diluted earnings per share		0.25	0.30

(15)  Accrued Business Restructuring

In the fourth quarter of fiscal 2007, the Company recorded $138 of restructuring charges related to a reduction in workforce of 13 people representing approximately 12% of the U.S. workforce.  The charge included separation pay, severance pay, benefit payments and associated payroll taxes.  The workforce reduction was implemented to adjust the cost structure of the business to improve the Company’s competitive position.  The Company has experienced a significant decline in its RAC revenues necessitating reductions in costs.  Terminated employees with more than one year of service received severance benefits.

The following table summarizes the activity in the business restructuring accrual for fiscal 2007:
 

Beginning balance as of April 1, 2006	$	-
Additions to accrual in March 2007		138
Less payments made in fiscal 2007		(25	)
Ending balance as of March 31, 2007	$	113

F-23

TECHNOLOGY RESEARCH CORPORATION

 AND SUBSIDIARY

Schedule II

Valuation and Qualifying Accounts

Years ended March 31, 2007, 2006 and 2005

(In thousands, except share data)

			Additions
		Balance at	Charges to	Charged to		Balance
		beginning	costs	other		at end of
Description		of period	and expense	accounts	Deductions	period
Allowance for doubtful accounts:
Year ended March 31, 2007	$	78	261	-	66	273
Year ended March 31, 2006		172	38	-	131	78
Year ended March 31, 2005		31	146	-	5	172

F-24

EX-10.8

TECHNOLOGY RESEARCH CORPORATION

INDIVIDUAL DIRECTOR INDEMNIFICATION AGREEMENT

This Indemnification Agreement (this “Agreement”), made and entered into as of June 1, 2005, by and between TECHNOLOGY RESEARCH CORPORATION, a Florida corporation (the “Company”), and _______________________, in his capacity as an independent member of the Company’s Board of Directors (the “Indemnitee”).

BACKGROUND INFORMATION

In the judgment of the Company’s Board of Directors (the “Board”), individuals with desired levels of experience and expertise have become more reluctant to serve publicly-held corporations as directors or in other capacities unless provided with adequate protection through insurance or contractual indemnities against liabilities arising from claims brought against them as a consequence of such service.

The Board has previously determined it to be in the best interests of the Company and its shareholders for the Company to maintain at its expense liability insurance to protect individuals serving the Company and its subsidiaries from and against certain liabilities.  Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Board is concerned that, given current market conditions and trends, such insurance may only be available to the Company in the future at higher premium cost and with lesser breadth of coverage.  It has also noted that directors, officers and other individuals in service to business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to matters that traditionally have been brought only against the enterprise.

The Company’s Bylaws provide that the Company shall indemnify and advance expenses to each of its directors and officers in the manner set forth therein and to the fullest extent permitted by applicable law.  Such law is principally embodied in Section 607.0850 of the Florida Business Corporation Act, Chapter 607, Florida Statutes (the “FBCA”).  Each of the By-Laws and the FBCA, however, provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that indemnity agreements may be entered into between a corporation and individual members of its board of directors, among others.

The Indemnitee has expressed concern that the protection available under the Company’s Director and Officer insurance coverage, and as manifested by its Bylaws and the FBCA, may be inadequate in the current environment, and that without such protection he may not be willing to continue to serve as a Company director. The Board desires for Indemnitee to continue to serve in such capacity, and therefore believes it to be prudent for the Company to obligate itself by means of a direct contractual promise, in the form of this Agreement, to indemnify, and to advance expenses on behalf of, the Indemnitee so that he will hereafter continue to serve the Company free from undue concern that he may not be so indemnified.

The parties understand that this Agreement is intended to supplement the protections offered by the FBCA, the Company’s Bylaws or its liability insurance coverage, and that any resolutions or written actions heretofore adopted by the Board pursuant to any such protection shall not be deemed rescinded or diminished in scope or content by this Agreement’s execution and delivery, and that none of the rights or privileges granted to the Indemnitee under such statutory law, insurance protection or resolutions or actions shall be deemed impaired or abrogated.

Accordingly, in consideration of the premises and the covenants contained herein, the Company and Indemnitee hereby covenant and agree as follows:

OPERATIVE PROVISIONS

ARTICLE 1

Certain Definitions

           Section 1.01                                As used in this Agreement:

“Change of Control” shall be deemed to have occurred in any one of the following circumstances occurring after the date hereof: (i) there shall have occurred an event required to be reported with respect to the Company in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item or any similar schedule or form) under the Exchange Act, regardless of whether the Company is then subject to such reporting requirement; (ii) any "person" or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) shall have become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 15% or more of the combined voting power of the Company's then outstanding voting securities; (iii) there occurs a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 51% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such surviving entity; (iv) all or substantially all the assets of the Company are sold or disposed of in a transaction or series of related transactions; (v) the approval by the shareholders of the Company of a complete liquidation of the Company; or (vi) the individuals who on the date hereof constitute the Board (including, for this purpose, any new director whose election or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the directors then still in office who were directors on the date hereof or whose election or nomination was so approved) cease for any reason to constitute at least a majority of the members of the Board.

“Corporate Status” describes the status of the Indemnitee as a current or prior director, officer, trustee, general partner, managing member, fiduciary, board of directors’ committee member, employee or agent of any other Enterprise (as defined below) as long as such service is or was at the request of the Company.

“Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

“Enterprise” means the Company and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary, board of directors’ committee member, employee or agent.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Expenses” shall include all reasonable direct and indirect costs (including, without limitation, attorneys' fees, retainers, court costs, transcripts, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with (i) prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding, (ii) establishing or enforcing a right to indemnification under this Agreement, applicable law or otherwise, or (iii) the review and preparation of this Agreement on behalf of Indemnitee.  Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent.  Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

“Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporate law and neither currently is, nor in the five years previous to its selection or appointment has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the rights of Indemnitee under this Agreement or of other indemnitees under similar indemnification agreements) or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.  Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

“Independent Directors” any member of the Company’s board of directors who is not (i) an officer or employee of the Company, (ii) an officer, director or employee or any affiliate (excluding the Company) thereof, (iii) a person who controls or is under common control of any affiliate thereof or (iv) a person who otherwise would fail to qualify as an “independent director” under the applicable rules of the Nasdaq National Market as then in effect.

“Liabilities” means any losses or liabilities, including, without limitation, any judgments, fines, ERISA excise taxes and penalties, penalties and amounts paid in settlement, arising out of or in connection with any Proceeding (including all interest, assessments and other charges paid or payable in connection with or in respect of any such judgments, fines, ERISA excise taxes and penalties, penalties or amounts paid in settlement).

 “person” shall have the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act; provided, however, that the term “person” shall exclude (i) the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (iii) any corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company.

“Proceeding” includes any threatened, pending or completed action, derivative action, suit, claim, counterclaim, cross claim, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual threatened or completed proceeding, whether civil (including intentional and unintentional tort claims), criminal, administrative or investigative, including any appeal therefrom, and whether instituted by or on behalf of the Company or any other party, or any inquiry or investigation that Indemnitee in good faith believes might lead to the institution of any such action, suit or other proceedings hereinabove listed in which Indemnitee was, is or will be involved as a party or otherwise by reason of any Corporate Status of Indemnitee, or by reason of any action taken (or failure to act) by him or of any action (or failure to act) on his part while serving in any Corporate Status, in each case whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement of Expenses can be provided under this Agreement.

Section 1.02                                For the purposes of this Agreement:

References to “Company” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that if Indemnitee is or was a director, officer, employee, or agent of such constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise, then Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.

Reference to “other enterprise” shall include employee benefit plans; references to “fines” shall include any excise tax assessed with respect to any employee benefit plan; references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

ARTICLE 2

Services By Indemnitee

Section 2.01.  Services By Indemnitee.  Indemnitee hereby agrees to continue to serve as a director of the Company for so long as Indemnitee is elected or until Indemnitee tenders his resignation or is removed.

ARTICLE 3

Indemnification

Section 3.01.  General.  (a) The Company hereby agrees to and shall indemnify Indemnitee and hold him harmless from and against any and all Expenses and Liabilities, in either case, actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf, to the fullest extent permitted by applicable law.

For purposes of this Section 3.01, the meaning of the phrase “to the fullest extent permitted by applicable law” shall include, but not be limited to:

(i)to the fullest extent permitted by any provision of the FBCA, or the corresponding provision of any amendment to or replacement of the FBCA, and

(ii)to the fullest extent authorized or permitted by any amendments to or replacements of the FBCA adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.

(b)Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.

(c)Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him in connection therewith. If Indemnitee is not wholly successful in such Proceeding, but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. If the Indemnitee is not wholly successful in such Proceeding, the Company also shall indemnify Indemnitee against all Expenses reasonably incurred in connection with a claim, issue or matter related to any claim, issue, or matter on which the Indemnitee was successful. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

Section 3.02. Exclusions.  Notwithstanding any provision of this Agreement, the Company shall not be obligated under this Agreement to make any indemnity (including any advancement of Expenses) in connection with any claim made against Indemnitee:

(a)for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law; or

(b)except as otherwise provided in Sections 6.01(d) or (f) hereof, prior to a Change in Control, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its affiliates or their respective directors, officers, employees or other indemnitees, unless (i) the Proceeding (or any part of any Proceeding) is authorized prior to its initiation by a majority of the Independent Directors or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

ARTICLE 4

Advancement Of Expenses; Defense of Claims

Section 4.01.  Advances.  Notwithstanding any provision of this Agreement to the contrary, the Company shall advance any Expenses incurred by Indemnitee in connection with any Proceeding within ten (10) days after the receipt by the Company of a statement or statements requesting such advances from time to time, whether prior to or after final disposition of any Proceeding.  Any overdue amount of such Expenses to be paid by the Company hereunder shall bear interest, compounded monthly, at a rate equal to the prime annual rate as reported on the last business day of each calendar month in the Money Rates (or other applicable) section of the Eastern Edition of the Wall Street Journal, a publication of Dow Jones & Company, Inc., which rate is a composite of the base rate on corporate loans posted from time to time by at least 75% of the 30 largest commercial banks operating within the United States.  Advances shall be made without regard to Indemnitee’s ability to repay such amounts and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement.  Advances shall include any and all reasonable Expenses incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed.  This Section 4.01 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 3.02.

Section 4.02.  Repayment of Advances or Other Expenses.  Indemnitee agrees that Indemnitee shall reimburse the Company for all Expenses advanced by the Company pursuant to Section 4.01 or 6.01(f), in the event and only to the extent that it shall be determined by final judgment or other final adjudication under the provisions of any applicable law (as to which all rights of appeal therefrom have been exhausted or lapsed) that Indemnitee is not entitled to be indemnified by the Company for such Expenses.

Section 4.03.  Defense of Claims.  The Company will be entitled to participate in the Proceeding at its own expense.  The Company shall not settle any action, claim or Proceeding (in whole or in part) which would impose any Expense, judgment, fine, penalty or limitation on the Indemnitee without the Indemnitee’s prior written consent, such consent not to be unreasonably withheld.  Indemnitee shall not settle any action, claim or Proceeding (in whole or in part) which would impose any Expense, judgment, fine, penalty or limitation on the Company without the Company’s prior written consent, such consent not to be unreasonably withheld.

ARTICLE 5

Procedures For Notification of and Determination of Entitlement To Indemnification

Section 5.01.  Request For Indemnification. (a) Within 60 days after the actual receipt by Indemnitee of notice that he is a party to or a participant (as a witness or otherwise) in any Proceeding, Indemnitee shall submit to the Company a written notice identifying the Proceeding.  The omission by the Indemnitee to so notify the Company will not relieve the Company from any liability which it may have to Indemnitee (i) otherwise than under this Agreement, and (ii) under this Agreement except and only to the extent the Company can establish that such omission to notify caused actual material prejudice to the Company.

(b)Indemnitee shall thereafter deliver to the Company a written application to indemnify Indemnitee in accordance with this Agreement.  Such application(s) may be delivered from time to time and at such time(s) as Indemnitee deems appropriate in his sole discretion.  Following such a written application for indemnification by Indemnitee, the Indemnitee’s entitlement to indemnification shall be determined according to Section 5.02 of this Agreement.

Section 5.02.  Determination of Entitlement. (a) Upon written request by Indemnitee for indemnification pursuant to Section 5.01, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case:  (i) by a majority vote of the Independent Directors who are Disinterested Directors, even though less than a quorum of the Board; or (ii) if so requested by the Indemnitee in his sole discretion, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee.  If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten days after such determination.  Indemnitee shall reasonably cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination.  Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification), and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

(b)If entitlement to indemnification is to be determined by Independent Counsel pursuant to Section 5.02(a), such Independent Counsel shall be selected as provided in this Section 5.02.  If a Change in Control shall not have occurred, the Independent Counsel shall be selected by the Independent Directors, and the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected.  If a Change in Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected.  In either event, Indemnitee or the Company, as the case may be, may, within ten days after such written notice of selection shall have been received, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 1 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion.  Absent a proper and timely objection, the person so selected shall act as Independent Counsel.  If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court of competent jurisdiction has determined that such objection is without merit.  If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 5.01 hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 5.02(a) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 6.01(a) of this Agreement, the Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

(c)The Company agrees to pay the reasonable fees of any Independent Counsel and to fully indemnify such Independent Counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

Section 5.03.  Presumptions and Burdens of Proof; Effect of Certain Proceedings.  (a) In making any determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 5.01 of this Agreement, and the Company shall have the burdens of coming forward with evidence and of persuasion to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.  Neither the failure of any person, persons or entity to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by any person, persons or entity that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(b)If the person, persons or entity empowered or selected under Section 5.02 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within 60 days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification.

(c)The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.

(d)For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of any Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of such Enterprise in the course of their duties, or on the advice of legal counsel for such Enterprise or on information or records given or reports made to such Enterprise by an independent certified public accountant or by an appraiser or other expert selected by such Enterprise.  The provisions of this Section 5.03(c) shall not be deemed to be exclusive or to limit the other circumstances in which Indemnitee may be deemed or found to have met the applicable standard of conduct set forth in this Agreement.

(e)The knowledge and/or actions, or failure to act, of any other director, trustee, partner, managing member, fiduciary, officer, agent or employee of any Enterprise shall not be imputed to Indemnitee for purposes of determining any right to indemnification under this Agreement.

ARTICLE 6

Remedies of Indemnitee

Section 6.01.  Adjudication or Arbitration.  (a) In the event of any dispute between Indemnitee and the Company hereunder as to entitlement to indemnification or advancement of Expenses (including without limitation where (i) a determination is made pursuant to Section 5.02 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 4.01 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 5.02(a) of this Agreement within 45 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to the last sentence of Section 5.02(a) of this Agreement within ten days after receipt by the Company of a written request therefor, or (v) payment of indemnification pursuant to Section 3.01 of this Agreement is not made within ten days after a determination has been made that Indemnitee is entitled to indemnification), then Indemnitee shall be entitled to an adjudication by a court of his entitlement to such indemnification or advancement of Expenses. Alternatively, in such case, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association.  The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

(b)In the event that a determination shall have been made pursuant to Section 5.02(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 6.01 shall be conducted in all respects as a de novo trial, or arbitration, on the merits, and Indemnitee shall not be prejudiced by reason of that adverse determination.  In any judicial proceeding or arbitration commenced pursuant to this Section 6.01 the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be, and the Company may not refer to or introduce into evidence any determination pursuant to Section 5.02(a) of this Agreement adverse to Indemnitee for any purpose.  If Indemnitee commences a judicial proceeding or arbitration pursuant to this Section 6.01, Indemnitee shall not be required to reimburse the Company for any advances pursuant to Section 4.02 until a final determination is made with respect to Indemnitee’s entitlement to indemnification (as to which all rights of appeal have been exhausted or lapsed).

(c)If a determination shall have been made pursuant to Section 5.02(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 6.01.

(d)In the event that Indemnitee, pursuant to this Section 6.01, seeks a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against, any and all Expenses actually and reasonably incurred by him in such judicial adjudication or arbitration.  If it shall be determined in said judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advancement of Expenses sought, the Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against, any and all Expenses reasonably incurred by Indemnitee in connection with such judicial adjudication or arbitration.

(e)The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 6.01 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.

(f)The Company shall indemnify Indemnitee to the fullest extent permitted by law against all Expenses and, if requested by Indemnitee, shall (within ten days after the Company’s receipt of each such written request) advance such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any judicial proceeding or arbitration brought by Indemnitee for (i) indemnification or advances of Expenses by the Company under this Agreement or any other agreement or provision of the Company’s Articles of Incorporation or By-laws now or hereafter in effect, or (ii) recovery or advances under any insurance policy maintained by any person for the benefit of Indemnitee in connection with the performance of his duties for or on behalf of the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance or insurance recovery, as the case may be.

ARTICLE 7

Directors' and Officers' Liability Insurance

Section 7.01.  D&O Liability Insurance.  The Company shall obtain and maintain a policy or policies of insurance (“D&O Liability Insurance”) with reputable insurance companies providing liability insurance for directors and officers of the Company in their capacities as such (and for any capacity in which any director or officer of the Company serves any other Enterprise at the request of the Company), in respect of acts or omissions occurring while serving in such capacity, on terms with respect to coverage and amount (including with respect to the payment of Expenses) no less favorable than those of such policy in effect on the date hereof.

Section 7.02.  Evidence of Coverage.  Upon request by Indemnitee, the Company shall provide copies of all policies of D&O Liability Insurance obtained and maintained in accordance with Section 7.01 of this Agreement.  The Company shall promptly notify Indemnitee of any changes in such insurance coverage.

ARTICLE 8

Miscellaneous

Section 8.01.  Nonexclusivity of Rights.  The rights of indemnification and advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled to under applicable law, the Company’s Articles of Incorporation, the Company’s Bylaws, any agreement, a vote of shareholders or a resolution of directors, or otherwise.  No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal.  To the extent that a change in Florida law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Company’s Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.  No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

Section 8.02.  Insurance and Subrogation. (a) To the extent that, pursuant to Section 7.01, the Company maintains a policy or policies providing D&O Liability Insurance, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, trustee, partner, managing member, fiduciary, officer, employee or agent under such policy or policies.  If, at the time the Company receives notice from any source of a Proceeding as to which Indemnitee is a party or a participant (as a witness or otherwise), the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies.  The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.  The failure or refusal of any such insurer to pay any such amount shall not affect or impair the obligations of the Company under this Agreement.

(b)In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(c)The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable (or for which advancement is provided hereunder) hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

(d)The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, trustee, partner, managing member, fiduciary, board of directors’ committee member, employee or agent of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of Expenses from such Enterprise.

Section 8.03.  Contribution.  To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as the Board deems fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving rise to such Proceeding; and/or (ii) the relative fault of the Company (inclusive of any of its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

Section 8.04.  Amendment.  This Agreement may not be modified or amended except by a written instrument executed by or on behalf of each of the parties hereto.

Section 8.05.  Waivers.  The observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) by the party entitled to enforce such term only by a writing signed by the party against which such waiver is to be asserted. Unless otherwise provided herein, no delay on the part of any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party hereto of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.

Section 8.06.  Entire Agreement.  This Agreement and the documents referred to herein constitute the entire agreement between the parties hereto with respect to the matters covered hereby, and any other prior or contemporaneous oral or written understandings or agreements with respect to the matters covered hereby are superseded by this Agreement.

Section 8.07.  Severability.  If any provision of this Agreement shall be held to be invalid, illegal or unenforceable for any reason:  (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

Section 8.08.  Notice Of Proceedings.  Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder.  The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise.

Section 8.09.  Notices.  All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been furnished (a) if delivered by hand or by courier and receipted for by the party to whom such notice or other communication shall have been directed, (b) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed or (c) if sent by facsimile transmission and fax confirmation is received, on the next business day following the date on which such facsimile transmission was sent. Addresses for notice to either party shall be those maintained in the Company’s records on the date of this Agreement, or such other address as either party shall have furnished by written notice to the other party as provided above.

Section 8.10.  Binding Effect.  (a) The Company confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby to induce Indemnitee to serve as a director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director of the Company.

(b)This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and executors, administrators, personal and legal representatives.  The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all, or a substantial part of the business or assets of the Company, by written agreement in the form and substance satisfactory to Indemnitee, to assume and agree to perform this Agreement in the manner and to the same extent that the Company would be required to perform if no such succession had taken place.

(c)The indemnification and advancement of Expenses provided by, or granted pursuant to this Agreement shall continue as to a person who has ceased to be a director, officer, employee or agent or is deceased and shall inure to the benefit of the heirs, executors, administrators, legatees and assigns, of such a person.

Section 8.11.  Governing Law.  This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Florida, without regard to its conflict of laws rules.

Section 8.12.  Consent To Jurisdiction.  Except with respect to any arbitration commenced by Indemnitee pursuant to Section 6.01(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Circuit Court in and for Pinellas County, Florida (the “Circuit Court”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Circuit Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) waive any objection to the laying of venue of any such action or proceeding in the Circuit Court, and (iv) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Circuit Court has been brought in an improper or inconvenient forum.

Section 8.13.  Headings.  The Article and Section headings in this Agreement are for convenience of reference only, and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof.

Section 8.14.  Counterparts.  This Agreement may be executed in one or more counterparts, by means of multiple signature pages each containing less than all required signatures, and by means of facsimile signatures, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement.  Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

.  Use of Certain Terms.  As used in this Agreement, the words “herein,” “hereof,” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular paragraph, subparagraph, section, subsection, or other subdivision. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

IN WITNESS WHEREOF, this Agreement has been executed and delivered and shall be deemed effective as of the date first above written.

TECHNOLOGY RESEARCH CORPORATION

By:                                                                           

Name:                                                                      

Title:                                                                        

INDEMNITEE

By:                                                                           

Name:                                                                      

EX-10.9

TECHNOLOGY RESEARCH CORPORATION

2000 LONG TERM INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AGREEMENT

This OPTION AGREEMENT is made this ____ day of _________, ____, between TECHNOLOGY RESEARCH CORPORATION, a Florida corporation, hereinafter referred to as the "Corporation" and __________________, a Director of the Corporation, hereinafter referred to as "Director."

WHEREAS, the holders of a majority of the shares of the Corporation’s voting common stock (the "Common Stock") represented in person or by proxy have adopted the terms and conditions of the 2000 Long Term Incentive Plan (the "Plan"), at its Annual Meeting of shareholders conducted on August 24, 2000 and modified on August 21, 2003, the terms of which are hereby incorporated by reference;

WHEREAS, the Corporation desires to carry out the purposes of the Plan to afford the Director an opportunity to purchase shares of its Common Stock and participate in the continued success and growth of the Corporation and to enhance ownership of the Corporation’s common stock by members of its Board of Directors.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto agree as follows:

1.Grant of Option.  The Corporation hereby irrevocably grants to the Director a Non-qualified StockOption, hereinafter called the "Option", to purchase all or any part of an aggregate of ______ shares (such number being subject to adjustment as provided in paragraph 10 hereof) of the Corporation’s Common Stock (the "Shares") on the terms and conditions herein set forth.  The Option granted under this Agreement is intended to qualify as an incentive stock option, as that term is defined in Section 422 of the Internal Revenue Code of 1986, as amended.

2.Purchase Price.  The purchase price of the Shares covered by the Option shall be $______ per share.

3.Term of Option.  The term of the Option shall be for a period of ten (10) years commencing on the date of grant of the Option; provided that any option granted to a Director owning more than ten percent (10%) of the voting power of all classes of voting stock of the Corporation shall similarly expire five years after the date of grant of such option.

4.Exercise of Option.  The Option may be exercised in whole or in part from time to time during its specified term in accordance with the following schedule:

·   ________ shares on ________, _____ and

·   ________ shares on ________, _____.

Exercisability of the Option Shares under this Section 4. is cumulative, and after the Option becomes exercisable under this Agreement with respect to any portion of the Option Shares, it shall continue to be exercisable with respect to that portion of the Option Shares until the Option expires.

The Director shall be entitled to exercise any portion of the Option in accordance with the provisions of Section 4 hereof, either in whole or in part, by delivering written notice of such exercise to the office of the Secretary of the Corporation or to such other location as may be designated by the Board (as that term is defined in the Plan), specifying therein the number of Shares with respect to which the Option is being exercised, which notice shall be accompanied by payment in full of the purchase price of the Shares being acquired.

Notwithstanding anything in this Section to the contrary, the Option Shares shall become fully vested upon the occurrence of a "change in control," if the change in control occurs prior to the Option Shares becoming fully vested, and the Director’s date of termination of directorship as a Director of the Corporation.  For purposes of this Section, the term "change in control" means (a) the acquisition of beneficial ownership, as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, by any entity, person, or group, of more than 50% of the outstanding capital stock of the Corporation entitled to vote for the election of directors (“Voting Stock”); (b) the effective date of (i) a merger or consolidation of the Corporation with one or more other corporations as the result of which the holders of the outstanding Voting Stock of the Corporation immediately prior to such merger or consolidation (excluding those who are affiliates of any such other corporation) hold less than 50% of the Voting Stock of the surviving or resulting corporation, or (ii) a transfer of substantially all of the property of the Corporation other than to an entity of which the Corporation owns at least 50% of the Voting Stock; or (c) the election to the Board, without the recommendation or approval of the incumbent board of the directors, constituting a majority of the number of directors of the Corporation then in office.

5.           Payment of Exercise Price.  Payment may be made (i) wholly or partly in cash, (ii) in Stock valued at its Fair Market Value at the date of exercise, (iii) by agreeing to surrender options then exercisable by the Director valued at the excess of the aggregate Fair Market Value of the Stock subject to such options on the date of exercise over the aggregate option exercise price of such Stock; (iv) by directing the Corporation to withhold such number of Stock otherwise issuable upon exercise of such options having an aggregate Fair Market Value on the date of exercise equal to the exercise price of the option; or (v) by such other medium of payment as the Board, in its discretion, shall authorize, or by any combination of the aforementioned methods of payment.  No Shares shall be issued until full payment therefore has been made in the manner set forth above or in any combination of the methods set forth above, in each case to the extent approved by the Board.

6.           Termination of Directorship.  In the event that termination of directorship occurs for any reason (other than by reason of death or permanent and total disability) and the Committee, as defined in the Plan, determines the Director to be in good standing, then the Option shall be considered fully and immediately vested, and the Director shall be entitled to exercise the Option at any time within three (3) months after such termination, but in no event more than ten (10) years after the date of grant of the Option; ii) the Director not to be in good standing, then the Director shall be entitled to exercise the vested portion of the Option at any time within three (3) months after such termination, but in no event more than ten (10) years after the date of grant of the Option

7.           Death of Director.  If the directorship of the Director terminates due to death, the Option shall expire on the first anniversary of such termination of directorship or the date the Option expires in accordance with its terms, whichever occurs first.  The vested Options may be exercised by the devisee or legatee of the Director or by the personal representative or executor of his estate with respect to the same number of shares of Common Stock in the same manner, and to the same extent as if the Director had continued his directorship during such period and the Option shall be canceled with respect to all remaining shares of Common Stock otherwise subject to the Option.

8.           Permanent and Total Disability of Director.  A permanent and totally disabled Director may exercise any Option within twelve (12) months after leaving the Corporation’s Board of Directors, or the date that the Option expires in accordance with its terms, whichever occurs first.  For purposes of the Plan and this Option, an individual is deemed to be permanently and totally disabled if he is unable to engage in any substantial, gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months.

9.           Transferability of Option.  Unless otherwise approved by the Board of Directors, the Option may be exercised only by the Director during his lifetime and may not be transferred other than by will or the applicable laws of descent or distribution.  The Option shall not otherwise be transferred, assigned, pledged or hypothecated for any purpose whatsoever and is not subject, in whole or in part, to execution, attachment, or similar process.  Any attempt at assignment, transfer, pledge or hypothecation or other disposition of the Option, other than in accordance with the terms set forth herein, shall be void and of no effect.  Notwithstanding anything in this Section to the contrary, the Director, with the approval of the Board, may transfer the Option for no consideration to or for the benefit of the Director’s immediate family (including, without limitation, to a trust for the benefit of the Director’s immediate family or to a partnership or limited liability company for one or more members of the Director’s immediate family), subject to such limits as the Board may establish, and the transferee shall remain subject to all the terms and conditions applicable to the Option prior to such transfer.  The foregoing right to transfer the Option shall apply to the right to consent to amendments to this Agreement and, in the discretion of the Board, shall also apply to the right to transfer ancillary rights associated with the Option.  The term “immediate family” shall mean the Director’s spouse, parent, children, stepchildren, adoptive relationships, sisters, brothers and grandchildren (and, for this purpose, shall also include the Director).

10.           Adjustment of Number of Shares.  In the event that a dividend shall be declared upon the Common Stock of the Corporation payable in shares of Common Stock of the Corporation or a stock split, the number of shares of Common Stock then subject to any such option and the number of shares reserved for issuance pursuant to the Plan but not yet covered by an Option shall be adjusted by adding to each share the number of shares which shall be distributed thereon if such shares had been outstanding on the date fixed for determining the stockholders entitled to receive such stock dividend or split.  For example, if an Option were granted for 1,000 shares at a $10.00 per share option price (a total price of $10,000), and subsequently there was a two for one stock split, then the holder of such option shall be entitled to purchase 2,000 shares of Common Stock at the price of $5.00 per share or an aggregate purchase price of $10,000.  In the event that the outstanding shares of the Common Stock of the Corporation shall be changed into or exchanged for a different class of shares of stock of the Corporation or of another Corporation, whether through reorganization, recapitalization, merger or acquisition, then there shall be substituted for each share of Common Stock subject to any such option and for each share of Common Stock reserved for issuance pursuant to the Plan, but not yet covered by an Option, the number and kind of shares of stock or other securities into which each outstanding share of Common Stock shall be so changed or for which such share shall be exchanged.  No adjustment or substitution provided for in this paragraph shall require the Corporation to sell a fractional share.

11.           Stock Certificates.  Upon exercise of the Option and payment of the exercise price, the Corporation shall deliver a certificate or certificates representing such Shares as soon as practicable after the notice shall be received; or (b) fix a date (not less than five (5) nor more than ten (10) business days from the date such notice shall be received by the Corporation) for the payment of the full purchase price of such Shares with the Secretary of the Corporation, against delivery of a certificate or certificates representing such shares.  The certificate or certificates for the Shares as to which the Option shall have been so exercised shall be registered in the name of the person or persons so exercising the Option (or, if the Option shall be exercised by the Director and if the Director shall so request in the notice exercising the Option, shall be registered in the name of the Director and another person jointly, with right of survivorship) and shall be delivered upon the written order of the person or persons exercising the Option.  In the event the Option shall be exercised pursuant to Section 7 hereof by any person or persons other than the Director, such notice shall be accompanied by appropriate proof of the right of such person or persons to exercise the Option.  All shares that shall be purchased upon the exercise of the Option as provided herein shall be fully paid and non-assessable.

12.           No Additional Rights.  Neither the Director nor any other person entitled to exercise the Option under the terms hereof shall be, or have any of the rights or privileges of, a shareholder of the Corporation with respect to any of the Shares of Common Stock issuable upon exercise of the Option, unless and until the purchase price for such Shares shall have been paid in full.

13.           Cancellation or Modification of Agreement.  In the event that the Option shall be exercised in whole, this Agreement shall be surrendered to the Corporation for cancellation.  In the event the Option shall be exercised in part, or a change in the number or designation of the Common Stock shall be made, this Agreement shall be delivered to the Corporation for the purpose of making appropriate notation thereon or otherwise revising in such manner as the Corporation shall determine the partial exercise or change in the number of Shares or designation of the Shares of Common Stock.

14.           Reload Stock Options.  Subject to the terms and conditions within the Plan, the Board may at its discretion grant a reload stock option to the Director to purchase that number of Shares delivered to the Corporation in partial or full payment of the exercise price of an Option; provided, however, (i) that any reload option is granted with an exercise price that reflects the current fair market value of such Shares; (ii) any reload stock option does not cause the Plan to lose its exemption under Rule 16b-3 of the Exchange Act, as may be amended from time to time; and (iii) any grant of a reload option does not cause the Director to violate the provisions of Section 16(b) of the Exchange Act.

15.           Notices.  Every direction, revocation or notice authorized or required by the Plan shall be deemed delivered to the Corporation (i) on the date it is personally delivered to the Secretary of the Corporation at its principal executive offices or (ii) three business days after it is sent by registered or certified mail, postage prepaid, addressed to the Secretary at such offices, and shall be deemed delivered to an optionee (i) on the date it is personally delivered to him or (ii) three business days after it is sent by registered or certified mail, postage prepaid, addressed to him at the last address shown for him on the records of the Corporation.

16.           Investment Purpose.  The Option is granted on the express condition that the purchase of Shares upon an exercise hereof shall be made for investment purposes only and not with a view to their resale or further distribution unless such Shares, at the time of their issuance and delivery, are registered under the Securities Act of 1933, as amended, or, alternatively, at some time following such issuance their resale is determined by counsel for the Corporation to be exempt from the registration requirements of the Act and of any other applicable law, regulation or ruling.

17.           Tax Withholding.  The Corporation shall have the right to deduct from any payment or settlement upon the exercise of any stock option, or the delivery of any Shares, any federal, state, local or other taxes of any kind which the Board, in its sole discretion, deems necessary to be withheld to comply with the Internal Revenue Code and/or any other applicable law, rule or regulation.  If the Board, in its sole discretion, permits Shares of the Corporation’s Common Stock to be used to satisfy any such tax withholding, such Shares shall be valued based on the fair market value of such Shares as of the date the tax withholding is required to be made, as determined by the Board.

18.           General.  The Corporation shall at all times during the term of the Option reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of this Option Agreement, shall pay all original issue and transfer taxes with respect to the issue and transfer of shares pursuant hereto and all other fees and expenses necessarily incurred by the Corporation in connection therewith, and will from time to time use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Corporation,  shall be applicable thereto.  The Option shall be exercised in accordance with such administrative regulations as the Board shall from time to time adopt.

19.           Acceptance by Director.  The exercise of the Option is conditioned upon the acceptance of Director of the terms hereof as evidenced by his execution of this Option Agreement.

IN WITNESS WHEREOF, the Corporation has caused this Option Agreement to be duly executed by its officers thereunto duly authorized, and the Director has hereunto set his hand and seal, all on the day and year first above written.

TECHNOLOGY RESEARCH CORPORATION

By:                                                                              

Name:                                                                         

                                                                              Its:                                                           

DIRECTOR

                                                                                                                                  _          

EX-10.10

TECHNOLOGY RESEARCH CORPORATION

2000 LONG TERM INCENTIVE PLAN

INCENTIVE STOCK OPTION AGREEMENT

This OPTION AGREEMENT is made this ____ day of _________, ____, between TECHNOLOGY RESEARCH CORPORATION, a Florida corporation, hereinafter referred to as the "Corporation" and _______________________, an employee of the Corporation, hereinafter referred to as "Employee."

WHEREAS, the holders of a majority of the shares of the Corporation’s voting common stock (the "Common Stock") represented in person or by proxy have adopted the terms and conditions of the 2000 Long Term Incentive Plan (the "Plan"), at its Annual Meeting of shareholders conducted on August 24, 2000, the terms of which are hereby incorporated by reference;

WHEREAS, the Corporation desires to carry out the purposes of the Plan to afford the Employee an opportunity to purchase shares of its Common Stock and participate in the continued success and growth of the Corporation and to enhance ownership of the Corporation’s common stock by members of its Board of Directors.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto agree as follows:

1.Grant of Option.  The Corporation hereby irrevocably grants to the Employee an Incentive Stock Option, hereinafter called the "Option", to purchase all or any part of an aggregate of _______ shares (such number being subject to adjustment as provided in paragraph 10 hereof) of the Corporation’s Common Stock (the "Shares") on the terms and conditions herein set forth.  The Option granted under this Agreement is intended to qualify as an incentive stock option, as that term is defined in Section 422 of the Internal Revenue Code of 1986, as amended.

2.Purchase Price.  The purchase price of the Shares covered by the Option shall be $_______ per share.

3.Term of Option.  The term of the Option shall be for a period of ten (10) years commencing on the date of grant of the Option; provided that any option granted to a key employee owning more than ten percent (10%) of the voting power of all classes of voting stock of the Corporation shall similarly expire five years after the date of grant of such option.

4.Exercise of Option.  The Option may be exercised in whole or in part from time to time during its specified term in accordance with the following schedule:

The Option Shares shall vest over a period of three (3) years with an equal number of shares vesting at a rate of 33-1/3% after the completion of the first year of employment, 33-1/3% after the completion of the second year of employment, and 33-1/3% after the completion of the third year of employment completed by the Employee.  Exercisability of the Option Shares under this Section 4. is cumulative, and after the Option becomes exercisable under this Agreement with respect to any portion of the Option Shares, it shall continue to be exercisable with respect to that portion of the Option Shares until the Option expires.

The Employee shall be entitled to exercise any portion of the Option in accordance with the provisions of Section 4 hereof, either in whole or in part, by delivering written notice of such exercise to the office of the Secretary of the Corporation or to such other location as may be designated by the Board (as that term is defined in the Plan), specifying therein the number of Shares with respect to which the Option is being exercised, which notice shall be accompanied by payment in full of the purchase price of the Shares being acquired.

Notwithstanding anything in this Section to the contrary, the Option Shares shall become fully vested upon the occurrence of a "change in control," if the change in control occurs prior to the Option Shares becoming fully vested, and the Employee’s date of termination of employment as an employee of the Corporation.  For purposes of this Section, the term "change in control" means (a) the acquisition of beneficial ownership, as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, by any entity, person, or group, of more than 50% of the outstanding capital stock of the Corporation entitled to vote for the election of directors (“Voting Stock”); (b) the effective date of (i) a merger or consolidation of the Corporation with one or more other corporations as the result of which the holders of the outstanding Voting Stock of the Corporation immediately prior to such merger or consolidation (excluding those who are affiliates of any such other corporation) hold less than 50% of the Voting Stock of the surviving or resulting corporation, or (ii) a transfer of substantially all of the property of the Corporation other than to an entity of which the Corporation owns at least 50% of the Voting Stock; or (c) the election to the Board, without the recommendation or approval of the incumbent board of the directors, constituting a majority of the number of directors of the Corporation then in office.

5.           Payment of Exercise Price.  Payment may be made (i) wholly or partly in cash, (ii) through the delivery of shares of Stock which have been outstanding for at least six months (unless the Committee approves a shorter period) and which have a fair market value equal to the exercise price; (iii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price through a “cashless exercise” arrangement which permits the Participant to simultaneously exercise an option and sell the Shares thereby acquired and enable the broker to use the proceeds from such sale as payment for the exercise price of such option; or (iv) by any combination of the foregoing permissible forms of payment.  No Shares shall be issued until full payment therefore has been made in the manner set forth above or in any combination of the methods set forth above, in each case to the extent approved by the Board.

6.           Termination of Employment.  In the event that termination of employment occurs for any reason (other than by reason of death, permanent and total disability or retirement), the Option shall expire on the date of termination of employment; provided that the Employee shall be entitled to exercise any vested Options at any time within three (3) months after such termination, but in no event more than ten (10) years after the date of grant of the Option.

7.           Death of Employee.  If the employment of the Employee terminates due to death, the Option shall expire on the first anniversary of such termination of employment or the date the Option expires in accordance with its terms, whichever occurs first.  The vested Options may be exercised by the devisee or legatee of the Employee or by the personal representative or executor of his estate with respect to the same number of shares of Common Stock in the same manner, and to the same extent as if the Employee had continued his employment during such period and the Option shall be canceled with respect to all remaining shares of Common Stock otherwise subject to the Option.

8.           Permanent and Total Disability of Employee.  A permanent and totally disabled Employee may exercise any Option within twelve (12) months after leaving the Corporation, or the date that the Option expires in accordance with its terms, whichever occurs first.  For purposes of the Plan and this Option, an individual is deemed to be permanently and totally disabled if he is unable to engage in any substantial, gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months.

9.           Retirement of Employee.  In the event that termination of employment occurs by reason of retirement and the Employee is of retirement age (i.e. age 65 or greater), the Option shall continue to vest and is exercisable until the three year anniversary of such date of termination or the date the Option expires in accordance with its terms, whichever occurs first.

10.           Transferability of Option.  Unless otherwise approved by the Board of Directors, the Option may be exercised only by the Employee during his lifetime and may not be transferred other than by will or the applicable laws of descent or distribution.  The Option shall not otherwise be transferred, assigned, pledged or hypothecated for any purpose whatsoever and is not subject, in whole or in part, to execution, attachment, or similar process.  Any attempt at assignment, transfer, pledge or hypothecation or other disposition of the Option, other than in accordance with the terms set forth herein, shall be void and of no effect.  Notwithstanding anything in this Section to the contrary, the Employee, with the approval of the Board, may transfer the Option for no consideration to or for the benefit of the Employee’s immediate family (including, without limitation, to a trust for the benefit of the Employee’s immediate family or to a partnership or limited liability company for one or more members of the Employee’s immediate family), subject to such limits as the Board may establish, and the transferee shall remain subject to all the terms and conditions applicable to the Option prior to such transfer.  The foregoing right to transfer the Option shall apply to the right to consent to amendments to this Agreement and, in the discretion of the Board, shall also apply to the right to transfer ancillary rights associated with the Option.  The term “immediate family” shall mean the Employee’s spouse, parent, children, stepchildren, adoptive relationships, sisters, brothers and grandchildren (and, for this purpose, shall also include the Employee).

11.           Adjustment of Number of Shares.  In the event that a dividend shall be declared upon the Common Stock of the Corporation payable in shares of Common Stock of the Corporation or a stock split, the number of shares of Common Stock then subject to any such option and the number of shares reserved for issuance pursuant to the Plan but not yet covered by an Option shall be adjusted by adding to each share the number of shares which shall be distributed thereon if such shares had been outstanding on the date fixed for determining the stockholders entitled to receive such stock dividend or split.  For example, if an Option were granted for 1,000 shares at a $10.00 per share option price (a total price of $10,000), and subsequently there was a two for one stock split, then the holder of such option shall be entitled to purchase 2,000 shares of Common Stock at the price of $5.00 per share or an aggregate purchase price of $10,000.  In the event that the outstanding shares of the Common Stock of the Corporation shall be changed into or exchanged for a different class of shares of stock of the Corporation or of another Corporation, whether through reorganization, recapitalization, merger or acquisition, then there shall be substituted for each share of Common Stock subject to any such option and for each share of Common Stock reserved for issuance pursuant to the Plan, but not yet covered by an Option, the number and kind of shares of stock or other securities into which each outstanding share of Common Stock shall be so changed or for which such share shall be exchanged.  No adjustment or substitution provided for in this paragraph shall require the Corporation to sell a fractional share.

12.           Stock Certificates.  Upon exercise of the Option and payment of the exercise price, the Corporation shall deliver a certificate or certificates representing such Shares as soon as practicable after the notice shall be received; or (b) fix a date (not less than five (5) nor more than ten (10) business days from the date such notice shall be received by the Corporation) for the payment of the full purchase price of such Shares with the Secretary of the Corporation, against delivery of a certificate or certificates representing such shares.  The certificate or certificates for the Shares as to which the Option shall have been so exercised shall be registered in the name of the person or persons so exercising the Option (or, if the Option shall be exercised by the Employee and if the Employee shall so request in the notice exercising the Option, shall be registered in the name of the Employee and another person jointly, with right of survivorship) and shall be delivered upon the written order of the person or persons exercising the Option.  In the event the Option shall be exercised pursuant to Section 7 hereof by any person or persons other than the Employee, such notice shall be accompanied by appropriate proof of the right of such person or persons to exercise the Option.  All shares that shall be purchased upon the exercise of the Option as provided herein shall be fully paid and non-assessable.

13.           No Additional Rights.  Neither the Employee nor any other person entitled to exercise the Option under the terms hereof shall be, or have any of the rights or privileges of, a shareholder of the Corporation with respect to any of the Shares of Common Stock issuable upon exercise of the Option, unless and until the purchase price for such Shares shall have been paid in full.

14.           Cancellation or Modification of Agreement.  In the event that the Option shall be exercised in whole, this Agreement shall be surrendered to the Corporation for cancellation.  In the event the Option shall be exercised in part, or a change in the number or designation of the Common Stock shall be made, this Agreement shall be delivered to the Corporation for the purpose of making appropriate notation thereon or otherwise revising in such manner as the Corporation shall determine the partial exercise or change in the number of Shares or designation of the Shares of Common Stock.

15.           Reload Stock Options.  Subject to the terms and conditions within the Plan, the Board may at its discretion grant a reload stock option to the Employee to purchase that number of Shares delivered to the Corporation in partial or full payment of the exercise price of an Option; provided, however, (i) that any reload option is granted with an exercise price that reflects the current fair market value of such Shares; (ii) any reload stock option does not cause the Plan to lose its exemption under Rule 16b-3 of the Exchange Act, as may be amended from time to time; and (iii) any grant of a reload option does not cause the Employee to violate the provisions of Section 16(b) of the Exchange Act.

16.           Notices.  Every direction, revocation or notice authorized or required by the Plan shall be deemed delivered to the Corporation (i) on the date it is personally delivered to the Secretary of the Corporation at its principal executive offices or (ii) three business days after it is sent by registered or certified mail, postage prepaid, addressed to the Secretary at such offices, and shall be deemed delivered to an optionee (i) on the date it is personally delivered to him or (ii) three business days after it is sent by registered or certified mail, postage prepaid, addressed to him at the last address shown for him on the records of the Corporation.

17.           Investment Purpose.  The Option is granted on the express condition that the purchase of Shares upon an exercise hereof shall be made for investment purposes only and not with a view to their resale or further distribution unless such Shares, at the time of their issuance and delivery, are registered under the Securities Act of 1933, as amended, or, alternatively, at some time following such issuance their resale is determined by counsel for the Corporation to be exempt from the registration requirements of the Act and of any other applicable law, regulation or ruling.

18.           Tax Withholding.  The Corporation shall have the right to deduct from any payment or settlement upon the exercise of any stock option, or the delivery of any Shares, any federal, state, local or other taxes of any kind which the Board, in its sole discretion, deems necessary to be withheld to comply with the Internal Revenue Code and/or any other applicable law, rule or regulation.  If the Board, in its sole discretion, permits Shares of the Corporation’s Common Stock to be used to satisfy any such tax withholding, such Shares shall be valued based on the fair market value of such Shares as of the date the tax withholding is required to be made, as determined by the Board.

19.           General.  The Corporation shall at all times during the term of the Option reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of this Option Agreement, shall pay all original issue and transfer taxes with respect to the issue and transfer of shares pursuant hereto and all other fees and expenses necessarily incurred by the Corporation in connection therewith, and will from time to time use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Corporation,  shall be applicable thereto.  The Option shall be exercised in accordance with such administrative regulations as the Board shall from time to time adopt.

20.           Acceptance by Employee.  The exercise of the Option is conditioned upon the acceptance of Employee of the terms hereof as evidenced by his execution of this Option Agreement.

IN WITNESS WHEREOF, the Corporation has caused this Option Agreement to be duly executed by its officers thereunto duly authorized, and the Employee has hereunto set his hand and seal, all on the day and year first above written.

TECHNOLOGY RESEARCH CORPORATION

By:                                                                               

Name:                                                                          

                           Its:                                                                                

EMPLOYEE

                                                                                                        ____________________________________

EX-21

Exhibit 21

  Subsidiaries of Technology Research Corporation

The following companies are direct wholly owned subsidiaries of Technology Research Corporation:

	Name of Subsidiary	Jurisdiction of Incoporation
1.	Technology Research Corporation, Honduras S.A. de C.V	Honduras

EX-23

       Exhibit 23

  Consent of Independent Registered Public Accounting Firm

The Board of Directors

Technology Research Corporation:

We consent to incorporation by reference in the registration statement (No. 333-96975,

No. 333-110825, No. 333-131633 and No. 333-132006) of Form S-8 of Technology

Research Corporation of our report dated June 27, 2007, with respect to the consolidated

balance sheets of Technology Research Corporation and subsidiary as of March 31, 2007

and 2006, and the related consolidated statements of operations, stockholders' equity and

cash flows for each of the years in the three-year period ended March 31, 2007, and the

related financial statement schedule, which report appears in the March 31, 2007, annual

report on Form 10-K of Technology Research Corporation.

Our report dated June 27, 2007, contains an explanatory paragraph regarding the adoption

of Statement of Financial Accounting Standards No. 123(R), Share-Based Payment.

/s/  KPMG LLP

Tampa, Florida

June 27, 2007

Certified Public Accountants

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Owen Farren, certify that:

1.	I have reviewed this Annual Report on Form 10-K for the year ended March 31, 2007 of Technology Research Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
		a.	Designed such disclosure controls and procedures, or caused disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
		b.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
		c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
		d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
		a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
		b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

DATE:   June 29, 2007	/s/ Owen Farren
	Owen. Farren
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

EX-32.1

Exhibit 32.1

EX-32.2

Exhibit 32.2