TRANSCAT INC (Form: 10-K, Received: 06/20/2016 16:24:36)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________

FORM 10-K
___________________

(Mark one)
☑		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended: March 26, 2016
		or
☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________
Commission File Number: 000-03905

TRANSCAT, INC.
(Exact name of registrant as specified in its charter)

Ohio		16-0874418
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

35 Vantage Point Drive, Rochester, New York 14624
(Address of principal executive offices) (Zip Code)

(585) 352-7777
(Registrant’s telephone number, including area code)

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

Title of each class		Name of each exchange on which registered
Common Stock, $0.50 par value		The NASDAQ Global Market

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑

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 ☐ No ☑

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

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

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. ☐

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

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)		Smaller reporting company ☑

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on September 25, 2015 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $61 million. The market value calculation was determined using the closing sale price of the registrant’s common stock on September 25, 2015, as reported on The NASDAQ Global Market.

The number of shares of common stock of the registrant outstanding as of June 14, 2016 was 6,983,376.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement relating to the Annual Meeting of Shareholders to be held on September 7, 2016 have been incorporated by reference into Part III, Items 10, 11, 12, 13 and 14 of this report.

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TABLE OF CONTENTS

		Page(s)
Part I
Item 1.	Business	1-12
Item 1A.	Risk Factors	12-17
Item 1B.	Unresolved Staff Comments	17
Item 2.	Properties	18
Item 3.	Legal Proceedings	18
Item 4.	Mine Safety Disclosures	18

Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
	Purchases of Equity Securities	19
Item 6.	Selected Financial Data	19-20
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20-30
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	30
Item 8.	Financial Statements and Supplementary Data	31-53
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	54
Item 9A.	Controls and Procedures	54
Item 9B.	Other Information	54

Part III
Item 10.	Directors, Executive Officers and Corporate Governance	55
Item 11.	Executive Compensation	55
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related
	Stockholder Matters	55
Item 13.	Certain Relationships and Related Transactions, and Director Independence	55
Item 14.	Principal Accountant Fees and Services	55

Part IV
Item 15.	Exhibits and Financial Statement Schedules	56
Signatures		57
Index to Exhibits		58-60

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FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, estimates, beliefs, assumptions and predictions of future events and are identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “projects,” “intends,” “could,” “may,” “intend” and other similar words. Forward-looking statements are not statements of historical fact and thus are subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical results or those expressed in such forward-looking statements. You should evaluate forward-looking statements in light of important risk factors and uncertainties that may affect our operating and financial results and our ability to achieve our financial objectives. These factors include, but are not limited to, our reliance on one vendor to supply a significant amount of inventory purchases, the risks related to current and future indebtedness, the relatively low trading volume of our common stock, risks related to our acquisition strategy and the integration of the businesses we acquire, the impact of economic conditions, the highly competitive nature of our two business segments, foreign currency rate fluctuations and cybersecurity risks. These risk factors and uncertainties are more fully described by us under the heading “Risk Factors” in Item IA. of Part I of this report. You should not place undue reliance on our forward-looking statements. Except as required by law, we undertake no obligation to update or publicly announce any revisions to any of the forward-looking statements contained in this report, whether as a result of new information, future events or otherwise.

PART I

ITEM 1. BUSINESS

BUSINESS OVERVIEW

Transcat, Inc. (“Transcat”, the “Company”, “we” or “us”) is a leading provider of accredited calibration and laboratory instrument services and a value-added distributor of professional grade test, measurement and control instrumentation. We are focused on providing our services and products to highly regulated industries, particularly the life science industry, which includes pharmaceutical, biotechnology, medical device and other FDA-regulated businesses. Additional industries served include industrial manufacturing; energy and utilities, including oil and gas; chemical manufacturing; FAA-regulated business, including aerospace and defense and other industries that require accuracy in their processes, confirmation of the capabilities of their equipment and for which the risk of failure is very costly.

We conduct our business through two operating segments: service (“Service”) and distribution (“Distribution”). See Note 7 to our Consolidated Financial Statements in this report for financial information for these segments. We concentrate on attracting new customers in each segment and on cross-selling to existing customers to increase our total revenue. We serve approximately 17,000 and 21,000 customers through our Service and Distribution segments, respectively, with approximately 30% of those customers transacting with us through both of our business segments.

Through our Service segment, we offer calibration, repair, inspection, analytical qualifications, preventative maintenance and other related services, a majority of which are processed through our proprietary asset management system, CalTrak® (“CalTrak®”). As of our fiscal year ended March 26, 2016 (“fiscal year 2016”), we operated twenty calibration service centers (“Calibration Service Centers”) strategically located across the United States, Puerto Rico, and Canada. All of our Calibration Service Centers have obtained ISO/IEC 17025 scopes of accreditation, which are believed to be among the best in the industry. Our accreditations are the cornerstone of our quality program, which we believe is among the best in the industry. Our dedication to quality is highly valued by businesses that operate in the industries we serve, particularly those in life science and other FDA-regulated industries, and our accreditations provide our customers with confidence that they will receive a consistent and uniform service, regardless of which of our service centers completes the service.

Through our Distribution segment, we market, sell and rent national and proprietary brand instruments to customers globally. Our e-commerce-focused website and product catalog (the “Master Catalog”) offer access to more than 100,000 test, measurement and control instruments, including products from approximately 540 leading manufacturers. Most instruments we sell and rent require calibration service to ensure that they maintain the most precise measurements. By having the capability to calibrate these instruments at the time of sale and at regular post-sale intervals, we can give customers a value-added service that most of our competitors are unable to provide. Other value-added options we offer through our Distribution segment include equipment rentals for varied lengths of time and used equipment procurement, refurbishing and resale to meet various customer needs.

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Our commitment to quality goes beyond the services and products we deliver. Our sales, customer service and support teams stand ready to provide expert advice, application assistance and technical support to our customers. Since calibration is an intangible service, our customers rely on us to uphold high standards and trust in the integrity of our people and processes.

Our customers include leading manufacturers in the life science/pharmaceutical, defense and industrial process control sectors. We believe our customers do business with us because of our integrity and commitment to quality service, our broad range of product and service offerings and CalTrak®. In our fiscal year ended March 29, 2014 (“fiscal year 2014”) through fiscal year 2016, no customer or controlled group of customers accounted for 10% or more of our total revenue. The loss of any single customer would not have a material adverse effect on our business, cash flows, balance sheet, or results of operations.

Transcat was incorporated in Ohio in 1964. We are headquartered in Rochester, New York and employ more than 500 people. Our executive offices are located at 35 Vantage Point Drive, Rochester, New York 14624. Our telephone number is 585-352-7777. Our website is www.transcat.com .

OUR STRATEGY

Our two operating segments are highly complementary in that their offerings are of value to customers within the same industries. Our strategy is to leverage the complementary nature of our operating segments in ways that add value for all customers who select Transcat as their source for test and measurement equipment and/or calibration and laboratory instrument services. We strive to differentiate ourselves within the markets we serve and build barriers to competitive entry by offering a broad range of products and services and by integrating our product and service offerings in a value-added manner to benefit our customers’ operations.

Within the Service segment, our strategy is to drive organic growth through our unique value proposition which resonates strongly with customers who rely on accredited calibration services and/or laboratory instrument services and value superior quality to maintain the integrity of their processes and/or meet the demands of regulated business environments. We focus on customers who require precise measurement capability for their manufacturing and testing processes to minimize risk, waste and defects. We execute this strategy by leveraging our multiple locations, qualified technicians and breadth of capabilities. We differentiate ourselves from our competitors in this segment by offering a broad suite of services, maintaining internationally recognized third-party accredited quality systems and proprietary asset management software solutions and having one of the largest geographic footprints in North America with 20 Calibrated Service Centers.

Our Distribution segment strategy is to be the premier distributor of leading handheld test and measurement equipment. Through our vendor relationships we have access to more than 100,000 products, which we market to our existing and prospective customers both with and without value-added service options that are unique to Transcat. We continuously evaluate our offerings and add new in-demand vendors and products and have expanded the number of SKU’s that we stock and the number of SKU’s that are sold with pre-shipment calibrations. In recent years, we have increased our focus on digital marketing to capitalize on the growing B2B ecommerce trend. Our search engine optimization strategy includes the development of unique, industry-targeted content to capture relevant web traffic, and we continue to build our presence in online marketplaces. In addition to offering pre-shipment calibrations of new equipment purchases, we offer our customers the options of renting selected test and measurement equipment or buying used equipment, furthering our ability to answer all of our customers’ test and measurement equipment needs. We see these initiatives as important to the future of our Distribution segment, as we seek to diversify and stabilize this operating segment’s performance in the wake of negative macro-economic conditions, changes in customers’ online buying patterns and increased competition.

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As part of our growth strategy, we completed a number of business acquisitions during our fiscal years 2014 through 2016:

●	On August 31, 2014, we acquired Ulrich Metrology Inc. (“Ulrich”). Headquartered in Montreal, Quebec, Ulrich is a provider of accredited and commercial calibrations throughout Canada that specializes in providing custom metrology solutions for the aerospace and defense, industrial manufacturing and life science industries.
●	On March 6, 2015, we acquired substantially all of the assets of Apex Metrology Solutions (“Apex”). Apex is a provider of accredited and commercial calibrations, specializing in 3D metrology services, through its ISO 17025 accredited lab located in Ft. Wayne, Indiana.
●	On June 22, 2015, we acquired substantially all of the assets of Calibration Technologies, Inc. (“Calibration Technologies”, a regional provider of analytical instrument services including qualification, validation, repair and installation, headquartered in Morris Plains, New Jersey.
●	Effective August 24, 2015, we acquired Anmar Metrology, Inc. (“Anmar”), a calibration and repair service provider with significant focus on the life science and defense market, headquartered in San Diego, California.
●	On August 25, 2015, we acquired Nordcal Calibration Inc. (“Nordcal”), a provider of radio frequency and electronic calibration and repair services, located in Montreal, Quebec.
●	Effective December 31, 2015, we acquired substantially all of the assets of Spectrum Technologies, Inc. (“Spectrum”). Headquartered in Paxinos, Pennsylvania, Spectrum provides commercial calibrations, test equipment repair services and product sales throughout North America, primarily to companies in the life science and biomedical sectors.
●	Effective January 18, 2016, we acquired Dispersion Laboratory Inc. (“Dispersion”), headquartered near Montreal, Quebec, Dispersion provides fully accredited services for the calibration, repair and product sales of weights, balances, temperature instruments and liquid handling devices.

In addition, just subsequent to the end of our fiscal year 2016, we acquired substantially all the assets of Excalibur Engineering, Inc. (“Excalibur”), a California based provider of calibration services, new and used test equipment, and product rentals.

Our acquisition strategy primarily targets service businesses that expand our geographic reach and leverage our infrastructure while also increasing the depth and/or breadth of our service capabilities and expertise. The table below illustrates the strategical drivers for each of the acquisitions executed during our fiscal year 2014 through our fiscal year 2016:

	Geographic	Increased	Leveraged
	Expansion	Capabilities	Infrastructure
Ulrich	✓	✓	✓
Apex	✓	✓
Calibration Technologies		✓
Anmar	✓
Nordcal		✓	✓
Spectrum	✓	✓
Dispersion		✓

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We believe our combined Service and Distribution segment offerings, experience, technical expertise and integrity create a unique and compelling value proposition for our customers, and we intend to continue to grow our business through organic revenue growth and business acquisitions. We believe the attributes of our Service segment which include higher gross margins and a recurring revenue stream are more compelling than our legacy Distribution segment. For this reason, we expect our Service segment to be the primary source of revenue and earnings growth in future fiscal years. The chart below illustrates Service segment and Distribution segment revenue as a portion of overall revenue over the past five years:

SEGMENTS

Service Segment

Calibration

Calibration is the act of comparing a unit or instrument of unknown value to a standard of known value and reporting the result in some specifically defined form. After the calibration has been completed, a decision is made, based on rigorously defined parameters, regarding what, if anything, should be done to the unit to conform to the required standards or specifications. The decision may be to adjust, optimize or repair a unit; limit the use, range or rating of a unit; scrap the unit; or leave the unit as is. The purpose of calibration is to significantly reduce the risk of product or process failures caused by inaccurate measurements. In addition to being an element of risk management, calibration improves an operation’s productivity and efficiency to optimal levels by assuring accurate, reliable instruments and processes. Through our Service segment, we generally perform recurring periodic calibrations (typically ranging from three-month to twenty-four month intervals) on new and used instruments, as well as repair services for our customers.

We perform over 425,000 calibrations annually and can address approximately 90% of the items requested to be calibrated with our in-house capabilities. For customers’ calibration needs in less common and highly specialized disciplines, we have historically subcontracted to third-party vendors that have unique or proprietary capabilities. While typically representing approximately 15% of our Service segment revenue, we believe the management of these vendors is highly valued by our customers, and our relationships have enabled us to continue our pursuit of having the broadest calibration offerings in these targeted markets.

Laboratory Instrument Services

Our laboratory instrument services include analytical qualification, validation, remediation and preventative maintenance services. Our analytical qualification and validation services provide a comprehensive and highly specialized service offering focused on life science-related industries. Analytical qualifications and validation services include validations to specifically documented protocols that are commonly used in highly-regulated life science

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industries including installation qualification (IQ), operational qualification (OQ), and performance qualification (PQ). Most of the demand for our qualification, validation and preventative maintenance services comes from companies and institutions engaged in pharmaceutical manufacturing and research and development.

Our goal is to deliver specialized technical services with a quality assurance approach, which maximizes document accuracy and on-time job delivery. These industries demand knowledgeable contract services, and Transcat meets these demands with cGMP and GLP compliant services. Companies within these innovative and cutting-edge life science industries need a reliable alternative to the original equipment manufacturers (“OEMs”) and the “generalist” service providers who cannot meet their industry-specific needs. We believe our value proposition to the life science industries is unique as a result of offering a comprehensive suite of both traditional calibration and laboratory instrument and other analytical services.

Analytical qualifications and preventative maintenance services are typically based on service agreements for periodic service, and tend to generate recurring revenue. Some validation services are based on certain customer processes. While some validation services may not be repeated, we generally develop relationships with these customers that lead to demand for additional unique validation services. Remediation services are based on specific regulatory actions and are generally project-based and required by a customer for a finite period of time. Remediation revenue is not recurring by its nature.

Other Services

We provide other services to our customers such as three dimensional parts inspections, which are typically performed for customers engaged in medical device manufacturing and testing, and repair and consulting services, which appeal to a broad range of customers. These services allow us to provide “one-stop shopping” for our customers.

Regulation

Our Service segment provides periodic calibration and laboratory instrument services for our customers’ test and measurement instruments and other equipment. We specifically target industries and companies that are regulated by the FDA, FAA or other regulatory bodies and, as a result, require quality calibration and laboratory instrument services as a critical component of their business operations. As a result of the various levels of regulation within our target industries, calibration and laboratory instrument service sourcing decisions are generally made based on the provider’s quality systems, accreditation, reliability, trust, customer service and documentation of services. To maintain our competitive position in this segment, we maintain internationally recognized third-party accredited quality systems, further detailed in the section entitled “Quality” below, and provide our customers with access to proprietary asset management software solutions, which offer tools to manage their internal calibration programs and provide them with visibility to their service records.

Approach

Transcat’s calibration services strategy encompasses multiple ways to manage a customer’s calibration and laboratory instrument service needs:

We offer an “Integrated Calibration Services Solution” that provides a complete wrap-around service, which can be delivered in the following ways:

●	permanent on-site services: Transcat establishes and manages a calibration service program within a customer’s facility;
●	periodic on-site services: Transcat technicians travel to a customer’s location and provide bench-top or in-line calibration or laboratory services on predetermined service cycles;
●	in-house services: services are performed at one of our Calibration Service Centers (often accompanied by pick-up and delivery services); and
●	mobile calibration services: services completed on customer’s property within our mobile calibration unit.

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For companies that maintain an internal calibration operation, we can provide:

●	calibration of primary standards; and
●	overflow capability, either on-site or at one of our Calibration Service Centers, during periods of high demand.

Inclusive with all these services, we provide total program management including logistical, remediation and consultation services when needed.

We strive to provide the broadest accredited calibration offering to our targeted markets, which includes certification of our technicians pursuant to the American Society for Quality standards, complete calibration management encompassing the entire metrology function, and access to our complementary service and product offerings. We believe our calibration services are of the highest technical and quality levels, with broad ranges of accreditation.

Our laboratory instrument services strategy is to identify and establish long-term relationships with life science research and development and manufacturing customers who require analytical qualifications, validation, remediation and/or preventative maintenance services. In most cases, these customers are life science companies, including pharmaceutical and biotechnology companies engaged in research and development and manufacturing, which are subject to extensive government regulation. The services we provide to these regulated customers are typically a critical component of the customer’s overall compliance program. Because many laboratory instrument service customers operate in regulated industries, these same customers typically also require accredited calibration services. This requirement allows a natural synergy between our laboratory instrument and calibration services. Our strategy includes cross-selling our services within our customer accounts to maximize our revenue opportunities with each customer.

CalTrak®

CalTrak® is our proprietary documentation and asset management software which is used to manage both the workflow of our Calibration Service Centers and our customers’ assets. With CalTrak®, we are able to provide our customers with timely and consistent calibration service while optimizing our own efficiencies. CalTrak® has been validated to U.S. federal regulations 21 CFR Part 820.75 and 21 CFR Part 11, as applicable. This validation is important to pharmaceutical and other FDA-regulated industries where federal regulations can be particularly stringent.

Additionally, CalTrak® Online provides our customers with web-based asset management capability and a safe and secure off-site archive of calibration and other service records that can be accessed 24 hours a day through our secure password-protected website. Through CalTrak® and CalTrak® Online, each customer calibration is tracked and automatically cross-referenced to the assets used to perform the calibration, providing traceability.

Our newly developed web-based customer portal and asset management tool (“C3™”) is scheduled to replace CalTrak® Online in fiscal year 2017. C3™ stands for Compliance, Control and Cost and at Transcat we see these as the major areas of focus for our clients within the regulatory environment as it relates to instrument calibration. We specifically designed C3™ to assist our valued clients in driving compliance to quality systems, enhancing control of instrumentation while driving overall metrology cost down. Understanding the unique environments that our clients operate within, we customized the platform to allow for single system of record utilization via capabilities that allow clients to track instruments maintained internally in addition to instruments supported by Transcat. C3™ is validated to 21 CFR Part 820.75 and 21 CFR Part 11 to meet stringent FDA requirements.

Marketing and Sales

Under our integrated sales model, we have both inside and outside sales teams that seek to acquire new customers in our targeted markets by leveraging our unique value proposition, including our broad geographic footprint and comprehensive suite of services. We target regulated, enterprise customers with multiple manufacturing operations throughout North America. We leverage our ability to manage the complete life cycle of instrumentation from purchase of calibrated equipment to long-term service and maintenance requirements. Connecting all the dots by using new and used product sales, rentals, and repair and calibration services is the aim of our marketing and sales initiatives. We also have a team of account managers, focused on servicing the needs of our existing customers. We utilize print media, trade shows and web-based initiatives to market our services to customers and prospective customers with a strategic focus in the highly regulated industries including life science and other FDA-regulated industries, aerospace and defense, energy and utilities, and chemical manufacturing. We also target industrial manufacturing and other

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industries that appreciate the value of quality calibrations. Our quality process and standards are designed to meet the needs of companies that must address regulatory requirements and/or have a strong commitment to quality and a comprehensive calibration and compliance program.

The approximate percentage of our Service revenue by industry type for the periods indicated are as follows:

	FY 2016			FY 2015			FY 2014
Life Science/FDA-regulated		39	%		32	%		34	%
Industrial Manufacturing		24	%		29	%		28	%
Energy/Utilities		7	%		8	%		8	%
Chemical Manufacturing		6	%		7	%		7	%
Other		24	%		24	%		23	%
Total		100	%		100	%		100	%

Competition

The calibration services industry is highly fragmented and is composed of companies ranging from internationally recognized and accredited corporations, such as Transcat, to non-accredited, sole proprietors as well as companies that perform their own calibrations in-house, resulting in a tremendous range of service levels and capabilities. A large percentage of calibration companies are small businesses that generally do not have a range of capabilities as broad as ours. There are also several companies with whom we compete that have national or regional operations. We differentiate ourselves from our competitors by demonstrating our commitment to quality, offering a broad suite of services, having a wide range of capabilities that are tailored to the markets we serve, and having a geographical footprint that spans North America. Customers see the value in using our unique CalTrak® Online and C3™ asset and data management programs to monitor their instrument’s status, history and performance data. We believe we are fundamentally different from most of our competitors, because we have the ability to bundle product, calibration, laboratory instrument and other services in a value-added manner, allowing our customers to utilize a single source.

Competition for laboratory instrument services is composed of both small local and regional service providers and large multi-national OEMs. We believe we are generally financially stronger, service a larger customer base and are typically able to offer a larger suite of services than many of the small local and regional competitors. The large OEMs may offer specialized services and brand-specific expertise which we do not offer, but they are generally focused on providing specialized services only for their proprietary brands and product lines, rather than servicing an array of brands and product lines as we do. We believe our competitive advantages in the laboratory instrument services market are our financial and technical resources, turnaround time, and flexibility to react quickly to customers’ needs. The breadth of our suite of laboratory instrument service, combined with our calibration service offerings, also differentiates us from our competitors by allowing us to be our customers’ one-source accredited provider for their entire calibration and compliance programs.

Quality

The accreditation process is the only system currently in existence that validates measurement competence. To ensure that the quality and consistency of our customer calibrations are consistent with the global metrology network, designed to standardize measurements worldwide, we have sought and achieved international levels of quality and accreditation. Our Calibration Service Centers are accredited to ISO/IEC 17025:2005 by National Voluntary Laboratory Accreditation Program (“NVLAP”) and other accrediting bodies. These accrediting bodies are signatories to the International Laboratory Accreditation Cooperation (“ILAC”), are proficient in the technical aspects of the chemistry and physics that underlie metrology, and provide an objective, third-party, internationally accepted evaluation of the quality, consistency, and competency of our calibration processes. Accreditation also requires that all measurement standards used for accredited measurements have a fully documented path, known as Metrological Traceability, through the National Institute of Standards and Technology or the National Research Council (these are the National Measurement Institutes for the United States and Canada, respectively), or to other national or international standards bodies, or to measurable conditions created in our Calibration Service Center, or accepted fundamental and/or natural physical constants, ratio type of calibration, or by comparison to consensus standards, all inclusive of measurement uncertainties. Acquired calibration labs might use other quality registration systems. We continually evaluate when to integrate acquired quality systems with the focus on minimizing business disruptions and disruptions to our customers.

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The importance of this international oversight to our customers is the assurance that our service documentation will be accepted worldwide, removing one of the barriers to trade that they may experience if using a non-ILAC traceable calibration service provider. To provide the widest range of services to our customers in our target markets, our ISO/IEC 17025:2005 accreditations extend across many technical disciplines, including working-level and reference-level capabilities. We believe our scope of accreditation to ISO/IEC 17025:2005 to be the broadest for the industries we serve.

Our scopes of accreditation can be found at http://www.transcat.com/calibration-services/accreditation/calibration-lab-certificates .

Distribution Segment

Summary

Our customers use test and measurement instruments to ensure that their processes, and ultimately their end products, are within specification. Utilization of such diagnostic instrumentation also allows for continuous improvement processes to be in place, increasing the accuracies of their measurements. The industrial test and measurement instrumentation market, in those geographic areas where we predominately operate, has historically been serviced by broad-based national equipment distributors and niche or specialty-focused organizations such as Transcat. We offer value-added services such as calibration/certification of equipment purchases, equipment rentals, used equipment for sale, and equipment kitting. In recent years, online-based distributors have become more prevalent. To more effectively compete with these online-based distributors, we have continued to make improvements to our website, and have added enhanced e-commerce capabilities.

Most industrial customers find that maintaining an in-house inventory of back-up test and measurement instruments is cost prohibitive. As a result, the distribution of test and measurement instrumentation has traditionally been characterized by frequent, small-quantity orders combined with a need for rapid, reliable, and complete order fulfillment. The majority of the products we distribute are not consumables, but are purchased as replacements, upgrades, or for expansion of manufacturing and research and development facilities. As a result, we evaluate Distribution sales trends over a twelve-month period, as any individual month’s or quarter’s sales can be impacted by numerous factors, many of which are unpredictable and potentially non-recurring.

We believe that a customer chooses a distributor based on a number of different criteria, including the timely delivery and accuracy of orders, consistent product quality, the technical competence of the representative serving them, value-added services, and price. The decision to buy is generally made by plant engineers, quality managers, or their purchasing personnel, and products are typically obtained from one or more distributors. Our on-line presence including our website and e-newsletters, Master Catalog, supplemental mailings, and other sales and marketing activities are designed to create demand and maintain a constant presence in front of our customers to ensure we receive the order when they are ready to purchase.

We provide our customers with value-added services including technical support, to ensure our customers receive the right product for their specific need, and the option to have calibration service performed on their new product purchases prior to shipment. We also offer online procurement, same day shipment of in-stock items, kitted products, the option to rent, training programs and a variety of custom product offerings. Items are regularly added to and deleted from our product offerings on the basis of customer demand, recommendations of suppliers, sales volumes and other factors. Because of the breadth of our product and service offerings, we are often a “one-stop shop” for our customers who gain operational efficiency by dealing with just one distributor for most or all of their test and measurement instrumentation needs.

Over the last several fiscal quarters, we have experienced a gradual decline in sales in our Distribution segment. We have attributed this decline to continued competitive pressures as well as the recessionary conditions experienced in U.S. industrial output in general and in the oil and gas industry in particular. To mitigate the impact of competition and recessionary market conditions, we have expanded our sales offerings of calibrated new equipment and forayed into the equipment rental and used equipment sales markets organically and acquisitively, through the acquisition of Excalibur. We will continue to use these and other efforts to bolster sales in the Distribution segment in an effort to stabilize the recent unpredictability and uncertainty of the Distribution segment.

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Marketing and Sales

We market, create demand and sell to our customers through multiple sales channels consisting of direct marketing, our website, web-based advertising, proactive outbound sales and an inbound call center. Our outbound and inbound sales teams are staffed with technically trained personnel who are available to help guide product selection. Customers may also purchase products through our website at www.transcat.com . Our website serves as a sales channel for our products and services, and provides search capability, detailed product information, in-stock availability, selection guides, demo videos and downloadable product specification sheets. We have made investments in our website to implement the latest marketing technologies which allow us to provide an intuitive customer experience, with simple product comparison and quoting, ease at checkout and automated post-order follow-up.

Through our Master Catalog, periodic supplemental catalogs, website, e-newsletters, and other direct sales and marketing programs, we offer our customers a broad selection of highly recognized branded products at competitive prices. The instruments typically range in price from $100 to over $25,000.

During fiscal year 2016, we circulated over 1.1 million pieces of direct marketing materials including catalogs, brochures, supplements and other promotional materials. We also disseminated approximately 7.5 million e-newsletters to our existing and prospective customers. Some of the key factors that determine the number of catalogs and other direct marketing materials sent to each customer include relevancy of new product introductions, the customer’s market segments and purchase history.

As a result of strong relationships with our product vendors and our historical performance of effectively marketing, we have the opportunity to carry out co-branded marketing initiatives, aimed at our existing customers and our prospective customer base, for which we receive cooperative advertising support. These co-branded marketing initiatives typically feature specific vendors, new products or targeted product categories and take the form of direct mailers, web-based initiatives or outbound sales efforts.

The acquisition of Excalibur in April 2016 brings us a network of experienced independent sales representatives who are currently focused on selling new and used equipment and equipment rentals, but who also will have the ability to sell our comprehensive suite of calibration services.

Competition

The distribution market for industrial test and measurement instrumentation is fragmented and highly competitive. Our competitors range from large national distributors and manufacturers that sell directly to customers to small local distributors. In addition, web-based distributors have become more prevalent in recent years and are increasing their market share. Key competitive factors typically include customer service and support, quality, lead time, inventory availability, brand recognition and price. To address our customers’ needs for technical support and product application assistance, and to differentiate ourselves from competitors, we employ a staff of highly trained technical sales specialists. In order to maintain this competitive advantage, technical training is an integral part of developing our sales staff.

Recently online competitors have emerged as a significant source of competition in the marketplace for some of the test and measurement instruments we sell. While online competitors lack the value-added services we offer in our Distribution segment, they have been successful in capturing some market share in the worldwide market for test and measurement instruments. To stay ahead of growing competition from these online distributors and the general trend of increased use of e-commerce, we continue to make improvements to our website design and functionality. Improvements made to our website are focused around enhancing customer experience through ease of use, better browsing and search functions, increased relevant and unique content as well as recommendations for complementary products and services.

Suppliers and Purchasing

We believe that effective purchasing is a key element to maintaining and enhancing our position as a provider of high quality test and measurement instruments. We frequently evaluate our purchase requirements and suppliers’ offerings to obtain products at the best possible cost. We obtain our products from approximately 425 suppliers of brand name and private-labeled equipment. In fiscal year 2016, our top 10 vendors accounted for approximately 61% of our aggregate Distribution business. Approximately one-third of our product purchases on an annual basis are from Fluke Electronics Corporation (“Fluke”), which we believe to be consistent with Fluke’s share of the markets we serve.

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We plan our product mix and inventory stock to best serve the anticipated needs of our customers, whose individual purchases vary in size. We can usually ship our top selling products to our customers the same day they are ordered.

Vendor Rebates

We have agreements with certain product vendors that provide for rebates based on meeting a specified cumulative level of purchases and/or incremental distribution sales. These rebates are recorded as a reduction of cost of distribution sales. Purchase rebates are calculated and recorded quarterly based upon our volume of purchases with specific vendors during the quarter. Point of sale rebate programs that are based on year-over-year sales performance on a calendar year basis are recorded as earned, on a quarterly basis, based upon the estimated level of annual achievement. Point of sale rebate programs that are based on year-over-year sales performance on a quarterly basis are recorded as earned in the respective quarter.

Operations

Our distribution operations primarily take place within our 37,250 square-foot facility in Rochester, New York and a 12,600 square-foot facility in Portland, Oregon. The Rochester location also serves as our corporate headquarters, houses our customer service, sales and administrative functions, and is a Calibration Service Center. The Portland location also is a Calibration Service Center. In fiscal year 2016, we shipped approximately 31,000 product orders, in the aggregate, from both locations. We also have two smaller warehouse facilities in Wisconsin that fulfill orders for certain large industrial scales.

Distribution

We distribute our products throughout North America and internationally. We maintain appropriate inventory levels in order to satisfy anticipated customer demand for prompt delivery and complete order fulfillment of their product needs. These inventory levels are managed on a daily basis with the aid of our sophisticated purchasing and stock management information system. Our systems facilitate prompt and accurate order fulfillment and freight manifesting.

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CUSTOMER SERVICE AND SUPPORT

Key elements of our customer service approach are our field sales team, outbound sales team, account management team, inbound sales and customer service organization. To ensure the quality of service provided, we frequently monitor our customer service through customer surveys, call monitoring and daily statistical reports.

Customers may place orders via:

●	Mail to Transcat, Inc., 35 Vantage Point Drive, Rochester, NY 14624;
●	Fax at 1-800-395-0543;
●	Telephone at 1-800-828-1470;
●	Email at sales@transcat.com ; or
●	Online at transcat.com .

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INFORMATION REGARDING EXPORT SALES

In fiscal years 2014 through 2016, approximately 10% of our total revenue resulted from sales to customers outside the United States. Of those export sales in fiscal year 2016, approximately 14% were denominated in U.S. dollars and the remaining 86% were in Canadian dollars. Our revenue is subject to the customary risks of operating in an international environment, including the potential imposition of trade or foreign exchange restrictions, tariff and other tax increases, fluctuations in exchange rates and unstable political situations, any one or more of which could have a material adverse effect on our business, cash flows, balance sheet or results of operations. See “Foreign Currency” in Item 7A. of Part II and Note 7 to our Consolidated Financial Statements in this report for further details.

INFORMATION SYSTEMS

We utilize a turnkey enterprise software solution from Infor, Inc. (“Infor”) called Application Plus to manage our business and operations segments. This software includes a suite of fully integrated modules to manage our business functions, including customer service, warehouse management, inventory management, financial management, customer relations management and business intelligence. This solution is a fully mature business package and has been subject to more than 20 years of refinement. We utilize customer relationship management (“CRM”) software offered by SalesForce.com, Inc., which is strategically partnered with Infor, allowing us to fully integrate the CRM software with our Infor enterprise software.

We also utilize CalTrak®, our proprietary document and asset management system, to manage documentation, workflow and customers’ assets within and amongst most of our Calibration Service Centers. In addition to functioning as an internal documentation, workflow, and asset management system, CalTrak®, through CalTrak® Online and C3™, provides customers with web-based calibration cycle management service and access to documentation relating to services completed by Transcat. Certain recent acquisitions utilize either third-party or their own proprietary calibration management systems. We continually evaluate when to integrate these acquired systems with a focus on obtaining operational synergies while imposing minimal disruption to customers.

INTELLECTUAL PROPERTY

We have federally registered trademarks for Transcat® and CalTrak®, which we consider to be of material importance to our business. The registrations for these trademarks encompass multiple classes, and the registrations are in good standing with the U.S. Patent & Trademark Office. Our CalTrak® trademark is also registered in Canada for one class with the Canada Intellectual Property Office. Our trademark registrations must be renewed at various times, and we intend to renew our trademarks, as necessary, for the foreseeable future.

In addition, we own www.transcat.com and www.transcat.ca . As with phone numbers, we do not have and cannot acquire any property rights to an Internet address. The regulation of domain names in the United States and in other countries is also subject to change. Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we might not be able to maintain our domain names or obtain comparable domain names, which could harm our business.

SEASONALITY

Our business has certain historical seasonal factors. Historically, our fiscal third and fourth quarters have been stronger than our fiscal first and second quarters due to operating cycles of our industrial sector customers.

ENVIRONMENTAL MATTERS

We believe that we are in compliance with federal, state, or local provisions relating to the protection of the environment, and that continued compliance will not have any material effect on our capital expenditures, earnings, or competitive position.

EMPLOYEES

At the end of fiscal year 2016, we had 537 employees, including 11 part-time employees, compared with 443 employees, including 16 part-time employees, at the end of fiscal year 2015.

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MANAGEMENT TEAM

The following table presents certain information regarding our management team, including our executive officers and certain key employees as of March 26, 2016:

Name	Age	Position
Lee D. Rudow	51	President and Chief Executive Officer
		Senior Vice President of Finance and Chief Financial Officer
John J. Zimmer	57	(retired effective March 27, 2016)
		Vice President of Finance (Chief Financial Officer effective
Michael J. Tschiderer	56	March 27, 2016)
Jennifer J. Nelson	45	Vice President of Human Resources
Michael W. West	45	Vice President of Inside Sales and Marketing
Scott D. Sutter	45	Vice President of Business Development
Robert A. Flack	46	Vice President of Operations
Scott D. Deverell	50	Corporate Controller and Principal Accounting Officer

AVAILABLE INFORMATION

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and, therefore, we file periodic reports, proxy statements and other information with the United States Securities and Exchange Commission (“SEC”). Such reports may be read and copied at the Public Reference Room of the SEC at 100 F Street NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at (800) SEC-0330. Additionally, the SEC maintains a website (sec.gov) that contains reports, proxy statements and other information for registrants that file electronically.

We maintain a website at transcat.com . We make available, free of charge, in the Investor Relations section of our website, documents we file with or furnish to the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports. We make this information available as soon as reasonably practicable after we electronically file such materials with, or furnish such information to, the SEC. The other information found on our website is not part of this or any other report we file with, or furnish to, the SEC.

We also post on our website our board of directors’ committee charters (audit committee, compensation committee and corporate governance and nominating committee) and Code of Ethics. Copies of such documents are available in print at no charge to any shareholder who makes a request. Such requests should be made to our corporate secretary at our corporate headquarters, 35 Vantage Point Drive, Rochester, New York 14624.

ITEM 1A. RISK FACTORS

You should consider carefully the following risks and all other information included in this report. The risks and uncertainties described below and elsewhere in this report are not the only ones facing our business. If any of the following risks were to actually occur, our business, financial condition or results of operations would likely suffer. In that case, the trading price of our common stock could fall and you could lose all or part of your investment.

We depend on manufacturers to supply inventory to our Distribution segment and rely on one vendor to supply a significant amount of our inventory purchases. If our vendor fails to provide desired products to us, increases prices, or fails to timely deliver products, our revenue and gross profit could suffer. A significant amount of our inventory purchases are made from one vendor, Fluke. Our reliance on this vendor leaves us vulnerable to having an inadequate supply of required products, price increases, late deliveries, and poor product quality. Like other distributors in our industry, we occasionally experience supplier shortages and are unable to purchase our desired volume of products. If we are unable to enter into and maintain satisfactory distribution arrangements with leading manufacturers, if we are unable to maintain an adequate supply of products, or if manufacturers do not regularly invest in, introduce to us, and/or make new products available to us for distribution, our Distribution segment sales could suffer considerably. Finally, we cannot provide any assurance that particular products, or product lines, will be available to us, or available in quantities sufficient to meet customer demand. This is of particular significance to our Distribution segment business because the products we sell are often only available from one source. Any limits to product access could materially and adversely affect our Distribution segment business.

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Volatility in the oil and gas industry has and could continue to negatively impact our operating results. A portion of our products and services customer base is directly or indirectly related to the oil and gas industry. As a result, demand for some of our products is dependent on the level of expenditures by the oil and gas industry. In addition to the more significant impact on our Distribution segment, an extended downturn in the oil and gas industry or continued volatility in oil and gas prices could impact customers’ demand for some of our services (generally excluding life sciences, our largest industry customer sector), which could have a material adverse effect on our financial condition, results of operations and cash flows.

Our future success may be affected by our current and future indebtedness. Under our revolving credit facility, as of March 26, 2016, we owed $19.1 million to our secured creditor, a commercial bank. We borrowed $10.0 million on April 1, 2016 via a term loan to fund the acquisition of Excalibur and provide us additional working capital. We may borrow additional funds in the future to support our growth and working capital needs. We are required to meet financial tests on a quarterly basis and comply with other covenants customary in secured financings. Although we believe that we will continue to comply with such covenants, if we do not remain in compliance with such covenants, our lender may demand immediate repayment of amounts outstanding. Changes in interest rates may have a significant effect on our payment obligations and operating results. Furthermore, we are dependent on credit from manufacturers of our products to fund our inventory purchases. If our debt burden increases to high levels, such manufacturers may restrict our credit. Our cash requirements will depend on numerous factors, including the rate of growth of our revenues, the timing and levels of products purchased, payment terms, and credit limits from manufacturers, the timing and level of our accounts receivable collections and our ability to manage our business profitably. Our ability to satisfy our existing obligations, whether or not under our secured credit facility, will depend upon our future operating performance, which may be impacted by prevailing economic conditions and financial, business, and other factors described in this report, many of which are beyond our control.

The relatively low trading volume of our common stock may limit your ability to sell your shares. Although our shares of common stock are listed on The NASDAQ Global Market, we have historically experienced a relatively low trading volume. If our low trading volume continues in the future, holders of our shares may have difficulty selling shares of our common stock in the manner or at a price that they desire.

If significant existing shareholders sell large numbers of shares of our common stock, our stock price could decline. The market price of our common stock could decline if a large number of our shares are sold in the public market by our existing shareholders or holders of stock options or as a result of the perception that these sales could occur. Due to the low trading volume of our common stock, the sale of a large number of shares of our common stock may significantly depress the price of our common stock.

We expect that our quarterly results of operations will fluctuate. Such fluctuation could cause our stock price to decline. A large portion of our expenses for our Service segment, including expenses for facilities, equipment and personnel are relatively fixed. Accordingly, if revenues decline or do not grow as we anticipate, we may not be able to correspondingly reduce our operating expenses in any particular quarter. Our quarterly revenues and operating results have fluctuated in the past and are likely to do so in the future. Historically, our fiscal third and fourth quarters have been stronger than our fiscal first and second quarters due to industrial operating cycles. Fluctuations in industrial demand for products we sell and services we provide could cause our revenues and operating results to fluctuate. If our operating results in some quarters fail to meet the expectations of stock market analysts and investors, our stock price may decline.

Our stock price may be volatile. The stock market, from time to time, has experienced significant price and volume fluctuations that are both related and unrelated to the operating performance of companies. Our stock may be affected by market volatility and by our own performance. The following factors, among others, may have a significant effect on the market price of our common stock:

●	Developments in our relationships with current or future manufacturers of products we distribute;
●	Announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
●	Litigation or governmental proceedings or announcements involving us or our industry;

●	Economic and other external factors, such as disasters or other crises;
●	Sales of our common stock or other securities in the open market;

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●	Repurchases of our common stock on the open market or in privately-negotiated transactions;
●	Period-to-period fluctuations in our operating results; and
●	Our ability to satisfy our debt obligations.

Our business acquisitions or future business acquisition efforts, which are important to our growth, may not be successful, which may limit our growth or adversely affect our results of operations and financial condition. Business acquisitions have been an important part of our growth to date. As part of our business strategy, we may make additional acquisitions of companies that could complement or expand our business, augment our market coverage, provide us with important relationships or otherwise offer us growth opportunities. If we identify an appropriate acquisition candidate, we may not be able to successfully negotiate terms or finance the acquisition. If we fail to successfully acquire businesses, our growth and results of operations could be adversely affected.

We may not successfully integrate business acquisitions. During fiscal year 2016 we acquired five businesses and completed a sixth acquisition just after the end of fiscal year 2016. If we fail to accurately assess and successfully integrate any recent or future business acquisitions, we may not achieve the anticipated benefits, which could result in lower revenues, unanticipated operating expenses, reduced profitability and dilution of our book value per share. Successful integration involves many challenges, including:

●	The difficulty of integrating acquired operations and personnel with our existing operations;
●	The difficulty of developing and marketing new products and services;
●	The diversion of our management’s attention as a result of evaluating, negotiating and integrating acquisitions;

●	Our exposure to unforeseen liabilities of acquired companies; and
●	The loss of key employees of an acquired operation.

In addition, an acquisition could adversely impact cash flows and/or operating results, and dilute shareholder interests, for many reasons, including:

●	Charges to our income to reflect the impairment of acquired intangible assets, including goodwill;
●	Interest costs and debt service requirements for any debt incurred in connection with an acquisition or new business venture; and
●	Any issuance of securities in connection with an acquisition or new business venture that dilutes or lessens the rights of our current shareholders.

If the integration of any or all of our acquisitions or future acquisitions is not successful, it could have a material adverse impact on our operating results and stock price.

Any impairment of goodwill or other intangible assets could negatively impact our results of operations. Our goodwill and other intangible assets are subject to an impairment test on an annual basis and are also tested whenever events and circumstances indicate that goodwill and/or intangible assets may be impaired. Any excess goodwill and/or indefinite-lived intangible assets value resulting from the impairment test must be written off in the period of determination. Intangible assets (other than goodwill and indefinite-lived intangible assets) are generally amortized over the useful life of such assets. In addition, from time to time, we may acquire or make an investment in a business that will require us to record goodwill based on the purchase price and the value of the acquired tangible and intangible assets. We may subsequently experience unforeseen issues with the businesses we acquire, which may adversely affect the anticipated returns of the business or value of the intangible assets and trigger an evaluation of the recoverability of the recorded goodwill and intangible assets for such business. Future determinations of significant write-offs of goodwill or intangible assets because of an impairment test or any accelerated amortization of other intangible assets could have a material negative impact on our results of operations and financial condition. We have completed our annual impairment analysis for goodwill and indefinite-lived intangible assets, in accordance with the applicable accounting guidance, and have concluded that we do not have any impairment of goodwill or other intangible assets as of March 26, 2016.

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The financing of any future acquisitions we might make may result in dilution to your stock ownership and/or could increase our leverage and our risk of defaulting on our bank debt. Our business strategy includes expansion into new markets and enhancement of our position in existing markets, including through acquisitions. In order to successfully complete targeted acquisitions, we may issue additional equity securities that could dilute your stock ownership. We may also incur additional debt if we acquire another company, which could significantly increase our leverage and our risk of default under our existing credit facility.

Adverse changes in general economic conditions or uncertainty about future economic conditions could adversely affect us. We are subject to the risks arising from adverse changes in general economic market conditions. Uncertainty about future economic conditions could negatively affect our current and prospective customers causing them to delay the purchase of necessary services or test and measurement instruments. Poor economic conditions could harm our business, financial condition, operating results and cash flow.

The industries in which we compete are highly competitive, and we may not be able to compete successfully. Within our Service segment, we provide calibration services and compete in an industry that is highly fragmented and is composed of companies ranging from internationally recognized and accredited corporations to non-accredited, sole proprietors, resulting in a tremendous range of service levels and capabilities. Also, within our Service segment, we provide compliance services and compete in an industry that is composed of both small local and regional service providers and large multi-national companies who are also OEMs. Within our Service segment, some of our larger competitors may have broader service capabilities and may have greater name recognition than us. Some manufacturers of the products we sell may also offer calibration and compliance services for their products.

Within our Distribution segment, we compete with numerous companies, including several major manufacturers and distributors. Most of our products are available from several sources and our customers tend to have relationships with several distributors. Competitors in the product distribution industry could also obtain exclusive rights to market particular products, which we would then be unable to market. Manufacturers could also increase their efforts to sell directly to end-users and bypass distributors like us. Industry consolidation among distributors, the unavailability of products, whether due to our inability to gain access to products or interruptions in supply from manufacturers, or the emergence of new competitors could also increase competition and adversely affect our business or results of operations.

In each of the industries in which we compete, some of our competitors have greater financial and other resources than we do, which could allow them to compete more successfully. In the future, we may be unable to compete successfully and competitive pressures may reduce our sales.

Our Service segment has a high concentration of customers in the life science and other FDA-regulated and industrial manufacturing industries. A large number of our Service segment customers operate in the pharmaceutical and other FDA-regulated or industrial manufacturing industries. This concentration of our customer base affects our overall risk profile, since a significant portion of our customers will be similarly affected by changes in economic, political, regulatory, and other industry conditions. We anticipate that our Service segment will continue to grow and comprise a greater percentage of our total revenue, which could increase our exposure to fluctuations in the life science and other FDA-regulated or industrial manufacturing industries. An abrupt or unforeseen change in conditions in these industries could adversely affect customer demand for our services, which could have a material adverse effect on our financial results.

Competition in our Distribution segment is changing with an increase in web-based distributors. We may not be able to compete successfully. We face substantial and increased competition throughout the world, especially in our Distribution segment where, over the last several fiscal quarters, we have experienced a gradual decline in sales. The competition is changing, with web-based distributors becoming more prevalent and increasing their market share. Some of our competitors are much larger than us. Changes in the competitive landscape pose new challenges that could adversely affect our ability to compete. Entry or expansion of other vendors into this market may establish competitors that have larger customer bases and substantially greater financial and other resources with which to pursue marketing and distribution of products. Their current customer base and relationships, as well as their relationships and ability to negotiate with manufacturers, may also provide them with a competitive advantage. If we are unable to effectively compete with our current and future competitors, our ability to sell products could be harmed and could result in a negative impact on our Distribution segment. Any erosion of our competitive position could have a material adverse effect on our business, results of operations, and financial condition.

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Our enterprise resource planning system is aging and we may experience issues from any implementation of a new enterprise resource planning system. We have an enterprise resource planning system (“ERP” or “Application Plus”) to assist with the collection, storage, management and interpretation of data from our business activities to support future growth and to integrate significant processes. Although we use current versions of software and have support agreements in place, due to the age of our ERP, we anticipate that a new ERP will be required to be implemented in the future. ERP implementations are complex and time-consuming and involve substantial expenditures on system software and implementation activities, as well as changes in business processes. Our ERP system is critical to our ability to accurately maintain books and records, record transactions, provide important information to our management and prepare our consolidated financial statements. ERP implementations also require the transformation of business and financial processes in order to reap the benefits of the ERP system; any such transformation involves risks inherent in the conversion to a new computer system, including loss of information and potential disruption to our normal operations. Any disruptions, delays or deficiencies in the design and implementation of a new ERP system could adversely affect our ability to process orders, provide services and customer support, send invoices and track payments, fulfill contractual obligations or otherwise operate our business. Additionally, if the ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess it adequately could be delayed.

We rely on our CalTrak® , Application Plus (our ERP) and other management information systems for inventory management, distribution, workflow, accounting and other functions. If our CalTrak® , Application Plus and other management information systems fail to adequately perform these functions, experience an interruption in their operation or a security breach, our business and results of operations could be adversely affected. The efficient operation of our business depends on our management information systems. We rely on our CalTrak®, Application Plus and other management information systems to effectively manage accounting and financial functions, customer service, warehouse management, order entry, order fulfillment, inventory replenishment, documentation, asset management, and workflow. Our management information systems are vulnerable to damage or interruption from computer viruses or hackers, natural or man-made disasters, vandalism, terrorist attacks, power loss, or other computer systems, internet, telecommunications or data network failures. Any such interruptions to our management information systems could disrupt our business and could result in decreased revenues, increased overhead costs, excess inventory and product shortages, causing our business and results of operations to suffer. In addition, our management information systems are vulnerable to security breaches. Our security measures or those of our third-party service providers may fail to detect or prevent such security breaches. Security breaches could result in the unauthorized publication of our confidential business or proprietary information, the unauthorized release of customer, vendor, or employee data and payment information, the violation of privacy or other laws, and the exposure to litigation, any of which could harm our business and results of operations.

If we fail to adapt our technology to meet customer needs and preferences, the demand for our products and services may diminish. Our future success will depend on our ability to develop services and solutions that keep pace with technological change, evolving industry standards and changing customer preferences in the markets we serve. We cannot be sure that we will be successful in adapting existing or developing new technology or services in a timely or cost-effective manner or that the solutions we do develop will be successful in the marketplace. Our failure to keep pace with changes in technology, industry standards and customer preferences in the markets we serve could diminish our ability to retain and attract customers and our competitive position, which could adversely impact our business and results of operations.

We face risks associated with foreign currency rate fluctuations. We currently transact a portion of our business in foreign currencies, namely the Canadian dollar. During fiscal years 2016 and 2015, less than 10% of our total revenues were denominated in Canadian dollars.

Conducting business in currencies other than U.S. dollars subjects us to fluctuations in currency exchange rates that could have a negative impact on our reported operating results. Fluctuations in the value of the U.S. dollar relative to the Canadian dollar impacts our revenues, cost of revenues and operating margins and result in foreign currency transaction gains and losses. During fiscal years 2016 and 2015, the value of the U.S. dollar relative to one Canadian dollar ranged from 1.20 to 1.46 and from 1.06 to 1.28, respectively.

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We continually utilize short-term foreign exchange forward contracts to reduce the risk that our earnings would be adversely affected by changes in currency exchange rates. However, this strategy does not eliminate our exposure. If there is a significant or prolonged downturn in the Canadian dollar, it could have an adverse impact on our business and financial condition.

If we fail to attract qualified personnel, we may not be able to achieve our stated corporate objectives. Our ability to manage our anticipated growth, if realized, effectively depends on our ability to attract and retain highly qualified executive officers and technical personnel. If we fail to attract and retain qualified individuals, we will not be able to achieve our stated corporate objectives.

Our revenue depends on retaining capable sales personnel and highly skilled service technicians as well as maintaining existing relationships with key customers, key vendors and manufacturers of the products that we distribute. Our future operating results depend on our ability to maintain satisfactory relationships with qualified sales personnel and skilled service technicians as well as key customers, vendors and manufacturers who appreciate the value of our services. If we fail to maintain our existing relationships with such persons or fail to acquire relationships with such key persons in the future, our business and results of operations may be adversely affected.

Our future success is substantially dependent upon our senior management. Our future success is substantially dependent upon the efforts and abilities of members of our existing senior management. Competition for senior management is intense, and we may not be successful in attracting and retaining key personnel, the inability of which could have an adverse effect on our business and results of operations.

Tax legislation initiatives could adversely affect our net earnings and tax liabilities. We are subject to the tax laws and regulations of the United States federal, state and local governments, as well as foreign jurisdictions. From time to time, various legislative initiatives may be enacted that could adversely affect our tax positions. There can be no assurance that our effective tax rate will not be adversely affected by these initiatives. In addition, tax laws and regulations are extremely complex and subject to varying interpretations. Although we believe that our historical tax positions are sound and consistent with applicable laws, regulations and existing precedent, there can be no assurance that our tax positions will not be challenged by relevant tax authorities or that we would be successful in any such challenge.

As a “smaller reporting company,” we are not required to comply with the auditor attestation requirement under Section 404(b) of the Sarbanes-Oxley Act, which may cause investors to have less confidence in our internal control over financial reporting. The auditor attestation requirement under Section 404(b) of the Sarbanes-Oxley Act provides that a public company’s independent auditor must attest to and report on management’s internal control over financial reporting. Because we qualify as a “smaller reporting company” under the applicable SEC regulation, we are not required to comply with the auditor attestation requirement. The lack of an auditor attestation concerning management’s internal control over financial reporting may cause investors to have less confidence in our internal control over financial reporting and increases the risk that any material weakness or other deficiencies in our internal controls will not be detected.

Changes in accounting standards, legal requirements and The NASDAQ Stock Market listing standards, or our ability to comply with any existing requirements or standards, could adversely affect our operating results. Extensive reforms relating to public company financial reporting, corporate governance and ethics, The NASDAQ Stock Market listing standards and oversight of the accounting profession have been implemented over the past several years and continue to evolve. Compliance with these rules, regulations and standards that have resulted from such reforms has increased our accounting and legal costs and has required significant management time and attention. In the event that additional rules, regulations or standards are implemented or any of the existing rules, regulations or standards to which we are subject undergoes additional material modification, we could be forced to spend significant financial and management resources to ensure our continued compliance, which could have an adverse effect on our results of operations. In addition, although we believe we are in full compliance with all such existing rules, regulations and standards, should we be or become unable to comply with any of such rules, regulations and standards, as they presently exist or as they may exist in the future, our results of operations could be adversely effected and the market price of our common stock could decline.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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ITEM 2. PROPERTIES

The following table presents our leased and owned properties as of March 26, 2016:

		Approximate
		Square
Property	Location	Footage
Corporate Headquarters, Calibration Service Center and Distribution Center	Rochester, NY		37,250
Calibration Service Center	Fullerton, CA		12,000
Calibration Service Center	Boston, MA		4,000
Calibration Service Center	Burlington, ON		14,152
Calibration Service Center	Charlotte, NC		4,860
Calibration Service Center	Cherry Hill, NJ		10,800
Calibration Service Center	Dayton, OH		10,500
Calibration Service Center	Denver, CO		19,441
Calibration Service Center	Houston, TX		10,333
Calibration Service Center	Montreal, QC		26,558
Calibration Service Center	Boisbriand, QC		3,000
Calibration Service Center	Nashville, TN		6,000
Calibration Service Center	Ottawa, ON		3,990
Calibration Service Center	Tempe, AZ		4,169
Calibration Service Center and Distribution Center	Portland, OR		12,600
Calibration Service Center	San Juan, PR		1,560
Calibration Service Center	St. Louis, MO		4,400
United Scale & Engineering:
Calibration Service Center	Green Bay, WI		3,320
Calibration Service Center and Warehouse	McFarland, WI		6,000
Calibration Service Center and Warehouse	New Berlin, WI		16,000
Calibration Service Center	Ft. Wayne, IN		3,600
Unaccredited Service Center	Morris Plains, NJ		1,000
Calibration Service Center	San Diego, CA		5,500
Spectrum Technologies Inc. (STI):
Unaccredited Service Center and Warehouse	Paxinos, PA		14,520
STI Satellite Office	Bakersfield, CA		1,150
STI Satellite Office	Richmond Hill, ON		882
STI Satellite Office	Birmingham, AL		625
STI Satellite Office	Melrose, FL		200
STI Satellite Office	Mt. Airy, NC		200
STI Satellite Office	LaCrosse, WI		280
Mobile Calibration Unit and Offices	Somerset, PA		3,347
Office	Mississauga, ON		1,500
Warehouse (1)	Lincoln, MT		5,406

____________________

(1)

Property owned by the Company

We believe that our properties are in good condition, are well maintained and are generally suitable and adequate to carry on our business in its current form.

ITEM 3. LEGAL PROCEEDINGS

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on The NASDAQ Global Market under the symbol “TRNS.” As of June 14, 2016, we had approximately 465 shareholders of record.

PRICE RANGE OF COMMON STOCK

The following table presents, on a per share basis, for the periods indicated, the high and low reported sales prices of our common stock as reported on The NASDAQ Global Market for each quarterly period in fiscal years 2016 and 2015:

	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
Fiscal Year 2016:
High		$	10.45		$	9.96		$	10.10		$	10.41
Low		$	9.06		$	9.00		$	8.80		$	8.86

Fiscal Year 2015:
High		$	10.33		$	10.79		$	10.55		$	10.22
Low		$	8.96		$	8.71		$	8.63		$	9.10

DIVIDENDS

Our credit agreement, as amended, limits our ability to pay cash dividends to $3.0 million in any fiscal year. We have not declared any cash dividends since our inception and have no current plans to pay any dividends in the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

The following table provides selected financial data for fiscal year 2016 and the previous four fiscal years (in thousands, except per share data). Certain reclassifications of financial information for prior fiscal years have been made to conform to the presentation for the current fiscal year.

	For the Fiscal Years Ended
	March 26,		March 28,		March 29,		March 30,		March 31,
	2016		2015		2014		2013		2012
Statements of Income Data:
Total Revenue	$	122,166	$	123,624	$	118,508	$	112,296	$	110,020
Total Cost of Revenue		93,047		94,537		88,718		84,892		82,896
Gross Profit		29,119		29,087		29,790		27,404		27,124
Operating Expenses		22,817		22,319		23,085		21,458		21,696
Operating Income		6,302		6,768		6,705		5,946		5,428
Interest and Other Expense, net		295		345		259		228		182
Income Before Income Taxes		6,007		6,423		6,446		5,718		5,246
Provision for Income Taxes		1,883		2,397		2,462		2,014		1,944
Net Income	$	4,124	$	4,026	$	3,984	$	3,704	$	3,302

Share Data:
Basic Earnings Per Share	$	0.60	$	0.59	$	0.56	$	0.50	$	0.45
Basic Average Shares Outstanding		6,887		6,798		7,080		7,404		7,309
Diluted Earnings Per Share	$	0.58	$	0.57	$	0.54	$	0.49	$	0.43
Diluted Average Shares Outstanding		7,121		7,059		7,357		7,592		7,651
Closing Price Per Share	$	10.14	$	9.59	$	9.28	$	6.36	$	13.11

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	As of or for the Fiscal Years Ended
	March 26,			March 28,			March 29,			March 30,			March 31,
	2016			2015			2014			2013			2012
Balance Sheets and Working Capital Data:
Inventory, net		$	6,520		$	6,750		$	6,181		$	6,803	$	6,396
Property and Equipment, net			12,313			9,397			7,089			6,885		5,306
Goodwill and Intangible Assets, net			37,323			24,477			20,035			21,283		15,839
Total Assets			76,707			62,149			53,874			55,047		44,977
Depreciation and Amortization			3,946			3,090			2,945			2,702		2,896
Capital Expenditures			4,101			3,500			1,961			2,657		1,391
Long-Term Debt			19,073			12,168			7,593			8,017		3,365
Shareholders’ Equity			38,911			34,318			30,083			31,650		27,378

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Operational Overview

We are a leading provider of accredited calibration, repair, inspection and laboratory instrument services and a value-added distributor of professional grade handheld test, measurement and control instrumentation.

We operate our business through two reportable business segments, Service and Distribution, which offer a comprehensive range of services and products to the same customer base.

Our strength in our Service segment is based upon our wide range of disciplines, our investment in quality systems and our ability to provide accredited calibrations to customers in highly-regulated targeted market segments. Our services range from the calibration and repair of a single unit to managing a customer’s entire calibration program. We believe our Service segment offers an opportunity for long-term growth and the potential for continuing revenue from established customers with regular calibration cycles and recurring laboratory instrument service requirements.

Transcat’s revenues tend to partially correlate with U.S. business investment and industrial output. During fiscal year 2016, our business has been affected by negative macro-economic conditions including the general retraction of U.S. industrial output and more specifically, the downturn in the oil and gas sector. While the impact of these conditions has been less in our Service segment than in our Distribution segment, we have devoted resources towards acquiring customers in other highly-regulated markets, such as life sciences and aerospace, to mitigate the impact of these conditions on our overall business. In the Service segment, resources have been dedicated to grow sales to customers in other highly-regulated markets organically and through business acquisitions. Business acquisitions made during fiscal year 2016 brought additional customer bases and service capabilities while increasing our geographic reach and leveraging our infrastructure to allow for realization of cost synergies. We believe there are other acquisition opportunities available within our targeted customer sectors and/or geographic markets and that pursuing business acquisitions in addition to organic growth initiatives is an effective strategy in the current economic environment.

In our Distribution segment, we sell and offer for rent, professional grade handheld test and measurement instruments. Because we specialize in professional grade handheld test and measurement instruments, as opposed to a wide array of industrial products, our sales and customer service personnel can provide value-added technical assistance to our customers to aid them in determining what product best meets their particular application requirements. With the acquisition of Excalibur in April 2016, we now have expertise in the sale of used equipment, furthering our ability to add value for our customers. Through our enhanced website and Master Catalog, customers can place orders for test and measurement instruments and can also elect to have their purchased instruments calibrated by us before shipment and use, as well as on a regular interval post-purchase.

Sales in our Distribution segment are generally not consumable items, but are instruments purchased as replacements, upgrades or for expansion of manufacturing or research and development facilities. As such, this segment can be heavily impacted by changes in the economic environment. As customers increase or decrease capital and discretionary spending, our Distribution sales will typically be directly impacted. This was evidenced in fiscal year 2016, when

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our sales to the oil and gas sector decreased concurrent with the overall contraction experienced in that sector. This segment also felt the impact of a general retraction of U.S. industrial output, resulting from the strong U.S. dollar’s impact on international demand for U.S. outputs. Also, recently we have seen web-based competitors begin to sell some of the same products that we have historically sold. All the above factors have had a negative impact on our Distribution segment sales. To stabilize Distribution segment sales, we will continue to expand the number of SKU’s that we offer, grow new product calibrations, leverage our digital transformation, and capitalize on our recent acquisition of Excalibur and its rental and used equipment business and national network of independent sales representatives.

Financial Overview

In evaluating our results for fiscal year 2016, it is important to consider that fiscal year 2016 operating results include those of acquired businesses from their respective dates of acquisition through March 26, 2016.

Total revenue for fiscal year 2016 was $122.2 million, a 1.2% decline compared with total revenue of $123.6 million for fiscal year 2015.

Service revenue increased 14.3% to $59.2 million, or 48.5% of total revenue, in fiscal year 2016. Of our Service revenue in fiscal year 2016, 82.5% was generated by our Calibration Service Centers while 15.7% was generated through subcontracted third-party vendors, compared with 82.2% and 15.8%, respectively, in fiscal year 2015. The balance of Service revenue was associated with other charges.

Distribution sales declined 12.3% to $63.0 million, or 51.5% of total revenue, in fiscal year 2016. Sales to domestic customers comprised 92.3% of total Distribution sales in fiscal year 2015, while 5.5% were to Canadian customers and 2.2% were to customers in other international markets.

Gross margin for fiscal year 2016 was 23.8%, a 30 basis point improvement compared with gross margin of 23.5% in fiscal year 2015. Service gross margin was 26.3% in fiscal year 2016 compared with 27.2% in fiscal year 2015. Distribution gross margin was 21.5% in fiscal year 2016 compared with 20.9% in fiscal year 2015.

Operating expenses were $22.8 million, or 18.6% of total revenue, in fiscal year 2016 compared with $22.3 million, or 18.0% of total revenue, in fiscal year 2015. Operating income was $6.3 million in fiscal year 2016 compared with $6.8 million in fiscal year 2015.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Use of Estimates

The preparation of our Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States (“US GAAP”) requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are used for, but not limited to, allowance for doubtful accounts and returns, inventory reserves, estimated levels of achievement for performance-based restricted stock units, fair value of stock options, depreciable lives of fixed assets, estimated lives of major catalogs and intangible assets, and the valuation of assets acquired and liabilities assumed in business acquisitions. Future events and their effects cannot be predicted with certainty; accordingly, our accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of our Consolidated Financial Statements will change as new events occur, as more experience is acquired, as additional information is obtained, and as our operating environment changes. Our estimates are evaluated on an ongoing basis and are drawn from historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates. Such changes and refinements in estimation methodologies are reflected in reported results of operations in the period in which the changes are made and, if material, their effects are disclosed in the Notes to our Consolidated Financial Statements.

The following items in our Consolidated Financial Statements require significant estimation or judgment.

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Accounts Receivable

Accounts receivable represent amounts due from customers in the ordinary course of business. These amounts are recorded net of the allowance for doubtful accounts and returns in the Consolidated Balance Sheets. The allowance for doubtful accounts is based upon the expected collectability of accounts receivable. We apply a specific formula to our accounts receivable aging, which may be adjusted on a specific account basis where the formula may not appropriately reserve for loss exposure. After all attempts to collect a receivable have failed, the receivable is written-off against the allowance for doubtful accounts. The returns reserve is calculated based upon the historical rate of returns applied to revenues over a specific timeframe. The returns reserve will increase or decrease as a result of changes in the level of revenues and/or the historical rate of returns. Management believes that the allowances are appropriate to cover anticipated losses under current conditions. However, unexpected changes or deterioration in economic conditions could materially change these expectations.

Inventory

Inventory consists of products purchased for resale and is valued at the lower of cost or market. Costs are determined using the average cost method of inventory valuation. Inventory is reduced by a reserve for items not saleable at or above cost by applying a specific loss factor, based on historical experience, to specific categories of our inventory. Inventory is at risk of obsolescence if economic conditions change. Relevant economic conditions include changing consumer demand, customer preferences or increasing competition. We believe these risks are largely mitigated because our inventory typically turns approximately ten times per year. We evaluate the adequacy of the reserve on a quarterly basis.

Business Acquisitions

We apply the acquisition method of accounting for business acquisitions. Under the acquisition method, the underlying tangible and intangible assets acquired and liabilities assumed are recorded based on their respective fair values at the date of acquisition. We use a valuation hierarchy to determine the fair values used. Purchase price allocations are subject to revision within the measurement period, not to exceed one year from the date of acquisition. Administration costs to acquire a business may include, but are not limited to, fees for accounting, legal and valuation services and are recorded as incurred in our Consolidated Statement of Income.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the values assigned to the underlying net assets of an acquired business and is not amortized. As of March 26, 2016, we had $29.1 million of recorded goodwill. During fiscal year 2016, we recorded $8.4 million in additional goodwill associated with five business acquisitions.

Other intangible assets, namely customer base and covenants not to compete, represent an allocation of purchase price to identifiable intangible assets of an acquired business. These intangible assets are amortized over their estimated useful lives. We estimate the fair value of our reporting units using the fair market value measurement requirement.

We test goodwill for impairment on an annual basis, or immediately if conditions indicate that such impairment could exist. We have the option to perform a qualitative assessment to determine if it is more likely than not that the fair value of a segment has declined below its carrying value. This assessment considers various financial, macroeconomic, industry and segment specific qualitative factors.

Other intangible assets are evaluated for impairment when events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Based on the results of our reviews, we have determined that no impairment was indicated as of March 26, 2016 and March 28, 2015.

Income Taxes

We base our deferred income taxes, accrued income taxes and provision for income taxes upon income, statutory tax rates, the legal structure of our Company, interpretation of tax laws and tax planning opportunities available to us in the various jurisdictions in which we operate. We file income tax returns in the U.S. federal jurisdiction, various states and Canada. We are regularly audited by federal, state and foreign tax authorities, but a number of years may elapse before an uncertain tax position, for which we have unrecognized tax benefits, is audited and finally resolved. From time to time, these audits result in assessments of additional tax. We maintain reserves for such assessments.

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We apply a more-likely-than-not threshold to the recognition and derecognition of uncertain tax positions. Accordingly, we recognize the amount of tax benefit that has a greater than 50% likelihood of being ultimately realized upon settlement. Future changes in judgments and estimates related to the expected ultimate resolution of uncertain tax positions will affect income in the quarter of such change. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe that our unrecognized tax benefits reflect the most likely outcome.

Stock-Based Compensation

We measure the cost of services received in exchange for all equity awards granted, including stock options and restricted stock units, based on the fair market value of the award as of the grant date. We record compensation cost related to unvested equity awards by recognizing, on a straight line basis, the unamortized grant date fair value over the remaining service period of each award. Excess tax benefits from the exercise of equity awards are presented in the Consolidated Statements of Cash Flows as a financing activity. Excess tax benefits are realized benefits from tax deductions for exercised awards in excess of the deferred tax asset attributable to stock-based compensation costs for such awards. We did not capitalize any stock-based compensation costs as part of an asset. We estimate forfeiture rates based on our historical experience.

We grant performance-based restricted stock units as a primary component of executive compensation. The units generally vest following the third fiscal year from the date of grant subject to certain cumulative diluted earnings per share growth targets over the eligible period. Compensation cost ultimately recognized for these performance-based restricted stock units will equal the grant-date fair market value of the unit that coincides with the actual outcome of the performance conditions. On an interim basis, we record compensation cost based on the expected level of achievement of the performance conditions.

Stock options generally vest over a period of up to four years, using either a graded schedule or on a straight-line basis, and expire ten years from the date of grant. The expense relating to options is recognized on a straight-line basis over the requisite service period for the entire award.

See Note 6 to our Consolidated Financial Statements for further disclosure regarding our stock-based compensation.

Post-retirement Health Care Plans

The Company has a defined benefit post-retirement health care plan which provides long-term care insurance benefits, medical and dental insurance benefits and medical premium reimbursement benefits to eligible retired corporate officers and their eligible spouses.

For accounting purposes, the defined benefit post-retirement health care plan requires assumptions to estimate the projected and accumulated benefit obligations, including the following variables: discount rate; certain employee-related factors, such as retirement age and mortality; and health care cost trend rates. These and other assumptions affect the annual expense and obligations recognized for the underlying plans. Our assumptions reflect our historical experiences and management’s best judgment regarding future expectations.

Increasing the assumed health care cost trend rate by one percentage point would increase the accumulated post-retirement benefit obligation and the annual net periodic post-retirement benefit cost by $0.1 million. A one percentage point decrease in the healthcare cost trend would decrease the accumulated post-retirement benefit obligation and the annual net periodic post-retirement benefit cost by $0.1 million.

Recently Issued Accounting Pronouncements

In the normal course of business, management evaluates all new accounting pronouncements issued by the Financial Accounting Standards Board to determine the potential impact they may have on our consolidated financial statements. For a discussion of the newly issued accounting pronouncements see “Recently Issued Accounting Pronouncements” under Note 1 to the Consolidated Financial Statements included in Item 8 of Part II of this report.

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RESULTS OF OPERATIONS

The following table sets forth, for fiscal years 2016 and 2015, the components of our Consolidated Statements of Income.

	FY 2016		FY 2015
Gross Profit Percentage:
Service Gross Profit	26.3	%	27.2	%
Distribution Gross Profit	21.5	%	20.9	%
Total Gross Profit	23.8	%	23.5	%

As a Percentage of Total Revenue:
Service Revenue	48.5	%	41.9	%
Distribution Sales	51.5	%	58.1	%
Total Revenue	100.0	%	100.0	%

Selling, Marketing and Warehouse Expenses	11.1	%	11.2	%
Administrative Expenses	7.5	%	6.8	%
Total Operating Expenses	18.6	%	18.0	%

Operating Income	5.2	%	5.5	%

Interest and Other Expense, net	0.3	%	0.3	%

Income Before Income Taxes	4.9	%	5.2	%
Provision for Income Taxes	1.5	%	1.9	%
Net Income	3.4	%	3.3	%

Fiscal Year Ended March 26, 2016 Compared to Fiscal Year Ended March 28, 2015 (dollars in thousands):

Revenue:

	For the Years Ended
	March 26,		March 28,		Change
	2016		2015		$			%
Revenue:
Service	$	59,202	$	51,801	$	7,401		14.3	%
Distribution		62,964		71,823		(8,859	)	(12.3	%)
Total	$	122,166	$	123,624	$	(1,458	)	(1.2	%)

Total revenue declined $1.5 million, or 1.2%, from fiscal year 2015 to fiscal year 2016.

Service revenue, which accounted for 48.5% and 41.9% of our total revenue in fiscal years 2016 and 2015, respectively, increased 14.3% from fiscal year 2015 to fiscal year 2016. This increase was the result of business acquisitions and organic growth. Organic revenue growth was experienced across various key industries that we serve and was driven by retention of existing customers as well as the expansion of our customer base through business development activities.

Our fiscal years 2016 and 2015 Service revenue growth in relation to prior fiscal year quarter comparisons, were as follows:

	FY 2016				FY 2015
	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Service Revenue Growth	21.4%	10.5%	12.7%	11.5%	7.5%	9.4%	9.8%	3.4%

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Within any year, while we add new customers, we also have customers from the prior year whose service orders may not repeat for any number of factors. Among those factors are variations in the timing of periodic calibrations and other services, customer capital expenditures and customer outsourcing decisions. Because the timing of Service segment orders can vary on a quarter-to-quarter basis, we believe a trailing twelve-month trend provides a better indication of the progress of this segment. The following table presents the trailing twelve-month Service segment revenue for each quarter in fiscal years 2016 and 2015 as well as the trailing twelve-month revenue growth as a comparison to that of the prior fiscal year period:

	FY 2016				FY 2015
	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Trailing Twelve-Month:
Service Revenue	$59,202	$56,112	$54,793	$53,198	$51,801	$50,793	$49,706	$48,583
Service Revenue Growth	14.3%	10.5%	10.2%	9.5%	7.5%	8.2%	9.7%	11.3%

Our strategy has been to focus our investments in the core electrical, temperature, pressure, physical/dimensional and radio frequency/microwave disciplines. We expect to subcontract approximately 15% of Service revenue to third-party vendors for calibration beyond our chosen scope of capabilities. During any individual quarter, we could fluctuate beyond these percentages. We continually evaluate our outsourcing needs and make capital investments, as deemed necessary, to add more in-house capabilities and reduce the need for third-party vendors. Capability expansion through business acquisitions is another way that we seek to reduce the need for outsourcing. Please refer to “Our Strategy” under Part 1, Item 1 of this report for an overview of recent business acquisitions that have expanded our capabilities. The following table presents the source of our Service revenue and the percentage of Service revenue derived from each source for each quarter during fiscal years 2016 and 2015:

	FY 2016								FY 2015
	Q4		Q3		Q2		Q1		Q4		Q3		Q2		Q1
Percent of Service Revenue:
In-House	84.1	%	81.5	%	81.4	%	82.4	%	82.8	%	81.8	%	81.6	%	82.8	%
Outsourced	14.0	%	16.9	%	16.7	%	15.8	%	15.4	%	16.4	%	16.5	%	15.1	%
Freight Billed to Customers	1.9	%	1.6	%	1.9	%	1.8	%	1.8	%	1.8	%	1.9	%	2.1	%
	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

Our Distribution sales accounted for 51.5% and 58.1% of our total revenue in fiscal years 2016 and 2015, respectively. Year-over-year, Distribution sales declined $8.9 million, or 12.3%. The year-over-year decline was primarily due to reduced demand from the oil and gas industry. Our fiscal years 2016 and 2015 Distribution sales (decline) growth in relation to prior fiscal year quarter comparisons were as follows:

	FY 2016				FY 2015
	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Distribution Sales (Decline) Growth	(14.4%)	(12.0%)	(17.4%)	(5.0%)	5.5%	(2.9%)	6.4%	0.1%

Distribution orders include orders for instruments that we routinely stock in our inventory, customized products, and other products ordered less frequently, which we do not stock. Pending product shipments are primarily backorders, but also include products that are requested to be calibrated in our service centers prior to shipment, orders required by the customer to be shipped complete or at a future date, and other orders awaiting final credit or management review prior to shipment. Our total pending product shipments declined $0.2 million, or 7.7%, at the end of fiscal year 2016 compared to the end of fiscal year 2015. Backorders at the end of fiscal year 2016 were $2.4 million, consistent with the end of fiscal year 2015. The following table presents the percentage of total pending product shipments that were backorders at the end of each quarter in fiscal years 2016 and 2015 and our historical trend of total pending product shipments:

	FY 2016				FY 2015
	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Total Pending Product Shipments	$2,966	$3,421	$3,124	$2,858	$3,215	$3,838	$3,383	$2,860
% of Pending Product Shipments
that were Backorders	80.3%	73.8%	78.4%	75.8%	73.9%	73.9%	69.0%	64.1%

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Gross Profit:

	For the Years Ended
	March 26,			March 28,			Change
	2016			2015			$				%
Gross Profit:
Service		$	15,585		$	14,103		$	1,482			10.5	%
Distribution			13,534			14,984			(1,450	)		(9.7	%)
Total		$	29,119		$	29,087		$	32			0.1	%

Total gross profit in fiscal year 2016 was $29.1 million, consistent with fiscal year 2015. As a percentage of total revenue, total gross margin improved 30 basis points over the same time period.

Service gross profit increased $1.5 million, or 10.5%, from fiscal year 2015 to fiscal year 2016. Our annual and quarterly Service segment gross margins are a function of several factors. Our organic Service revenue growth provides some incremental gross margin growth by leveraging certain fixed costs of this segment. Service segment revenue growth from our recent business acquisitions, while providing a base for future organic revenue growth, may moderate or reduce our gross margins as we acquire additional fixed costs. The mix of services provided to customers may also affect gross margins in any given period. Service gross margin declined 90 basis points from fiscal year 2015 to fiscal year 2016, reflecting the combined impact of increased performance-based compensation and additional fixed costs from businesses acquired late in our fiscal year. The following table presents the quarterly historical trend of our Service gross margin as a percent of Service revenue:

	FY 2016				FY 2015
	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Service Gross Margin	30.3%	23.5%	24.4%	26.1%	33.2%	24.5%	26.0%	24.2%

We evaluate Distribution gross profit from two perspectives. Channel gross profit includes net sales less the direct cost of inventory sold. Our Distribution gross profit includes channel gross profit as well as the impact of vendor rebates, cooperative advertising income, freight billed to customers, freight expenses and direct shipping costs. In general, our Distribution gross margin can vary based upon the mix of products sold, price discounting, and the timing of periodic vendor rebates and cooperative advertising programs from suppliers.

Distribution gross profit declined $1.5 million in fiscal year 2016 compared to fiscal year 2015, primarily due to reduced sales volume. Total Distribution gross margin in fiscal year 2016 was 21.5%, a 60 basis point increase when compared with fiscal year 2015. This increase resulted from a year-over-year increase in vendor rebates. Vendor rebates in any given period may vary depending on what programs our vendors offer and which programs we choose to pursue. The following table presents the quarterly historical trend of our Distribution gross profit as a percent of Distribution sales:

	FY 2016				FY 2015
	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Channel Gross Margin (1)	18.7%	19.1%	19.4%	18.6%	18.1%	19.6%	19.8%	19.5%
Total Distribution Gross Margin (2)	21.0%	21.6%	21.4%	21.9%	20.7%	21.2%	19.7%	22.0%

____________________

(1)	Channel gross margin is calculated as net sales less purchase costs divided by net sales.

(2)	Includes vendor rebates, cooperative advertising income, freight billed to customers, freight expenses, and direct shipping costs.

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Operating Expenses:

	For the Years Ended
	March 26,			March 28,			Change
	2016			2015			$				%
Operating Expenses:
Selling, Marketing and Warehouse		$	13,625		$	13,913		$	(288	)		(2.1	%)
Administrative			9,192			8,406			786			9.4	%
Total		$	22,817		$	22,319		$	498			2.2	%

Operating expenses increased $0.5 million, or 2.2%, from fiscal year 2015 to fiscal year 2016. As a percentage of total revenue, operating expenses increased from 18.0% in fiscal year 2015 to 18.6% in fiscal year 2016. Administrative expenses increased $0.8 million reflecting increased non-recurring acquisition related expenses and increased performance-based compensation expense.

Income Taxes:

	For the Years Ended
	March 26,	March 28,	Change
	2016	2015	$	%
Provision for Income Taxes	$1,883	$2,397	$(514)	(21.4%)

Our effective tax rates for fiscal years 2016 and 2015 were 31.3% and 37.3%, respectively. The decrease largely reflects the cumulative impact of U.S. federal and state research and development tax credits that were identified for open years, including fiscal year 2016. We expect our future effective tax rate to be approximately 34.0% to 36.0%, with certain tax credits still being recognized but to a lesser extent than in fiscal year 2016.

Adjusted EBITDA (dollars in thousands) :

In addition to other measures, management relies on earnings before interest, income taxes, depreciation and amortization, and non-cash stock compensation expense (“Adjusted EBITDA”) as an indicator of performance of the business. We believe Adjusted EBITDA allows investors to view our performance in a manner similar to the methods used by management and provides additional insight into our operating results. Adjusted EBITDA is not a measure of financial performance under US GAAP and is not calculated through the application of US GAAP. As such, it should not be considered as a substitute or alternative for the US GAAP measures of net income; operating income or cash flows from operating, financing and investing activities; or a measure of liquidity. Adjusted EBITDA, as presented, may not be comparable to similarly defined non-US GAAP measures used by other companies.

	For the Years Ended
	March 26,			March 28,
	2016			2015
Net Income	$	4,124		$	4,026
+ Interest Expense		247			234
+ Other Expense / (Income)		48			111
+ Tax Provision		1,883			2,397
Operating Income	$	6,302		$	6,768
+ Depreciation & Amortization		3,946			3,090
+ Other (Expense) / Income		(48	)		(111	)
+ Noncash Stock Compensation		359			507
Adjusted EBITDA	$	10,559		$	10,254

Adjusted EBITDA for fiscal year 2016 was $10.6 million, a 3.0% improvement as compared to fiscal year 2015. This compares with a decline of 7.3% in operating income from $6.8 million in fiscal 2015 to $6.3 million in fiscal year 2016.

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LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

The following table is a summary of our Consolidated Statements of Cash Flows (dollars in thousands):

	For the Years Ended
	March 26,			March 28,
	2016			2015
Cash Provided by (Used in):
Operating Activities	$	10,982		$	4,439
Investing Activities		(17,964	)		(10,728	)
Financing Activities		7,225			4,987

Operating Activities

Net cash provided by operations was $11.0 million during fiscal year 2016 compared to $4.4 million during fiscal year 2015.

The year-over-year increase in cash provided by operations is primarily the result of changes in net working capital (defined as current assets less current liabilities). The significant changes in net working capital were:

●

Cash: Cash increased $0.6 million during fiscal year 2016. The increase was primarily due to the timing of payments towards our long-term debt.

●

Receivables: Accounts receivable increased by a net amount of $0.2 million during fiscal year 2016, inclusive of $1.2 million of accounts receivable acquired as part of the assets acquired during business acquisitions within the period. Excluding acquired accounts receivable, the change would be a decrease of $1.0 million which reflects timing of collections. During fiscal year 2015, accounts receivable increased by $1.2 million, inclusive of $0.7 million of accounts receivable acquired as part of business acquisitions completed within the period. The following table illustrates our days sales outstanding as of March 26, 2016 and March 28, 2015:

	March 26,			March 28,
	2016			2015
Net Sales, for the last two fiscal months		$	24,568		$	24,335
Accounts Receivable, net		$	17,080		$	16,899
Days Sales Outstanding			42			42

●	Inventory: Our inventory strategy includes making appropriate large quantity, high dollar purchases with key manufacturers for various reasons, including maximizing on-hand availability of key products, reducing backorders for products with long lead times and optimizing vendor volume discounts. As a result, inventory levels may vary from quarter-to-quarter based on the timing of these large orders in relation to our quarter end. Our inventory balance decreased $0.2 million during fiscal year 2016, compared to a $0.6 million increase during fiscal year 2015. The year-over-year change represents timing of strategic purchases in fiscal year 2015 and a small reduction in on-hand inventory in fiscal year 2016, in response to reduced demand in our Distribution segment.
●	Accounts Payable: In general, changes in accounts payable may or may not correlate with changes in inventory balances at any given quarter end due to the timing of vendor payments for inventory, as well as the timing of outsourced Service revenues and capital expenditures. Accounts payable increased $0.4 million during fiscal year 2016 compared with an increase of $0.6 million in fiscal year 2015.
●	Accrued Compensation and Other Liabilities: Accrued compensation and other liabilities increased by $3.5 million during fiscal year 2016, primarily resulting from increases in accrued contingent consideration and other holdback amounts related to acquisitions and accrued payroll and other employee related expenses, including performance-based compensation. During fiscal year 2015, accrued compensation and other liabilities decreased by $1.5 million, primarily due to the payment of previously accrued performance-based compensation.

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●	Income Taxes Payable: In any given period, net working capital may be affected by the timing and amount of income tax payments. During fiscal year 2015, income taxes payable decreased by $1.0 million whereas in fiscal year 2016, income taxes payable decreased by less than $0.1 million.

Investing Activities

During fiscal year 2016, we invested $4.1 million in capital expenditures, compared to $3.5 million in fiscal year 2015, primarily for additional Service segment capabilities and assets for our instrument rental program. During fiscal year 2016, we used $13.9 million for business acquisitions, compared to $7.3 million in fiscal year 2015. We expect capital expenditures, primarily for Service segment and rental business expansion, to total between $5.0 million to $5.5 million for fiscal year 2017.

Financing Activities

During fiscal year 2016, approximately $6.9 million in net cash proceeds were provided by our Revolving Credit Facility, primarily to fund business acquisitions, and $0.5 million in cash was generated from the issuance of common stock. During fiscal year 2015, cash provided by financing activities included approximately $4.6 million in cash from our Revolving Credit Facility, used primarily to fund business acquisitions, and $0.5 million from the issuance of common stock.

Credit Agreement

Through our credit agreement, as amended, (the “Credit Agreement”) which matures on September 20, 2018, we have a revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility allows for maximum borrowings of $30.0 million and limits the amount of borrowings that may be used for business acquisitions.

The Revolving Credit Facility is subject to a maximum borrowing restriction based on a 2.75 multiple of earnings before interest, income taxes, depreciation and amortization, and non-cash stock-based compensation expense for the preceding four consecutive fiscal quarters. As of March 26, 2016, $30.0 million was available under the Revolving Credit Facility, of which $19.1 million was outstanding and included in long-term debt on the Consolidated Balance Sheets. On April 1, 2016 we borrowed $6.6 million under the Revolving Credit Facility in connection with the acquisition of substantially all of the assets of Excalibur.

The Credit Agreement has certain covenants with which we have to comply, including a fixed charge ratio covenant and a leverage ratio covenant. We were in compliance with all loan covenants and requirements throughout fiscal year 2016.

On March 31, 2016, the Company entered into Amendment 3 to its Credit Agreement. Amendment 3 increased the limit of borrowings that may be used for business acquisitions to $20.0 million for fiscal year 2017 and $15.0 million for each fiscal year thereafter. Amendment 3 also provides the Company with a $10.0 million term loan. The term loan requires principal repayments of $0.1 million per month plus interest. Amendment 3 also increases the allowable leverage ratio to a maximum of 3.0 from 2.75.

We believe that amounts available under our current credit facility and our cash on hand are sufficient to satisfy our expected working capital and capital expenditure needs as well as our lease commitments for the foreseeable future.

Contractual Obligations and Commercial Commitments

The table below contains aggregated information about future payments related to contractual obligations and commercial commitments such as debt and lease agreements as of March 26, 2016 (in millions):

	Payments Due By Period
	Less Than			1-3			3-5			More Than
	1 Year			Years			Years			5 Years			Total
Revolving Line of Credit (1)		$	—		$	19.1		$	—		$	—	$	19.1
Operating Leases			2.1			3.6			1.3			0.5		7.5
Total Contractual Cash Obligations		$	2.1		$	22.7		$	1.3		$	0.5	$	26.6

____________________

(1)	Due to the uncertainty of forecasting expected variable rate interest payments, this amount excludes the interest portion of our debt obligation.

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Effective April 2016, the Company will have term loan payments due at a monthly amount of $0.1 million plus interest. These amounts are not reflected in the table above.

OUTLOOK

As we look forward, we remain confident in our strategic direction and believe that the long-term view of Transcat continues to be quite compelling.

In fiscal 2017, for the Service segment, we expect double-digit top-line performance with strong organic growth. We also expect to realize the inherent leverage within the segment as we integrate recent acquisitions and drive operating margin expansion.

For the Distribution segment, our primary goal is stabilization. We expect to accomplish this by continuing our SKU expansion, growing new product calibrations, leveraging our digital transformation, and capitalizing on our recent acquisition of Excalibur, which brought an established national platform to expand our equipment rental business, provided a used equipment sales operation, and added a network of independent sales representatives throughout the U.S.

Looking forward, we believe our strong cash generation, combined with the expansion of our credit facility, provides the liquidity and flexibility to execute on our business strategy, and that we are on track to grow revenue to $175 million to $200 million over the next five years with double-digit Adjusted EBITDA margins at that level.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATES

Our exposure to changes in interest rates results from our borrowing activities. In the event interest rates were to move by 1%, our yearly interest expense would increase or decrease by approximately $0.2 million assuming our average borrowing levels remained constant. As of March 26, 2016, $30.0 million was available under our Revolving Credit Facility, of which $19.1 million was outstanding and included in long-term debt on the Consolidated Balance Sheet. As described above under “Liquidity and Capital Resources”, we executed a $10.0 million term loan on March 31, 2016 under the same terms as the Revolving Credit Facility.

We borrow from our Revolving Credit Facility at the one-month LIBOR, adjusting daily, or at a fixed rate for a designated period at the LIBOR corresponding to such period, in each case, plus a margin. Our interest rate margin is determined on a quarterly basis based upon our calculated leverage ratio. As of March 26, 2016, the one-month LIBOR was 0.4%. Our interest rate for fiscal year 2016 ranged from 1.3% to 1.9%. On March 26, 2016, we had no hedging arrangements in place to limit our exposure to upward movements in interest rates.

FOREIGN CURRENCY

Over 90% of our total revenues for fiscal years 2016 and 2015 were denominated in U.S. dollars, with the remainder denominated in Canadian dollars. A 10% change in the value of the Canadian dollar to the U.S. dollar would impact our revenue by less than 1%. We monitor the relationship between the U.S. and Canadian currencies on a monthly basis and adjust sales prices for products and services sold in Canadian dollars as we believe to be appropriate.

We continually utilize short-term foreign exchange forward contracts to reduce the risk that future earnings would be adversely affected by changes in currency exchange rates. We do not apply hedge accounting and therefore the net change in the fair value of the contracts, which totaled a gain of $0.4 million and $0.9 million in fiscal years 2016 and 2015, respectively, was recognized as a component of other expense in the Consolidated Statements of Income. The change in the fair value of the contracts is offset by the change in fair value on the underlying receivables denominated in Canadian dollars being hedged. On March 26, 2016, we had a foreign exchange contract, which matured in April 2016, outstanding in the notional amount of $5.7 million. The foreign exchange contract was renewed in April 2016 and continues to be in place. We do not use hedging arrangements for speculative purposes.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX

	Page(s)
Report of Independent Registered Public Accounting Firm	32

Consolidated Financial Statements:
Statements of Income for the Years Ended March 26, 2016 and March 28, 2015	33
Statements of Comprehensive Income for the Years Ended March 26, 2016 and March 28, 2015	34
Balance Sheets as of March 26, 2016 and March 28, 2015	35
Statements of Cash Flows for the Years Ended March 26, 2016 and March 28, 2015	36
Statements of Shareholders’ Equity for the Years Ended March 26, 2016 and March 28, 2015	37
Notes to Consolidated Financial Statements	38-53

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Transcat, Inc.
Rochester, New York

We have audited the accompanying consolidated balance sheets of Transcat, Inc. and its subsidiaries (“the Company”) as of March 26, 2016 and March 28, 2015 and the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for the fiscal years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. 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 Transcat, Inc. and its subsidiaries as of March 26, 2016 and March 28, 2015, and the results of their operations and their cash flows for the fiscal years then ended, in conformity with accounting principles generally accepted in the United States.

/s/ Freed Maxick CPAs, P.C.

Freed Maxick CPAs, P.C.

Buffalo, New York

June 20, 2016

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TRANSCAT, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)

	For the Years Ended
	March 26,			March 28,
	2016			2015
Service Revenue		$	59,202	$	51,801
Distribution Sales			62,964		71,823
Total Revenue			122,166		123,624

Cost of Services Sold			43,617		37,698
Cost of Distribution Sales			49,430		56,839
Total Cost of Revenue			93,047		94,537

Gross Profit			29,119		29,087

Selling, Marketing and Warehouse Expenses			13,625		13,913
Administrative Expenses			9,192		8,406
Total Operating Expenses			22,817		22,319

Operating Income			6,302		6,768

Interest and Other Expense, net			295		345

Income Before Provision for Income Taxes			6,007		6,423
Provision for Income Taxes			1,883		2,397

Net Income		$	4,124	$	4,026

Basic Earnings Per Share		$	0.60	$	0.59
Average Shares Outstanding			6,887		6,798

Diluted Earnings Per Share		$	0.58	$	0.57
Average Shares Outstanding			7,121		7,059

See accompanying notes to consolidated financial statements.

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TRANSCAT, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)

For the Years Ended

March 26,       March 28,

2016 2015

Net Income $ 4,124 $ 4,026

Other Comprehensive Income (Loss):

       Currency Translation Adjustment (202 ) (652 )

       Unrecognized Prior Service Cost (Benefit), net of tax of $26 and $29 for the years

              ended March 26, 2016 and March 28, 2015, respectively 41 (46 )

       Unrealized Loss on Other Asset, net of tax of $34 and $8 for the years ended

              March 26, 2016 and March 28, 2015, respectively (54 ) (12 )

                     Total Other Comprehensive (Loss) Income (215 ) (710 )

Comprehensive Income $ 3,909 $ 3,316

See accompanying notes to consolidated financial statements.

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TRANSCAT, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Amounts)

	March 26,				March 28,
	2016				2015
ASSETS
Current Assets:
Cash		$	641			$	65
Accounts Receivable, less allowance for doubtful accounts of $113
and $111 as of March 26, 2016 and March 28, 2015, respectively			17,080				16,899
Other Receivables			881				1,171
Inventory, net			6,520				6,750
Prepaid Expenses and Other Current Assets			1,096				1,209
Deferred Tax Assets			—				1,048
Total Current Assets			26,218				27,142
Property and Equipment, net			12,313				9,397
Goodwill			29,112				20,923
Intangible Assets, net			8,211				3,554
Other Assets			853				1,133
Total Assets		$	76,707			$	62,149

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable		$	8,141			$	7,695
Accrued Compensation and Other Liabilities			7,688				4,195
Income Taxes Payable			—				43
Total Current Liabilities			15,829				11,933
Long-Term Debt			19,073				12,168
Deferred Tax Liabilities, net			1,071				1,684
Other Liabilities			1,823				2,046
Total Liabilities			37,796				27,831

Shareholders’ Equity:
Common Stock, par value $0.50 per share, 30,000,000 shares authorized;
6,923,557 and 6,835,828 shares issued and outstanding as of
March 26, 2016 and March 26, 2015, respectively			3,462				3,418
Capital in Excess of Par Value			12,993				12,289
Accumulated Other Comprehensive Loss			(358	)			(143	)
Retained Earnings			22,814				18,754
Total Shareholders’ Equity			38,911				34,318
Total Liabilities and Shareholders’ Equity		$	76,707			$	62,149

See accompanying notes to consolidated financial statements.

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TRANSCAT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)

	For the Years Ended
	March 26,			March 28,
	2016			2015
Cash Flows from Operating Activities:
Net Income	$	4,124		$	4,026
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Loss on Disposal of Property and Equipment		38			3
Deferred Income Taxes		136			779
Depreciation and Amortization		3,946			3,090
Provision for Accounts Receivable and Inventory Reserves		147			128
Stock-Based Compensation Expense		359			507
Changes in Assets and Liabilities, net of acquisitions:
Accounts Receivable and Other Receivables		998			(1,218	)
Inventory		177			(593	)
Prepaid Expenses and Other Assets		118			(343	)
Accounts Payable		446			464
Accrued Compensation and Other Liabilities		22			(1,502	)
Income Taxes Payable		471			(902	)
Net Cash Provided by Operating Activities		10,982			4,439

Cash Flows from Investing Activities:
Business Acquisitions, net of cash acquired		(13,894	)		(7,279	)
Purchase of Property and Equipment		(4,101	)		(3,500	)
Proceeds from Sale of Property and Equipment		31			51
Net Cash Used in Investing Activities		(17,964	)		(10,728	)

Cash Flows from Financing Activities:
Proceeds from Revolving Credit Facility, net		6,905			4,575
Issuance of Common Stock		454			466
Repurchase of Common Stock		(73	)		(71	)
Stock Option Redemption		(61	)		—
Excess Tax Benefits Related to Stock-Based Compensation		—			17
Net Cash Provided by Financing Activities		7,225			4,987

Effect of Exchange Rate Changes on Cash		333			1,344

Net Increase in Cash		576			42
Cash at Beginning of Fiscal Year		65			23
Cash at End of Fiscal Year	$	641		$	65

Supplemental Disclosures of Cash Flow Activity:
Cash paid during the fiscal year for:
Interest	$	243		$	232
Income Taxes, net	$	1,287		$	2,433

Contingent Consideration Related to Business Acquisition	$	800		$	—
Holdback Amounts Related to Business Acquisitions	$	1,588		$	—

See accompanying notes to consolidated financial statements.

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TRANSCAT, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In Thousands, Except Per Share Amounts)

						Capital
	Common Stock					In			Accumulated
	Issued					Excess			Other
	$0.50 Par Value					of Par			Comprehensive				Retained
	Shares		Amount			Value			Income (Loss)				Earnings			Total
Balance as of March 29, 2014	6,716			3,358			11,387				567			14,771			30,083
Issuance of Common Stock	78			39			427				—			—			466
Repurchase of Common Stock	(8	)		(4	)		(24	)			—			(43	)		(71	)
Stock-Based Compensation	50			25			482				—			—			507
Tax Benefit from Stock-
Based Compensation	—			—			17				—			—			17
Other Comprehensive Loss	—			—			—				(710	)		—			(710	)
Net Income	—			—			—				—			4,026			4,026

Balance as of March 28, 2015	6,836		$	3,418		$	12,289			$	(143	)	$	18,754		$	34,318
Issuance of Common Stock	70			35			419				—			—			454
Repurchase of Common Stock	(8	)		(4	)		(5	)			—			(64	)		(73	)
Stock-Based Compensation	26			13			346				—			—			359
Redemption of Stock Options	—			—			(61	)			—			—			(61	)
Tax Benefit from Stock-
Based Compensation	—			—			5				—			—			5
Other Comprehensive Loss	—			—			—				(215	)		—			(215	)
Net Income	—			—			—				—			4,124			4,124

Balance as of March 26, 2016	6,924		$	3,462		$	12,993			$	(358	)	$	22,814		$	38,911

See accompanying notes to consolidated financial statements.

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TRANSCAT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Per Share and Per Unit Amounts)

NOTE 1 – GENERAL

Description of Business

Transcat, Inc. (“Transcat” or the “Company”) is a leading provider of accredited calibration and laboratory instrument services and a value-added distributor of professional grade handheld test, measurement and control instrumentation. The Company is focused on providing services and products to highly regulated industries, particularly life science, which includes companies in the pharmaceutical, medical device and biotechnology industries. Additional industries served include industrial manufacturing, energy and utilities, chemical manufacturing and other industries that require accuracy in their processes and confirmation of the capabilities of their equipment.

Principles of Consolidation

The Consolidated Financial Statements of Transcat include the accounts of Transcat and the Company’s wholly-owned subsidiaries, Transcat Canada Inc., United Scale & Engineering Corporation, WTT Real Estate Acquisition, LLC and Anacor Acquisition, LLC. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of Transcat’s Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States (“GAAP”) requires that the Company make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are used for, but not limited to, allowance for doubtful accounts and returns, inventory reserves, estimated levels of achievement for performance-based restricted stock units, fair value of stock options, depreciable lives of fixed assets, estimated lives of major catalogs and intangible assets, and the valuation of assets acquired and liabilities assumed in business acquisitions. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of the Consolidated Financial Statements will change as new events occur, as more experience is acquired, as additional information is obtained, and as the operating environment changes. Actual results could differ from those estimates. Such changes and refinements in estimation methodologies are reflected in reported results of operations in the period in which the changes are made and, if material, their effects are disclosed in the Notes to the Consolidated Financial Statements.

Fiscal Year

Transcat operates on a 52/53 week fiscal year, ending the last Saturday in March. In a 52-week fiscal year, each of the four quarters is a 13-week period. In a 53-week fiscal year, the last quarter is a 14-week period. The fiscal years ended March 26, 2016 (“fiscal year 2016”) and March 28, 2015 (“fiscal year 2015”) consisted of 52 weeks.

Accounts Receivable

Accounts receivable represent amounts due from customers in the ordinary course of business. These amounts are recorded net of the allowance for doubtful accounts and returns in the Consolidated Balance Sheets. The allowance for doubtful accounts is based upon the expected collectability of accounts receivable. Transcat applies a specific formula to its accounts receivable aging, which may be adjusted on a specific account basis where the formula may not appropriately reserve for loss exposure. After all attempts to collect a receivable have failed, the receivable is written-off against the allowance for doubtful accounts. The returns reserve is calculated based upon the historical rate of returns applied to revenues over a specific timeframe. The returns reserve will increase or decrease as a result of changes in the level of revenue and/or the historical rate of returns.

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Inventory

Inventory consists of products purchased for resale and is valued at the lower of cost or market. Costs are determined using the average cost method of inventory valuation. Inventory is reduced by a reserve for items not saleable at or above cost by applying a specific loss factor, based on historical experience, to specific categories of inventory. The Company evaluates the adequacy of the reserve on a quarterly basis. At March 26, 2016 and March 28, 2015, the Company had reserves for inventory losses totaling $0.5 million and $0.4 million, respectively.

Property and Equipment, Depreciation and Amortization

Property and equipment are stated at cost. Depreciation and amortization are computed primarily under the straight-line method over the following estimated useful lives:

	Years
Machinery, Equipment and Software	2 – 20
Rental Equipment	8 – 15
Furniture and Fixtures	3 – 10
Leasehold Improvements	2 – 10
Buildings	39

Property and equipment determined to have no value are written off at their then remaining net book value. Transcat capitalizes certain costs incurred in the procurement and development of computer software used for internal purposes. Leasehold improvements are amortized under the straight-line method over the estimated useful life or the lease term, whichever is shorter. Maintenance and repairs are expensed as incurred. See Note 2 for further information on property and equipment.

Business Acquisitions

The Company applies the acquisition method of accounting for business acquisitions. Under the acquisition method, the purchase price of an acquisition is allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair values at the date of acquisition. The Company uses a valuation hierarchy, as further described under Fair Value of Financial Instruments below, and typically utilizes independent third-party valuation specialists to determine the fair values used in this allocation. Purchase price allocations are subject to revision within the measurement period, not to exceed one year from the date of acquisition. Administration costs to acquire a business may include, but are not limited to, fees for accounting, legal and valuation services, and are recorded as incurred in the Consolidated Statement of Income.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the values assigned to the underlying net assets of an acquired business. Other intangible assets, namely customer base and covenants not to compete, represent an allocation of purchase price to identifiable intangible assets of an acquired business. The Company estimates the fair value of its reporting units using the fair market value measurement requirement.

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The Company tests goodwill for impairment on an annual basis, or immediately if conditions indicate that such impairment could exist. Other intangible assets are evaluated for impairment when events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company determined that no impairment was indicated as of March 26, 2016 and March 28, 2015. A summary of changes in the Company’s goodwill and intangible assets is as follows:

	Goodwill									Intangible Assets
	Distribution			Service			Total			Distribution				Service			Total
Net Book Value as of March 29, 2014		$	8,031	$	9,353		$	17,384			$	318		$	2,333		$	2,651
Additions (see Note 9)			—		4,392			4,392				—			2,293			2,293
Amortization			—		—			—				(115	)		(877	)		(992	)
Currency Translation Adjustment			—		(853	)		(853	)			—			(398	)		(398	)
Net Book Value as of March 28, 2015			8,031		12,892			20,923				203			3,351			3,554
Additions (see Note 9)			—		8,421			8,421				—			6,126			6,126
Amortization			—		—			—				(79	)		(1,255	)		(1,334	)
Currency Translation Adjustment			—		(232	)		(232	)			—			(137	)		(137	)
Net Book Value as of March 26, 2016		$	8,031	$	21,081		$	29,112			$	124		$	8,087		$	8,211

The intangible assets are being amortized on an accelerated basis over their estimated useful life of up to 10 years. Amortization expense relating to intangible assets is expected to be $2.0 million in fiscal year 2017, $1.6 million in fiscal year 2018, $1.3 million in fiscal year 2019, $1.0 million in fiscal year 2020 and $0.8 million in fiscal year 2021.

Catalog Costs

Transcat capitalizes the cost of each Master Catalog mailed and amortizes the cost over the respective catalog’s estimated productive life. The Company reviews response results from catalog mailings on a continuous basis, and if warranted, modifies the period over which costs are recognized. The Company amortizes the cost of each Master Catalog over an eighteen-month period and amortizes the cost of each catalog supplement over a three-month period. Total unamortized catalog costs, included as a component of prepaid expenses and other current assets on the Consolidated Balance Sheets, were $0.1 million and $0.2 million as of March 26, 2016 and March 28, 2015, respectively.

Deferred Taxes

Transcat accounts for certain income and expense items differently for financial reporting purposes than for income tax reporting purposes. Deferred taxes are provided in recognition of these temporary differences. If necessary, a valuation allowance on net deferred tax assets is provided for items for which it is more likely than not that the benefit of such items will not be realized based on an assessment of both positive and negative evidence. See Note 4 for further discussion on income taxes.

Fair Value of Financial Instruments

Transcat has determined the fair value of debt and other financial instruments using a valuation hierarchy. The hierarchy, which prioritizes the inputs used in measuring fair value, consists of three levels. Level 1 uses observable inputs such as quoted prices in active markets; Level 2 uses inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, which is defined as unobservable inputs in which little or no market data exists, requires the Company to develop its own assumptions. The carrying amount of debt on the Consolidated Balance Sheets approximates fair value due to variable interest rate pricing, and the carrying amounts for cash, accounts receivable and accounts payable approximate fair value due to their short-term nature. Investment assets, which fund the Company’s non-qualified deferred compensation plan, consist of mutual funds and are valued based on Level 1 inputs. At March 26, 2016 and March 28, 2015, investment assets totaled $0.7 million and $0.9 million, respectively, and are included as a component of other assets (non-current) on the Consolidated Balance Sheets.

Stock-Based Compensation

The Company measures the cost of services received in exchange for all equity awards granted, including stock options and restricted stock units, based on the fair market value of the award as of the grant date. The Company records compensation cost related to unvested equity awards by recognizing, on a straight line basis, the unamortized

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grant date fair value over the remaining service period of each award. Excess tax benefits from the exercise of equity awards are presented in the Consolidated Statements of Cash Flows as a financing activity. Excess tax benefits are realized benefits from tax deductions for exercised awards in excess of the deferred tax asset attributable to stock-based compensation costs for such awards. The Company did not capitalize any stock-based compensation costs as part of an asset. The Company estimates forfeiture rates based on its historical experience. During fiscal years 2016 and 2015, the Company recorded non-cash stock-based compensation cost in the amount of $0.4 million and $0.5 million, respectively, in the Consolidated Statements of Income.

The estimated fair value of options granted in fiscal year 2015 was calculated using the Black-Scholes-Merton pricing model (“Black-Scholes”), which produced a weighted average fair value of $1.41 per share. No options were granted during fiscal year 2016.

The following are the weighted average assumptions used in the Black-Scholes model:

	FY 2015
Expected term	2 years
Annualized volatility rate	29.7%
Risk-free rate of return	0.4%
Dividend rate	0.0%

The Black-Scholes model incorporates assumptions to value stock-based awards. The risk-free rate of return for periods within the contractual life of the award was based on a zero-coupon U.S. government instrument over the contractual term of the equity instrument. Expected volatility was based on historical volatility of the Company’s stock. The expected option term represented the period that stock-based awards are expected to be outstanding based on the simplified method, which averages an award’s weighted-average vesting period and expected term for “plain vanilla” share options. Options are considered to be “plain vanilla” if they have the following basic characteristics: granted “at-the-money”; exercisability is conditioned upon service through the vesting date; termination of service prior to vesting results in forfeiture; limited exercise period following termination of service; and options are non-transferable and non-hedgeable. The Company will continue to use the simplified method until it has the historical data necessary to provide a reasonable estimate of expected life.

Revenue Recognition

Distribution sales are recorded when an order’s title and risk of loss transfers to the customer. The Company recognizes the majority of its Service revenue based upon when the calibration or other activity is performed and then shipped and/or delivered to the customer. Some Service revenue is generated from managing customers’ calibration programs in which the Company recognizes revenue in equal amounts at fixed intervals. The Company generally invoices its customers for freight, shipping, and handling charges. Provisions for customer returns are provided for in the period the related revenue is recorded based upon historical data.

Vendor Rebates

Vendor rebates are generally based on specified cumulative level of purchases and/or incremental distribution sales and are recorded as a reduction of cost of distribution sales. Purchase rebates are calculated and recorded quarterly based upon the volume of purchases with specific vendors during the quarter. Point of sale rebate programs that are based on year-over-year sales performance on a calendar year basis are recorded as earned, on a quarterly basis, based upon the expected level of annual achievement. Point of sale rebate programs that are based on year-over-year sales performance on a quarterly basis are recorded as earned in the respective quarter. The Company recorded vendor rebates of $0.9 million and $0.3 million in fiscal years 2016 and 2015, respectively.

Cooperative Advertising Income

Transcat records cash consideration received from a vendor for advertising as a reduction of cost of distribution sales as the related inventory is sold. The Company recorded consideration in the amount of $2.0 million and $2.2 million in fiscal years 2016 and 2015, respectively.

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Advertising Costs

Advertising costs, other than catalog costs, are expensed as they are incurred and are included in Selling, Marketing and Warehouse Expenses in the Consolidated Statements of Income. Advertising costs were approximately $1.2 million and $1.6 million in fiscal years 2016 and 2015, respectively.

Shipping and Handling Costs

Freight expense and direct shipping costs are included in the cost of revenue. These costs totaled approximately $1.8 million in each of fiscal years 2016 and 2015. Direct handling costs, the majority of which represent direct compensation of employees who pick, pack, and prepare merchandise for shipment to customers, are reflected in selling, marketing and warehouse expenses. Direct handling costs were $0.9 million in fiscal years 2016 and 2015.

Foreign Currency Translation and Transactions

The accounts of Transcat Canada Inc. are maintained in the local currency and have been translated to U.S. dollars. Accordingly, the amounts representing assets and liabilities have been translated at the period-end rates of exchange, and related revenue and expense accounts have been translated at an average rate of exchange during the period. Gains and losses arising from translation of Transcat Canada Inc.’s financial statements into U.S. dollars are recorded directly to the accumulated other comprehensive income (loss) component of shareholders’ equity.

Transcat records foreign currency gains and losses on business transactions denominated in foreign currency. The net foreign currency loss was $0.1 million in fiscal year 2015 and less than $0.1 million in fiscal year 2016. The Company continually utilizes short-term foreign exchange forward contracts to reduce the risk that its earnings would be adversely affected by changes in currency exchange rates. The Company does not apply hedge accounting and therefore the net change in the fair value of the contracts, which totaled a net gain of $0.4 million in fiscal year 2016 and a net gain of $0.9 million in 2015, was recognized as a component of other expense in the Consolidated Statements of Income. The change in the fair value of the contracts is offset by the change in fair value on the underlying accounts receivables denominated in Canadian dollars being hedged. On March 26, 2016, the Company had a foreign exchange contract, which matured in April 2016, outstanding in the notional amount of $5.7 million. This contract was subsequently renewed and remains in place. The Company does not use hedging arrangements for speculative purposes.

Other Comprehensive Income

Comprehensive income is composed of currency translation adjustments, unrecognized prior service costs, net of tax, and unrealized gains or losses on other assets, net of tax. At March 26, 2016, accumulated other comprehensive income consisted of cumulative currency translation losses of $0.3 million, unrecognized prior service costs, net of tax, of $0.1 million and an unrealized gain on other assets, net of tax, of less than $0.1 million. At March 28, 2015, accumulated other comprehensive income consisted of cumulative currency translation losses of less than $0.1 million, unrecognized prior service costs, net of tax, of $0.1 million and an unrealized gain on other assets, net of tax, of less than $0.1 million.

Earnings Per Share

Basic earnings per share of common stock are computed based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share of common stock reflect the assumed conversion of stock options and unvested restricted stock units using the treasury stock method in periods in which they have a dilutive effect. In computing the per share effect of assumed conversion, funds which would have been received from the exercise of options and unvested restricted stock units and the related tax benefits are considered to have been used to purchase shares of common stock at the average market prices during the period, and the resulting net additional shares of common stock are included in the calculation of average shares of common stock outstanding.

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For each of fiscal years 2016 and 2015, the net additional common stock equivalents had a $.02 per share effect on the calculation of dilutive earnings per share. The average shares outstanding used to compute basic and diluted earnings per share are as follows:

	For the Years Ended
	March 26,		March 28,
	2016		2015
Average Shares Outstanding – Basic		6,887		6,798
Effect of Dilutive Common Stock Equivalents		234		261
Average Shares Outstanding – Diluted		7,121		7,059
Anti-dilutive Common Stock Equivalents		10		10

Shareholders’ Equity

During each of fiscal years 2016 and 2015, the Company repurchased and subsequently retired less than 0.1 million shares of its common stock.

Recently Issued Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Compensation-Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016. Early adoption is permitted in any annual or interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of fiscal year that includes that interim period and the entity must adopt all of the amendments from ASU 2016-09 in the same period. The Company expects to adopt this ASU in the first quarter of fiscal year 2017 and does not expect adoption to have a material impact on the Consolidated Financial Statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU indicates that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606) - Deferral of the Effective Date, which deferred the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, with earlier application permitted as of annual reporting periods beginning after December 15, 2016. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606) - Principal versus Agent Considerations, to clarify the implementation guidance on principal versus agent. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing, which clarifies the identifying performance obligations and licensing implementation guidance. The Company is currently evaluating the impact of adopting these ASU’s and the methods of adoption; however, the Company does not expect adoption of these ASU’s to have a material impact on its Consolidated Financial Statements. See Note 1 “Revenue Recognition” for a description of the Company’s current revenue recognition policy.

In February 2016, the FASB issued ASU 2016-02 to Topic 842, Leases. This ASU requires companies to recognize all leases as assets and liabilities on the consolidated balance sheet. Under this ASU, there continues to be a differentiation between finance leases and operating leases. As a result, the recognition, measurement, and presentation of expenses and cash flows arising from a lease have not significantly changed from previous GAAP. However, the principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases should be recognized on the Consolidate Balance Sheet. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Earlier adoption is permitted. The Company is currently evaluating the impact that the adoption of this ASU will have on its Consolidated Financial Statements.

In November 2015, the FASB issued 2015-17 to Topic 740, Income Taxes. This ASU requires entities to record all deferred tax liabilities and assets as noncurrent in the Consolidated Balance Sheet. This ASU is effective for financial statements issued for annual periods beginning after December 15, 2016 and may be applied either prospectively to all

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deferred tax liabilities and assets or retrospectively to all periods presented. Early adoption of this ASU is permitted. The Company adopted this ASU in the fourth quarter of fiscal year 2016 on a prospective basis. This adoption did not have a material impact on the Consolidated Financial Statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330) -Simplifying the Measurement of Inventory. ASU 2015-11 requires inventory that is recorded using the first-in, first-out method to be measured at the lower of cost or net realizable value. ASU 2015-11 is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company does not expect adoption of this ASU to have a material impact on its Consolidated Financial Statements.

Reclassification of Amounts

Certain reclassifications of financial information for prior fiscal years have been made to conform to the presentation for the current fiscal year.

Subsequent Events

On March 31, 2016, the Company entered into Amendment 3 to its Credit Agreement (“Amendment 3”), which amends the Credit Agreement to add a $10.0 million term loan, expanding total borrowings available to $40.0 million. Amendment 3 also amends the Credit Agreement to allow borrowings for business acquisitions of up to $20.0 million for fiscal year 2017 and $15.0 million for each fiscal year thereafter. The term loan matures on March 31, 2021 and is considered a LIBOR Loan. Amendment 3 also increased the allowable leverage ratio to 3.0 to 1.0, from 2.75 to 1.0.

Required repayments under the term loan began in April 2016 in the amount of $0.1 million per month plus interest. Annual repayment amounts of $1.4 million are required in fiscal years 2017 through 2021 with a $3.0 million repayment required in fiscal year 2022.

On April 1, 2016, the Company acquired substantially all of the assets of Excalibur, a California based provider of calibration services, new and used test equipment, and product rentals for approximately $7.4 million, of which $6.6 million was paid at closing. The remainder of the purchase price was held back under typical indemnification provisions and is expected to be paid-out in the fourth quarter of fiscal year 2017.

The allocation of the Excalibur purchase price to the fair value of the net assets acquired and pro forma financial results were not yet available at the time this report was filed due to the proximity of the filing date to the date of acquisition. Goodwill equal to the amount of purchase price paid in excess of the fair value of the underlying net assets of Excalibur is expected to be recorded during the first quarter of fiscal year 2017. Acquisition costs related to this acquisition of approximately $0.1 million were incurred and recorded as administrative expenses in the Consolidated Statement of Income in fiscal year 2016. The results of operations of this acquisition will be included with the results of the Company from the date of acquisition.

NOTE 2 – PROPERTY AND EQUIPMENT

Property and equipment consist of:

	March 26,			March 28,
	2016			2015
Machinery, Equipment and Software	$	29,833		$	26,081
Rental Equipment		1,243			585
Furniture and Fixtures		2,326			2,132
Leasehold Improvements		2,281			1,989
Buildings and Land		500			500
Total Property and Equipment		36,182			31,287
Less: Accumulated Depreciation and Amortization		(23,869	)		(21,890	)
Total Property and Equipment, net	$	12,313		$	9,397

Total depreciation and amortization expense relating to property and equipment amounted to $2.3 million and $1.7 million in fiscal years 2016 and 2015, respectively.

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NOTE 3 – LONG-TERM DEBT

Description

Transcat, through its Credit Agreement which matures September 20, 2018, has a Revolving Credit Facility which allows for maximum borrowings of $30.0 million. The Revolving Credit Facility is subject to a maximum borrowing restriction based on a 2.75 multiple of earnings before income taxes, depreciation and amortization, and non-cash stock-based compensation expense for the preceding four consecutive fiscal quarters. As of March 26, 2016, $30.0 million was available under the Revolving Credit Facility, of which $19.1 million was outstanding and included in long-term debt on the Consolidated Balance Sheets. See Note 1 for discussion of Amendment 3 to the Revolving Credit Facility on March 31, 2016.

Except as otherwise provided for in Amendment 3 to the Credit Agreement and as described in Note 1, borrowings available under the Credit Agreement for business acquisitions are limited to $15.0 million in any fiscal year. During fiscal year 2016, the Company borrowed $13.9 million for business acquisitions.

Interest and Other Costs

Interest on the Revolving Credit Facility accrues, at Transcat’s election, at either the one-month London Interbank Offered Rate (“LIBOR”), adjusting daily, or a fixed rate for a designated period at the LIBOR corresponding to such period; in each case, plus a margin. Commitment fees accrue based on the average daily amount of unused credit available on the Revolving Credit Facility. Interest rate margins and commitment fees are determined on a quarterly basis based upon the Company’s calculated leverage ratio, as defined in the Credit Agreement. The one-month LIBOR as of March 26, 2016 was 0.4%. The Company’s interest rate for fiscal year 2016 ranged from 1.3% to 1.9%.

Covenants

The Credit Agreement has certain covenants with which the Company has to comply, including a fixed charge ratio covenant and a leverage ratio covenant. The Company was in compliance with all loan covenants and requirements throughout fiscal year 2016.

Other Terms

The Company has pledged all of its U.S. tangible and intangible personal property, the equity interests of its U.S.-based subsidiaries, and a majority of the common stock of Transcat Canada Inc. as collateral security for the loans made under the Revolving Credit Facility.

NOTE 4 – INCOME TAXES

Transcat’s net income before income taxes on the Consolidated Statements of Income is as follows:

	FY 2016			FY 2015
United States		$	5,760		$	6,115
Foreign			247			308
Total		$	6,007		$	6,423

The provision for income taxes for fiscal years 2016 and 2015 is as follows:

	FY 2016			FY 2015
Current Tax Provision:
Federal	$	1,367		$	1,200
State		202			311
Foreign		174			107
		1,743			1,618
Deferred Tax (Benefit) Provision:
Federal	$	266		$	776
State		85			64
Foreign		(211	)		(61	)
		140			779
Provision for Income Taxes	$	1,883		$	2,397

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A reconciliation of the income tax provision computed by applying the statutory U.S. federal income tax rate and the income tax provision reflected in the Consolidated Statements of Income is as follows:

	FY 2016			FY 2015
Federal Income Tax at Statutory Rate	$	2,042		$	2,184
State Income Taxes, net of federal benefit		226			220
Federal, State & Foreign Research & Development Credits		(479	)		0
Other, net		94			(7	)
Total	$	1,883		$	2,397

The components of net deferred tax assets (liabilities) are as follows:

	March 26,			March 28,
	2016			2015
Deferred Tax Assets:
Accrued Liabilities	$	399		$	384
Performance-Based Grants		335			395
Inventory Reserves		163			143
Non-Qualified Deferred Compensation Plan		273			362
Post-retirement Health Care Plans		387			385
Stock-Based Compensation		808			810
Capitalized Inventory Costs		117			112
Net Operating Loss Carryforward		133			—
Other		313			151
Total Deferred Tax Assets	$	2,928		$	2,742
Deferred Tax Liabilities:
Goodwill and Intangible Assets	$	(1,865	)	$	(1,754	)
Depreciation		(2,127	)		(1,544	)
Other		(7	)		(80	)
Total Deferred Tax Liabilities		(3,999	)		(3,378	)
Net Deferred Tax (Liabilities) Assets	$	(1,071	)	$	(636	)

Deferred U.S. income taxes have not been recorded for basis differences related to the investments in the Company’s foreign subsidiary. The Company considers undistributed earnings, if any, as permanently reinvested in the subsidiary. The determination of a deferred tax liability on unremitted earnings would not be practicable because such liability, if any, would depend on circumstances existing if and when remittance occurs.

The Company files income tax returns in the U.S. federal jurisdiction, various states and Canada. The Company is no longer subject to examination by U.S. federal income tax authorities for fiscal years 2013 and prior, by state tax authorities for fiscal years 2010 and prior, and by Canadian tax authorities for fiscal years 2008 and prior. There are no tax years currently under examination by U.S. federal, state or Canadian tax authorities.

During fiscal years 2016 and 2015, there were no uncertain tax positions, and the Company expects no material uncertain tax positions within the next twelve months. The Company recognizes interest and penalties, if any, related to uncertain tax positions in the provision for income taxes. No interest or penalties related to uncertain tax positions were recognized in fiscal years 2016 and 2015 or were accrued at March 26, 2016 and March 28, 2015.

At March 26, 2016, the deferred tax asset related to U.S. federal net operating loss carryforwards of approximately $0.1 million and U.S. state net operating loss carryforwards of less than $0.1 million are available to reduce future taxable income. The utilization of these losses is subject to an annual limitation due to ownership change rules set forth under Internal Revenue Code Section 382.

The Company’s effective tax rate for fiscal years 2016 and 2015 was 31.3% and 37.3%, respectively. Its tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions, which we expect to be fairly consistent in the near term. It is also affected by discrete items that may

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occur in any given year but are not consistent from year to year. The most significant impact on the difference between the Company’s statutory U.S. federal income tax rate of 34.0% and effective tax rate was the cumulative impact of research and development credits of $0.5 million, of which $0.3 million relates to prior periods.

The Company expects to receive certain federal and state tax credits in future years, but not to the extent that they were received in fiscal year 2016. As such, we expect our effective tax rate to be higher in future years than it was in fiscal year 2016.

NOTE 5 – EMPLOYEE BENEFIT PLANS

Defined Contribution Plan

All of Transcat’s U.S.-based employees are eligible to participate in a defined contribution plan, the Long-Term Savings and Deferred Profit Sharing Plan (the “Plan”), provided they meet certain qualifications.

In the long-term savings portion of the Plan (the “401K Plan”), plan participants are entitled to a distribution of their vested account balance upon termination of employment or retirement. Plan participants are fully vested in their contributions while Company contributions are fully vested after three years of service. The Company’s matching contributions to the 401K Plan were $0.6 million and $0.5 million in fiscal years 2016 and 2015, respectively.

In the deferred profit sharing portion of the Plan, Company contributions are made at the discretion of the board of directors. The Company made no profit sharing contributions in fiscal years 2016 and 2015.

Non-Qualified Deferred Compensation Plan

The Company has available a non-qualified deferred compensation plan (the “NQDC Plan”) for directors and officers. Participants are fully vested in their contributions. At its discretion, the Company may elect to match employee contributions, subject to legal limitations in conjunction with the 401K Plan, which fully vest after three years of service. During fiscal years 2016 and 2015, the Company did not match any employee contributions. Participant accounts are adjusted to reflect performance, whether positive or negative, of selected investment options chosen by each participant during the deferral period. In the event of bankruptcy, the assets of the NQDC Plan are available to satisfy the claims of the Company’s general creditors. The liability for compensation deferred under the NQDC Plan was $0.7 million as of March 26, 2016 and $0.9 million as of March 28, 2015 and is included as a component of other liabilities (non-current) on the Consolidated Balance Sheets.

Post-retirement Health Care Plans

The change in the postretirement benefit obligation is as follows:

	FY 2016			FY 2015
Post-retirement benefit obligation, at beginning of fiscal year	$	1,001		$	882
Service cost		34			19
Interest cost		37			39
Benefits paid		(70	)		(56	)
Actuarial loss		4			117
Post-retirement benefit obligation, at end of fiscal year		1,006			1,001
Fair value of plan assets, at end of fiscal year		—			—
Funded status, at end of fiscal year	$	(1,006	)	$	(1,001	)
Accumulated post-retirement benefit obligation, at end of fiscal year	$	1,006		$	1,001

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The accumulated postretirement benefit obligation is included as a component of other liabilities (non-current) in the Consolidated Balance Sheets. The components of net periodic postretirement benefit cost and other amounts recognized in other comprehensive income are as follows:

	FY 2016				FY 2015
Net periodic postretirement benefit cost:
Service cost		$	34			$	19
Interest cost			37				39
Amortization of prior service cost			58				58
			129				116
Benefit obligations recognized in other comprehensive income:
Amortization of prior service cost			(58	)			(58	)
Net gain (loss)			(8	)			133
			(66	)			75
Total recognized in net periodic benefit cost and other comprehensive income		$	63			$	191
Amount recognized in accumulated other comprehensive income,
at end of fiscal year:
Unrecognized prior service cost		$	162			$	229

The prior service cost is amortized over the average remaining life expectancy of active participants for the Officer Plan. The estimated prior service cost that will be amortized from accumulated other comprehensive income into net periodic postretirement benefit cost during fiscal year 2017 is less than $0.1 million.

The postretirement benefit obligation was computed by an independent third-party actuary. Assumptions used to determine the postretirement benefit obligation and the net periodic postretirement benefit cost were as follows:

	March 26,	March 28,
	2016	2015
Weighted average discount rate	3.9%	3.8%
Medical care cost trend rate:
Trend rate assumed for next year	8.0%	8.0%
Ultimate trend rate	6.0%	5.0%
Year that rate reaches ultimate trend rate	2022	2023
Dental care cost trend rate:
Trend rate assumed for next year and remaining at that level thereafter	5.0%	5.0%

Benefit payments are funded by the Company as needed. Payments toward the cost of a retiree’s medical and dental coverage are initially determined as a percentage of a base coverage plan in the year of retirement and are limited to increase at a rate of no more than 50% of the annual increase in medical and dental costs, as defined in the plan document. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows:

Fiscal Year	Amount
2017		$	75
2018			63
2019			57
2020			60
2021			69
Thereafter			682

Increasing the assumed health care cost trend rate by one percentage point would increase the accumulated postretirement benefit obligation and the annual net periodic postretirement benefit cost by $0.1 million. A one percentage point decrease in the healthcare cost trend would decrease the accumulated postretirement benefit obligation and the annual net periodic postretirement benefit cost by $0.1 million.

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NOTE 6 – STOCK-BASED COMPENSATION

The Transcat, Inc. 2003 Incentive Plan, as Amended and Restated (the “2003 Plan”), provides for, among other awards, grants of restricted stock units and stock options to directors, officers and key employees at the fair market value at the date of grant. At March 26, 2016, 1.3 million shares were available for future grant under the 2003 Plan.

Restricted Stock

The Company grants performance-based restricted stock units as a primary component of executive compensation. The units generally vest following the third fiscal year from the date of grant subject to certain cumulative diluted earnings per share growth targets over the eligible period. Compensation cost ultimately recognized for performance-based restricted stock units will equal the grant date fair market value of the unit that coincides with the actual outcome of the performance conditions. On an interim basis, the Company records compensation cost based on the estimated level of achievement of the performance conditions.

The following table summarizes the performance-based restricted stock units vested and shares issued during fiscal years 2015 and 2016:

Total

Grant Date

Number

Fair

Target

Number of

Date

Measurement

of Units

Value

Level

Shares

Granted

Period

Granted

Per Unit

Achieved

Issued

April 2011

April 2011 - March 2014

8.44

114%

May 2014

April 2012

April 2012 - March 2015

13.11

75%

May 2015

The following table summarizes the non-vested performance-based restricted stock units outstanding as of March 26, 2016:

		Total	Grant Date			Estimated
		Number	Fair			Level of
Date	Measurement	of Units	Value			Achievement at
Granted	Period	Granted	Per Unit			March 26, 2016
April 2013	April 2013 - March 2016	99		$	6.17	50% of target level
April 2014	April 2014 - March 2017	61		$	9.28	50% of target level
April 2015	April 2015 - March 2018	73		$	9.59	75% of target level

Total expense relating to performance-based restricted stock units, based on grant date fair value and the achievement criteria, was $0.2 million and $0.3 million in fiscal years 2016 and 2015, respectively. Unearned compensation totaled $0.5 million as of March 26, 2016.

During fiscal year 2016, the Company’s Board of Directors granted a stock award of two thousand shares of common stock under the 2003 Plan to a retiring board member. The award vested in the second quarter of fiscal year 2016. During fiscal year 2015, the Company’s Board of Directors granted stock awards to its Executive Chairman and to a retiring board member. The Executive Chairman received an award of ten thousand shares of common stock under the 2003 Plan. 50% this award vested in the second quarter of fiscal year 2015, and the remaining 50% vested in the second quarter of fiscal year 2016. The retiring board member received an award of two thousand shares of common stock under the 2003 Plan. This award vested in the second quarter of fiscal year 2015. Total expense relating to these stock awards, based on grant date fair value, was less than $0.1 million in fiscal year 2016 and was $0.1 million in fiscal year 2015.

Stock Options

Options generally vest over a period of up to four years, using either a graded schedule or on a straight-line basis, and expire ten years from the date of grant. The expense relating to options is recognized on a straight-line basis over the requisite service period for the entire award.

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The following table summarizes the Company’s options for fiscal years 2016 and 2015:

				Weighted			Weighted
				Average			Average
	Number			Exercise			Remaining		Aggregate
	of			Price Per			Contractual		Intrinsic
	Shares			Share			Term (in Years)		Value
Outstanding as of March 29, 2014		609			$	6.58
Granted		10				9.66
Exercised		(58	)			4.66
Outstanding as of March 28, 2015		561				6.83
Exercised		(50	)			5.35
Forfeited		(1	)			4.26
Options Redeemed		(16	)			5.68
Outstanding as of March 26, 2016		494				7.03		3		$	1,535
Exercisable as of March 26, 2016		414				6.92		2			1,330

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of fiscal year 2016 and the exercise price, multiplied by the number of in-the-money stock options) that would have been received by the option holders had all holders exercised their options on March 26, 2016. The amount of aggregate intrinsic value will change based on the fair market value of the Company’s stock.

During both of fiscal years 2016 and 2015, total expense relating to stock options was $0.1 million. Total unrecognized compensation cost related to non-vested stock options as of March 26, 2016 was $0.1 million, which is expected to be recognized over a weighted average period of one year. The aggregate intrinsic value of stock options exercised in fiscal years 2016 and 2015 was $0.2 million and $0.3 million, respectively. Cash received from the exercise of options in each of fiscal years 2016 and 2015 was $0.3 million.

NOTE 7 – SEGMENT AND GEOGRAPHIC DATA

Transcat has two reportable segments: Distribution and Service. The accounting policies of the reportable segments are the same as those described above in Note 1 to the Consolidated Financial Statements. The Company has no inter-segment sales. The following table presents segment and geographic data for fiscal years 2016 and 2015:

	FY 2016		FY 2015
Revenue:
Service	$	59,202	$	51,801
Distribution		62,964		71,823
Total		122,166		123,624
Gross Profit:
Service		15,585		14,103
Distribution		13,534		14,984
Total		29,119		29,087
Operating Expenses:
Service (1)		11,430		10,410
Distribution (1)		11,387		11,909
Total		22,817		22,319
Operating Income:
Service		4,155		3,693
Distribution		2,147		3,075
Total		6,302		6,768
Unallocated Amounts:
Interest and Other Expense, net		295		345
Provision for Income Taxes		1,883		2,397
Total		2,178		2,742
Net Income	$	4,124	$	4,026

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	FY 2016		FY 2015
Total Assets:
Service	$	48,640	$	31,552
Distribution		24,878		26,220
Unallocated		3,189		4,377
Total	$	76,707	$	62,149
Depreciation and Amortization (2):
Service	$	3,216	$	2,362
Distribution		730		728
Total	$	3,946	$	3,090
Capital Expenditures:
Service	$	3,133	$	2,409
Distribution		968		1,091
Total	$	4,101	$	3,500
Geographic Data:
Revenues to Unaffiliated Customers (3):
United States (4)	$	109,770	$	110,077
Canada		10,854		11,075
Other International		1,542		2,472
Total	$	122,166	$	123,624
Long-Lived Assets:
United States (4)	$	11,337	$	8,782
Canada		976		615
Total	$	12,313	$	9,397

____________________

(1)		Operating expense allocations between segments were based on actual amounts, a percentage of revenues, headcount, and management’s estimates.

(2)		Including amortization of catalog costs.

(3)		Revenues are attributed to the countries based on the destination of a product shipment or the location where service is rendered.

(4)		United States includes Puerto Rico.

NOTE 8 – COMMITMENTS

Leases

Transcat leases facilities, equipment, and vehicles under various non-cancelable operating leases. Total rental expense was approximately $2.4 million and $2.0 million in fiscal years 2016 and 2015, respectively. The minimum future annual rental payments under the non-cancelable leases at March 26, 2016 are as follows (in millions):

Fiscal Year
2017	$	2.1
2018		1.9
2019		1.7
2020		0.8
2021		0.5
Thereafter		0.5
Total minimum lease payments	$	7.5

Effective April 2016, the Company will have term loan payments due at a monthly amount of $0.1 million plus interest. These amounts are not reflected in the table above.

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NOTE 9 – BUSINESS ACQUISITIONS

The Company has engaged in a number of business acquisitions. During fiscal years 2015 and 2016, Transcat completed the following:

●	On August 31, 2014, acquired Ulrich Metrology Inc. (“Ulrich”). Headquartered in Montreal, Quebec, Ulrich is a provider of accredited and commercial calibrations throughout Canada that specializes in providing custom metrology solutions for the aerospace and defense, industrial manufacturing and life science industries.

●	On March 6, 2015, acquired substantially all of the assets of Apex Metrology Solutions (“Apex”). Apex is a provider of accredited and commercial calibrations, specializing in 3D metrology services, through its ISO 17025 accredited lab located in Ft. Wayne, Indiana.

●	On June 22, 2015, acquired substantially all of the assets of Calibration Technologies, Inc., a regional provider of analytical instrument services including qualification, validation, repair and installation, headquartered in Morris Plains, New Jersey.

●	Effective August 24, 2015, acquired Anmar Metrology, Inc. (“Anmar”), a calibration and repair service provider with significant focus on the life science and defense market, headquartered in San Diego, California.

●	On August 25, 2015, acquired Nordcal Calibration Inc. (“Nordcal”), a provider of radio frequency and electronic calibration and repair services, located in Montreal, Quebec.

●	Effective December 31, 2015, acquired substantially all of the assets of Spectrum Technologies, Inc. (“Spectrum”). Headquartered in Paxinos, Pennsylvania, Spectrum provides commercial calibrations, test equipment repair services and product sales throughout North America.

●	Effective January 18, 2016, acquired Dispersion Laboratory Inc. (“Dispersion”), headquartered near Montreal, Quebec, Dispersion provides fully accredited services for the calibration, repair and product sales of weights, balances, temperature instruments and liquid handling devices.

These transactions align with the Company’s acquisition strategy of targeting service businesses that expand the Company’s geographic reach and leverage its infrastructure while also increasing the depth and breadth of the Company’s service capabilities.

The acquisitions were accounted for using the acquisition method of accounting. Goodwill, calculated as the excess of the purchase price paid over the fair value of the underlying net assets of the businesses acquired, generally represents expected future economic benefits arising from the reputation of an acquired business, the assembled workforce, expected synergies and other assets acquired that could not be individually identified and separately recognized. Other intangible assets, namely customer bases and covenants not to compete, represent an allocation of a portion of the purchase price to identifiable intangible assets of the acquired businesses. Intangible assets are being amortized for financial reporting purposes on an accelerated basis over an estimated useful life of up to 10 years. Amortization of goodwill and the intangible assets relating to the Ulrich, Anmar, Nordcal and Dispersion acquisitions is not expected to be deductible for tax purposes.

The total purchase price paid for the businesses acquired in fiscal year 2016 was approximately $13.9 million, net of $0.2 million cash acquired. The total purchase price paid for the businesses acquired in fiscal year 2015 was approximately $7.3 million, net of $0.1 million cash acquired. The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of assets and liabilities acquired during each period presented:

		FY 2016			FY 2015
Goodwill		$	8,421		$	4,392
Intangible Assets – Customer Base			5,617			2,179
Intangible Assets – Covenants Not to Compete			509			114
Deferred Tax Liability			(299	)		(711	)
			14,248			5,974
Plus:	Current Assets		1,257			872
	Non-Current Assets		1,198			669
Less:	Current Liabilities		(2,809	)		(236	)
Total Purchase Price		$	13,894		$	7,279

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The business acquisitions completed during fiscal year 2016 contain holdback provisions, as defined by the respective purchase agreements. The Company accrues contingent consideration, if any, based on its estimated fair value at the date of acquisition, in addition to other amounts relating to the holdback provisions. No contingent consideration or other holdback amounts were paid during fiscal years 2015 or 2016. As of March 26, 2016, $0.8 million of contingent consideration and $1.6 million of other holdback amounts were unpaid and reflected in current liabilities on the Consolidated Balance Sheet. As of March 28, 2015, contingent consideration and other holdback amounts totaling less than $0.1 million were unpaid and reflected in current liabilities on the Consolidated Balance Sheet.

During fiscal year 2016, acquisition costs of $0.6 million were incurred and recorded as administrative expenses in the Consolidated Statement of Income. Acquisition costs of $0.2 million were incurred and recorded in fiscal year 2015.

The results of the acquired businesses are included in Transcat’s consolidated operating results as of the date the businesses were acquired. The following unaudited pro forma information presents the Company’s results of operations as if the acquisitions had occurred at the beginning of the respective fiscal year. The pro forma results do not purport to represent what the Company’s results of operations actually would have been if the transactions had occurred at the beginning of each period presented or what the Company’s operating results will be in future periods.

	(Unaudited)
	For the Years Ended
	March 26, 2016			March 28, 2015
Total Revenue		$	128,516		$	135,474
Net Income			5,161			5,509
Basic Earnings Per Share			0.75			0.81
Diluted Earnings Per Share			0.72			0.78

NOTE 10 – QUARTERLY DATA (UNAUDITED)

The following table presents a summary of certain unaudited quarterly financial data for fiscal years 2016 and 2015:

									Basic			Diluted
	Total		Gross			Net			Earnings			Earnings
	Revenues		Profit			Income			Per Share (a)			Per Share (a)
FY 2016:
Fourth Quarter	$	32,860		$	8,542		$	1,577		$	0.22		$	0.22
Third Quarter		30,160			6,788			1,682			0.15			0.15
Second Quarter		29,476			6,737			878			0.13			0.12
First Quarter		29,670			7,062			601			0.09			0.08

FY 2015:
Fourth Quarter	$	32,342		$	8,498		$	1,909		$	0.28		$	0.27
Third Quarter		31,052			6,994			813			0.12			0.11
Second Quarter		31,111			6,926			859			0.13			0.12
First Quarter		29,119			6,669			445			0.07			0.06

____________________

(a)

Earnings per share calculations for each quarter include the weighted average effect of stock issuances and common stock equivalents for the quarter; therefore, the sum of quarterly earnings per share amounts may not equal full-year earnings per share amounts, which reflect the weighted average effect on an annual basis. Diluted earnings per share calculations for each quarter include the effect of stock options and non-vested restricted stock units, when dilutive to the quarter. In addition, basic earnings per share and diluted earnings per share may not add due to rounding.

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ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a) CONCLUSION REGARDING THE EFFECTIVENESS OF DISCLOSURE CONTROLS AND PROCEDURES

Our principal executive officer and our principal financial officer evaluated our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934, as amended (“the Exchange Act”) Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this annual report. Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our principal executive officer and principal financial officer to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of such date.

(b) MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. In designing and evaluating our internal control system, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives and that the effectiveness of any system has inherent limitations including, but not limited to, the possibility of human error and the circumvention or overriding of controls and procedures. Management, including the principal executive officer and the principal financial officer, is required to apply judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected in a timely manner.

An evaluation was performed under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, of the effectiveness of the design and operation of our procedures and internal control over financial reporting using the framework and criteria described in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management, including our principal executive officer and our principal financial officer, concluded that our internal control over financial reporting was effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles as of March 26, 2016.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report on internal control over financial reporting was not subject to attestation by our independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission for smaller reporting companies that permit us to provide only management’s report in this annual report.

(c) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There has been no change in our internal control over financial reporting that occurred during the last fiscal quarter covered by this annual report (our fourth fiscal quarter) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

Not applicable.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item 10 is incorporated herein by reference from our proxy statement for our 2016 Annual Meeting of Shareholders under the headings “Election of Directors,” “Corporate Governance,” “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance,” which proxy statement will be filed pursuant to Regulation 14A within 120 days after the March 26, 2016 fiscal year end.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item 11 is incorporated herein by reference from our proxy statement for our 2016 Annual Meeting of Shareholders under the headings “Executive Compensation” and “Director Compensation,” which proxy statement will be filed pursuant to Regulation 14A within 120 days after the March 26, 2016 fiscal year end.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

With the exception of the information presented in the table below, the information required by this Item 12 is incorporated herein by reference from our proxy statement for our 2016 Annual Meeting of Shareholders under the headings “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management,” which proxy statement will be filed pursuant to Regulation 14A within 120 days after the March 26, 2016 fiscal year end.

Securities Authorized for Issuance Under Equity Compensation Plans as of March 26, 2016:

Equity Compensation Plan Information
(In Thousands, Except Per Share Amounts)

Number of securities

remaining available

to be issued

Weighted average

for future issuance under

upon exercise of

exercise price of

equity compensation plans

outstanding options,

(excluding securities

Plan category

warrants and rights

reflected in column (a))

(a)

(b)

(c)

Equity compensation plans approved by

security holders

494

(1)

7.02

(2)

1,385

Equity compensation plans not approved by

security holders

—

Total

494

7.02

1,385

____________________

(1)	Includes performance-based restricted stock units granted to officers and key employees pursuant to our 2003 Incentive Plan. See Note 6 to our Consolidated Financial Statements in Item 8 of Part II.

(2)	Does not include restricted stock units.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item 13 is incorporated herein by reference from our proxy statement for our 2016 Annual Meeting of Shareholders under the headings “Corporate Governance” and “Certain Relationships and Related Transactions,” which proxy statement will be filed pursuant to Regulation 14A within 120 days after the March 26, 2016 fiscal year end.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item 14 is incorporated herein by reference from our proxy statement for our 2016 Annual Meeting of Shareholders under the heading “Ratification of Selection of Independent Registered Public Accounting Firm,” which proxy statement will be filed pursuant to Regulation 14A within 120 days after the March 26, 2016 fiscal year end.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)	See Index to Financial Statements included in Item 8 of Part II of this report.

(b)	Exhibits.

See Index to Exhibits contained in this report.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		TRANSCAT, INC.

Date: June 20, 2016		/s/ LEE D. RUDOW
	By:	L EE D. R UDOW
		President and Chief Executive Officer

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 and in the capacities and on the dates indicated.

Date	Signature	Title

June 20, 2016	/s/ LEE D. RUDOW	Director, President and Chief Executive Officer
	L EE D. R UDOW	(Principal Executive Officer)

June 20, 2016	/s/ MICHAEL J. TSCHIDERER	Vice President of Finance and
	M ICHAEL J. T SCHIDERER	Chief Financial Officer
		(Principal Financial Officer)

June 20, 2016	/s/ SCOTT D. DEVERELL	Controller and Principal Accounting Officer
	S COTT D. D EVERELL	(Principal Accounting Officer)

June 20, 2016	/s/ CHARLES P. HADEED	Chairman of the Board of Directors
	C HARLES P. H ADEED

June 20, 2016	/s/ RICHARD J. HARRISON	Director
	R ICHARD J. H ARRISON

June 20, 2016	/s/ GARY J. HASELEY	Director
	G ARY J. H ASELEY

June 20, 2016	/s/ PAUL D. MOORE	Director
	P AUL D. M OORE

June 20, 2016	/s/ ANGELA J. PANZARELLA	Director
	A NGELA J. P ANZARELLA

June 20, 2016	/s/ ALAN H. RESNICK	Director
	A LAN H. R ESNICK

June 20, 2016	/s/ CARL E. SASSANO	Director
	C ARL E. S ASSANO

June 20, 2016	/s/ JOHN T. SMITH	Director
	J OHN T. S MITH

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INDEX TO EXHIBITS

(3)		Articles of Incorporation and Bylaws

		3.1(a)	The Articles of Incorporation, as amended (the “Articles”), are incorporated herein by reference from Exhibit 4(a) to the Company’s Registration Statement on Form S-8 (Registration No. 33-61665) filed on August 8, 1995.

		3.1(b)	Certificate of Amendment to the Articles is incorporated herein by reference from Exhibit 3(i) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.

		3.1 (c)	Certificate of Amendment to the Articles is incorporated herein by reference from Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2012.

		3.1 (d)	Certificate of Amendment to the Articles is incorporated herein by reference from Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 26, 2015.

		3.2	Code of Regulations, as amended through May 5, 2014, are incorporated herein by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 5, 2014.

(10)		Material contracts

	#	10.1	Transcat, Inc. 2003 Incentive Plan, as amended, is incorporated herein by reference from Appendix D to the Company’s definitive proxy statement filed on July 10, 2006 in connection with the 2006 Annual Meeting of Shareholders.

	#	10.2	Transcat, Inc. 2003 Incentive Plan, as Amended and Restated, is incorporated herein by reference from Appendix A to the Company’s definitive proxy statement filed on July 22, 2011 in connection with the 2011 Annual Meeting of Shareholders.

	#	10.3	Amendment No. 1 to the Transcat, Inc. 2003 Incentive Plan, as Amended and Restated, is incorporated herein by reference from Appendix B to the Company’s definitive proxy statement filed on July 26, 2013 in connection with the 2013 Annual Meeting of Shareholders.

	#	10.4	Form of Award Notice for Incentive Stock Options granted under the Transcat, Inc. 2003 Incentive Plan is incorporated herein by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 25, 2004.

	#	10.5	Form of Award Notice for Restricted Stock granted under the Transcat, Inc. 2003 Incentive Plan is incorporated herein by reference from Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 25, 2004.

	#	10.6	Form of Award Notice for Non-Qualified Stock Options granted under the Transcat, Inc. 2003 Incentive Plan is incorporated herein by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 24, 2005.

	#	10.7	Form of Award Notice for Performance-Based Restricted Stock granted under the Transcat, Inc. 2003 Incentive Plan, as amended, is incorporated herein by reference from Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the year ended March 28, 2009.

	#	10.8	Form of Performance-Based Restricted Stock Unit Award Notice granted under the Transcat, Inc. 2003 Incentive Plan, as Amended and Restated is incorporated by reference from Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the year ended March 30, 2013.

	*#	10.9	Form of Performance-Based Restricted Stock Unit Award Notice granted under the Transcat, Inc. 2003 Incentive Plan, as Amended and Restated.

		10.10	Credit Facility Agreement, dated as of September 20, 2012, by and between Transcat, Inc. and Manufacturers and Traders Trust Company is incorporated herein by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 29, 2012.

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		10.11	Letter from Manufacturers and Traders Trust Company to the Company, dated October 7, 2013, regarding the exclusion of payments made to repurchase stock from certain financial covenant provisions under the Credit Facility Agreement with the Company dated as of September 20, 2012 is incorporated herein by reference from Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 28, 2013.

		10.12	Master Security Agreement, dated September 20, 2012, by and between Transcat, Inc., United Scale & Engineering Corporation, WTT Real Estate Acquisition, LLC, Anacor Acquisition, LLC and Manufacturers and Traders Trust Company is incorporated herein by reference from Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 29, 2012.

		10.13	Credit Facility Agreement Amendment 1 dated as of August 26, 2014 by and among Transcat, Inc. and Manufacturers and Traders Trust Company is incorporated herein by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 27, 2014.

		10.14	Credit Facility Agreement Amendment 2 dated as of December 30, 2015 by and among Transcat, Inc. and Manufacturers and Traders Trust Company is incorporated herein by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 26, 2015.

	*	10.15	Credit Facility Agreement Amendment 3 dated as of March 31, 2016 by and among Transcat, Inc. and Manufacturers and Traders Trust Company.

		10.16	Lease Addendum between Gallina Development Corporation and Transcat, Inc., dated June 2, 2008, is incorporated herein by reference from Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 27, 2008.

	#	10.17	Transcat, Inc. Post-Retirement Benefit Plan for Officers (Amended and Restated Effective April 2, 2012) is incorporated herein by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.

		10.18	Transcat, Inc. Executive Officer and Director Share Repurchase Plan is incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 4, 2011.

		10.19	Transcat, Inc. 2009 Insider Stock Sales Plan, as amended is incorporated herein by reference from Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2012.

	#	10.20	Agreement for Severance Upon Change in Control between Transcat, Inc. and Lee D. Rudow dated as of May 7, 2012 is incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 11, 2012.

		10.21	Asset Purchase Agreement entered into effective as of December 31, 2015 by and among Transcat, Inc., Spectrum Technologies, Inc. and Brian E. Hubler and Kenneth E. Horvath is incorporated herein by reference from Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 26, 2015.

	*	10.22	Asset Purchase Agreement dated as of April 1, 2016 by and among Transcat, Inc., Excalibur Engineering, Inc., Christopher LaPlante Family Trust dated 12/23/97 and Christopher M. LaPlante.

(11)		Statement re computation of per share earnings

			Computation can be determined from the Consolidated Statements of Income and Comprehensive Income included in this Form 10-K under Part II, Item 8.

(21)		Subsidiaries of the registrant

	*	21.1	Subsidiaries

(23)		Consents of experts and counsel

	*	23.1	Consent of Freed Maxick CPAs, P.C.

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(31)		Rule 13a-14(a)/15d-14(a) Certifications

	*	31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	*	31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(32)		Section 1350 Certifications

	*	32.1	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(101)		Interactive Data File

	*	101.INS XBRL Instance Document

	*	101.SCH XBRL Taxonomy Extension Schema Document

	*	101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

	*	101.DEF XBRL Taxonomy Extension Definition Linkbase Document

	*	101.LAB XBRL Taxonomy Extension Label Linkbase Document

	*	101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

____________________

*		Exhibit filed with this report.

#		Management contract or compensatory plan or arrangement.

Exhibit 10.9

AWARD NOTICE OF
PERFORMANCE-BASED LONG-TERM COMPENSATION AWARD
GRANTED PURSUANT TO THE
TRANSCAT, INC. 2003 INCENTIVE PLAN

	Grantee: Number of Restricted Stock Units Awarded: Date of Grant:

1.	Grant of Restricted Stock Unit Award . This Award Notice serves to notify you that the Board of Directors of Transcat, Inc., an Ohio corporation (the “Company”), has granted to you, under the Company’s 2003 Incentive Plan, as amended and restated (the “Plan”), a restricted stock unit award (the “Award”), on the terms and conditions set forth in this Award Notice and the Plan, of the number of Restricted Stock Units (“RSUs”) set forth above. Each RSU entitles you to receive from the Company one Share of the Company’s Common Stock, $0.50 par value per share (the “Common Stock”), which will vest (become non-forfeitable) as set forth in Sections 2 and 3 and will be payable in the form of Shares of the Company’s Common Stock as set forth in Section 4, all in accordance with the terms of this Award Notice, the Plan, and any rules and procedures adopted by the Committee. The Plan is incorporated herein by reference and made a part of this Award Notice. Capitalized terms not defined herein have the respective meanings set forth in the Plan.

2.	Performance Criteria and Vesting . The RSUs subject to the Award will vest based on the successful completion of all of the following:

	a.	Subject to Section 3 below, you are employed with the Company through [_____], which is the last day of the Company’s [_____] fiscal year (the “Vesting Date”);

	b.	The percentage of the RSUs that will vest, if any, is determined based on the Company’s performance against the performance measure set forth below over the three-year period ending on the Vesting Date, as validated by the Company’s external auditors. The applicable performance measure for the Award and the percentage of RSUs that vest for the specified levels of performance are as follows:

Cumulative fully diluted EPS
for the three-year period ending		Percentage of RSUs
on the Vesting Date		that vest
$[___]		150%
$[___]		125%
$[___]		100%
$[___]		75%
$[___]		50%

No RSUs will vest for Company performance below 50%, and therefore all RSUs subject to the Award will be forfeited. Performance above 50% and up to 150% will be determined using straight line interpolation and the vesting percentages set forth above for the EPS results immediately preceding and immediately following the actual EPS results shown above.

3.	Effects of Certain Events .

	a.	General . Subject to Sections 3(b) through 3(d) of this Award Notice, in the event that your employment with the Company is terminated prior to the Vesting Date, all RSUs that are not vested as of the date of such termination are automatically forfeited.

	b.	Death or Disability . In the event of your death or termination of employment due to Disability prior to the Vesting Date, then the Award shall continue and the vested RSUs, if any, from such performance, shall be distributed on a pro-rata basis on the date that other active participants receive such distributions under their Award Notice for this program, based on actual performance, based on the following:

		i.	If you terminate employment in the first 15 months of the performance period you will forfeit all RSUs.

		ii.	If you terminate employment within the 16th through the 27th month of the performance period you will receive a pro-rated number of RSUs subject to the Award that become vested under Section 2, above.

		iii.	If you terminate employment after 27 months of the performance period have elapsed you will receive the full number of RSUs that become vested under Section 2 above.

	The pro-rata portion shall be determined by multiplying the number of vested RSUs based on actual performance by a fraction, the numerator of which is the number of completed months during the three-year period ending on the Vesting Date which you were employed by the Company, and the denominator of which is 36. For purposes of this Award Notice, Disability has the meaning given to such term under the Plan.

c.	Retirement . If you terminate employment prior to the Vesting Date due to Retirement, then the Award shall continue and the vested RSUs, if any, shall be distributed on a pro-rata basis on the date that other active participants receive such distributions under their Award Notice for this program, based on actual performance, based on the following:

	i.	If you terminate employment in the first 15 months of the performance period you will forfeit all RSUs.

	ii.	If you terminate employment within the 16th through the 27th month of the performance period you will receive a pro-rated number of RSUs subject to the Award that become vested under Section 2, above.

	iii.	If you terminate employment after 27 months of the performance period have elapsed you will receive the full number of RSUs that become vested under Section 2 above.

The pro-rata portion shall be determined by multiplying the number of vested RSUs based on actual performance by a fraction, the numerator of which is the number of completed months during the three-year period ending on the Vesting Date which you were employed by the Company, and the denominator of which is 36. For purposes of this Award Notice, Retirement means your termination of employment on or after the date that you have attained age 55 and have completed five or more years of service with the Company.

	d.	Change in Control . Upon a Change in Control of the Company, the provisions of Section 10.3 of the Plan shall automatically and immediately become operative with respect to the Award.

4.		Issuance of Shares of Common Stock . Unless the RSUs are forfeited prior to the Vesting Date as provided in Sections 2 and 3 above, the RSUs will be payable in the form of Common Stock as soon as administratively practicable following the release of the Company’s operating results for the [_____] fiscal year, but in no event later December 31, [_____] (the “Payment Date”). Each vested RSU will be payable in the form of one share of Common Stock on the Payment Date. Shares of Common Stock will be registered on the books of the Company in your name as of the Payment Date and delivered to you as soon as practical thereafter, in certificated or uncertificated form, as you shall direct. You understand that the Company will, and you hereby authorize the Company to, issue such instructions to its transfer agent as the Company may deem necessary or proper to comply with the intent and the purposes of this Award Notice. Notwithstanding the foregoing provisions of this Section 4, if you make a valid election to defer receipt of the Shares of Common Stock pursuant to the terms of a nonqualified deferred compensation plan maintained by the Company, payment of vested RSUs shall be made in accordance with that election and the terms of such nonqualified deferred compensation plan.

5.		Nontransferability . The RSUs awarded pursuant to this Award Notice may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated (“Transfer”), other than by will or by the laws of descent and distribution, except as provided in the Plan. If any prohibited Transfer, whether voluntary or involuntary, of the RSUs is attempted to be made, or if any attachment, execution, garnishment, or lien shall be attempted to be issued against or placed upon the RSUs, your right to such RSUs shall be immediately forfeited to the Company, and this Award Notice shall be null and void.

6.		No Shareholder Rights . The RSUs do not entitle the Grantee to any rights of a shareholder of Common Stock, including dividends or voting rights.

7.		Restrictions on Issuance of Shares . If at any time the Company determines that listing, registration or qualification of the shares of Common Stock subject to this Award upon any securities exchange or under any state or federal law, or the approval of any governmental agency, is necessary or advisable as a condition to the Award or issuance of certificate(s) for Common Stock hereunder, then, subject to the limitations imposed under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), such Award or issuance may not be made in whole or in part unless and until such listing, registration, qualification or approval shall have been effected or obtained free of any conditions not acceptable to the Company.

8.		Plan Controls . The Award is subject to all of the provisions of the Plan, and is further subject to all the interpretations, amendments, rules and regulations that may from time to time be promulgated and adopted by the Committee pursuant to the Plan. In the event of any conflict among the provisions of the Plan and this Award Notice, the provisions of the Plan will be controlling and determinative.

9.		Taxes . You are responsible for any and all federal, state and local taxes (other than stock transfer or issuance taxes) arising as a result of the vesting of the RSUs or the delivery of the shares of Common Stock to you pursuant to this Award or any subsequent sale of the shares of Common Stock by you.

10.		Section 409A . This Award Notice and the RSUs granted hereunder are intended to comply with the requirements of Section 409A of the Code and shall be construed and interpreted in a manner consistent with such intent.

ACKNOWLEDGEMENT

The undersigned Grantee acknowledges receipt of, and understands and agrees to, this Award Notice and the Plan. The Grantee further acknowledges that as of the date of grant, this Award Notice and the Plan set forth the entire understanding between the Grantee and the Company regarding the grant of the RSUs under the Award and supercede all prior oral and written agreements on that subject.

Date:
			*Transcat, Inc.*
			By:

			Grantee:

Exhibit 10.15

CREDIT FACILITY AGREEMENT AMENDMENT 3

This CREDIT FACILITY AGREEMENT AMENDMENT 3 (“ Amendment 3 ”) is made as of March 31, 2016, by and among TRANSCAT, INC. (“ Borrower ”), a corporation formed under the laws of the State of Ohio with offices at 35 Vantage Point Drive, Rochester, New York 14624, and MANUFACTURERS AND TRADERS TRUST COMPANY (“ Lender ”), a New York banking corporation, with offices at 255 East Avenue, Rochester, New York 14604.

WHEREAS, Borrower and Lender are parties to a Credit Facility Agreement dated September 20, 2012, as amended by Credit Facility Agreement Amendment 1 dated August 26, 2014 and Credit Facility Agreement Amendment 2 dated December 30, 2015 (as amended, modified and supplemented from time to time, the “ Credit Agreement ”), pursuant to which the Lender has made certain loans and financial accommodations available to Borrower;

WHEREAS, Borrower has requested that the Lender amend the Credit Agreement to add a term loan and modify certain covenants, and the Lender is willing to accommodate Borrower's request on the terms and conditions hereinafter set forth;

WHEREAS, Borrower is entering into this Amendment 3 with the understanding and agreement that, except as specifically provided herein, none of the Lender’s rights or remedies as set forth in the Credit Agreement or any other Loan Document is being waived or modified by the terms of this Amendment 3;

NOW, THEREFORE, in consideration of the agreements and provisions herein contained, effective on the Amendment 3 Effective Date (defined below), the parties hereby agree as follows:

1. Definitions . Any capitalized term used but not otherwise defined in this Amendment 3 shall have the meaning ascribed to such term in the Credit Agreement, and the interpretations set forth in the Credit Agreement shall apply to this Amendment 3.

2. Amendments to Credit Agreement . Subject to Section 3 below, effective on the Amendment 3 Effective Date, the Credit Agreement is hereby amended as follows:

(a) Section 1.1 of the Credit Agreement is hereby amended to add the following definitions:

“ Amendment 3 ” means Credit Facility Agreement Amendment 3 made between Borrower and Lender effective as of the Amendment 3 Effective Date.

“ Amendment 3 Effective Date ” means March 31, 2016.

“ Conversion Date ” means the date that Borrower’s election to convert a LIBOR Loan to a LIBOR Loan with another Interest Period becomes effective in accordance with this Agreement.

“ Term Loan ” shall have the meaning set forth in Section 2.6 hereof.

“ Term Loan Facility ” means the term loan facility established pursuant to Section 2.6 of this Agreement.

“ Term Loan Maturity Date ” means March 31, 2021.

“ Term Loan Note ” means the Term Loan Note issued pursuant to Section 2.7, as such Note may be amended, modified or restated from time to time.

(b) Section 1.1 of the Credit Agreement is hereby amended to modify subsection (k) of the definition of “Permitted Acquisition” to read in its entirety as follows:

(k)

no more than an aggregate of $20,000,000 of Acquisitions shall have been financed, directly or indirectly, with the Revolving Credit Facility and Term Loan for the Fiscal Year ending March 25, 2017, and no more than an aggregate of $15,000,000 of Acquisitions shall have been financed, directly or indirectly, with the Revolving Credit Facility in each Fiscal Year ending thereafter.

(c) Section 1.1 of the Credit Agreement is hereby amended to modify the following definitions to read in their entirety as follows:

“ Facility ” means the Revolving Credit Facility or the Term Loan Facility, as the case may be.

“ Fixed Charges ” means with reference to any period and calculated for the Borrower and its Subsidiaries on a consolidated basis without duplication, the sum of (i) cash Interest Expense, (ii) prepayments, if any, of the Term Loan, (iii) prepayments, if any, of the Revolving Credit Loans that are required due to a permanent termination or reduction of the Revolving Line Commitment, (iv) scheduled principal payments, (v) loan fees on Indebtedness due during such period, (v) expense for taxes paid in cash, (vi) permitted Restricted Payments paid in cash, (vii) Capital Lease Obligation payments and (viii) cash contributions to any Plan.

“ LIBOR ” means shall mean the rate per annum (rounded upward, if necessary, to the nearest 1/16th of 1%) obtained by dividing (i) the applicable London Interbank Offered Rate as applicable in accordance with the LIBOR Rate selected by Borrower for each Loan, or in the case of Daily LIBOR Loans, each day (or if such day is not a LIBOR Business Day, as fixed in the same manner on the immediately preceding LIBOR Business Day, which day’s rate shall, unless otherwise provided for, apply to the immediately succeeding non-LIBOR Business Days), as set and administered by ICE Benchmark Administration Limited (or such other administrator of LIBOR, as may be duly authorized by the UK Financial Conduct Authority or such other proper authority from time to time) for United States dollar deposits in the London interbank market at approximately 11:00 a.m. London, England time (or as soon thereafter as practicable), as determined by the Bank from any broker, quoting service or commonly available source utilized by the Bank, by (ii) a percentage equal to 100% minus the stated maximum rate of all reserves required to be maintained against “Eurocurrency Liabilities” as specified in Regulation D (or against any other category of liabilities which includes deposits by reference to which the interest rate on any LIBOR Rate Loan or Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States’ office of a bank to United States’ residents) on such date to any member bank of the Federal Reserve System. Notwithstanding any provision above, the practice of rounding to determine LIBOR may be discontinued at any time in the Bank’s sole discretion.

“ LIBOR Rate ” means, as selected by the Borrower for the respective LIBOR Loan under the Revolving Credit Facility or Term Loan Facility, the one-month, two-month, three-month or six-month LIBOR, each with an Interest Period of equal duration, or in the case of a Daily LIBOR Loan, the one-month LIBOR with an Interest Period of one day, in all cases plus the Applicable Rate.

“ Loans ” means the loans and advances, or if applicable, portions thereof, made by the Lender pursuant to this Agreement.

“ Note(s) ” means the Revolving Credit Note, the Term Loan Note, and any other note made in connection herewith.

“ Revolving Credit Commitment ” means the commitment of the Lender to make Revolving Credit Loans (including the obligation of the Lender to issue Letters of Credit for the account of the Borrower).

“ Revolving Credit Facility ” means the revolving credit facility established pursuant to Section 2.1 of this Agreement.

(d) Section 1.1 of the Credit Agreement is hereby amended to delete the definition of “Commitment”.

(e) The title of Article 2 of the Credit Agreement is hereby changed to “CREDIT FACILITIES”.

(f) The headers of Section 2.3 and 2.4 of the Credit Agreement are hereby respectively changed to “ Revolving Credit Facility Interest ” and “ Revolving Credit Facility Payments ”.

(g) The following new Sections are hereby added to Article 2 of the Credit Agreement to read in their entirety as follows:

2.6 Term Loan . The Lender agrees, subject to the terms and conditions of this Agreement, to make a Term Loan to the Borrower on the Amendment 3 Effective Date in the principal amount of Ten Million Dollars ($10,000,000) (the “ Term Loan ”). Principal repaid under the Term Loan may not be reborrowed.

2.7 Term Loan Note . The Borrower’s obligation to pay the principal of, and interest on, the Term Loan shall be evidenced by a promissory note in the aggregate principal amount of Lender’s Term Loan duly executed and delivered by the Borrower substantially in the form of Exhibit C , with blanks appropriately completed in conformity herewith. The Term Loan Note shall be entitled to the benefits of the Loan Documents.

2.8 Term Loan Interest . Except as elsewhere provided in this Agreement with respect to Prime Rate Loans, the Term Loan shall be a LIBOR Loan with an Interest Period of one month unless in accordance with this Agreement the Borrower has requested that the Term Loan or a portion thereof be another LIBOR Loan, in which case such Term Loan or applicable portion thereof shall be the applicable other LIBOR Loan. Interest shall accrue on the Term Loan in the same manner as is provided in Section 2.3(b) and Section 2.3(c).

2.9 Term Loan Payments . All accrued interest shall be due and paid on the first day of each month. Each interest payment shall be accompanied by a monthly principal payment of $119,048. Except as otherwise provided herein, all outstanding principal and accrued and unpaid interest shall be due and paid in full on the Term Loan Maturity Date.

2.10 Origination Fee . On the Amendment 3 Effective Date the Borrower shall pay to the Lender a Term Loan origination fee of $25,000.

(h) Section 3.1(e), Section 3.1(f) and Section 3.1(g) of the Credit Agreement are hereby amended to read in their entirety as follows:

(e) Continuation and Conversion Elections . An authorized Person may, upon irrevocable Request to the Lender in accordance with Section 3.1(f) below, elect to continue or convert, as of the last day of the applicable Interest Period, any or a portion (subject to the Minimum Borrowing Amount limitation) of any LIBOR Loan to another LIBOR Loan with the same or a different Interest Period.

(f) Notice of Continuation or Conversion .

(i) For an election under Section 3.1(e) above, an authorized person must deliver to the Lender, by 2:00 p.m. (New York time) on a Business Day, a written notice for an election under Section 3.1(e) (a “ Notice ”), specifying:

(A) the aggregate amount of each LIBOR Loan to be continued or converted;

(B) the applicable LIBOR Rate selection and corresponding Interest Period duration for each LIBOR Loan to be continued or converted; and

(C) whether the Automatic Continuation Option will be in effect for each such LIBOR Loan. The Automatic Continuation Option shall be in effect for each LIBOR Loan, unless otherwise specified by Borrower in writing.

(ii) For any election in accordance with Section 3.1(e) above, the Continuation Date or Conversion Date shall be the later of (A) the last day of the applicable Interest Period, or (B) two (2) LIBOR Business Days following the date the Lender receives the Notice of Continuation or Conversion, except as otherwise determined by the Lender in its sole discretion. If a Notice is received after 2:00 p.m. (New York time) on any Business Day, such Notice will be deemed to have been received on the next Business Day. Accordingly, as an example, if Borrower has a LIBOR Loan with a one-month Interest Period ending on June 15 and wants to continue the LIBOR Loan with a two- month Interest Period, Borrower must deliver to the Lender an appropriate Notice of Continuation by no later than 2:00 p.m. (New York time) on June 13 (assuming that June 13 is a Business Day and June 14 and 15 are LIBOR Business Days).

(iii) For LIBOR Loans with the Automatic Continuation Option in effect, the Lender shall, at the end of each Interest Period, automatically continue such LIBOR Loan with the same Interest Period unless a contrary Notice has been received.

(iv) The Lender may take action on any Notice in reliance upon any oral, telephonic, written or teletransmitted Notice that the Lender in good faith believes to be valid and to have been made by Borrower or on behalf of Borrower by an authorized person. No Notice may be delivered by e-mail unless otherwise permitted by Lender. The Lender may act on the Notice from any authorized person until the Lender shall have received from Borrower, and had a reasonable time to act on, written notice revoking the authority of such authorized person. The Lender shall incur no liability to Borrower or to any other person as a direct or indirect result of acting on any Notice under this Agreement. The Lender, in its sole discretion, may reject any Notice that is incomplete.

(g) Expiration of Interest Period . With respect to any LIBOR Loan for which an Automatic Continuation Option is not in effect, if Borrower does not deliver to the Lender an appropriate Notice of Continuation or Notice of Conversion (in accordance with the terms hereof) at least two (2) LIBOR Business Days before the end of an Interest Period, at the end of such Interest Period the Lender shall have the right (but not the obligation) to immediately, and without notice, convert such LIBOR Loan into a Daily LIBOR Loan and such Loan shall continue as a Daily LIBOR Loan until two (2) LIBOR Business Days after the Lender receives an appropriate Notice under Section 3.1(f) electing a different Interest Period. A Notice of Continuation or Notice of Conversion received one (1) LIBOR Business Day before the end of an Interest Period may not effectuate a continuation of such Loan as a LIBOR Loan, other than a Daily LIBOR Loan, as of the last day of the Interest Period. Rather, such LIBOR Loan may be converted (in the manner described above) to a Daily LIBOR Loan on the last day of the Interest Period. Such Notice of Continuation or Notice of Conversion, however, will be deemed to be a Notice that will be effective two (2) LIBOR Business Days from the date it is received (or deemed to be received) by the Lender.

(i) The word “Commitments” in Section 3.6(b) is hereby changed to read “Revolving Credit Commitment”.

(j) Section 3.7(b) of the Credit Agreement is hereby amended to read in its entirety as follows:

(b) any failure by Borrower to borrow a LIBOR Loan on the date for borrowing, continuation or conversion specified in the relevant notice under Section 10.1, as the case may be; or

(k) Section 3.10 of the Credit Agreement is hereby amended to read in its entirety as follows:

3.10 Default Interest Rate . Upon the occurrence of an Event of Default for so long as such Event of Default is continuing, notwithstanding anything else herein, if the Lender so requires (i) the Borrower’s right to renew, elect, or continue LIBOR Loans shall cease and all renewals, elections, or continuations shall be to Prime Rate Loans, and in the Lender’s sole discretion (ii) the rate of interest on all Loans shall be increased to a rate at all times equal to three percentage points (3%) above the higher of the LIBOR Rate (computed in the same manner as for LIBOR Loans with an Interest Period of one month) and the Prime Rate, and fees applicable to Letters of Credit shall be increased by three percentage points (3%), such increased rate and fees to remain in effect through and including the satisfaction and payment in full of all of the Obligations and the termination of the Revolving Credit Commitment, or written waiver of such Event of Default by the Lender. The imposition of such Default Rate is without prejudice to any other rights and remedies the Lender may have.

(l) The word “Commitment” in Section 5.1(d) of the Credit Agreement is hereby changed to read “Revolving Credit Commitment”.

(m) Section 5.2(f) of the Credit Agreement is hereby amended to read in its entirety as follows:

(f) Landlord Waivers . The Borrower shall have delivered to the Lender on or within sixty (60) days after the Amendment 3 Effective Date a waiver in form and substance satisfactory to Lender from each landlord of premises on which the Collateral is located and that is not owned by a Loan Party, unless otherwise agreed by Lender.

(n) Section 8.1 of the Credit Agreement is hereby amended to read in its entirety as follows:

8.1 Leverage Ratio . The Borrower will not permit as of the end of each Fiscal Quarter, the Leverage Ratio (with Total Funded Indebtedness measured at the end of such Fiscal Quarter and EBITDA determined for the period of four consecutive Fiscal Quarters then ending), to be equal to or greater than 3.00 to 1.00.

(o) Section 8.2 of the Credit Agreement is hereby amended to read in its entirety as follows:

8.2 Fixed Charge Coverage Ratio . The Borrower will not permit as of the end of each Fiscal Quarter, the Fixed Charge Coverage Ratio, determined for the period of the four Fiscal Quarters then ending, to be less than 1.15 to 1.00.

(p) The word “Commitments” in both places it is used in Section 10.2(a) is changed to read “Revolving Credit Commitment”.

(q) Exhibit A to the Credit Agreement is hereby replaced with Exhibit A to this Amendment 3. A new Exhibit C is hereby added to the Credit Agreement in the form attached as Exhibit C to this Amendment 3.

(r) Effective as of the Amendment 3 Effective Date Schedules 1.1, 4.1, 4.4, 4.5 and 7.2 to the Credit Agreement are hereby replaced with Schedules 1.1, 4.1, 4.4, 4.5 and 7.2 attached to this Amendment 3.

3. Conditions to Effectiveness of this Amendment 3 . This Amendment 3 is subject to satisfaction of each of the following conditions to the satisfaction of the Lender:

(a) The Lender shall have received such Loan Documents as Lender may request, in form and substance satisfactory to the Lender, including the Notes, a Reaffirmation of Guaranties and Security Agreements.

(b) The Borrower shall have delivered evidence satisfactory to the Lender of the due authorization, execution, delivery and performance of Amendment 3 and the related Loan Documents.

(c) The Borrower shall have delivered to the Lender (i) certificates of good standing from appropriate governmental officials to the effect that it is validly subsisting in good standing in its jurisdictions of formation and qualification, and UCC searches against the Loan Parties in all jurisdictions deemed necessary by the Lender, all of which shall be reasonably satisfactory to the Lender in all respects.

(d) The Borrower and Loan Parties shall have delivered favorable customary opinions of their counsel, in form and substance satisfactory to the Lender.

(e) The representations and warranties of the Loan Parties contained herein shall be true and correct in all material respects.

(f) Each document required by the Security Documents or under law or reasonably requested by the Lender to be filed, registered or recorded in order to create in favor of the Lender, a perfected Lien on the Collateral described therein, shall have been delivered to Lender in proper form for filing, registration or recordation.

(g) No suit, investigation or proceeding pending in any court or before any arbitrator or Governmental Authority that can reasonably be expected to have a Material Adverse Effect on the Loan Parties shall be pending or overtly threatened.

(h) Since the Closing Date, there has been no change, circumstance, or occurrence that has had a Material Adverse Effect.

(i) There shall exist no Default or Event of Default.

(j) The Borrower shall have paid all costs and expenses, including legal fees and disbursements, of the Lender related to this Amendment 3, and shall have paid the origination fees due on the date hereof.

4. Representations and Warranties . In order to induce Lender to enter into this Amendment 3 and take the other actions provided for herein, Borrower represents and warrants to each Lender that the following statements are true and correct in all respects:

(a) Authority . Each of the Loan Parties has the requisite corporate power and authority to execute and deliver this Amendment 3 and any other Loan Documents delivered in connection therewith, and to perform its obligations hereunder and under such Loan Documents (as amended or modified hereby) to which it is a party. The execution, delivery and performance by each of the Loan Parties of this Amendment 3 and the other Loan Documents delivered in connection herewith have been duly approved by all necessary corporate or company action and no other corporate or company proceedings are necessary to consummate such transactions.

(b) Enforceability . This Amendment 3 and the related Loan Documents have been duly executed and delivered by the Loan Parties. This Amendment 3 and the related Loan Documents are the legal, valid and binding obligations of the Loan Parties, enforceable against each of them respectively in accordance with their terms, and are in full force and effect.

(c) Representations and Warranties . The representations and warranties contained in in this Amendment 3 and in the Credit Agreement and supporting Schedules, except those contained in Section 4.6(a) of the Credit Agreement, are correct on and as of the date hereof as though made on and as of the date hereof (notwithstanding that by the terms of the Credit Agreement they were made as of a date other than the date hereof).

(d) Litigation . Except as set forth on Schedule 4.5 (Supplement) attached to this Amendment 3, as of the date hereof there is no action, suit or proceeding at law or in equity by or before any court or any Governmental Authority pending or, to the knowledge of the Loan Parties threatened against or affecting the Loan Parties.

(e) No Contravention . The execution, delivery and performance of this Amendment 3 by the Borrower have received all necessary governmental approvals, if any, and do not contravene any law of contractual restrictions binding on Borrower.

(f) No Default . No event has occurred and is continuing that constitutes a Default or an Event of Default.

(g) Subsidiaries . The Borrower and Loan Parties are in compliance with Section 6.9 of the Credit Agreement.

5. General Confirmations and Amendments .

(a) Continuing Effect . Except as specifically provided herein, the Credit Agreement and the other Loan Documents shall remain in full force and effect in accordance with their respective terms and are hereby ratified and confirmed in all respects.

(b) No Waiver . The execution, delivery and effectiveness of this Amendment 3 shall not, except as expressly provided herein, operate as a modification, acceptance or waiver of any right, power or remedy of the Lender under any of the Loan Documents, nor constitute a waiver of any provision of the Loan Documents, except as specifically set forth herein.

(c) Reference to and Effect on the Loan Documents . Upon and after the effectiveness of this Amendment 3, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to “the Credit Agreement,” “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified and amended hereby.

To the extent that any terms and conditions in any of the Loan Documents shall contradict or be in conflict with any terms or conditions of the Credit Agreement, after giving effect to this Amendment 3, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Credit Agreement as modified or amended hereby.

6. Miscellaneous .

(a) Governing Law . This Amendment 3 shall be governed by, and construed in accordance with, the internal laws of the State of New York.

(b) Severability . The provisions of this Amendment 3 are severable, and if any subsection or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision in this Amendment 3 in any jurisdiction.

(c) Counterparts . This Amendment 3 may be executed in any number of counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.

(d) Binding Effect; Assignment . This Amendment 3 shall be binding upon and inure to the benefit of Borrower and the Lender and their respective successors and assigns; provided, however, that the rights and obligations of Borrower under this Amendment 3 shall not be assigned or delegated without the prior written consent of the Lender.

IN WITNESS WHEREOF, the parties have caused this Amendment 3 to be executed by their duly authorized representatives by their signatures below as of the date first above written.

[Signature Pages Follow]

MANUFACTURERS AND TRADERS TRUST COMPANY

By:	/s/ Curt S. Provenzo
	Curt S. Provenzo
	Vice President

TRANSCAT, INC.

By:	/s/ Michael Tschiderer
	Michael Tschiderer
	Vice President of Finance
	Chief Financial Officer

EXHIBIT A
FORM OF COMPLIANCE CERTIFICATE

TRANSCAT, INC.
COMPLIANCE CERTIFICATE

As of ______________

Definitions used in this Certificate have the meanings given to them in the Credit Facility Agreement (“ Credit Agreement ”) dated September 20, 2012, as amended.

In connection with the [quarterly consolidated financial statements (“Quarterly Statements ”) / annual consolidated financial statements (“ Annual Statements ”)] delivered to the Lender for the period ended [_______________________] (“ Applicable Quarter ” / “ Applicable Year ”] / [fourth Fiscal Quarter ended [______________]), as required by Section 6.1(c) of the Credit Agreement I hereby certify that:

(a) [Note: clause (a) not required for 4th Quarter Certificate][The Annual Statements / The Quarterly Statements, subject to the absence of footnote disclosure and normal year-end audit adjustments] (i) fairly present in all material respects the consolidated] financial condition of the Borrower as of the last day of the [Applicable Year / Applicable Quarter], and the consolidated results of operations and cash flows of the Borrower for such period and (ii) excepting the cash flows, have been prepared in accordance with GAAP (or a reconciliation statement has been delivered together therewith conforming such consolidated financial statements to GAAP).

(b) [No Default has occurred and is continuing and no Event of Default that has not been waived in writing by the Lender has occurred. / A Default has occurred and is continuing or an Event of Default that has not been waived in writing by the Lender has occurred, the nature of such Default or Event of Default is _________________________, such Default has existed and been continuing or Event of Default has existed during the period _________________________, and the Borrower has taken and/or proposes to take the following actions with respect thereto: ______________________________.]

(c) Set forth below is a schedule of the computations determining compliance with the covenants contained in Article 8 of the Credit Agreement, which calculations are correct and accurately reflect the consolidated financial condition of the Borrower as of the end of the date shown above:

Credit Agreement Section	Covenant	Requirement	Calculation as of Above Date	Compliance (Yes/No)
8.1	Leverage Ratio	< 3.00:1.00	____:1.00
8.2	Fixed Charge Coverage Ratio	≥ 1.15:1.00	____:1.00

The Leverage Ratio is _____:1.00. Based upon such ratio, the Applicable Rate will be set at Level ___.

(d) With respect to the [Annual Statements / Quarterly Statements], [there are no changes in GAAP applied in the their preparation from GAAP as previously applicable that would affect the calculation of, or compliance with, Article 8 of the Credit Agreement / changes in GAAP applied in the their preparation from GAAP as previously applicable that would affect the calculation of, or compliance with, Article 8 of the Credit Agreement are __________________________________, reconciled as follows: _______________________.


	Transcat, Inc.
	Chief Financial Officer

Dated:

EXHIBIT C
FORM OF TERM LOAN NOTE

TERM LOAN NOTE

$10,000,000

March 31, 2016

Transcat, Inc. (“ Borrower ”), a corporation organized under the laws of the State of Ohio, for value received, hereby promises to pay to the order of Manufacturers and Traders Trust Company, a New York banking corporation (“ Lender ”), the principal sum of Ten Million Dollars ($10,000,000) in lawful money of the United States of America and in immediately available funds, with interest on the unpaid principal balance hereof, for the period such balance is outstanding, at the rates of interest as provided in the Credit Agreement. Payments shall be due and payable on the dates and as provided in the Credit Agreement, with a final payment on the Term Loan Maturity Date.

This is the Term Loan Note referred to in that certain Credit Facility Agreement, dated as of September 20, 2012 by and between Borrower and Lender (as the same has been and in the future may be modified, supplemented and replaced from time to time, the “ Credit Agreement ”), and evidences the Term Loan made thereunder. All capitalized terms not defined herein shall have the meanings given to them in the Credit Agreement, and the terms of the Credit Agreement are incorporated herein.

Borrower waives presentment, notice of dishonor, protest and any other notice or formality with respect to this Note.

TRANSCAT, INC.

By:
	Michael Tschiderer
	Vice President of Finance
	Chief Financial Officer

SCHEDULE 1.1
SECURITY DOCUMENTS

Master Security Agreement

Master Continuing Guaranty

Pledge Agreement

Patent Security Agreement

Trademark Security Agreement

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Deposit Control Agreements

Any and all joinder agreements, supplements, amendments, reaffirmations, or replacements and all supporting documents and agreements such as stock powers, endorsements, control agreement, and allonges

SCHEDULE 4.1
LOAN PARTIES’ JURISDICTIONS OF FORMATION AND QUALIFICATION

Transcat, Inc. is an Ohio corporation qualified to do business in Texas, New York, New Jersey, North Carolina, Missouri, Colorado, California, Massachusetts, Pennsylvania, Tennessee and Oregon.

Anmar Acquisition, LLC is a Delaware limited liability company qualified to do business in New York.

United Scale & Engineering Corporation is a Wisconsin corporation qualified to do business in Michigan.

WTT Real Estate Acquisition, LLC is a New York limited liability company qualified to do business in Montana.

Anmar Metrology, Inc. is a California corporation.

SCHEDULE 4.4
EQUITY INTERESTS OF LOAN PARTIES AND RELATED MATTERS

As of February 3, 2016, 6,906,010 of the Borrower’s 30,000,000 authorized shares of common stock, par value $.50 per share, were issued and outstanding.

As of the Amendment 3 Effective Date, the following subsidiaries are wholly-owned by the Borrower:

Transcat (Canada) Inc.
WTT Real Estate Acquisition, LLC
Anmar Acquisition, LLC
United Scale & Engineering Corporation

As of the Amendment 3 Effective Date, Anmar Metrology, Inc. is wholly-owned by Anmar Acquisition, LLC

As of the Amendment 3 Effective Date, Ulrich Metrology, Inc. is wholly-owned by Transcat (Canada) Inc.

As of the Amendment 3 Effective Date, Nordcal Calibration, Inc. is wholly-owned by Ulrich Metrology, Inc.

SCHEDULE 4.5
LITIGATION

None

SCHEDULE 7.2
LIENS

Lien evidenced by UCC financing statement File Number OH00197096794 filed 1/29/16 with the Ohio Department of State, limited to security interests in equipment leased to Borrower by IKON Financial Services

Exhibit 10.22

ASSET PURCHASE AGREEMENT

by and among

TRANSCAT, INC.,

EXCALIBUR ENGINEERING, INC.,

CHRISTOPHER LAPLANTE FAMILY TRUST DATED 12/23/97

and

CHRISTOPHER M. LAPLANTE

Dated as of April 1, 2016

Table of Contents

Article I. Definitions		1
	1.1 Definitions	1
	1.2 Accounting Terms	6
	1.3 Other Definitional Provisions	6

Article II. Purchase and Sale		7
	2.1 Transfer of Purchased Assets	7
	2.2 Excluded Assets	8
	2.3 Use of Seller’s Name and Phone Numbers	8
	2.4 Purchase Price	8
	2.5 Payment of Purchase Price	9
	2.6 Adjustment to Purchase Price	9
	2.7 Holdback	11
	2.8 Termination of Pre-Closing Escrow Agreement	11
	2.9 Repayment of Indebtedness	11

Article III. Liabilities And Contracts		12
	3.1 No Assumption of Liabilities or Contracts	12
	3.2 Liabilities Assumed	12

Article IV. Seller Parties’ Representations And Warranties		12
	4.1 Organization, Standing and Power	12
	4.2 Authority for Transaction	13
	4.3 No Conflict	13
	4.4 Financial Statements	13
	4.5 No Undisclosed Liabilities	14
	4.6 Absence of Certain Changes	14
	4.7 Title	14
	4.8 Compliance with Laws; Permits	14
	4.9 Condition and Sufficiency of Purchased Assets	14
	4.10 Privacy Laws and Data Protection	15
	4.11 Accounts Receivable	15
	4.12 Inventory	15
	4.13 Intellectual Property	15
	4.14 Assigned Contracts	16
	4.15 Other Contracts	16
	4.16 Legal Proceedings	16
	4.17 Tax Matters	17
	4.18 Insurance	17
	4.19 Labor Relations and Employment Issues	17
	4.20 Employee Benefits	18
	4.21 Environmental Matters	21
	4.22 Real Property	21
	4.23 Product and Service Warranties	22
	4.24 Relationship with Customers and Suppliers	22
	4.25 Officers, Directors and Shareholders	22

	4.26 Brokers and Finders		22
	4.27 Material Misstatements or Omissions		22

Article V. Buyer’s Representations and Warranties			22
	5.1	Organization, Standing and Power	23
	5.2	Authority for Transaction	23
	5.3	No Conflict	23
	5.4	Legal Proceedings	23
	5.5	Brokers and Finders	23
	5.6	Material Misstatements or Omissions	23

Article VI. Survival and Indemnification			24
	6.1	Survival or Representations, Warranties and Covenants	24
	6.2	Indemnification by Seller Parties	24
	6.3	Indemnification by Buyer	24
	6.4	Limitations on Indemnification	25
	6.5	Indemnification Claim Procedures	26
	6.6	Recoupment Against Holdback	27
	6.7	Tax Treatment of Indemnification Payments	28
	6.8	Effect of Investigation	28

Article VII. Closing			28
	7.1	Closing	28
	7.2	Closing Deliveries of Seller Parties	28
	7.3	Closing Deliveries of Buyer	29

Article VIII. Further Covenants			30
	8.1	Taxes	30
	8.2	Expenses of the Parties	30
	8.3	Confidentiality	30
	8.4	Non-Disclosure; Non-Solicitation and Non-Competition	30
	8.5	Consulting Agreement	31
	8.6	Notices to and Consents of Third Parties	31
	8.7	Further Assurances	31
	8.8	Employees and COBRA Compliance	31
	8.9	Uncollected Receivables	32

Article IX. General Provisions			32
	9.1	Amendment and Waiver	32
	9.2	Assignment	32
	9.3	Notices	32
	9.4	Binding Effect	33
	9.5	Governing Law; Venue	34
	9.6	Effect of Agreement	34
	9.7	Severability	34
	9.8	Negotiated Transaction	34
	9.9	Headings; Counterparts	34

Asset Purchase Agreement

This Asset Purchase Agreement , dated as of April 1, 2016, is made by and among Transcat, Inc. , an Ohio corporation ( “Buyer” ), Excalibur Engineering, Inc. , a California corporation ( “Seller” ), Christopher LaPlante Family Trust Dated 12/23/97 (the “Trust” ) and Christopher M. LaPlante ( “LaPlante” ). Buyer, Seller, the Trust and LaPlante are collectively referred to herein as the “ Parties ”, and each is a “ Party .”

RECITALS:

A. Seller wishes to sell and assign to Buyer, and Buyer wishes to purchase and assume from Seller, the Purchased Assets and the Assumed Liabilities (as defined in Section 1.1), subject to the terms and conditions set forth in this Agreement.

B. The Trust is the sole shareholder of Seller. LaPlante is the sole trustee and a beneficiary of the Trust and was previously a shareholder of Seller.

NOW, THEREFORE, the Parties agree as follows:

ARTICLE I. DEFINITIONS

1.1 Definitions . As used in this Agreement and, unless the context requires otherwise, in each other agreement, document or instrument delivered under or in connection with this Agreement:

“Accounts Receivable” has the meaning given to it in Section 2.1(d).

“Accrued Vacation Credit” has the meaning given to it in Section 8.8.

“ Action ” means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity.

“Adverse Effect” means an effect in the condition (financial or otherwise), properties, assets, liabilities, rights, obligations, Business or prospects of Seller, which effect, individually or in the aggregate, is materially adverse to such condition, properties, assets, liabilities, rights, obligations, operations, Business or prospects of Seller, or which is materially adverse to Seller’s ability to consummate the transactions contemplated hereby.

“Affiliate” means, with respect to a Party, any Person that directly or indirectly controls, is controlled by, or under common control with, such Party.

“Agreement” means this Asset Purchase Agreement, together with all Exhibits and Schedules hereto.

“Assigned Contracts” has the meaning given to it in Section 2.1(f).

“Assignment and Assumption Agreement” has the meaning given to it in Section 7.2(d).

“Assumed Liabilities” has the meaning given to it in Section 3.2.

“Balance Sheet Date” means December 31, 2015.

“Business” means Seller’s business of providing commercial instrument calibration and test equipment repair services and new and used product sales and rentals.

“Buyer” has the meaning given to it in the preamble.

“Buyer Indemnified Parties” has the meaning given to it in Section 6.2

“Cap” has the meaning given to it in Section 6.4(a).

“Closing” means the closing of the purchase and sale hereunder.

“Closing Date” means the date of the Closing, as defined in Section 7.1.

“Closing Date Indebtedness” has the meaning given to it in Section 2.9.

“Closing Date Working Capital ” means the value, as of the Closing, of the portion of the Purchased Assets which would be identified as current assets, less the aggregate amount of current Liabilities included in the Assumed Liabilities, all as determined in accordance with GAAP and in accordance with the terms and conditions of, and subject to the adjustments described in, Section 2.6.

“ Closing Statement ” has the meaning given to it in Section 2.4.

“ Closing Statement Adjustment ” has the meaning given to it in Section 2.4.

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, Section 4980B of the Code, Title I Part 6 of ERISA, and any similar state group health plan continuation Law.

“Code” means the Internal Revenue Code of 1986, as amended.

“Consulting Agreement” has the meaning given to it in Section 8.5.

“Contracts” means and includes all contracts, subcontracts, agreements, leases, options, notes, bonds, mortgages, indentures, deeds of trust, collateral assignments of lease and rights, guarantees, warranties, licenses, franchises, permits, purchase orders, arrangements, transactions, commitments, undertakings and understandings of every kind, written or oral.

“ Customer ” has the meaning given to it in Section 4.24.

“Deemed Acceptance” has the meaning given to it in Section 6.5(b).

“Deposit” means the deposit, in the aggregate amount of $50,000, which Buyer is holding in an escrow account pursuant to the Pre-Closing Escrow Agreement.

“Dispute Notice” has the meaning given to it in Section 6.5(b).

“Employee Benefit Plan” has the meaning given to it in Section 4.20.

“Encumbrances” means and includes all liens, options, pledges, mortgages, security interests, charges, adverse claims, rights, restrictions, burdens and encumbrances of every kind.

“Environmental Laws” means any applicable Law, and any Governmental Order or binding agreement with any Governmental Authority: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Substance.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” means any Person that is a member of “controlled group of corporations” with, or is under “common control” with, or is a member of the same “affiliated service group” with Seller, as defined in Section 414 of the Code.

“Estimated Closing Date Working Capital ” has the meaning given to it in Section 2.6(a).

“Estimated Increase Amount” has the meaning given to it in Section 2.6(a).

“Estimated Reduction Amount” has the meaning given to it in Section 2.6(a).

“Excluded Assets” has the meaning given to it in Section 2.2.

“Existing Leases” has the meaning given to it in Section 4.22(b).

“Final Closing Date Working Capital ” has the meaning given to it in Section 2.6(b).

“Final Increase Amount” has the meaning given to it in Section 2.6(c).

“Final Reduction Amount” has the meaning given to it in Section 2.6(c).

“Financial Statements” has the meaning given to it in Section 4.4.

“GAAP” means, at any time, United States generally accepted accounting principles, methods and practices, consistently maintained and applied throughout the periods referenced.

“Governmental Authority ” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction.

“Governmental Order ” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

“Hazardous Substance” means any (a) substance, gas, material or chemical which poses or may pose a hazard to human health or safety, (b) toxic substance or hazardous waste, substance or related material, or any pollutant or contaminant, or (c) asbestos, urea formaldehyde foam insulation, petroleum and petroleum by-products and which, in each case described above in (a), (b) and (c), is now subject to any Environmental Law.

“Holdback Amount” has the meaning given to it in Section 2.7.

“Holdback Period” means the period beginning on the Closing Date and ending on the date that is nine months after the Closing Date.

“Indebtedness Repayment Amount” has the meaning given to it in Section 2.9.

“Indemnified Party” has the meaning given to it in Section 6.5(a).

“Indemnifying Party” has the meaning given to it in Section 6.5(a).

“Intellectual Property” has the meaning given to it in Section 4.13(a).

“Inventory” has the meaning given to it in Section 2.1(c).

“Irvine Lease” means the Lease Agreement, in substantially the form attached hereto as Exhibit A , to be entered into by Buyer and MelChris with respect to the Irvine Property as of the Closing Date.

“ Irvine Property ” means the real property located at 9201 Irvine Blvd., Irvine, California, which is owned by MelChris and leased to Seller, as more particularly described in Schedule 4.22 .

“Knowledge” means, with respect to a Party, the actual or constructive knowledge of such Party, after due inquiry. When used with respect to Seller, Knowledge shall include only the Knowledge of LaPlante and Wirth.

“LaPlante” has the meaning given to such term in the preamble.

“ Law ” means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, or other requirement of any Governmental Authority.

“Leased Real Property” has the meaning given to it in Section 4.22.

“Liability” means any liability, obligation, claim against or Contract of Seller of any kind or nature, at any time existing or asserted, whether or not accrued, whether fixed, contingent or otherwise, whether known or unknown, and whether or not recorded on the books and records of Seller, arising out of or by reason of this or any other transaction or event occurring prior or subsequent to the Closing.

“Losses” means losses, damages, liabilities, deficiencies, Actions, judgments, interest, awards, penalties, fines, costs or expenses of whatever kind, including reasonable attorneys’ fees and the cost of enforcing any right to indemnification hereunder.

“MelChris” means MelChris Holding, LLC, a California limited liability company that is an Affiliate of LaPlante.

“Net Adjustment Payment” has the meaning given to it in Section 2.6(c).

“Notice of Claim” has the meaning given to it in Section 6.5(a).

“Party” or “Parties” have the meanings given to such terms in the preamble.

“ Permits ” means all permits, licenses, franchises, approvals, authorizations, registrations, certificates, variances and similar rights obtained, or required to be obtained, from Governmental Authorities.

“Person” means and includes any individual, partnership, corporation, trust, unincorporated organization or other entity or Government Authority.

“Personal Information” means the type information regulated or subject to Privacy Laws and collected, used, disclosed or retained by Seller including information regarding Seller’s clients, customers, suppliers, employees, agents, dependent and independent contractors including an individual’s name, address, age, gender, identification or social insurance number, income, citizenship, employment, assets, liabilities, payment records, credit information, personal and professional references and health and/or medical records.

“Pre-Closing Escrow Agreement” means the escrow letter agreement dated as of December 14, 2015 among Buyer, Seller and LaPlante.

“Privacy Laws” means all applicable Laws governing the collection, use, disclosure or retention of Personal Information.

“Purchased Assets” means the assets being purchased and sold hereunder, as defined in Section 2.1.

“Purchased IP” has the meaning given to it in Section 4.13(b).

“Purchase Price” has the meaning given to it in Section 2.4.

“Representative” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.

“Restrictive Covenant Agreement” has the meaning given to it in Section 8.4.

“Restrictive Covenant Payment” has the meaning given to it in Section 2.5(b) .

“Seller” has the meaning given to it in the preamble.

“Seller Parties” means, collectively, Seller, the Trust and LaPlante.

“Seller Indemnified Parties” has the meaning given to it in Section 6.3.

“Target Working Capital Ceiling” means $215,000.

“Target Working Capital Floor” means $115,000.

“Tax Clearance Certificate” has the meaning given to it in Section 8.1(c).

“ Taxes ” means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, documentary, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties.

“ Tax Return ” means any return, declaration, report, claim for refund, information return or statement or other document relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“Third Party Action” has the meaning given to it in Section 6.5(d).

“ Transaction Documents ” means this Agreement, the Consulting Agreement, the Restrictive Covenant Agreement, the Assignment and Assumption Agreement, the Irvine Lease, the bill of sale and the other agreements and instruments required to be delivered at the Closing pursuant to Section 7.2 or Section 7.3.

“Trust” has the meaning given to such term in the preamble.

“Trust Agreement” means the Second Amendment to and Complete Restatement of the Christopher LaPlante Family Trust dated 12/23/97, dated as of February 19, 2016.

“Uncollected Receivables” has the meaning given to it in Section 8.9.

“Wirth” means Joseph Wirth, Seller’s director of operations prior to Closing.

1.2 Accounting Terms . Subject to the provisions of Section 4.4 with respect to the Financial Statements, as used in this Agreement and, unless the context requires otherwise, in each other agreement, document or instrument delivered under or in connection with this Agreement, all accounting terms not otherwise defined herein or therein shall have the meanings assigned to them in accordance with GAAP.

1.3 Other Definitional Provisions . Unless the context requires otherwise, references to “Articles” and “Sections” are to the Articles or Sections of this Agreement, and references to “Exhibits” and “Schedules” are to the Exhibits and Schedules annexed hereto. Any of the terms defined in this Article I may, unless the context requires otherwise, be used in the singular or the plural depending on the reference. Wherever used herein, the masculine pronoun shall include the feminine and the neuter, as appropriate in the context. With respect to any matter or thing, “including” or “includes” means including but not limited to such matter or thing. All references to currency contained in this Agreement shall be to United States currency. Except as otherwise specifically provided in this Agreement, all references to numbers of “days” shall mean calendar days.

ARTICLE II. PURCHASE AND SALE

2.1 Transfer of Purchased Assets . Subject to all of the terms and conditions of this Agreement, at the Closing Seller shall sell, transfer, convey, assign and deliver to Buyer, free and clear of all Encumbrances, and Buyer shall purchase and accept from Seller, all of the assets, of every nature and description whatsoever and wherever situated, tangible or intangible, owned by Seller on the Closing Date (collectively, the “Purchased Assets” ), including the following (but excluding the Excluded Assets):

(a) Seller’s leasehold interest in the Leased Real Property (subject, in the case of the Irvine Property, to modification pursuant to the Irvine Lease);

(b) all of Seller’s tangible personal property, including equipment, machinery, furniture, fixtures, leasehold improvements, vehicles and supplies, including without limitation those described in Schedule 2.1(b) , together with related product warranties;

(c) all of Seller’s inventory, raw materials, work in progress and finished goods (collectively, the “Inventory” );

(d) all of Seller’s accounts receivable and notes receivable and interest receivable thereon (collectively, the “Accounts Receivable” );

(e) all of Seller’s deposits (including security deposits) and prepaid expenses, all as more particularly described in Schedule 2.1(e) ;

(f) all of Seller’s interest in and to all of the Contracts identified in Schedule 2.1(f) (collectively, the “Assigned Contracts” );

(g) all of Seller’s interest in and to (1) all patents, applications for patents, copyrights, license agreements (including software license agreements), assumed names, trade names, trademark and/or service mark registrations, applications for trademark and/or service mark registrations, trademarks and service marks of Seller, as more particularly described in Schedule 2.1(g) , and all variants thereof, including all of Seller’s rights to use the name “Excalibur Engineering” to the exclusion of Seller; (2) all of Seller’s rights in and to client information, client lists, and candidate/prospect lists; (3) all telephone numbers, fax numbers, telephone directory advertising, web sites, domain names, domain leases, and e-mail addresses used or held for use in the Business, all as identified on Schedule 2.1(g) ; (4) all of Seller’s other proprietary information, including trade secrets, know-how, product designs and specifications, operating data and other information pertaining to the Business; and (5) the goodwill associated with the Business;

(h) all Permits necessary for or incident to the operation of the Business, to the extent assignable;

(i) all of Seller’s business and operational records relating to the Business, including employee records (to the extent permitted under applicable Law), office and sales records, blueprints, marketing strategies, business plans, studies and inventory lists and records (but expressly excluding Seller’s capital stock records, corporate minute books, bank account records and Tax Returns); and

(j) all other assets of Seller, not described above, which are either (1) reflected on the Financial Statements and not disposed of by Seller in the ordinary course of business between the Balance Sheet Date and the Closing Date, or (2) acquired by Seller in the ordinary course of business between the Balance Sheet Date and the Closing Date.

2.2 Excluded Assets . Notwithstanding the provisions of Section 2.1, the “Purchased Assets” shall not include, and Buyer shall not acquire hereunder (collectively, the “Excluded Assets” ): (i) any of the capital stock of Seller, (ii) any Employee Benefit Plan, or any interest therein or right thereunder (including, without limitation, any assets of Seller’s 401(k) plan included in the Employee Benefit Plans), (iii) Seller’s capital stock records, corporate minute books, bank account records and Tax Returns, (iv) Seller’s cash, cash-equivalents and securities, or (v) the assets identified on Schedule 2.2 .

2.3 Use of Seller’s Name and Phone Numbers . In furtherance of the purchase and sale of the Purchased Assets hereunder, immediately upon the Closing the Seller Parties shall cause Seller’s corporate name to be changed to a name completely dissimilar to “Excalibur Engineering, Inc.”, and thereafter shall not adopt, use, cause to be used, or approve or sanction the use of such name, or any name so similar as to cause confusion therewith, or any other trade name or assumed name listed in Schedule 2.1(g) . Promptly after the Closing, Seller shall discontinue use of its existing business telephone numbers and shall take all reasonable action (at no cost to Seller) and sign all documents as may be reasonably necessary to make such telephone numbers available for use by Buyer.

2.4 Purchase Price . Subject to the provisions of this Agreement (including, without limitation, the adjustments set forth in Section 2.6, the total purchase price for the Purchased Assets and the Restrictive Covenant Agreement shall be $7,350,000 (the “Purchase Price” ). The Purchase Price shall be allocated among the Purchased Assets and to the Restrictive Covenant Agreement as set forth in Schedule 2.4 . The Purchase Price shall be payable to Seller and LaPlante in accordance with the provisions of Section 2.5. At the Closing, the Parties shall execute a funds flow memorandum and closing statement in a form acceptable to the Parties (the “ Closing Statement ”) that sets forth the calculation of the Closing Cash Payment pursuant to Section 2.5(a), and may include certain other adjustments or credits to the Purchase Price (and the Closing Cash Payment) that are not otherwise adjusted for pursuant to Section 2.6 and are agreed upon by the Parties (the “ Closing Statement Adjustment ”).

2.5 Payment of Purchase Price . Subject to the adjustment described in Section 2.6 and all of the terms and conditions of this Agreement, at the Closing:

(a) Buyer shall pay to Seller, by wire transfer of immediately available funds to an account designated in writing by Seller, an amount (the “Closing Cash Payment” ) equal to (i) the Purchase Price, (ii) less the Holdback Amount, (iii) less the Restricted Covenant Payment, (iv) less the Estimated Reduction Amount, if any, (v) plus the Estimated Increase Amount, if any, (vi) less the Indebtedness Repayment Amount, and (vii) plus or less , as the case may be, the Closing Statement Adjustment, if any;

(b) Buyer shall pay to LaPlante the sum of $100,000, by wire transfer of immediately available funds to an account designated in writing by LaPlante, in consideration for LaPlante’s execution and delivery of the Restrictive Covenant Agreement (the “Restrictive Covenant Payment” );

(c) Buyer shall pay the Indebtedness Repayment Amount in accordance with Section 2.9; and

(d) Buyer shall hold the Holdback Amount in accordance with Section 2.7.

2.6 Adjustment to Purchase Price . The Purchase Price shall be subject to adjustment in accordance with the following procedures:

(a) On the business day immediately prior to the Closing Date, Seller shall deliver to Buyer a good faith estimate of the Closing Date Working Capital, which shall be determined in accordance with GAAP (the “Estimated Closing Date Working Capital ”); provided, however, that for purposes of determining the Closing Date Working Capital (including the Estimated Closing Date Working Capital and the Final Closing Date Working Capital), the Accrued Vacation Credit shall be treated as an Assumed Liability. Seller shall include with such estimate statements setting forth in detail the Purchased Assets (including, without limitation, an itemized list of Accounts Receivable, with aging schedule, and prepaid expenses) and the Assumed Liabilities included in its calculation of the Estimated Closing Date Working Capital. If the Estimated Closing Date Working Capital is less than the Target Working Capital Floor, then the Purchase Price and, as provided in Section 2.5(a), the Closing Cash Payment shall be reduced, on a dollar-for-dollar basis, by the amount by which the Estimated Closing Date Working Capital is less than the Target Working Capital Floor (the “Estimated Reduction Amount” ). If the Estimated Closing Date Working Capital is greater than the Target Working Capital Ceiling, then the Purchase Price and, as provided in Section 2.5(a), the Closing Cash Payment, shall be increased, on a dollar-for-dollar basis, by the amount by which the Estimated Closing Date Working Capital is greater than the Target Working Capital Ceiling (the “Estimated Increase Amount” ). If the Estimated Closing Date Working Capital is equal to or greater than the Target Working Capital Floor but less than or equal to the Target Working Capital Ceiling, then neither the Purchase Price nor the Closing Cash Payment shall be adjusted pursuant to this Section 2.6(a).

(b) Within 30 days after the Closing Date, Buyer shall prepare and deliver to Seller the calculation of the Closing Date Working Capital. The calculation of Closing Date Working Capital shall be prepared in accordance with GAAP. Buyer’s calculation of the Closing Date Working Capital shall be final and binding on the Parties for purposes of this Section 2.6 unless, within 10 days after delivery thereof to Seller, Seller delivers to Buyer a written notice of dispute specifying in reasonable detail the items in dispute. After delivery of such a dispute notice, Seller and Buyer shall promptly negotiate in good faith with respect to the subject of the dispute notice. The Closing Date Working Capital finally determined under this Section 2.6(b) shall be referred to as the “Final Closing Date Working Capital” . Without limiting any other rights or remedies available to Buyer (including, without limitation, Section 6.2), Buyer may include in its calculation of the Final Closing Date Working Capital all accounts payable or other Liabilities of Seller existing as of the Closing Date that Buyer pays or otherwise satisfies, whether or not such accounts payable or Liabilities are identified as Assumed Liabilities on the schedule of accounts payable that Seller delivers with its calculation of the Estimated Closing Date Working Capital pursuant to Section (a).

(c) Subject to the provisions of this Section 2.6(c), (i) if the Final Closing Date Working Capital is less than the Target Working Capital Floor, then the Purchase Price shall be reduced, on a dollar-for-dollar basis, by the amount by which the Final Closing Date Working Capital is less than the Target Working Capital Floor (the “Final Reduction Amount” ); (ii) if the Final Closing Date Working Capital is greater than the Target Working Capital Ceiling, then the Purchase Price shall be increased, on a dollar-for-dollar basis, by the amount by which the Final Closing Date Working Capital is greater than the Target Working Capital Ceiling (the “Final Increase Amount” ); and (iii) if the Final Closing Date Working Capital is equal to or greater than the Target Working Capital Floor but less than or equal to the Target Working Capital Ceiling, then the Purchase Price shall not be adjusted pursuant to this Section 2.6(c). Notwithstanding the foregoing, for purposes of determining the amount, if any, due from Buyer or Seller as a result of the adjustments set forth in this Section 2.6(c) (the “Net Adjustment Payment” ), any Estimated Reduction Amount or Estimated Increase Amount paid under Section 2.6(a) shall be applied to or offset or netted against, as applicable, the Final Reduction Amount or Final Increase Amount, as appropriate, so that the Net Adjustment Payment shall result in the net aggregate amount of payments or adjustments made pursuant to Section 2.6(a) and Section 2.6(c) reflecting the adjustment, if any, that would be due pursuant to this Section 2.6(c) based on the Final Closing Date Working Capital and Buyer or Seller, as applicable, shall pay to the other the Net Adjustment Payment so calculated, as provided in Section 2.6(d). For purposes of clarification, if the Final Closing Date Working Capital is greater than the Target Working Capital Floor but less than the Target Working Capital Ceiling (resulting in there being no adjustment to the Purchase Price pursuant to this Section 2.6(c)), but there was an adjustment to the Purchase Price made at Closing pursuant to Section 2.6(a), then the Net Adjustment Payment shall be equal to the Estimated Reduction Amount (which shall be returned and paid by Buyer to Seller) or Estimated Increase Amount (which shall be returned and paid by Seller to Buyer), as the case may be, calculated under Section 2.6(a).

(d) If the Purchase Price is reduced (or the Net Adjustment Payment is otherwise due from Seller) pursuant to Section 2.6(c), then, within 10 days after determination of the Final Closing Date Working Capital, the Seller Parties, jointly and severally, shall pay to Buyer in cash the full amount of the Net Adjustment Payment (or authorize Buyer in writing to offset such amount against the Holdback Amount in accordance with Section 6.6). If the Seller Parties fail to pay when due the amount of the Net Reduction Payment, if any, due from them then, in addition to any other rights and remedies available to Buyer (and notwithstanding any failure by the Seller Parties to authorize such offset as provided above), Buyer shall have the right to offset such amounts against the Holdback Amount, subject to and in accordance with the terms of Section 6.6. If the Purchase Price is increased (or the Net Adjustment Payment is otherwise due from Buyer) pursuant to Section 2.6(c), then Buyer shall pay to Seller, in cash, within 10 days after determination of the Final Closing Date Working Capital, the full amount of the Net Adjustment Payment. Any reduction or increase in the Purchase Price made pursuant to this Section 2.6 shall be treated by the Parties as an adjustment to the Purchase Price for income tax purposes, and the Parties shall adjust the allocation of the Purchase Price as necessary to reflect such adjustment.

2.7 Holdback . As security for the obligations of the Seller Parties pursuant to 2.6(d) and Section 6.2, at the Closing, Buyer shall withhold from the Purchase Price the sum of $735,000 (the “Holdback Amount” ). Buyer shall hold the Holdback Amount during the Holdback Period, pursuant to the terms of this Agreement. Subject to and in accordance with the provisions of Section 6.6, Buyer shall have the right to deduct from and set off against the Holdback Amount (A) any Losses for which Buyer is entitled to indemnification from the Seller Parties pursuant to Section 6.2; (B) any amounts due to Buyer from the Seller Parties with respect to the Net Adjustment Payment pursuant to Section 2.6(d) (and not otherwise paid by the Seller Parties pursuant to Section 2.6(d)); and (C) any amounts due to Buyer from the Seller Parties with respect to Uncollected Receivables pursuant to Section 8.9 (and not otherwise paid by the Seller Parties pursuant to Section 8.9). Upon expiration of the Holdback Period, Buyer shall pay to Seller, in immediately available funds, an amount equal to (i) the Holdback Amount, less (ii) any amounts set off against the Holdback Amount pursuant to Section 6.6, less (iii) any amounts that Buyer is permitted to continue to hold pursuant to Section 6.6, plus (iv) interest, at the rate of 0.5% per annum, on the portion of the Holdback Amount payable to Seller (not including amounts that Buyer is permitted to set off or continue to hold, as described in clauses (ii) and (iii)) from the Closing Date to the date of payment.

2.8 Termination of Pre-Closing Escrow Agreement . Effective upon Seller’s receipt of the Closing Cash Payment, (a) the Pre-Closing Escrow Agreement is hereby terminated, and neither Party shall have any further rights or obligations thereunder, and (b) Seller hereby releases all rights and claims to the Deposit.

2.9 Repayment of Indebtedness . Seller hereby authorizes and directs Buyer to pay at the Closing, on Seller’s behalf, the outstanding Liabilities of Seller as of the Closing Date that are secured by any Encumbrances on the Purchased Assets (the “Closing Date Indebtedness” ). Seller has delivered to Buyer (a) payoff statements indicating the full payoff amounts (including principal, interest, prepayment penalties or fees, and all other charges due or payable in connection with the payoff of the Closing Date Indebtedness) of the Closing Date Indebtedness (collectively, the “Indebtedness Repayment Amount” ) and (ii) wire instructions for the repayment of the Indebtedness Repayment Amount. At the Closing, Buyer shall pay or cause to be paid to the holders of the Closing Date Indebtedness, in accordance with the payoff statements and wire instructions so provided by Seller, the Indebtedness Repayment Amount, and Buyer’s payment of the Indebtedness Repayment Amount shall be applied to the payment of the Purchase Price payable to Seller pursuant to this Agreement, to the full extent of the Indebtedness Repayment Amount so paid by Buyer.

ARTICLE III. LIABILITIES AND CONTRACTS

3.1 No Assumption of Liabilities or Contracts . It is expressly understood and agreed that Buyer does not assume nor shall it be liable for any Liability other than the Assumed Liabilities that Buyer expressly assumes under Section 3.2. Seller shall pay or make adequate provision for the payment of all of the Liabilities of every kind and nature other than the Assumed Liabilities, and the Seller Parties shall jointly and severally indemnify Buyer, as provided by Section 6.2, with respect to all such Liabilities other than the Assumed Liabilities.

3.2 Liabilities Assumed . Subject to all of the terms and conditions of this Agreement, at the Closing Buyer shall assume and become responsible to perform and discharge when due, to the extent the same have not been performed or discharged by Seller prior to the Closing, only the following Liabilities (collectively, the “Assumed Liabilities” ):

(a) any account payable (other than a trade account payable to any Affiliate of any of the Seller Parties) incurred by Seller in the ordinary course of business that (i) remains unpaid as of the Closing Date and (ii) is set forth in a schedule provided with Seller’s calculation of the Estimated Closing Date Working Capital pursuant to Section 2.6(a); and

(b) the Liabilities arising on or after the Closing Date under the Assigned Contracts, but only to the extent that such Liabilities do not relate to any breach, default or violation by Seller of the Assigned Contracts prior to the Closing Date.

Upon assumption by Buyer of the Assigned Contracts at Closing, Buyer shall be entitled to all of Seller’s rights and benefits thereunder and shall relieve Seller of its obligations to perform the same; provided, however, that nothing herein contained shall relieve Seller of its obligations or Liabilities arising thereunder or in connection therewith prior to such assumption by Buyer at the Closing. Buyer shall indemnify Seller, as provided by Section 6.3, with respect to all of the Assumed Liabilities from and after the Closing Date.

ARTICLE IV. SELLER PARTIES’ REPRESENTATIONS AND WARRANTIES

Each of the Seller Parties hereby jointly and severally represents and warrants to Buyer, as of the Closing Date, as follows:

4.1 Organization, Standing and Power . Seller is a corporation duly organized, validly existing and in good standing under the Laws of the State of California. Seller has all necessary corporate power and authority to own, use and transfer its properties and assets and to transact the Business as now being conducted. Schedule 4.1 sets forth each jurisdiction in which Seller is licensed or qualified to do business and except as set forth in Schedule 4.1 Seller is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the ownership of the Purchased Assets or the operation of the Business as currently conducted makes such licensing or qualification necessary. Seller has no subsidiaries. Schedule 4.1 includes a list of all of the holders of the outstanding capital stock of Seller, and the number of shares held by each such holder. The Trust is a trust duly established and existing under the laws of California and was established by the Trust Agreement. LaPlante is the sole trustee of the Trust, and has the necessary power, authority and capacity, on behalf of the Trust, to enter into this Agreement and to perform the obligations of the Trust hereunder. The Trust Agreement remains in full force and effect, and no proceedings have been instituted or are pending for the termination, dissolution or liquidation of the Trust.

4.2 Authority for Transaction . Seller’s execution and delivery of this Agreement and all other Transaction Documents to which it is a party, its compliance with the provisions hereof and thereof and the consummation of all of the transactions contemplated hereby and thereby, have all been duly and validly authorized by all necessary corporate action on the part of Seller, and this Agreement and all other Transaction Documents to which Seller is a party are valid and binding upon Seller in accordance with their respective terms. The Trust’s execution and delivery of this Agreement and all other Transaction Documents to which it is a party, its compliance with the provisions hereof and thereof and the consummation of all of the transactions contemplated hereby and thereby, have all been duly and validly authorized by all necessary action on the part of the Trust and its trustee, and this Agreement and all other Transaction Documents to which the Trust is a party are valid and binding upon the Trust in accordance with their respective terms. LaPlante has full power and authority to execute and deliver this Agreement and all other Transaction Documents to which LaPlante is a party, to comply with the provisions hereof and thereof and to consummate the transactions contemplated hereby and thereby. This Agreement and all other Transaction Documents to which LaPlante is a party are valid and binding upon LaPlante in accordance with their respective terms.

4.3 No Conflict . Neither the execution and delivery of this Agreement or any other Transaction Document by the Seller Parties, nor compliance by the Seller Parties with any of the provisions hereof or thereof, nor the consummation of the transactions contemplated hereby or thereby, will:

(a) conflict with or result in a breach of any provision of Seller’s articles of incorporation or by-laws or any provision of the Trust Agreement;

(b) except as set forth in Schedule 4.3 , result in a default, or give rise to any right of termination, cancellation or acceleration, under any term, condition or provision of any Contract, Encumbrance or other instrument or obligation to which any of the Seller Parties is a party or by which they or any of their respective properties or assets may be bound;

(c) violate any Governmental Order or Law applicable to Seller or any of its properties or assets; or

(d) require any consent, waiver or approval by, notice to or filing with any Person, except for such consents, waivers, approvals, notices or filings set forth in Schedule 4.3 , all of which have been obtained, given or made.

4.4 Financial Statements . Seller has heretofore delivered to Buyer a true, correct and complete copy of the unaudited balance sheets and related statements of income for Seller for the fiscal years ended December 31, 2013, December 31, 2014 and December 31, 2015, respectively (collectively, the “Financial Statements” ). The Financial Statements are prepared from the books of account and records of Seller. The Financial Statements fairly present Seller’s financial position as at the dates thereof and the results of Seller’s operations, changes in Seller’s financial position and other information of Seller included therein for the periods or as at the dates therein set forth.

4.5 No Undisclosed Liabilities . Seller has no Liabilities with respect to the Business, except (a) those which are adequately reflected or reserved against in the Financial Statements as of the Balance Sheet Date, and (b) those which have been incurred in the ordinary course of business consistent with past practice since the Balance Sheet Date and which are not, individually in excess of $10,000 or in the aggregate in excess of $50,000.

4.6 Absence of Certain Changes . Except as disclosed in Schedule 4.6 , since the Balance Sheet Date, (a) Seller has conducted the Business only in the ordinary course of business consistent with past practice, (b) there has not been any material adverse change in the condition (financial or otherwise), assets, Liabilities or Business of Seller, or any damage, destruction or loss, whether or not covered by insurance, materially adversely affecting its properties or the Business, and (c) Seller has not experienced any other change in the Business resulting in or which could have an Adverse Effect.

4.7 Title . Seller has, and shall transfer to Buyer at the Closing, good title to each item comprising the Purchased Assets, free and clear of all Encumbrances.

4.8 Compliance with Laws; Permits .

(a) Seller has complied, and is now complying in all material respects, with all Laws applicable to ownership and use of the Purchased Assets or the operation of the Business and, to the Knowledge of the Seller Parties, there is no basis for any Action arising out of or in connection therewith. Seller has not received any notice of any violation of any Law, and Seller is not party to any settlement agreement or consent decree with continuing obligations or restrictions on Seller. To the Knowledge of the Seller Parties, each item comprising the Purchased Assets and the current uses thereof conform in all material respects to all applicable Laws.

(b) All Permits required for Seller to conduct the Business as currently conducted or for the ownership and use of the Purchased Assets have been obtained by Seller and are valid and in full force and effect. All fees and charges with respect to such Permits as of the date hereof have been paid in full. Schedule 4.8(b) lists all current Permits issued to Seller which are related to the conduct of the Business as currently conducted or the ownership and use of the Purchased Assets, including the names of the Permits and their respective dates of issuance and expiration. No event has occurred that, with or without notice or lapse of time or both, would reasonably be expected to result in the revocation, suspension, lapse or limitation of any Permit set forth in Schedule 4.8(b) .

4.9 Condition and Sufficiency of Purchased Assets . Except as set forth in Schedule 4.9 , each material item of tangible property included in the Purchased Assets is in good condition and repair, ordinary wear and tear excepted, and none of such tangible personal property is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not in the aggregate material in nature or cost. Except for the Excluded Assets, the Purchased Assets (i) constitute all of the assets, tangible and intangible, of any nature whatsoever, used to operate the Business in the manner presently operated by Seller, and (ii) include all of the operating assets of Seller. None of the assets used or useful in the operation of the Business are owned by the Trust or LaPlante.

4.10 Privacy Laws and Data Protection . Seller has complied in all material respects with all applicable Privacy Laws. There are no restrictions on the collection, use, disclosure and retention of Personal Information by Seller except as provided by Privacy Laws. With respect to the Business, Seller has established, implemented, updated, maintained and enforced such policies, programs, procedures, contracts and systems with respect to the collection, use, storage, transfer, retention, deletion, destruction, disclosure and other forms of processing of any and all Personal Information as are consistent and compliant with practice and standards typical for companies of comparable size to Seller that conduct businesses similar to the Business. The Seller Parties do not have any Knowledge of any actual, suspected or threatened (i) breach, misappropriation, or unauthorized disclosure, access, use, dissemination or modification of any Personal Information; or (ii) breach or violation of any of Seller’s policies, programs, procedures, contracts and systems described in this Section 4.10.

4.11 Accounts Receivable . The Accounts Receivable (a) have arisen from bona fide transactions entered into by Seller involving the sale of goods or the rendering of services in the ordinary course of business consistent with past practice; (b) constitute only valid, undisputed claims of Seller that, to the Knowledge of Seller, are not subject to any claims of set-off or other defenses or counterclaims or disputes, other than normal cash discounts accrued in the ordinary course of business consistent with past practice; and (c) subject to the reserve for bad debts, if any, shown on the Financial Statements or, with respect to Accounts Receivable arising after the Balance Sheet Date, on the accounting records of the Business, are collectible in full within 90 days after billing.

4.12 Inventory . Except for used, obsolete, damaged or defective items of Inventory that have been written off or are not otherwise reflected in the Financial Statements, all of the Inventory (i) consists of inventories of the kind, quality and quantity regularly and currently used in the Business, and (ii) is good and saleable (or rentable) condition .

4.13 Intellectual Property .

(a) “Intellectual Property ” means any and all of the following in any jurisdiction throughout the world: (A) trademarks and service marks, including all applications and registrations and the goodwill connected with the use of and symbolized by the foregoing; (B) copyrights, including all applications and registrations related to the foregoing; (C) trade secrets and confidential know-how; (D) patents and patent applications; (E) websites and internet domain name registrations; and (F) other intellectual property and related proprietary rights, interests and protections (including all rights to sue and recover and retain damages, costs and attorneys' fees for past, present and future infringement and any other rights relating to any of the foregoing).

(b) Schedule 2.1(g) lists all Intellectual Property included in the Purchased Assets ( “ Purchased IP ” ). Seller is the sole and exclusive legal and beneficial owner of all of the Purchased IP, free and clear of all Encumbrances, and has the valid right to use all other Intellectual Property used in or necessary for the conduct of the Business as currently conducted.

(c) Seller’s prior and current use of the Purchased IP, and Seller’s conduct of the Business as currently conducted, has not and does not infringe, violate, dilute or misappropriate the Intellectual Property of any Person. To the Knowledge of the Seller Parties, no Person is infringing, misappropriating, diluting or otherwise violating any of the Purchased IP.

(d) There are no Actions (including any oppositions, interferences or re-examinations) settled, pending or, to the Knowledge of the Seller Parties, threatened (including in the form of offers to obtain a license): (i) alleging any infringement, misappropriation, dilution or violation of the Intellectual Property of any Person by Seller in connection with the Business; ; (ii) challenging the validity, enforceability, registrability or ownership of any of the Purchased IP or Seller’s rights with respect to any Purchased IP; or (iii) by Seller or any other Person alleging any infringement, misappropriation, dilution or violation by any Person of any Purchased IP. Seller is not subject to any outstanding or prospective Governmental Order (including any motion or petition therefor) that does or would restrict or impair the use of any Purchased IP or restrict the licensing thereof to any Person.

(e) None of the past or present employees, officers, directors or shareholders of Seller has any rights in any of the Purchased IP or in any inventions, whether or not patented, which have been or are used by Seller in the Business or which pertain to the Business.

4.14 Assigned Contracts . Each of the Assigned Contracts is valid and binding, in full force and effect and, except for obtaining any consents, waivers or approvals or giving any notice listed in Schedule 4.3 , is fully assignable to and assumable by Buyer, so that immediately after the Closing, Buyer will be entitled to the full benefits thereof. None of Seller or, to the Knowledge of the Seller Parties, any other party thereto is in breach of or default under (or is alleged to be in breach of or default under), or has provided or received any notice of any intention to terminate, any Assigned Contract. To the Knowledge of the Seller Parties, no event or circumstance has occurred that, with or without notice or lapse of time or both, would constitute an event of default under any Assigned Contract or result in a termination thereof or would cause or permit the acceleration or other changes of any right or obligation or the loss of benefit thereunder. Seller has made available to Buyer complete and correct copies of each Assigned Contract. There are no disputes pending or, to the Knowledge of the Seller Parties, threatened under any Assigned Contract.

4.15 Other Contracts . Other than the Assigned Contracts, Seller is not a party to, or otherwise bound by, any Contract or other instrument which is material or necessary to the ownership of the Purchased Assets or the operation of the Business or which has an Adverse Effect on any of the Purchased Assets or the Business.

4.16 Legal Proceedings . Except as set forth in Schedule 4.16 , there are no Actions pending or, to the Knowledge of the Seller Parties, threatened against or by Seller (a) relating to or affecting the Business, the Purchased Assets or the Assumed Liabilities; or (b) that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. To the Knowledge of the Seller Parties, no event has occurred or circumstances exist that may give rise to, or serve as a basis for, any such Action. There are no outstanding Governmental Orders and no unsatisfied judgments, penalties or awards against, relating to or affecting the Business.

4.17 Tax Matters . Seller has filed all federal, state, county and local Tax Returns which are required to be filed prior to the date of this Agreement and has paid or has reserved for the payment of all Taxes which have become due and payable. All such Tax Returns are complete and accurate and disclose all Taxes required to be paid. To the Knowledge of the Seller Parties, no event has occurred which could impose on Buyer any successor or transferee liability for any Taxes in respect of Seller, except as may occur by operation of law under any Laws which provide for such liability upon the transfer of all or substantially all of the assets of Seller. No examination or audit of any Tax Return is currently in progress and no Governmental Authority is asserting, or has threatened in writing to assert, against Seller any deficiency, proposed deficiency or claim for additional Taxes or any adjustment thereof with respect to any period for which a Tax Return has been filed, for which Tax Returns have not yet been filed or for which Taxes are not yet due and payable. All amounts required to be withheld by Seller (including from employees for income Taxes and social security and other payroll Taxes) have been collected or withheld, and either paid to the respective Taxing authorities, set aside in accounts for such purpose, or accrued, reserved against and entered upon the books of Seller.

4.18 Insurance . Schedule 4.18 contains (a) a list and general description of all fire, theft, casualty, liability, life, hospitalization, medical reimbursement and other insurance coverage insuring the Purchased Assets, Seller and its personnel and Business operations; and (b) with respect to the Business, the Purchased Assets or the Assumed Liabilities, a list of all pending claims and the claims history for Seller since January 1, 2013. There are no claims related to the Business, the Purchased Assets or the Assumed Liabilities pending under any such insurance policies as to which coverage has been questioned, denied or disputed or in respect of which there is an outstanding reservation of rights. Seller has provided to Buyer true and complete copies of the insurance policies identified on Schedule 4.18 .

4.19 Labor Relations and Employment Issues .

(a) Seller has made available to Buyer a true, correct and complete list setting forth the names, date of hire, the rate of compensation (and the portions thereof attributable to salary and bonuses, respectively), the amount of accrued but unused vacation time as of the date of this Agreement, and work location of all current employees of Seller. Seller has made available to Buyer a true, correct and complete list setting forth the names of all employees of Seller currently on short-term or long-term disability leave, workers’ compensation leave, leave under the Family Medical Leave Act, and any other leave.

(b) Except as set forth in Schedule 4.19 , (1) Seller has not entered into any collective bargaining agreement or other contract with any employee, union, labor organization or other employee representative or group of employees and, to the Knowledge of the Seller Parties, no such organization or Person has made or is making any attempt to organize or represent employees of Seller; (2) there is no pending grievance or arbitration and no unsatisfied or unremedied grievance or arbitration award against Seller or any agent, representative or employee of Seller and, to the Knowledge of the Seller Parties, there is no basis for any such grievance or arbitration; (3) there is no unfair labor practice charge, pending trial of unfair labor practice charges, unremedied unfair labor practice finding or adverse decision of the National Labor Relations Board or administrative law judge thereof, against Seller or any agent, representative or employee of Seller and, to the Knowledge of the Seller Parties, there is no basis for any such unfair labor practice charge; and (4) there is not pending or, to the Knowledge of the Seller Parties, threatened with respect to Seller or its employees any labor dispute, strike or work stoppage.

(c) Without limiting the generality of Section 4.8, Seller is in compliance in all material respects with all applicable Laws, standards and Contracts relating to employment, and the payment and withholding of Taxes and other similar obligations, and Seller has not received any notice of any violation of any such Law, standard or Contract.

(d) Except as set forth in Schedule 4.19 , no current or former employee of Seller is owed by Seller overtime pay (other than overtime pay for the current payroll period), wages or salary for any period other than the current payroll period, vacation, holiday or other time off or pay in lieu thereof (other than time off or pay in lieu thereof earned in respect of the current year), or any amount arising from any violation of any Law, or Contract relating to the payment of wages, fringe benefits, wage supplements or hours of work.

4.20 Employee Benefits .

(a) Schedule 4.20 lists all employee benefit plans and collective bargaining, employment or severance agreements or other similar arrangements which Seller or any ERISA Affiliate, has ever sponsored, or maintained, or to which contributions are made or have ever been made, or for which obligations have been incurred, for the benefit of employees or former employees of Seller or any ERISA Affiliate, or with respect to which Seller or any ERISA Affiliate could have any Liability including, without limitation, (1) any “employee benefit plan” (within the meaning of Section 3(3) of ERISA), (2) any profit-sharing, stock bonus, deferred compensation, bonus, stock option, stock purchase, restricted stock, equity incentive, phantom equity, pension, retirement, retainer, compensation, consulting, severance, retention, indemnification, welfare or incentive plan, agreement or arrangement, (3) any plan, agreement or arrangement providing for “fringe benefits” or perquisites to employees, officers, directors or agents, including but not limited to benefits relating to automobiles, clubs, vacation, child care, parenting, sabbatical, sick leave, tuition reimbursement, medical, dental, hospitalization, life insurance, disability insurance and other types of insurance, whether written or unwritten, and (4) any employment agreement. The plans, agreements and arrangements described in this Section 4.20 are referred to herein as “Employee Benefit Plans.”

(b) None of the Employee Benefit Plans is, and neither Seller nor any ERISA Affiliate has ever contributed to or had any obligation to contribute to: (i) a plan subject to Title IV of ERISA or Section 412 of the Code; (ii) a “multiemployer plan” (within the meaning of Section 3(37) of ERISA); (iii) a “multiple employer plan” (within the meaning of Section 413(c) of the Code); (iv) any “voluntary employees’ beneficiary association” (within the meaning of Section 501(c)(9) of the Code); or (v) any “multiple employer welfare arrangement” (within the meaning of Section 3(40) of ERISA).

(c) Seller has delivered to Buyer copies of all documents and summary plan descriptions of the Employee Benefit Plans or summary descriptions of any such Employee Benefit Plan not otherwise in writing, which documents and descriptions are true, correct and complete in all respects. Seller has delivered to Buyer true, correct and complete copies of the most recent determination letters, advisory letters and opinion letters and the Forms 5500 filed in the most recent three plan years with respect to any Employee Benefit Plan, including all schedules thereto and financial statements with attached opinions of independent accountants. Seller has delivered to Buyer summaries of material modifications distributed since the most recent summary plan description and material communications distributed within the last year to the participants of each Employee Benefit Plan.

(d) Each Employee Benefit Plan (and any related trust agreement, insurance contract or fund) has been maintained, funded and administered in accordance with its terms and any applicable collective bargaining agreement, and each Employee Benefit Plan, Seller and each ERISA Affiliate, is in compliance in all material respects with the applicable provisions of ERISA, the Code and all Laws applicable thereto. Seller has not incurred and could not reasonably be expected to incur an employer shared responsibility penalty under Section 4980H of the Code. None of Seller, any ERISA Affiliate, nor any Employee Benefit Plan fiduciary has, with respect to the Employee Benefit Plans, engaged in a breach of fiduciary duty or a non-exempt “prohibited transaction,” as such term is defined in Section 4975 of the Code or Section 406 of ERISA.

(e) No Actions (other than routine claims for benefits in the ordinary course) are pending or, to the Knowledge of the Seller Parties, threatened with respect to any Employee Benefit Plan. No audits, inquiries, reviews, proceedings, claims, or demands are pending with any Governmental Authority with respect to any Employee Benefit Plan. There are no facts which could give rise to any Liability in the event of any such Action, audit, review, or other proceeding.

(f) Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter (or an opinion or advisory letter on which it is entitled to rely) from the Internal Revenue Service that such Employee Benefit Plan is qualified under Section 401(a) of the Code, and such determination letter, opinion letter or advisory letter has not expired as of the date hereof (or, in the case of an expired determination letter, the Employee Benefit Plan’s sponsor has a timely filed application for an updated determination letter pending with the Internal Revenue Service and has no reason to believe that a favorable determination letter will not be issued). Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been timely amended to reflect the provisions of all statutory or regulatory changes requiring amendments for which the deadline for amendment has passed. No event has occurred that will or could give rise to the revocation of any applicable determination letter or the loss of the right to rely on any applicable opinion or advisory letter, or the disqualification or loss of tax-exempt status of any such Employee Benefit Plan or trust under Sections 401(a) or 501(a) of the Code.

(g) Except as set forth in Schedule 4.20 , no Employee Benefit Plan provides for or continues medical or health benefits, or life insurance or other welfare benefits (through insurance or otherwise) for any person or any dependent or beneficiary of any person after such person’s retirement or other termination of employment except as may be required by COBRA or applicable state Law, and there has been no communication to any person that could reasonably be expected to promise or guarantee any such benefits.

(h) No condition exists as a result of which Seller or any ERISA Affiliate would have any Liability, whether absolute or contingent, including any obligations under the Employee Benefit Plans, with respect to any misclassification of a Person performing services for Seller or an ERISA Affiliate as an independent contractor or the employee of another entity rather than as an employee of Seller or an ERISA Affiliate.

(i) Since January 1, 2015, Seller and its ERISA Affiliates have offered minimum essential coverage (as described in Section 4980H of the Code) to their common law employees who must be treated as “full-time employees” under Section 4980H of the Code and its implementing regulations, and such coverage has satisfied the affordability and minimum value standards under Section 4980H of the Code and its implementing regulations.

(j) No common law employee of Seller or any ERISA Affiliate has been awarded an applicable premium tax credit or cost-sharing reduction, as such terms are defined under Section 4980H of the Code, with respect to health insurance coverage purchased in a state or federal health insurance marketplace (also known as an “exchange”) and neither Seller nor any ERISA Affiliate has heretofore been and reasonably does not expect to be subject to any penalty under Section 4980H of the Code with respect to any period prior to the Closing.

(k) Neither the execution of this Agreement nor the consummation of the transactions contemplated by this Agreement will (either alone or upon the occurrence of any additional or subsequent events): (i) entitle any individual to severance pay or any other payment; (ii) accelerate the time of payment, funding or vesting (other than vesting required due to the termination of tax-qualified retirement plans, which shall not require an additional contribution to such plans), or increase the amount of compensation due to any such individual; (iii) increase the amount payable under or result in any other material obligation pursuant to any Employee Benefit Plan; or (iv) result in “excess parachute payments” within the meaning of Section 280G(b) of the Code. No person is entitled to receive any additional payment (including any tax gross-up or other payment) as a result of the imposition of the excise Taxes required by Section 4999 of the Code.

(l) Each Employee Benefit Plan that is a “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of the Code) has been operated since January 1, 2005, in compliance with the applicable provisions of Section 409A of the Code, and since January 1, 2009 has been in documentary compliance with the applicable provisions of Section 409A of the Code; and neither Seller nor any ERISA Affiliate is or has been required to report any Taxes due as a result of a failure of an Employee Benefit Plan to comply with Section 409A of the Code. With respect to each Employee Benefit Plan, neither Seller nor any ERISA Affiliate has any indemnity obligation for any Taxes or interest imposed or accelerated under Section 409A of the Code.

4.21 Environmental Matters . Seller is in compliance in all material respects with all applicable Environmental Laws. None of the Seller Parties has received any notice of any violation of Environmental Laws. Seller has not used the Leased Real Property in any manner at any previous time for the storage, disposal, treatment, processing, production, refinement, generation or other handling of, any Hazardous Substances, except such Hazardous Substances that are used in the ordinary course of Seller’s Business in compliance in all material respects with applicable Environmental Laws. Neither Seller nor any of its employees or agents, has ever disposed of liquid, solid or semi-solid wastes on the Leased Real Property or on any other premises on which the Business is or was conducted. To the Knowledge of the Seller Parties, (i) no portion of the Irvine Property contains, or has been used in any manner at any previous time for the storage, disposal, treatment, processing, production, refinement, generation or other handling of (except in the ordinary course of business in compliance in all material respects with applicable Environmental Laws), any Hazardous Substances; and (ii) there has been no contamination, whether of soil, groundwater or otherwise, on, in, under or about the Irvine Property.

4.22 Real Property .

(a) Except for its interest in the Leased Real Property, Seller does not own any right, title or interest in any real property nor has Seller ever owned any real property.

(b) Schedule 4.22 contains a list of all of the real property leased (or otherwise used) by Seller in connection with the Business (collectively, the “ Leased Real Property ”), and identifies each Contract under which such real property is leased (the “Existing Leases” ). Seller has delivered to Buyer true, correct and complete copies of the Existing Leases, including all amendments, modifications, notices or memoranda of lease thereto.

(c) With respect to each parcel of the Leased Real Property, except as limited to the Irvine Property below or as set forth in Schedule 4.22 , (i) the buildings and improvements included in the Irvine Property (including, without limitation, the roof, the walls and all plumbing, wiring, electrical, heating, air conditioning, fire protection and other systems, as well as all paved areas, included therein or located thereat) are in good working order, condition and repair, reasonable wear and tear excepted, and are not in need of maintenance or repairs except for maintenance or repairs which are routine, ordinary and are not material in costs; (ii) Seller has received all approvals of all Governmental Authorities (including Permits) required in connection with Seller’s use and operation of the Leased Real Property, and Seller has operated and maintained the Leased Real Property in accordance with all applicable Laws; (iii) there are no Contracts granting to any person or entity (other than Seller) the right of use or occupancy of any portion of the Leased Real Property, and there are no Persons (other than Seller) in possession of any of the Leased Real Property, excepting Leased Real Property that is shared or multi-tenant property; and (iv) there are no outstanding options or rights of first refusal or similar rights to purchase any of the Leased Real Property or any portion thereof or interest therein. To the Knowledge of the Seller Parties, no event or condition currently exists which would create a legal or other impediment to the use of any of the Leased Real Property as currently used, or would increase the additional charges or other sums payable by the tenant under any Existing Lease (including, without limitation, any pending Tax reassessment or other special assessment affecting the Leased Real Property). None of the Seller Parties has received notice from any Governmental Authority of any violations of any Law affecting any portion of the Leased Real Property. The Leased Real Property is sufficient for the continued conduct of the Business after the Closing in substantially the same manner as conducted prior to the Closing and constitutes all of the real property necessary to conduct the Business as currently conducted.

4.23 Product and Service Warranties . Except for warranties under applicable Law (if any) and except as set forth on Schedule 4.23 , (a) there are no warranties, express or implied, written or oral, with respect to the products and services of the Business, and (b) there are no pending or, to the Knowledge of the Seller Parties, threatened claims or Liabilities with respect to any such warranties.

4.24 Relationship with Customers and Suppliers . Seller has delivered to Buyer a true, correct and complete list of each customer of Seller to whom Seller sold products or services during the year ended December 31, 2014, the year ended December 31, 2015, or the current year, together with, in each case, the amount billed during such periods (each, a “ Customer ”). The Seller Parties have not received notice from any Customer that such Customer is canceling or otherwise materially reducing its usage or purchase of the products and services of Seller, except as set forth in a written summary delivered to Buyer. The Seller Parties have no grounds to believe that any Customer will cancel or otherwise materially reduce its usage or purchase of the products and services of the Business following the Closing. To the Knowledge of the Seller Parties, no current supplier to Seller of items material to the conduct of the Business has threatened to terminate or change the terms of its business relationship with Seller for any reason.

4.25 Officers, Directors and Shareholders . Except as set forth on Schedule 4.25 , Seller does not have any business relationship, whether under any Contract or otherwise, with any Person who is an officer, director or shareholder of Seller, or any of their respective spouses, children or Affiliates, other than employment relationships in the ordinary course of business. Except as set forth on Schedule 4.25 , no officer, director or shareholder of Seller, nor any spouse, child or Affiliate thereof, has any interest in any competitor, supplier or customer of Seller, except for immaterial interests in publicly held companies.

4.26 Brokers and Finders . None of the Seller Parties or any of their respective officers, directors, employees or agents has employed any broker or finder or incurred any Liability for any brokerage fees, commissions or finders’ fees in connection with the transactions contemplated hereby.

4.27 Material Misstatements or Omissions . No representation or warranty of any of the Seller Parties made in this Agreement, nor any Schedule, document, statement, certificate or other information furnished or to be furnished to Buyer by or on behalf of any of the Seller Parties pursuant hereto or in connection with the transactions contemplated hereby, contains (or will when furnished contain) any untrue statement of a material fact, or omits (or will then omit) to state a material fact necessary in order to make the statement of facts made therein not misleading.

ARTICLE V. BUYER’S REPRESENTATIONS AND WARRANTIES

Buyer represents and warrants to the Seller Parties, as of the Closing Date, as follows:

5.1 Organization, Standing and Power . Buyer is a corporation duly formed, validly existing and in good standing under the Laws of the State of Ohio. Buyer has all necessary corporate power and authority to execute and deliver this Agreement and each other Transaction Document to which Buyer is a party, to comply with the provisions hereof and thereof and to consummate the transactions contemplated hereby and thereby.

5.2 Authority for Transaction . Buyer’s execution and delivery of this Agreement and each other Transaction Document to which Buyer is a party, its compliance with the provisions hereof and thereof and the consummation of all of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of Buyer, and this Agreement and each other Transaction Document to which Buyer is a party is valid and binding upon Buyer in accordance with their respective terms.

5.3 No Conflict . Neither the execution and delivery of this Agreement or any other Transaction Document by Buyer, nor compliance by Buyer with any of the provisions hereof or thereof, nor the consummation of the transactions contemplated hereby or thereby will:

(a) conflict with or result in a breach of any provision of Buyer’s articles of incorporation or code of regulations;

(b) result in a default, or give rise to any right of termination, cancellation or acceleration, under any term, condition or provision of any Contract, Encumbrance or other instrument or obligation to which Buyer is a party or by which it or any of its properties or assets may be bound;

(c) violate any Governmental Order or Law applicable to Buyer or any of its properties or assets; or

(d) require any consent, waiver or approval by, notice to or filing with any Person, except for such consents, waivers, approvals, notices or filings set forth in Schedule 5.3 , all of have been obtained, given or made.

5.4 Legal Proceedings . There is no Action pending or, to the Knowledge of Buyer, threatened against or affecting Buyer or any of its assets which, if adversely determined, would adversely affect the ability of Buyer to consummate the transactions contemplated hereby.

5.5 Brokers and Finders . Neither Buyer nor any of its officers, directors, employees or agents has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders’ fees in connection with the transactions contemplated hereby.

5.6 Material Misstatements or Omissions . No representation or warranty of Buyer made in this Agreement, nor any Schedule, document, statement, certificate or other information furnished or to be furnished to any of the Seller Parties by or on behalf of Buyer pursuant hereto or in connection with the transactions contemplated hereby, contains (or will when furnished contain) any untrue statement of a material fact, or omits (or will then omit) to state a material fact necessary in order to make the statement of facts made therein not misleading.

ARTICLE VI. SURVIVAL AND INDEMNIFICATION

6.1 Survival or Representations, Warranties and Covenants . Subject to the provisions of this Agreement, the representations and warranties contained in this Agreement shall survive the Closing and shall remain in full force and effect until the date that is 18 months from the Closing Date; provided, however, that the representations and warranties in Section 4.1, Section 4.2, Section 4.7, Section 4.17, Section 4.20, Section 4.21, Section 5.1 and Section 5.2 (collectively, the “Fundamental Representations” ) shall survive as hereafter provided. The Fundamental Representations contained in Section 4.17, Section 4.20 and Section 4.21 shall survive the Closing and shall remain in full force and effect for the full period of all applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof) plus 30 days; and all of the other Fundamental Representations shall survive indefinitely. All covenants and agreements of the Parties contained herein shall survive the Closing indefinitely or for the period explicitly specified therein.

6.2 Indemnification by Seller Parties . Subject to all of the terms and conditions of this Agreement including, without limitation, Section 6.4, each of the Seller Parties jointly and severally agrees to defend, indemnify and hold harmless each of Buyer and its Affiliates and their respective Representatives, successors and assigns (collectively, the “Buyer Indemnified Parties” ), from and against any and all Losses suffered, sustained, incurred or required to be paid by any Buyer Indemnified Party arising out of, based upon, in connection with or as a result of:

(a) any Liability, other than the Assumed Liabilities;

(b) any failure or breach of any representation or warranty of any of the Seller Parties made in this Agreement or any other Transaction Document;

(c) any breach or nonfulfillment of any covenant or agreement of any of the Seller Parties made in this Agreement or in any other Transaction Document;

(d) any Excluded Asset;

(e) any arrangements or agreements made or alleged to have been made by any of the Seller Parties with any broker, finder or other agent in connection with the transactions contemplated by this Agreement; or

(f) the Parties’ non-compliance with any applicable Laws of the State of California pertaining to “bulk transfers” including, without limitation, Cal. Rev. & Tax Code Sections 6811 and 6812 and the California Uniform Commercial Code - Bulk Sales.

6.3 Indemnification by Buyer . Subject to all of the terms and conditions of this Agreement including, without limitation, Section 6.4, Buyer shall be responsible for, and hereby agrees to defend, indemnify and hold harmless the Seller Parties and their respective Representatives, successors and assigns (collectively, “Seller Indemnified Parties” ), from and against any and all Losses suffered, sustained, incurred or required to be paid by any Seller Indemnified Party arising out of, based upon, in connection with or as a result of:

(a) any Assumed Liability;

(b) any failure or breach of any representation or warranty of Buyer made in this Agreement or any other Transaction Document;

(c) any breach or nonfulfillment of any covenant or agreement of Buyer made in this Agreement or any other Transaction Document; or

(d) any arrangements or agreements made or alleged to have been made by Buyer with any broker, finder or other agent in connection with the transactions contemplated by this Agreement.

6.4 Limitations on Indemnification .

(a) Notwithstanding the provisions of Section 6.2 and except as provided in Section 6.4(b), the aggregate liability of the Seller Parties under 6.2(b) for Losses arising from breaches of representations and warranties (other than the Fundamental Representations) shall not exceed, in the aggregate, an amount equal to 25% of the Purchase Price (the “Cap” ).

(b) Notwithstanding the provisions of Section 6.4(a), the Cap shall not apply to (i) the Seller Parties’ indemnification obligations with respect to the matters set forth in Section 6.2(a), Section 6.2(c), Section 6.2(d), Section 6.2(e), or Section 6.2(f), (ii) any breach of the Fundamental Representations; (iii) the Seller Parties’ obligations pursuant to Section 2.6; or (iv) any facts or circumstances which constitute fraud, intentional misrepresentation or willful misconduct by any of the Seller Parties.

(c) The obligation of the Seller Parties to indemnify Buyer Indemnified Parties under Section 6.2(b) shall expire, with respect to any representation or warranty, on the date on which the survival of such representation or warranty shall expire in accordance with Section 6.1, except with respect to any Notice of Claim which any Buyer Indemnified Parties have delivered to the Seller Parties prior to such date, in which case the obligation of the Seller Parties to indemnify Buyer Indemnified Parties shall continue until any Losses payable to Buyer Indemnified Parties with respect to such Notice of Claim are finally determined. Notwithstanding anything in this Agreement to the contrary, any claims based on any facts or circumstances which constitute fraud, intentional misrepresentation or willful misconduct by any of the Seller Parties shall not be subject to the time limitations set forth in this Section.

(d) The obligation of Buyer to indemnify Seller Indemnified Parties under Section 6.3(b) shall expire, with respect to any representation or warranty, on the date on which the survival of such representation or warranty shall expire in accordance with Section 6.1, except with respect to any Notice of Claim which any Seller Indemnified Parties have delivered to Buyer prior to such date, in which case the obligation Buyer to indemnify Seller Indemnified Parties shall continue until any Losses payable to Seller Indemnified Parties with respect to such Notice of Claim are finally determined. Notwithstanding anything in this Agreement to the contrary, any claims based on any facts or circumstances which constitute fraud, intentional misrepresentation or willful misconduct by Buyer shall not be subject to the time limitations set forth in this Section.

(e) Except as otherwise provided in this Section 6.4(e), the rights and remedies that a Party may have against another Party for claims for a breach of any representation, warranty, covenant or obligation under this Agreement are exclusively governed by this Agreement. Except as otherwise provided in this Section 6.4(e), to the extent permitted by applicable Law, any further claims and remedies, irrespective of the nature, amount or legal basis, are hereby expressly waived and excluded; provided, however, that nothing in this Section 6.4(e) shall limit any Person’s right to seek and obtain (a) any equitable relief (including claims for specific performance, injunctive relief or other equitable remedy) to which any Person shall be entitled or (b) any remedy on account of any Party’s fraud, intentional misrepresentation or willful misconduct; or (c) any rights or remedies available to any Party under or in respect of the other Transaction Documents.

6.5 Indemnification Claim Procedures .

(a) If any Buyer Indemnified Party or Seller Indemnified Party (an “Indemnified Party” ) believes that it has suffered or incurred or will suffer or incur any Losses for which it is entitled to indemnification under this Article VI, such Indemnified Party shall deliver to the Party or Parties from whom indemnification is being claimed (an “Indemnifying Party” ) reasonably prompt written notice of such claim setting forth, in reasonable detail, the nature and basis of the claim and the amount thereof, to the extent known, and any other relevant information in the possession of the Indemnified Party (a “Notice of Claim” ). The Notice of Claim shall be accompanied by any relevant documents in the possession of the Indemnified Party relating to the claim. Subject to the provisions of this Agreement including, without limitation, Section 6.4(c) and Section 6.4(d), the failure of an Indemnified Party to give any Notice of Claim required by this Section shall not affect any of such Party’s rights under this Article VI or otherwise except and to the extent that such failure is actually prejudicial to the rights and obligations of the Indemnifying Party. Notwithstanding anything herein to the contrary, if any Notice of Claim relates to a Third Party Action, the procedures of Section 6.5(d) shall apply to such Third Party Action.

(b) After an Indemnified Party has delivered a Notice of Claim requesting payment from an Indemnifying Party for any Losses, the Indemnifying Party shall, within 30 days of receipt of such Notice of Claim, (i) pay to the Indemnified Party, in immediately available funds, the amount of Losses, or (ii) deliver to the Indemnified Party written notice (a “Dispute Notice” ) advising the Indemnified Party that it disputes the claim for indemnification. If, within 30 days of receipt of such Notice of Claim, the Indemnifying Party fails to pay said amount to the Indemnified Party or deliver to the Indemnified Party a Dispute Notice the Indemnifying Party shall be deemed to have accepted and agreed to such claim for indemnification (a “Deemed Acceptance” ) and the Indemnified Party may exercise any and all legal or equitable remedies available to the Indemnified Party under this Agreement or otherwise with respect to such Losses.

(c) If, within such 30 day period following receipt of the Notice of Claim, the Indemnifying Party delivers a Dispute Notice with respect to the Indemnified Party’s claim for indemnification for Losses, the Indemnifying Party and the Indemnified Party agree that, prior to commencing any litigation or other proceedings against the other concerning any matter in which such Party intends to claim a right of indemnification, they will negotiate in good faith to resolve any dispute with respect to such claim and to provide each other with all relevant information relating to such dispute. If the Indemnifying Party and the Indemnified Party are unable to resolve any such dispute within 30 days of the delivery of a Dispute Notice (or such longer period as the Parties may agree upon), the Indemnifying Party or the Indemnified Party may thereafter commence litigation or other proceedings to resolve such dispute. The successful Party in any such proceeding shall be entitled to reimbursement from the non-successful Party for any and all of the successful Party’s costs and expenses including, without limitation, reasonable attorneys’ fees, incurred in connection with such proceeding.

(d) If any Notice of Claim relates to any Action against any Indemnified Party by a third party (a “Third Party Action” ), the Indemnifying Party shall be entitled to participate in such Third Party Action and, at its option, assume the defense thereof with its own counsel (to be reasonably satisfactory to the Indemnified Party), at the Indemnifying Party’s sole expense, by providing written notice to the Indemnified Party delivered within 30 days after the Indemnifying Party receives the Notice of Claim; provided, however, that the Indemnifying Party shall not have the right to assume the defense of any Third Party Action if the Indemnified Party shall have one or more legal or equitable defenses available to the Indemnified Party which are different from or in addition to those available to the Indemnifying Party, and, in the reasonable opinion of counsel for the Indemnified Party, counsel for the Indemnifying Party could not adequately represent the interests of the Indemnified Party because such interests could be in conflict with those of the Indemnifying Party. If the Indemnifying Party shall assume the defense of any Third Party Action, the Indemnified Party shall be entitled to participate in any Third Party Action at its expense. The Indemnifying Party shall not consent to the entry of a judgment with respect to the Third Party Action or enter into any settlement that involves anything other than the payment of money by the Indemnified Party without the Indemnified Party’s prior written consent (which shall not be unreasonably withheld or delayed). Whether or not the Indemnifying Party assumes the defense of any Third Party Action, the Indemnified Party shall not admit any liability with respect to, or settle, compromise or discharge, such Third Party Action without the Indemnifying Party’s prior written consent (which consent shall not be unreasonably withheld). The Indemnified Party shall provide the Indemnifying Party with access to its records and personnel relating to any such Third Party Action during normal business hours and shall otherwise cooperate with the Indemnifying Party in the defense or settlement thereof.

6.6 Recoupment Against Holdback . Subject to the notice, dispute and other procedures in Section 6.5, the Seller Parties agree that any payments which may be due to Seller from Buyer pursuant to Section 2.7 with respect to the Holdback Amount may be used by Buyer to satisfy (i) Seller’s indemnification obligations with respect to any claim for Losses required to be paid by the Seller Parties pursuant to Section 6.2; (ii) any obligation of the Seller Parties to pay Buyer the Net Adjustment Payment pursuant to Section 2.6(d), which right may be exercised at any time after the Net Adjustment Payment is determined in accordance with Section 2.6(b) (provided the Seller Parties do not otherwise timely pay the Net Adjustment Payment to Buyer pursuant to Section 2.6(d)); and (iii) any obligation of the Seller Parties to pay Buyer for Uncollected Receivables pursuant to Section 8.9, which right may be exercised at any time after Buyer’s delivery of notice of the Uncollected Receivables in accordance with Section 8.9 (provided the Seller Parties do not otherwise timely pay the amount of Uncollected Receivables to Buyer pursuant to Section 8.9). If, at the time payment of the Holdback Amount is due to Seller pursuant to Section 2.7, there is a pending Notice of Claim by Buyer against any of the Seller Parties for indemnification pursuant to this Article VI, then Buyer may withhold from the payment of the Holdback Amount then due to Seller an amount that Buyer reasonably deems necessary to fully satisfy the claim described in such Notice of Claim, and instead hold such amount until there is a final resolution of such claim (at which time Buyer may set off the amount necessary to satisfy the claim, and pay the balance, if any, to Seller). Any portion of the Holdback Amount not so set-off or held pursuant to this Section 6.6 shall be timely paid to Seller when due pursuant to Section 2.7.

6.7 Tax Treatment of Indemnification Payments. All indemnification payments made under this Agreement shall be treated by the Parties as an adjustment to the Purchase Price for Tax purposes, unless otherwise required by Law.

6.8 Effect of Investigation . The representations, warranties and covenants of the Indemnifying Party, and the Indemnified Party’s right to indemnification with respect thereto, shall not be affected or deemed waived by reason of any investigation made by or on behalf of the Indemnified Party (including by any of its Representatives).

ARTICLE VII. CLOSING

7.1 Closing . The Closing shall take place simultaneously with the execution of this Agreement on the date of this Agreement (the “ Closing Date ” ), and the Closing shall be deemed to occur effective as of 12:01 a.m. on the Closing Date. The Closing shall take place at a location acceptable to the Parties, and may be completed remotely through the exchange of signature pages by electronic means. The Parties shall take such actions, including the delivery of documents in escrow or by facsimile or e-mail, in order to facilitate completion on the Closing Date of all of the transactions contemplated hereby. Each Party’s obligations to consummate the transactions contemplated pursuant to this Agreement shall be conditioned on the other Party delivering at the Closing each of the documents or items required to be delivered by such other Party under Section 7.2 or Section 7.3, as applicable.

7.2 Closing Deliveries of Seller Parties . At (or prior to) the Closing, the Seller Parties shall deliver to Buyer the following:

(a) A certificate, duly executed by the Secretary of Seller, containing true, correct and complete copies of the following:

(i) Certificate of the Secretary of the State of California, attesting to the good standing of Seller in such jurisdiction as of a date reasonably proximate to the Closing Date;

(ii) A copy of the certificate of incorporation of Seller and of all amendments thereto, certified by the Secretary of the State of California;

(iii) A copy of the by-laws of the Seller as amended through the Closing Date; and

(iv) a copy of all actions taken by Seller’s Board of Directors and by Seller’s shareholders approving this Agreement and the transactions contemplated hereby;

(b) A Bill of Sale, duly executed by Seller, in a form reasonably acceptable to Buyer and Seller, conveying the Purchased Assets to Buyer free and clear of all Encumbrances;

(c) Certificates of title for all title motor vehicles included in the Purchased Assets, duly endorsed for transfer to Buyer;

(d) An Assignment and Assumption Agreement, duly executed by Seller, with respect to each of the Assigned Contracts, in a form or forms reasonably acceptable to Buyer and Seller (collectively, the “Assignment and Assumption Agreement” ), together with all consents and approvals as may be required in connection with the assignment by Seller and the assumption by Buyer of the Assigned Contracts;

(e) The Restrictive Covenant Agreement, duly executed by each of the Seller Parties;

(f) The Consulting Agreement, duly executed by LaPlante;

(g) The Irvine Lease, duly executed by MelChris;

(h) A written acceptance of an employment offer letter whereby Wirth agrees to become an employee of Buyer after Closing, duly executed by Wirth, as provided in Section 8.8;

(i) A Non-Competition, Non-Solicitation and Non-Disclosure Agreement in favor of Buyer in a form acceptable to Buyer, duly executed by Wirth;

(j) The Closing Statement, duly executed by each of the Seller Parties; and

(k) Such other instruments and documents necessary to transfer title in the Purchased Assets to the Buyer or to consummate any of the other transactions contemplated hereby as shall have been reasonably requested by counsel to Buyer on or before the Closing Date.

7.3 Closing Deliveries of Buyer . At (or prior to) the Closing, Buyer shall deliver to the Seller Parties the following:

(a) The Closing Cash Payment;

(b) The Irvine Lease, duly executed by Buyer;

(c) The Assignment and Assumption Agreement, duly executed by Buyer;

(d) The Consulting Agreement, duly executed by Buyer;

(e) The Closing Statement, duly executed by Buyer;

(f) An employment offer letter for Wirth, duly executed by Buyer, as provided in Section 8.8; and

(g) Such other instruments and documents necessary to consummate any of the transactions contemplated hereby as shall have been reasonably requested by counsel to Seller on or before the Closing Date.

ARTICLE VIII. FURTHER COVENANTS

8.1 Taxes .

(a) All sales or use Taxes payable by reason of the sale and transfer of any of the Purchased Assets hereunder shall be paid by Buyer.

(b) Without limiting the generality of Section 3.1, Seller shall be and remain responsible for all (and Buyer shall not assume any) Liabilities for Taxes of Seller of any kind or description including, without limitation, any Taxes relating to the Business, the Purchased Assets or the Assumed Liabilities for periods prior to the Closing. Each of Seller and Buyer shall pay Taxes for which it is responsible (and file all Tax Returns) when due.

(c) If requested by Buyer, Seller shall notify all of the Taxing authorities in the jurisdictions that impose Taxes on Seller or where Seller has a duty to file Tax Returns of the transactions contemplated by this Agreement in the form and manner required by such Taxing authorities, if the failure to make such notifications or receive any available tax clearance certificate (a “ Tax Clearance Certificate ” ) could subject the Buyer to any Taxes of Seller. If any Taxing authority asserts that Seller is liable for any Tax, Seller shall promptly pay any and all such amounts and shall provide evidence to Buyer that such Liabilities have been paid in full or otherwise satisfied.

8.2 Expenses of the Parties . Except as otherwise expressly provided in this Agreement, all expenses involved in the preparation, negotiation, authorization and consummation of this Agreement and the transactions contemplated hereby, including all fees and expenses of Representatives, shall be borne solely by the Party who shall have incurred the same, and no other Party shall have any responsibility with respect thereto.

8.3 Confidentiality . Except for necessary disclosure to such Party’s directors, officers, employees, counsel, accountants, bankers and other agents, and except for the disclosure contemplated by Section 8.6 or this Section 8.3, each Party shall keep the provisions of this Agreement confidential both prior and subsequent to the Closing Date. Without limiting the generality of the foregoing and except as otherwise provided in this Section, no Party shall make any press release or announcement with respect to the transactions contemplated hereby without the prior consent of Buyer and Seller, unless such Party determines, upon the advice of counsel, that such action is required by Law or the rules or regulations of any stock exchange or relevant Governmental Authority to which such party is subject. Notwithstanding anything in this Section 8.3 to the contrary, following the Closing Buyer may, without the prior consent of Seller, disclose in a press release or other format the existence of this Agreement with Seller and such additional information related to the transactions contemplated hereby as Buyer may be required to disclose under Law or the rules or regulations of any stock exchange or relevant Governmental Authority.

8.4 Non-Disclosure; Non-Solicitation and Non-Competition . At the Closing, each of the Seller Parties shall execute a Non-Competition, Non-Solicitation and Non-Disclosure Agreement in favor of Buyer in the form attached hereto as Exhibit B (the “Restrictive Covenant Agreement” ).

8.5 Consulting Agreement . At the Closing, Buyer and LaPlante shall execute a Consulting Agreement in substantially the form attached hereto as Exhibit C (the “Consulting Agreement” ).

8.6 Notices to and Consents of Third Parties . Buyer and each of the Seller Parties shall in a timely fashion give all notices to and make all filings with all governmental authorities and other Persons required to be given or made by such Party under any license, authorization, Contract or other instrument or otherwise in connection with the transactions contemplated by this Agreement including, without limitation, those described on Schedule 4.3 and Schedule 5.3 .

8.7 Further Assurances . Each Party shall cooperate with the others, take such further action, and execute and deliver such further documents, as may be reasonably requested by any other Party in order to carry out the terms and purposes of this Agreement. Without limiting the generality of the foregoing, from and after the Closing Date:

(a) Each Party shall file all Tax Returns consistent with the allocation of the Purchase Price set forth in Schedule 2.4 , and no Party shall take any position on audit or in litigation which is inconsistent with such allocation if such position would result in the payment of any additional Tax by, or the disallowance of any deduction or credit to, any other Party; and

(b) On the request of Buyer, the Seller Parties shall take such action and deliver to Buyer such further instruments of assignment, conveyance or transfer and other documents of further assurance as in the reasonable opinion of counsel to Buyer may be reasonably desirable to assure, complete and evidence the full and effective transfer, conveyance and assignment of the Purchased Assets and possession thereof to Buyer, its successors and assigns, and the performance of this Agreement by the Seller Parties in all respects. In addition, on the request of Buyer, the Seller Parties shall provide Buyer with such advice and assistance as may be reasonably necessary or appropriate to convey to Buyer the proprietary information, know-how and other intellectual property included in the Purchased Assets.

8.8 Employees and COBRA Compliance . Effective as of the Closing, Buyer shall offer at-will employment to Wirth, on terms acceptable to Buyer. Whether or not Buyer hires after the Closing any employees of Seller (including LaPlante or Wirth), Seller shall be responsible for all compensation and benefits (including, without limitation, salary, bonus, accrued vacation, any benefits attributable to compensation and service earned prior to the Closing, and sick pay) accruing prior to the Closing Date, except as otherwise provided in this Section with respect to the Accrued Vacation Credit. Without limiting the generality of Section 3.2, Buyer is not assuming any obligations or Liability (i) to any of Seller’s employees for sick or vacation pay or other benefits (except as otherwise provided in this Section with respect to the Accrued Vacation Credit), or (ii) under any Employee Benefit Plan. With respect to any employee of Seller that Buyer hires as of the Closing Date, Buyer shall recognize, assume and honor, subject to and in accordance with Buyer’s vacation policies, the unused and accrued vacation, as of the Closing Date, for all of such employees, as set forth on a schedule delivered by Seller to Buyer on the Closing Date (the “Accrued Vacation Credit” ). Seller agrees and acknowledges that all COBRA obligations arising with respect to the Purchased Assets or Seller’s Business prior to or in connection with the transactions contemplated by this Agreement are and shall remain the sole responsibility of Seller, regardless of which Party is responsible under the COBRA regulations. Notwithstanding the foregoing, in no event shall Seller have any COBRA obligations with respect to an individual who experiences a COBRA qualifying event under Buyer’s group health plan.

8.9 Uncollected Receivables . If, during the eight-month period beginning on the Closing Date (the “Collection Period” ), Buyer does not collect in full any of the Accounts Receivable of Seller included in the Purchased Assets, then Buyer shall deliver to the Seller Parties written notice identifying all such Accounts Receivable that were not so collected ( “Uncollected Receivables” ). Within 10 days of receipt of such notice from Buyer, the Seller Parties, jointly and severally, shall pay to Buyer an amount equal to the lesser of: (a) $38,000 or (b) the total amount of Uncollected Receivables (or authorize Buyer in writing to offset such applicable amount against the Holdback Amount in accordance with Section 6.6). If the Seller Parties fail to pay when due the amount of Uncollected Receivables due pursuant to this Section then, in addition to any other rights and remedies available to Buyer (and notwithstanding any failure by the Seller Parties to authorize such offset as provided above), Buyer shall have the right to offset such applicable amounts against the Holdback Amount, subject to and in accordance with the terms of Section 6.6. Upon receipt of the applicable payment from the Seller Parties for the Uncollected Receivables (or upon offset of such amount from the Holdback Amount), Buyer shall assign, without recourse, the Uncollected Receivables (or pro-rata portion thereof) to Seller, and Seller shall thereafter be entitled to take reasonable actions to collect, for Seller’s benefit, the Uncollected Receivables (or pro-rata portion thereof). During the Collection Period, Buyer shall use commercially reasonable efforts to collect the Accounts Receivable (but Buyer shall not be obligated to bring collection actions to collect any such accounts from an account debtor). Buyer shall apply amounts received during the Collection Period from customers in payment of accounts receivables (including the Accounts Receivable) to the specific outstanding invoice to which such payment relates.

ARTICLE IX. GENERAL PROVISIONS

9.1 Amendment and Waiver . This Agreement may be amended only by a writing executed by each of the Parties. No waiver of compliance with any provision or condition hereof, and no consent provided for herein, shall be effective unless evidenced by an instrument in writing duly executed by the Party sought to be charged therewith. No failure on the part of any Party to exercise, and no delay in exercising, any of its rights hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by any Party of any right preclude any other or future exercise thereof or the exercise of any other right.

9.2 Assignment . No Party shall assign or attempt to assign any of its rights or obligations under this Agreement without the prior written consent of each of the other Parties.

9.3 Notices . Each notice, report, demand, waiver, consent and other communication required or permitted to be given hereunder shall be in writing and shall be sent either by registered or certified first-class mail, postage prepaid and return receipt requested, or by facsimile or e-mail, addressed as follows:

If to Buyer:	Transcat, Inc.
	35 Vantage Point Drive
	Rochester, New York 14624
	Attention: Chief Financial Officer
	Fax: (585) 352-7788
	e-mail: mtschiderer@transcat.com

with a copy to:	Harter, Secrest & Emery LLP
	1600 Bausch & Lomb Place
	Rochester, New York 14604
	Attention: James M. Jenkins, Esq.
	Fax: (585) 232-2152
	e-mail: jjenkins@hselaw.com

If to any of the Seller Parties, to:

	Excalibur Engineering, Inc.
	9201 Irvine Blvd.
	Irvine, CA 92618
	Attention: Christopher LaPlante, President
	Fax: (949) 246-2252
	e-mail: evochris@outlook.com

with a copy to:	InterFocus Law, LLP
	580 California Street, Suite 1200
	San Francisco, CA 94104
	Attention: James Prenton, Esq.
	Fax: (415) 625-9770
	e-mail: james@interfocuslaw.com

Each such notice and other communication given by mail shall be deemed to have been given when it is deposited in the United States mail in the manner specified herein, and each such notice and other communication given by facsimile or e-mail shall be deemed to have been given when it is so transmitted and the appropriate answerback is received. Any Party may change its address for the purpose hereof by giving notice in accordance with the provisions of this Section 9.3.

9.4 Binding Effect . Subject to the provisions of Section 9.2, this Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and permitted assigns. This Agreement creates no rights of any nature in any Person not a party hereto.

9.5 Governing Law; Venue . This Agreement shall be governed by and construed in accordance with the Laws of the State of New York applicable to agreements made and to be performed entirely within such State. Any legal suit, action or proceeding arising out of or related to this Agreement or the matters contemplated hereunder shall be instituted exclusively in the federal courts of the United States or the courts of the State of New York in each case located in the City of Rochester and County of Monroe, and each Party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding and waives any objection based on improper venue or forum non conveniens . Service of process, summons, notice or other document by mail to such Party’s address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. Each Party hereby waives the right to a trial by jury.

9.6 Effect of Agreement . This Agreement sets forth the entire understanding of the Parties with respect to the subject matter hereof, and supersedes any and all prior agreements, arrangements and understandings, written or oral, relating to the subject matter hereof.

9.7 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Agreement shall be prohibited or invalid under applicable Law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement.

9.8 Negotiated Transaction . The provisions of this Agreement were negotiated by the Parties hereto and this Agreement shall be deemed to have been drafted by all the Parties hereto, notwithstanding any presumptions at law to the contrary. Each of the Parties hereto has had the opportunity to seek legal and/or other professional counsel in connection with the negotiation and drafting of this Agreement and with respect to the consummation of the transactions contemplated hereby.

9.9 Headings; Counterparts . The Article and Section headings of this Agreement are for convenience of reference only and do not form a part hereof and do not in any way modify, interpret or construe the intention of the Parties. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[Signature page follows]

In Witness Whereof , the Parties have duly executed this Asset Purchase Agreement on the date first written above.

Transcat, Inc.

By:	/s/ Michael J. Tschiderer
	Michael J. Tschiderer, Chief Financial Officer

Excalibur Engineering, Inc.

By: /s/ Christopher M. LaPlante

Christopher M. LaPlante, President

Christopher LaPlante Family Trust
Dated 12/23/97

By:	/s/ Christopher M. LaPlante
	Christopher M. LaPlante, Trustee

/s/ Christopher M. LaPlante
Christopher M. LaPlante

Table of Schedules and Exhibits

Upon request, Transcat, Inc. will furnish supplementally a copy of any schedule or exhibit to this Asset Purchase Agreement to the Securities and Exchange Commission.

Schedules

Schedule 2.1(b) – Tangible Personal Property

Schedule 2.1(e) - Deposits and Prepaid Expenses

Schedule 2.1(f) - Assigned Contracts

Schedule 2.1(g) – Intellectual Property

Schedule 2.2 – Excluded Assets

Schedule 2.4 – Purchase Price Allocation

Schedule 4.1 – Shareholders

Schedule 4.3 – Seller Conflicts

Schedule 4.6 – Absence of Change

Schedule 4.8(b) – Compliance with Laws (Permits)

Schedule 4.9 - Condition of Purchased Assets

Schedule 4.16 – Legal Proceedings

Schedule 4.18 – Insurance

Schedule 4.19 – Labor Relations and Employment Issues

Schedule 4.20 – Employee Benefits

Schedule 4.22 – Leased Real Property; Existing Leases

Schedule 4.23 – Product and Service Warranties

Schedule 4.25 – Officers, Directors and Shareholders

Schedule 5.3 – Buyer Conflicts

Exhibits

Exhibit A – Form of Lease Agreement

Exhibit B - Form of Restrictive Covenant Agreement

Exhibit C - Form of Consulting Agreement

Exhibit 21.1

SUBSIDIARIES

Subsidiary		Jurisdiction
Transcat Canada Inc.		Canada
United Scale & Engineering Corporation		Wisconsin
WTT Real Estate Acquisition, LLC		New York
Anmar Acquisition, LLC		Delaware

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Transcat, Inc.
Rochester, NY

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Registration Nos. 333-109985, 333-191438 and 333-191631) of Transcat, Inc. of our report dated June 20, 2016 relating to the consolidated financial statements, which appear in this Form 10-K of Transcat, Inc. for the year ended March 26, 2016.

/s/ Freed Maxick CPAs, P.C.

Freed Maxick CPAs, P.C.

Buffalo, NY

June 20, 2016

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Lee D. Rudow, President and Chief Executive Officer of Transcat, Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Transcat, Inc.;

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) 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;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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 20, 2016	/s/ Lee D. Rudow
	Lee D. Rudow
	President and Chief Executive Officer

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael J. Tschiderer, Vice President of Finance and Chief Financial Officer of Transcat, Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Transcat, Inc.;

(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 20, 2016	/s/ Michael J. Tschiderer
	Michael J. Tschiderer
	Vice President of Finance and Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this annual report on Form 10-K of Transcat, Inc., Lee D. Rudow, the Chief Executive Officer of Transcat, Inc. and Michael J. Tschiderer, the Chief Financial Officer of Transcat, Inc. certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of their knowledge, that:

	1.	This annual report on Form 10-K for the fiscal year ended March 26, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	2.	The information contained in this annual report on Form 10-K for the fiscal year ended March 26, 2016 fairly presents, in all material respects, the financial condition and results of operations of Transcat, Inc.

Date: June 20, 2016	/s/ Lee D. Rudow
	Lee D. Rudow
	President and Chief Executive Officer

Date: June 20, 2016	/s/ Michael J. Tschiderer
	Michael J. Tschiderer
	Vice President of Finance and Chief Financial Officer

By:	/s/ Christopher M. LaPlante
	Christopher M. LaPlante, President