- Amended Annual Report (10-K/A)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Mark One)

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2009

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

For the transition period from ___________ to ______________

Commission file number 0-10707

THERMODYNETICS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada		06-1042505
(State or Other Jurisdiction of		(I.R.S. Employer Identification
Incorporation or Organization)		Number)

651 Day Hill Road, Windsor, Connecticut	06095	(860) 683-2005
(Address of Principal Executive Offices)	(Zip Code)	(Registrant's telephone number)

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

	Name of Each Exchange
Title of Each Class	on which Registered
None	None

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


Title of Each Class
Common Stock $.01 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [ ] No [ X ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

Yes [ ] No [ X ]

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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T 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. [ X ]

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. (Check one):

Large accelerated filer [ ] Accelerated filer [ ]

Non-accelerated filer [ ] Smaller reporting company [ X ]

(Do not check if a smaller reporting company)

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

As of June 11, 2009, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $1,500,000 based on the price at which the common equity was last sold, or based on the average of the closing bid and asked prices as reported by the Non-NASD OTC Bulletin Board composite feed or other qualified interdealer quotation medium.

Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.

Class	Outstanding as of June 9, 2009
Common Stock $.01 par value	4,090,306 Common Shares

The following documents are incorporated by reference: None.

AMENDMENT :

On March 31, 2010, the Audit Committee of the Company's Board of Directors and the Company's management concluded that the equity method of accounting for the May 2006 sale of 43.68% of Turbotec Products, Plc (" Turbotec ") and subsequent reporting for the remaining 56.32% interest in Turbotec is the proper method to utilize. Previously the Company utilized the consolidation method of accounting under Generally Accepted Accounting Principles (" GAAP "). In the course of a routine Securities and Exchange Commission (" SEC ") review of the Company's prior periodic filings, the SEC issued comments identifying possible incorrect applications of certain accounting principles. As a result of the SEC staff comments, the Company reconsidered its accounting method and agreed consolidating Turbotec into its financial statements subsequent to the May, 2006 Turbotec stock offering was inappropriate. Therefore, the Company is restating its annual and quarterly financial statements since May, 2006 utilizing the equity method of accounting.

The affected consolidated financial statements are those for all periods since the May 2006 sale of the Turbotec shares through the quarter ended December 31, 2009; such financial statements should no longer be relied upon.

Thus, the Company hereby restates its financial statements for the fiscal years ended March 31, 2009, March 31, 2008, and March 31, 2007 by hereby amending its report on form 10-K as had been filed on July 13, 2009. Item 15 of Part IV is hereby amended and restated in its entirety as follows:

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)	Financial Statements

Report of Independent Registered Public Accounting Firm.

Consolidated Balance Sheets - March 31, 2009, March 31, 2008, and March 31, 2007.

Consolidated Statements of Operations - For The Years Ended March 31, 2009, 2008, and 2007.

Consolidated Statements of Stockholders' Equity - For The Years Ended March 31, 2009, 2008, and 2007.

Consolidated Statements of Cash Flows - For The Years Ended March 31, 2009, 2008, and 2007.

Notes to Consolidated Financial Statements

THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

YEARS ENDED MARCH 31, 2009, 2008 AND 2007

CONTENTS

		Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		6

CONSOLIDATED FINANCIAL STATEMENTS:

	Consolidated Balance Sheets	7

	Consolidated Statements of Operations and Comprehensive Income (Loss)	8

	Consolidated Statements of Stockholders’ Equity	9

	Consolidated Statements of Cash Flows	10

	Notes to Consolidated Financial Statements	11 – 29

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of

Thermodynetics, Inc. and Subsidiaries

Windsor, Connecticut

We have audited the accompanying consolidated balance sheets of Thermodynetics, Inc. and Subsidiaries (the “Company”) as of March 31, 2009, 2008 and 2007, and the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity and cash flows for the years then ended. These consolidated 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 audit 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 financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Thermodynetics, Inc. and Subsidiaries as of March 31, 2009, 2008 and 2007 and the results of its operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 3, the consolidated financial statements for the years ended March 31, 2009, 2008 and 2007 have been restated.

/s/ Mahoney Sabol & Company, LLP

Certified Public Accountants

Glastonbury, Connecticut

June 25, 2009

(except for Notes 3 and 22, as to which

the date is June 11, 2010)

THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MARCH 31, 2009, 2008 AND 2007

	2009			2008			2007
	(Restated)			(Restated)			(Restated)

ASSETS
CURRENT ASSETS
Cash	$	475,399		$	176,068		$	613,818
Marketable securities		50,767			259,332			215,521
Prepaid expenses and other current assets		583,644			25,201			37,462
Total current assets		1,109,810			460,601			866,801

PROPERTY, PLANT AND EQUIPMENT, net		3,207,949			3,329,081			3,460,309

DEFERRED INCOME TAXES		1,200,000			1,200,000			1,200,000

OTHER ASSETS
Investments - at equity		5,323,704			4,520,438			4,366,251
Related party receivables		889,297			997,558			8,723
Other		82,580			167,602			168,907
Total other assets		6,295,581			5,685,598			4,543,881

	$	11,813,340		$	10,675,280		$	10,070,991

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit	$	1,062,000		$	100,000		$	-
Accounts payable		205,264			80,768			37,367
Accrued expenses and taxes		552,515			209,909			87,815
Current portion of long-term debt		110,681			111,190			95,950
Total current liabilities		1,930,460			501,867			221,132

LONG-TERM LIABILITIES
Long-term debt, less current maturities above		1,561,174			1,645,202			1,766,258
Long-term liabilities from discontinued operations		2,782,195			2,782,195			2,782,195
Total long-term debt		4,343,369			4,427,397			4,548,453

COMMITMENTS AND CONTINGENCIES (Note 22)		-			-			-

STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share; authorized 25,000,000 shares		40,903			40,803			40,463
Additional paid-in capital		7,138,403			7,137,803			7,115,523
Accumulated other comprehensive income		24,554			36,690			1,600
Deficit		(1,664,349	)		(1,469,280	)		(1,856,180	)
Total stockholders' equity		5,539,511			5,746,016			5,301,406

	$	11,813,340		$	10,675,280		$	10,070,991

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

THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED MARCH 31, 2009, 2008 AND 2007

	2009			2008			2007
	(Restated)			(Restated)			(Restated)
REVENUES
Management Fee & Rental Income	$	967,557		$	924,380		$	919,824
Manufacturing Sales		-			-			2,839,969

COST OF SALES		-			-			2,160,494

OPERATING EXPENSES		2,269,860			1,546,151			2,097,256

Income (loss) from operations		(1,302,303	)		(621,771	)		(497,957	)

EQUITY IN EARNINGS OF UNCONSOLIDATED SUBSIDIARY		913,536			1,147,872			751,487

OTHER INCOME (EXPENSE)
Other, net		52,331			21,509			51,130
Interest expense		(147,699	)		(130,310	)		(172,344	)
Gain of sale of investment in unaffiliated company		328,928			-
Gain on sale of subsidiary stock		-			-			2,547,179
		233,560			(108,801	)		2,425,965

Income (loss) before provision for income taxes		(155,207	)		417,300			2,679,495

PROVISION FOR INCOME TAXES		39,862			30,400			95,313

Income (loss) from continuing operations		(195,069	)		386,900			2,584,182

DISCONTINUED OPERATIONS
Income from discontinued operations including gain on extinguishment of debt of $605,929		-			-			597,071
Net income on discontinued operations		-			-			597,071

Net income (loss)		(195,069	)		386,900			3,181,253

OTHER COMPREHENSIVE INCOME (LOSS), net of tax		(12,136	)		35,090			1,600

Comprehensive income (loss)	$	(207,205	)	$	421,990		$	3,182,853


EARNINGS PER COMMON SHARE	$	(0.05	)	$	0.10		$	0.79

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

THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED MARCH 31, 2009, 2008, AND 2007

	Common Stock
									Accumulated
				Additional		Retained			Other
	Number of			Paid-in		Earnings			Comprehensive
	Shares	Amount		Capital		(Deficit)			Income			Total
						(Restated)						(Restated)

Balance, March 31, 2006	3,989,727	$	39,897	$	5,783,090	$	(5,037,433	)	$	-		$	785,554

Issuance of stock pursuant to retirement plans	25,000		250		-		-			-			250
Sale of common stock	31,579		316		22,172		-			-			22,488
Sale of subsidiary stock	-		-		1,310,261		-			-			1,310,261
Net income	-		-				3,181,253			1,600			3,182,853

Balance, March 31, 2007	4,046,306	$	40,463	$	7,115,523	$	(1,856,180	)	$	1,600		$	5,301,406

Issuance of stock pursuant to retirement plans	25,000		250		18,500		-			-			18,750
Sale of common stock	9,000		90		3,780		-			-			3,870
Amortization of share based payments	-		-		-		-			-			-
Net income	-		-		-		386,900			35,090			421,990

Balance, March 31, 2008	4,080,306	$	40,803	$	7,137,803	$	(1,469,280	)	$	36,690		$	5,746,016

Issuance of common stock	10,000		100		600		-			-			700
Net loss	-		-		-		(195,069	)		(12,136	)		(207,205	)

Balance, March 31, 2009	4,090,306	$	40,903	$	7,138,403	$	(1,664,349	)	$	24,554		$	5,539,511

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

THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED MARCH 31, 2009, 2008 AND 2007

	2009			2008			2007
	(Restated)			(Restated)			(Restated)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(195,069	)	$	386,900		$	3,181,253
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		180,806			162,588			135,483
Earnings in unconsolidated subsidiary		(803,266	)		(1,055,725	)		(682,990	)
Amortization of share based payment expense		-			-			-
Gain on sale of investments in unaffiliated companies		(328,928	)		-			-
Deconsolidation of subsidiary, net of cash		-			-			117,340
Gain on sale of stock		-			-			(2,547,179	)
Gain on extinguishment of debt		-			-			(605,750	)
Increase (decrease) in deferred tax liability		-			-			(305,000	)
Issuance of stock		-			18,750			-
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable		-			-			(1,146,991	)
Decrease (increase) in inventories		-			-			1,089,921
(Increase) decrease in prepaid expenses and other current assets		(558,445	)		12,261			553,589
(Increase) decrease in other assets		6,173			1,305			-
Increase (decrease) in accounts payable		124,497			43,401			(374,605	)
Increase (decrease) in accrued expenses and taxes		342,606			122,094			201,276
Cash provided from operating activities of discontinued operations		-			-			(8,858	)
Net cash provided by operating activities		(1,231,626	)		(308,426	)		(392,511	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(19,917	)		(31,360	)		(138,896	)
(Purchase) proceeds - marketable securities		196,429			(8,721	)		(213,921	)
Proceeds from sale of investment in unaffiliated companies		438,442			-			-
Dividends from equity investment		-			901,538			-
Investment in unafiliated company		(35,863	)		-			-
Net cash used in investing activities		579,091			861,457			(352,817	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net (increase) decrease in related party receivable		108,261			(988,835	)		(6,286	)
Proceeds from long-term debt		-			-			-
Proceeds from issuance of stock		700			3,870			3,212,815
Proceeds from short-term borrowings		962,000			100,000			176,416
Principal payments on debt and capital lease obligations		(119,095	)		(105,816	)		(2,023,799	)
Net cash provided by financing activities		951,866			(990,781	)		1,359,146

NET INCREASE (DECREASE) IN CASH		299,331			(437,750	)		613,818

CASH, beginning of year		176,068			613,818			-

CASH, end of year	$	475,399		$	176,068		$	613,818

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

THERMODYNETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2009, 2008 AND 2007

NOTE 1 – BASIS OF PRESENTATION:

The consolidated financial statements include the accounts of Thermodynetics, Inc. and its wholly owned subsidiaries , Vulcan Industries, Inc., TPI Systems, Inc. and National Energy Systems, Inc. (collectively the “Company”). For the period from April 1, 2006 through May 8, 2006 the consolidated statements of operations includes a majority interest in Turbotec Products, Plc and its wholly owned subsidiary, Turbotec Products, Inc. (“Turbotec”) (see Note 2). From May 8, 2006 through March 31, 2009, the Company accounts for its ownership of Turbotec under the equity method of accounting. All material intercompany balances and transactions have been eliminated.

NOTE 2 – SALE OF MINORITY INTEREST IN SUBSIDIARY:

On May 8, 2006, the Company completed the sale of a minority interest of its subsidiary, Turbotec Products Plc (PLC), whereby approximately 43.68% of that company was sold pursuant to an offering on the AIM Market of the London Stock Exchange. The PLC is a United Kingdom holding company for the Company’s operating subsidiary, Turbotec Products, Inc.

Under a Relationship Agreement (RA), the Company and its Board of Directors (the “Board”) have undertaken, inter alia, not to exercise its voting rights, except with the consent of the nominated advisor and PLC (on the authority of its non-executive Directors) in favor of any resolution to give the board of the Plc authority under British law to allot shares in the PLC or to remove or reduce any pre-emption rights that PLC shareholders may have. The RA contains further provisions regarding an annual administration fee; restrictions on related party transactions; restrictions on appointments to the board of the PLC and mutual confidentiality and reporting undertakings. The RA also contains non-competition undertakings from both the Company and its Board and restricts the ability of the Company to dispose of its interest in the ordinary shares into the United States in a manner that would require registration of any such disposition under the US Securities Act. As part of the transaction, in accordance with the RA, the Company and the PLC established independent officers and directors and the two boards of directors act independently.

As a result of the transaction and the terms of the RA, the Company began to account for its significant influence in Turbotec under the equity method of accounting effective May 8, 2006.

Nature of Operations:

Thermodynetics, Inc., is engaged in managing its real estate and business holdings, marketing consulting services to other companies and investing in other companies.

Turbotec is a manufacturer of high performance, high quality heat exchangers, fabricated metal components and flexible connector products serving the heat transfer, transportation and plumbing industries. The Company markets its products in the United States, Canada and abroad to customers in the space conditioning, refrigeration, biomedical, appliance, water heating, aerospace and other industries.

THERMODYNETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2009, 2008 AND 2007

NOTE 3 - RESTATEMENT

The accompanying financial statements have been restated to utilize the equity method of accounting for the May 2006 sale of 43.68% of Turbotec Products, Plc and subsequent reporting for the remaining 56.32% interest in Turbotec Products, Plc. Previously the Company utilized the consolidation method of accounting under Generally Accepted Accounting Principles ("GAAP”). A summary of the effects of this change are shown in the following schedules.

THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MARCH 31, 2009, 2008 AND 2007

	As Restated									As Previously Reported									Change
	2009			2008			2007			2009			2008			2007			2009			2008			2007

ASSETS
CURRENT ASSETS
Cash	$	475,399		$	176,068		$	613,818		$	1,984,092		$	1,061,647		$	659,238		$	(1,508,693	)	$	(885,579	)	$	(45,420	)
Accounts receivable, net of allowance for doubtful accounts		-			-			-			1,859,834			2,908,606			2,839,958			(1,859,834	)		(2,908,606	)		(2,839,958	)
Marketable securities		50,767			259,332			215,521			50,767			259,332			215,521			-			-			-
Inventories		-			-			-			3,571,743			3,136,220			3,415,929			(3,571,743	)		(3,136,220	)		(3,415,929	)
Prepaid expenses and other current assets		583,644			25,201			37,462			363,418			196,359			120,880			220,226			(171,158	)		(83,418	)
Total current assets		1,109,810			460,601			866,801			7,829,854			7,562,164			7,251,526			(6,720,044	)		(7,101,563	)		(6,384,725	)

PROPERTY, PLANT AND EQUIPMENT, net		3,207,949			3,329,081			3,460,309			8,226,673			7,825,326			7,635,388			(5,018,724	)		(4,496,245	)		(4,175,079	)

DEFERRED INCOME TAXES		1,200,000			1,200,000			1,200,000			980,000			980,000			980,000			220,000			220,000			220,000

OTHER ASSETS
Investments - at equity		5,323,704			4,520,438			4,366,251			-			-			-			5,323,704			4,520,438			4,366,251
Related party receivables		889,297			997,558			8,723			-			-			-			889,297			997,558			8,723
Other		82,580			167,602			168,907			183,573			266,615			293,649			(100,993	)		(99,013	)		(124,742	)
Total other assets		6,295,581			5,685,598			4,543,881			183,573			266,615			293,649			6,112,008			5,418,983			4,250,232

	$	11,813,340		$	10,675,280		$	10,070,991		$	17,220,100		$	16,634,105		$	16,160,563		$	(5,406,760	)	$	(5,958,825	)	$	(6,089,572	)

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit	$	1,062,000		$	100,000		$	-		$	1,062,000		$	100,000		$	-		$	-		$	-		$	-
Accounts payable		205,264			80,768			37,367			905,662			2,046,076			2,095,006			(700,398	)		(1,965,308	)		(2,057,639	)
Accrued expenses and taxes		552,515			209,909			87,815			1,204,295			818,680			975,720			(651,780	)		(608,771	)		(887,905	)
Current portion of long-term debt		110,681			111,190			95,950			306,366			290,044			228,830			(195,685	)		(178,854	)		(132,880	)
Total current liabilities		1,930,461			501,867			221,132			3,478,323			3,254,800			3,299,556			(1,547,862	)		(2,752,933	)		(3,078,424	)

LONG-TERM LIABILITIES
Long-term debt, less current maturities above		1,561,174			1,645,202			1,766,258			1,711,383			1,991,097			1,965,776			(150,209	)		(345,895	)		(199,518	)
Long-term liabilities from discontinued operations		2,782,195			2,782,195			2,782,195			2,782,195			2,782,195			2,782,195			-			-			-
Total long-term		4,343,369			4,427,397			4,548,453			4,493,578			4,773,292			4,747,971			(150,209	)		(345,895	)		(199,518	)

DEFERRED INCOME TAXES		-			-			-			383,000			296,000			335,000			(383,000	)		(296,000	)		(335,000	)

COMMITMENTS AND CONTINGENCIES (Note 23)		-			-			-			-			-			-			-			-			-

MINORITY INTEREST		-			-			-			3,914,836			3,152,001			3,163,545			(3,914,836	)		(3,152,001	)		(3,163,545	)

STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share; authorized 25,000,000 shares		40,903			40,803			40,463			40,903			40,803			40,463			-			-			-
Additional paid-in capital		7,138,403			7,137,803			7,115,523			7,138,403			7,137,803			7,115,523			-			-			-
Accumulated other comprehensive income		24,554			36,690			1,600			24,554			36,690			1,600			-			-			-
Deficit		(1,664,349	)		(1,469,280	)		(1,856,180	)		(2,253,497	)		(2,057,284	)		(2,543,095	)		589,148			588,004			686,915
Total stockholders' equity		5,539,511			5,746,016			5,301,406			4,950,363			5,158,012			4,614,491			589,148			588,004			686,915

	$	11,813,340		$	10,675,280		$	10,070,991		$	17,220,100		$	16,634,105		$	16,160,563		$	(5,406,760	)	$	(5,958,825	)	$	(6,089,572	)

THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED MARCH 31, 2009, 2008 AND 2007

	As Restated									As Previously Reported									Change
	2009			2008			2007			2009			2008			2007			2009			2008			2007

REVENUES
Management Fee & Rental Income	$	967,557		$	924,380		$	919,824		$	-		$	-		$	-		$	967,557		$	924,380		$	919,824
Manufacturing Sales		-			-			2,839,969			26,985,712			28,020,878			23,529,748			(26,985,712	)		(28,020,878	)		(20,689,779	)

COST OF SALES		-			-			2,160,494			19,052,789			20,212,772			18,439,961			(19,052,789	)		(20,212,772	)		(16,279,467	)

OPERATING EXPENSES		2,269,860			1,546,151			2,097,256			6,691,137			5,637,045			4,258,436			(4,421,277	)		(4,090,894	)		(2,161,180	)

Income from operations		(1,302,303	)		(621,771	)		(497,957	)		1,241,786			2,171,061			831,351			(2,544,089	)		(2,792,832	)		(1,329,308	)

EQUITY IN EARNINGS OF UNCONSOLIDATED SUBSIDIARY		913,536			1,147,872			751,487			-			-			-			913,536			1,147,872			751,487

OTHER INCOME (EXPENSE)
Other, net		52,331			21,509			51,130			35,000			(8,509	)		26,225			17,331			30,018			24,905
Interest expense		(147,699	)		(130,310	)		(172,344	)		(164,310	)		(162,831	)		(250,562	)		16,611			32,521			78,218
Gain of sale of investment in unaffiliated company		328,928			-						328,928			-						-			-			-
Gain on sale of stock		-			-			2,547,179			-			-			2,547,179			-			-			-
		233,560			(108,801	)		2,425,965			199,618			(171,340	)		2,322,842			33,942			62,539			103,123

Income before provision for income taxes		(155,207	)		417,300			2,679,495			1,441,404			1,999,721			3,154,193			(1,596,611	)		(1,582,421	)		(474,698	)

PROVISION FOR INCOME TAXES		39,862			30,400			95,313			1,006,462			863,000			950,000			(966,600	)		(832,600	)		(854,687	)

MINORITY INTEREST		-			-			-			(631,155	)		(688,722	)		(306,926	)		631,155			688,722			306,926

Income from continuing operations		(195,069	)		386,900			2,584,182			(196,213	)		447,999			1,897,267			1,144			(61,099	)		686,915

DISCONTINUED OPERATIONS
Income from discontinued operations including gain on extinguishment of debt of $605,929		-			-			597,071			-			-			597,071			-			-			-
Net income on discontinued operations		-			-			597,071			-			-			597,071			-			-			-

Net income (loss)		(195,069	)		386,900			3,181,253			(196,213	)		447,999			2,494,338			1,144			(61,099	)		686,915

OTHER COMPREHENSIVE INCOME (LOSS), net of tax		(12,136	)		35,090			1,600			(12,136	)		35,090			1,600			-			-			-

Comprehensive income (loss)	$	(207,205	)	$	421,990		$	3,182,853		$	(208,349	)	$	483,089		$	2,495,938		$	1,144		$	(61,099	)	$	686,915


EARNINGS PER COMMON SHARE	$	(0.05	)	$	0.10		$	0.79		$	(0.05	)	$	0.11		$	0.62		$	0.00		$	(0.01	)	$	0.17

THERMODYNETICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

MARCH 31, 2009, 2008 AND 2007

	As Restated									As Previously Reported									Change
	2009			2008			2007			2009			2008			2007			2009			2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(195,069	)	$	386,900		$	3,181,253		$	(196,213	)	$	447,999		$	2,494,338		$	1,144		$	(61,099	)	$	686,915
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		180,806			162,588			135,483			523,605			456,209			381,833			(342,799	)		(293,621	)		(246,350	)
Earnings in unconsolidated subsidiary		(803,266	)		(1,055,725	)		(682,990	)											(803,266	)		(1,055,725	)		(682,990	)
Net change in minority interest in subsidiary		-			-			-			762,835			(11,544	)		306,926			(762,835	)		11,544			(306,926	)
Amortization of share based payment expense		-			-			-			-			37,812			-			-			(37,812	)		-
Gain on sale of investments in unaffiliated companies		(328,928	)		-			-			(328,928	)		-			-			-			-			-
Deconsolidation of subsidiary, net of cash		-			-			117,340			-			-			-			-			-			117,340
Gain on sale of stock		-			-			(2,547,179	)		-			-			(2,547,179	)		-			-			-
Gain on extinguishment of debt		-			-			(605,750	)		-			-			(605,750	)		-			-			-
Increase (decrease) in deferred tax liability		-			-			(305,000	)		87,000			(39,000	)		250,000			(87,000	)		39,000			(555,000	)
Unrealized gain on marketable securities		-			-			-			-			35,090			1,600			-			(35,090	)		(1,600	)
Issuance of stock		-			18,750			-			-			18,750			-			-			-			-
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable		-			-			(1,146,991	)		1,048,772			(68,648	)		(789,444	)		(1,048,772	)		68,648			(357,547	)
Decrease (increase) in inventories		-			-			1,089,921			(435,523	)		279,709			(414,173	)		435,523			(279,709	)		1,504,094
(Increase) decrease in prepaid expenses and other current assets		(558,445	)		12,261			553,589			(167,059	)		(45,479	)		348,645			(391,386	)		57,740			204,944
(Increase) decrease in other assets		6,173			1,305			-			(31,671	)		15,963			(27,451	)		37,844			(14,658	)		27,451
Increase (decrease) in accounts payable		124,497			43,401			(374,605	)		(1,140,414	)		(48,930	)		(163,763	)		1,264,911			92,331			(210,842	)
Increase (decrease) in accrued expenses and taxes		342,606			122,094			201,276			385,616			(161,261	)		645,951			(43,010	)		283,355			(444,675	)
Cash provided from operating activities of discontinued operations		-			-			(8,858	)		-			-			(8,858	)		-			-			-
Net cash provided by operating activities		(1,231,626	)		(308,426	)		(392,511	)		508,020			916,670			(127,325	)		(1,739,646	)		(1,225,096	)		(265,186	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment		(19,917	)		(31,360	)		(138,896	)		(885,197	)		(646,197	)		(861,780	)		865,280			614,837			722,884
(Purchase) proceeds - marketable securities		196,429			(8,721	)		(213,921	)		196,429			(58,469	)		(245,521	)		-			49,748			31,600
Proceeds from sale of investment in unaffiliated companies		438,442			-			-			438,442			-			-			-			-			-
Dividends from equity investment		-			901,538			-			-			-			-			-			901,538			-
Investment in unafiliated company		(35,863	)		-			-			-			-			-			(35,863	)		-			-
Other decrease in life insurance receivable		-			-			-			-			-			2,437			-			-			(2,437	)
Net cash used in investing activities		579,091			861,457			(352,817	)		(250,326	)		(704,666	)		(1,104,864	)		829,417			1,566,123			752,047

CASH FLOWS FROM FINANCING ACTIVITIES
Net (increase) decrease in related party receivable		108,261			(988,835	)		(6,286	)		-			-			-			108,261			(988,835	)		(6,286	)
Proceeds from long-term debt		-			-			-			-			366,000			-			-			(366,000	)		-
Proceeds from issuance of stock		700			3,870			3,212,815			700			3,870			6,736,260			-			-			(3,523,445	)
Proceeds from short-term borrowings		962,000			100,000			176,416			962,000			100,000			89,628			-			-			86,788
Payments of debt from stock offering proceeds		-			-			-			-			-			(4,616,000	)		-			-			4,616,000
Principal payments on debt and capital lease obligations		(119,095	)		(105,816	)		(2,023,799	)		(297,949	)		(279,465	)		(318,461	)		178,854			173,649			(1,705,338	)
Net cash provided by financing activities		951,866			(990,781	)		1,359,146			664,751			190,405			1,891,427			287,115			(1,181,186	)		(532,281	)

NET INCREASE (DECREASE) IN CASH		299,331			(437,750	)		613,818			922,445			402,409			659,238			(623,114	)		(840,159	)		(45,420	)

CASH, beginning of year		176,068			613,818			-			1,061,647			659,238			-			(885,579	)		(45,420	)		-

CASH, end of year	$	475,399		$	176,068		$	613,818		$	1,984,092		$	1,061,647		$	659,238		$	(1,508,693	)	$	(885,579	)	$	(45,420	)

THERMODYNETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2009, 2008 AND 2007

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Estimates:

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Cash Equivalents:

The Company considers all highly liquid instruments purchased with original maturities of three months or less to be cash equivalents.

Accounts Receivables:

Accounts receivables are carried at their estimated collectible amounts and represent rental income and pass through costs to a third party lessee of the Company’s real estate.

Marketable Securities:

The Company determines the appropriate classification of debt and equity securities at the time of purchase and reevaluates such designation as of each balance sheet date.

Inventories :

Inventories of Turbotec were valued at the lower of cost or market, with cost determined on a standard cost basis which approximates a first-in, first-out basis.

Property, Plant and Equipment :

Property, plant and equipment of the Company are carried at cost. For financial and income tax reporting purposes, depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized; expenditures for maintenance and repairs are charged to expense as incurred.

Estimated useful lives to compute depreciation are as follows:

Office equipment, furniture and fixtures 7 years

Building and improvements 40 years

THERMODYNETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2009, 2008 AND 2007

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

Intangible Assets:

The Company utilizes Statement of Financial Accounting Standards (SFAS) No. 142 “Goodwill and Other Intangible Assets.” Under the provisions of this Statement, goodwill and intangible assets deemed to have indefinite lives are no longer subject to amortization. Goodwill is assigned to specific reporting units and is reviewed for impairment at least annually and upon the occurrence of an event or when circumstances indicate that a reporting units’ carrying value is greater than its fair value. All other intangible assets, classified as definite-lived assets, are amortized over their estimated future lives (See Note 8).

Revenue Recognition:

Rental income and management fee income are recognized when services are rendered or when the revenue is earned.

Income Taxes :

The Company files consolidated federal and combined state corporate income tax returns with all of its subsidiaries. Tax credits are recorded as a reduction of income taxes in the year realized. The Company utilizes the asset and liability method of accounting for deferred income taxes as prescribed by the Statement of Financial Accounting Standards No. 109 (SFAS 109) "Accounting for Income Taxes." This method requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the tax return and financial statement reporting bases of certain assets and liabilities.

The Company also follows FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes” (an interpretation of FASB Statement No. 109), which clarifies the accounting for uncertainty in income taxes recognized in financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

Earnings Per Common Share :

In fiscal 1999, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 128, “Earnings Per Share”. SFAS No. 128 simplifies the standards for computing earnings per share (EPS) and makes them comparable to international EPS standards. It replaced the presentation of primary EPS with a presentation of basic EPS.

Reclassification :

Certain amounts as of March 31, 2008 and 2007 have been reclassified to conform with the March 31, 2009 presentation. The reclassifications have no material affect on the financial statements.

THERMODYNETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2009, 2008 AND 2007

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

New Pronouncements :

In July 2002, the Public Company Accounting Reform and Investor Protection Act of 2002 (the Sarbanes-Oxley Act) was enacted. Section 404 stipulates that public companies must take responsibility for maintaining an effective system of internal control. The Act requires public companies to report on the effectiveness of their control over financial reporting (effective with fiscal year ended March 31, 2008) and obtain an attest report from their independent registered public accountant about management’s report (for the fiscal year ending March 31, 2010).

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. This Statement defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and expands disclosures about fair value measurements. The Company has determined that there is no material impact to the financial statements as a result of the adoption of this Statement.

The Company adopted SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115” (“SFAS No. 159”) as of May 4, 2008. SFAS No. 159 permits entities to elect to measure many financial instruments and certain other items at fair value. The company did not elect the fair value option for any assets or liabilities that were not previously carried at fair value. Accordingly, the adoption of SFAS No. 159 had no impact on our Consolidated Financial Statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin No. 51 (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the potential impact of the adoption of SFAS 160 on the consolidated financial statements.

In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162, “ The Hierarchy of Generally Accepted Accounting Principles ”. SFAS No. 162 sets forth the level of authority to a given accounting pronouncement or document by category. Where there might be conflicting guidance between two categories, the more authoritative category will prevail. SFAS No. 162 will become effective 60 days after the SEC approves the PCAOB’s amendments to AU Section 411 of the AIPCA Professional Standards. SFAS No. 162 has no affect on the Company’s financial position, statements of operations, or cash flows at this time.

THERMODYNETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2009, 2008 AND 2007

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

New Pronouncements (continued) :

In April 2009, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) FAS 107-1 and APB 28-1, “ Interim Disclosures about Fair Value of Financial Instruments (“FAS 107-1 and APB 28-1”), which amends SFAS No. 107, “ Disclosures about Fair Value of Financial Instruments ,” and APB opinion No. 28, “ Interim Financial Reporting ,” to require disclosures about fair value of financial instruments in interim as well as in annual financial statements. FSP FAS 107-1 and ABP 28-1 are effective for interim reporting periods ending after June 15, 2009, which for the Company is the first quarter of fiscal 2010. It is not believed that, based on the Company’s current corporate structure, FSP FAS 107-1 and ABP 28-1 will have an impact on the Company's financial position, results of operations or cash flows.

NOTE 5 – FINANCIAL INSTRUMENTS:

Concentrations of Credit Risk :

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and other assets.

·	Cash – At various times during the fiscal year, the Company’s cash balances exceeded federally insured limits. The cash balance in excess of federally insured limits was $-0-, $42,578 and $814,083 at March 31, 2009, 2008 and 2007 , respectively.

Fair Value of Financial Instruments:

Statement of Financial Accounting Standards (SFAS) No. 107, “Fair Value of Financial Instruments”, requires disclosure of the fair value of financial instruments for which the determination of fair value is practicable. SFAS No. 107 defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties.

The carrying amounts of the Company’s financial instruments approximate their fair value as outlined below:

·	Cash, trade receivables, trade payables – The carrying amounts approximate their fair value because of the short maturity of those instruments.

·	Line of credit – The carrying amount approximates fair value as the line of credit has a variable interest rate which fluctuates with the market.

·	Long-term debt and capital leases – The carrying amount approximates fair value as the interest rates on the various notes/leases approximate the Company’s estimated incremental borrowing rate.

The Company’s financial instruments are held for other than trading purposes.

THERMODYNETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2009, 2008 AND 2007

NOTE 6 – MARKETABLE SECURITIES:

The Company invests in certain marketable securities that are categorized as available for sale. The cost and market values of marketable securities as well as the unrealized gains and losses are as follows at March 31:

	2009		2008		2007

Cost	$	26,213	$	222,642	$	213,921
Unrealized gains		24,554		36,690		1,600

Market value	$	50,767	$	259,332	$	215,521

NOTE 7 – NET PROPERTY AND EQUIPMENT:

Property and equipment are summarized by major classifications as follows at March 31:

	2009		2008		2007

Buildings	$	4,915,481	$	4,915,481	$	4,915,481
Leasehold improvements		967,312		951,629		920,263
Land		204,484		204,484		204,484
Furniture and equipment		140,486		101,694		101,694
		6,227,763		6,173,288		6,141,922
Less accumulated depreciation and amortization		3,019,814		2,844,207		2,681,613

	$	3,207,949	$	3,329,081	$	3,460,309

NOTE 8 – CURRENT AND OTHER ASSETS:

Other assets consist of the following at March 31:

	2009			2008			2007

Deferred financing costs	$	51,990		$	63,359		$	74,723
Investments in unaffiliated companies		35,863			109,514			94,856
Other		(5,271	)		(5,271	)		(672	)

	$	82,582		$	167,602		$	168,907

THERMODYNETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2009, 2008 AND 2007

NOTE 8 – CURRENT AND OTHER ASSETS (Continued):

Impairment tests on intangible assets with indefinite useful economic lives are undertaken annually on March 31. These intangible assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount, the asset is written down accordingly.

Included in other current assets is a $100,000 note receivable from an entity in which the Company has some common management and small ownership. The note is due during fiscal year 2010. Additional loans have been made subsequent to the year end March 31, 2009.

NOTE 9 – EQUITY METHOD INVESTMENT

The Company’s 56.32% investment in its unconsolidated subsidiary Turbotec Products, Plc, in which the Company exercises significant influence, is carried at cost, adjusted for the Company’s proportionate share of their undistributed earnings or losses.

At March 31, 2009, 2008, and 2007, the market values of the common stock investment in Turbotec Products, Plc were as follows:

Year	Carrying Value			Per Share MV		Market Value

2009	$	5,323,704	$	0.39	$	2,819,352
2008		4,520,428	$	1.61		11,584,877
2007		4,366,251	$	1.39		10,050,760

As a result of a decline in the market value of Turbotec Products, Plc at March 31, 2009, the carrying amount of the investment exceeded its market value. Management has evaluated this decline in market value, which is due to fluctuations in the stock price and the foreign currency exchange rate, and has deemed the decline to be temporary at March 31, 2009.

THERMODYNETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2009, 2008 AND 2007

NOTE 9 – EQUITY METHOD INVESTMENT (Continued):

Following is a summary of financial position and results of operations of Turbotec Products, Plc:

	2009		2008		2007
Current assets	$	6,734,746	$	7,004,972	$	6,406,003
Property and equipment, net		5,018,725		4,496,245		4,175,078
Other assets, net		100,991		94,741		507,752
Total assets	$	11,854,462	$	11,595,958	$	11,088,833

Current liabilities		1,531,336		2,749,015		2,874,347
Long-term Debt		167,040		345,895		223,909
Deferred liabilities		781,000		693,000		493,000
		2,479,376		3,787,910		3,591,256
Stockholders' equity		9,375,086		7,808,048		7,497,577
	$	11,854,462	$	11,595,958	$	11,088,833
Sales	$	26,985,712	$	28,020,878	$	23,529,748
Net income	$	1,446,983	$	1,874,513	$	1,194,699

Included in management fee and rental income on the statements of operations is $898,857, $858,255, $826,189 from Turbotec Products, Plc, for the years ended March 31, 2009, 2008 and 2007, respectively. Additionally, included in receivables on the balance sheet are net amounts from Turbotec Products, Plc which represent management fees, dividends receivable (net of an allowance) and pass-through rent amounts. The balances are $889,297, $997,558, and $8,723 at March 31, 2009, 2008 and 2007, respectively.

NOTE 10 – LINES OF CREDIT:

During December 2006, the Company entered into a line of credit (the “Line”) agreement with a bank. The agreement provides for a borrowing base of $1,100,000. Interest is charged at the bank’s prime rate (3.25%, 5.25% and 8.25% at March 31, 2009, 2008 and 2007, respectively). The Line is secured by certain real property of the Company. At March 31, 2009, 2008 and 2007, the Company had available borrowings of $38,000, $1,000,000 and $1,100,000, respectively. The line expired on July 31, 2009 and the Company is currently negotiating renewal terms.

THERMODYNETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2009, 2008 AND 2007

NOTE 11 – NOTES PAYABLE AND LONG-TERM DEBT:

During the year ended March 31, 2007, the Company, certain of its subsidiaries, Turbotec and their bank, entered into certain loan modification agreements to provide for the separation of the credit facilities between the Company and Turbotec Products, Inc., and the release of certain cross collateral guarantees. Principally, the Company's remaining indebtedness with its principal bank at that time was a term loan in the original principal amount of $2,025,000 secured by the real estate and building at 651 Day Hill Road, Windsor, CT, and the term loan of the original principal amount of $183,000, secured by all of the assets of the Company. Turbotec Products, Inc. remained indebted on an equipment term note and the revolving line of credit.

During the year ended March 31, 2007 , the Company paid down the Day Hill Road mortgage loan with proceeds from the sale of stock (Note 2). The remaining balance was refinanced by obtaining a 10-year, $900,000 mortgage note payable from another bank. The mortgage note is secured by a first mortgage on the building. The note is payable in monthly principal installments of $3,750 plus accrued interest commencing January 21, 2007. Interest is accrued on the unpaid principal at the 30 day LIBOR market Index rate (6%, 6% and 5.3% at March 31, 2009, 2008, and 2007, respectively) plus 1.5%.

The Company has a term loan dated December 1, 2006, which is payable in 60 monthly installments of $1,628 including principal and interest at 6.39%. The note is secured by a vehicle. The Company also has a term loan dated May 6, 2008, which is payable in 36 monthly installments of $974 including principal and interest at 1%. The note is secured by a vehicle.

In August 2004 the Company refinanced the mortgage on its multi-purpose building by obtaining a 10-year, $1,000,000 mortgage note payable. The mortgage note is secured by a first mortgage on the multi-purpose building (see Note 15). The note is payable in eighty-four monthly installments of principal and interest of $8,932 and has a fixed interest rate of 6.9%.

The Company had various subordinated notes to the former shareholders of Vulcan totaling $581,500. These notes were subordinated in priority to any and all commercial financing. Interest on the outstanding principal balance was at a fixed interest rate of 6%, payable quarterly commencing March 31, 2004. These notes were settled and cancelled during the year ended March 31, 2007 (Note 22).

	2009		2008		2007

Mortgage loan	$	798,750	$	843,750	$	888,750
Mortgage note payable – multi-purpose building		799,860		848,904		894,769
Note payables – vehicles		73,245		63,738		78,689

	$	1,671,855	$	1,756,392	$	1,862,208

THERMODYNETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2009, 2008 AND 2007

NOTE 11 – NOTES PAYABLE AND LONG-TERM DEBT (Continued):

Maturities of notes payable and long-term debt from continuing operations for each of the years succeeding March 31, 2009 are as follows:

Year ending March 31,	Amount

2010	$	110,681
2011		150,412
2012		747,012
2013		45,000
2014 and thereafter		618,750

	$	1,671,855

NOTE 12 – LEASES:

The Company and Turbotec Products, Inc. entered into real estate leases effective May 8, 2006, for approximately 54,500 square feet at 651 Day Hill Road, Windsor, CT, and approximately 17,000 square feet at 50 Baker Hollow Road, Windsor, CT. The leases commenced April 1, 2006 with a five-year term, and one extension option for three years, and a second extension option for two years. Rent charges with respect to the 651 Day Hill Road property are equal to seven dollars per square foot in years one and two, escalating annually thereafter through each of the extension terms; monthly fixed rent in year one equals $31,792, escalating to $42,010 monthly in year ten, assuming both lease extensions are exercised. Rent charges with respect to the 50 Baker Hollow Road property are equal to $5.50 per square foot in year one, escalating annually thereafter through each of the extension terms; monthly fixed rent in year one equals $7,792, escalating to $10,979 monthly in year ten, assuming both lease extensions are exercised (See Note 9).

NOTE 13 – STOCK OPTION PLAN:

In October 2002, the Company adopted the 2002 Incentive Stock Option Plan (“2002 ISO Plan”) and the 2002 Non Qualified Stock Incentive Plan (“2002 NQ Plan”). The 2002 ISO Plan provides for an aggregate number of shares available for grant of options, not to exceed 100,000 shares (post split). The option price is not to exceed 100% of fair market value for the stock. The 2002 NQ Plan provides for an aggregate number of shares available for stock options, stock bonuses and stock appreciation rights (SARS), not to exceed 100,000 shares (post split).

The option price and the value awarded for bonuses shall not exceed 33.33% of the fair market value on the effective date of the option or bonus. The value awarded for stock appreciation rights shall be equal to the excess of fair market value on the day of exercise less the fair market value on the effective date of the award. Through March 31, 2009, no options, shares or SARS had been granted under these plans.

THERMODYNETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2009, 2008 AND 2007

NOTE 14 – EARNINGS PER COMMON SHARE:

A reconciliation of the numerators and denominators of the basic and diluted Earnings per Common Share (EPS) computations for the years ended March 31:

	2009				2008		2007
	Income (Numerator)			Shares (Denominator)	Income (Numerator)	Shares (Denominator)	Income (Numerator)	Shares (Denominator)

Net income (loss)	$	(195,069	)		386,900		3,181,253

Basic EPS
Income (loss) available to common stockholders		(195,069	)	4,083,895	386,900	4,060,002	3,181,253	4,025,439

Effect of Dilutive Securities
Stock warrants		-		-	-	-	-	-

Diluted EPS
Income (loss) available to common stockholders including assumed conversions	$	(195,069	)	4,083,895	386,900	4,060,002	3,181,253	4,025,439

NOTE 15 – RENTAL OF MULTI-PURPOSE BUILDING:

The Company leases a portion of its multi-purpose building to an unrelated tenant under an agreement which expires August 31, 2010. Rental income aggregated $86,000, $66,125 and $64,927 for the years ended March 31, 2009, 2008 and 2007, respectively, and is included in rental income in the accompanying consolidated statements of operations and comprehensive income.

NOTE 16 – INCOME TAXES:

The provision (benefit) for income taxes consists of the following as of March 31:

	2009		2008		2007

Current	$	39,862	$	30,400	$	10,313
Deferred		-		-		85,000
	$	39,862	$	30,400	$	95,313

THERMODYNETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2009, 2008 AND 2007

NOTE 16 – INCOME TAXES (Continued):

The alternative minimum tax (AMT) had no effect on the tax provision for financial reporting purposes, as the Company’s AMT income was completely offset by application of AMT net operating loss carryforwards and the AMT exemption. State taxes accrued were based on net income on a separate company basis.

The provision for income taxes differs from the amount computed by applying the statutory rates to income before income taxes for continuing operations for fiscal years 2009, 2008 and 2007. The principal reasons for this difference are listed in the following table as of March 31:

	2009			2008			2007

Statutory federal and state income tax		39	%		39	%		39	%
Change in valuation allowance		(39	)		(39	)		(39	)
Other		(26	)		7			4
		(26)	%		7	%		4	%

The significant components of the deferred tax provision are as follows as of March 31:

	2009			2008			2007
Net operating loss	$	6,000		$	419,000		$	(512,000	)
Reserves		-			-			118,000
Deferred Revenue		-			-			1,224,000
Valuation allowance		397,000			77,000			(600,000	)
Equity method investment		(402,000	)		(495,000	)		(314,000	)
Property and equipment, net		(1,000	)		(1,000	)		(1,000	)
	$	-		$	-		$	(85,000	)

THERMODYNETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2009, 2008 AND 2007

NOTE 16 – INCOME TAXES (Continued):

The components of the net deferred tax asset as of March 31, 2009, 2008 and 2007 are as follows:

		2009			2008			2007
Deferred tax assets:
Net operating loss	$	1,379,000		$	1,373,000		$	954,000
Reserves		118,000			118,000			118,000
Deferred revenue		1,224,000			1,224,000			1,224,000
Valuation allowance		(126,000	)		(523,000	)		(600,000	)
Total deferred tax assets		2,595,000			2,192,000			1,696,000
Deferred tax liabilities:
Equity method investment		(936,000	)		(534,000	)		(39,000	)
Property and equipment, net		(459,000	)		(458,000	)		(457,000	)
Net deferred tax asset	$	1,200,000		$	1,200,000		$	1,200,000

Differences between financial reporting and tax reporting relate primarily to inventory reserves and allowances for doubtful accounts recorded for financial reporting purposes, inventory capitalization adjustments recorded for tax reporting purposes and differences between depreciation for financial reporting and tax reporting purposes . Net operating loss carryforwards of approximately $2,500,000 and $4,278,000 are available for federal and state income tax purposes. The carryforwards begin to expire in 2026 for federal income tax purposes and 2023 for state income tax purposes.

In July 2006, the FASB issued FIN 48. The Company adopted the provisions of FIN 48, effective April 1, 2007. This interpretation was issued to clarify the accounting for uncertainty in income taxes recognized in the financial statements by prescribing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

The cumulative effect of adopting FIN 48 did not have a material impact on the financial statements of the Company. At March 31, 2009, the Company had no material gross unrecognized tax benefits. At this time, the Company’s best estimate of the reasonably possible change in the amount of the gross unrecognized tax benefits is deemed not to be material during the next twelve months mainly due to the expiration of certain statutes of limitations. The federal statute of limitations remains open for this fiscal year. Tax years 2005 and forward are subject to audit by state tax authorities depending on open statute of limitations waivers and the tax code of each state.

THERMODYNETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2009, 2008 AND 2007

NOTE 17 – 401(k) PLANS:

During the year ended March 31, 2008, the Company formed a deferred compensation/retirement plan covering employees of Thermodynetics. A contribution of $1,750, $11,250, and $0 was accrued to the plan during the years ended March 31, 2009, 2008 and 2007, respectively, and will be paid through a contribution of shares of Thermodynetics common stock.

NOTE 18 – EMPLOYMENT CONTRACTS:

The Company has extended its employment agreements with two employees and directors through March 2014. These agreements provide for annual base salaries of approximately $276,000 and $208,000, respectively, updated annually for increases in the Consumer Price Index, as well as certain medical, life and disability insurance coverage.

In the event of termination, each agreement provides for the continuation of compensation and benefits. However, the employees may not compete with the Company within the United States for a period of two years after termination and are subject to the terms and conditions of confidentiality agreements.

NOTE 19 – STOCK BONUSES:

During the years ended March 31, 2009, 2008 and 2007, the Company issued a total of 10,000, 8,000 and 12,000 shares, respectively, to certain members of its Board of Directors.

NOTE 20 – CASH FLOW INFORMATION:

Cash paid for interest was $147,699, $130,310 and $154,437 for the years ended March 31, 2009, 2008 and 2007, respectively.

Issuance of stock pursuant to the 401(k) plan was $0, $18,750 and $0 for the years ended March 31, 2009, 2008 and 2007, respectively.

Long term debt of $34,555, $0 and $83,494 was incurred to acquire vehicles during the years ended March 31, 2009, 2008 and 2007, respectively.

THERMODYNETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2009, 2008 AND 2007

NOTE 21 – DISCONTINUED OPERATIONS:

In August 2005, the Company discontinued the operations of Vulcan. From that date through March 31, 2007 the Company liquidated Vulcan’s remaining assets and settled all secured liabilities.

In November 2006, the Company and the selling shareholders of Vulcan reached an agreement to extinguish the remaining unpaid notes payable relating to the acquisition of Vulcan. Under the agreement, all unpaid notes were cancelled together with accrued interest payable in exchange for a lump sum of $10,000. Accordingly, the Company recorded a gain on extinguishment of debt of $605,928.

The Company allocates interest expense based on the named debtor of all interest bearing debt. Interest expense included in discontinued operations was $0 for the years ended March 31, 2009, 2008 and 2007.

Assets and liabilities of Vulcan were reported as assets and liabilities of discontinued operations at March 31, 2009, 2008 and 2007 , and were as follows:

	2009		2008		2007
Current liabilities of discontinued operations:
Accounts payable	$	-	$	12,000	$	12,000
Long-term liabilities of discontinued operations:
Long-term payables		2,782,195		2,782,195		2,782,195

Total liabilities of discontinued operations	$	2,782,195	$	2,794,195	$	2,794,195

The following amounts of Vulcan are included in discontinued operations on the consolidated statement of operations:

	2009		2008		2007

Revenues	$	-	$	-	$	-
Pre-tax income (loss)	$	-	$	-	$	597,071

THERMODYNETICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2009, 2008 AND 2007

NOTE 22 – COMMITMENTS AND CONTINGENCIES:

The following are the known or threatened legal proceedings:

The lawsuit instituted by the Company on January 8, 2008 in the High Court in England, file no. HC08C00046, against Turbotec Products Plc was concluded in February, 2010. A judgment in favor of the Company on one count and against it on two counts was rendered on May 10, 2010. The net effect of the judgment held that the administrative fees were not payable to the Company, and that the Company was required under British law to reimburse the PLC for a substantial portion of the PLC’s legal expenses. All administrative fees that had been paid to the Company by the PLC were credited against the dividends that had been due to the Company, and no further previously declared dividend payments are payable. The PLC has claimed total legal costs of approximately £700,000 which are to be subject to an assessment by the Court if they cannot be agreed. The PLC will be entitled to 85% of its legal costs after assessment by the Court. On May 24, 2010 in accordance with the judgment, the Company paid £350,000 to the PLC on account of their costs. The exchange rate of pounds sterling for US dollars is approximately $1.45 per £1.

Turbotec Products, Inc. commenced a lawsuit against Thermodynetics on February 27, 2008 in the Connecticut Superior Court, Judicial District of Hartford, alleging that Thermodynetics breached two commercial leases, and that Thermodynetics improperly withdrew funds from a sinking fund established under the leases. The lawsuit was transferred from the regular docket to the Housing Session and now is entitled Turbotec Product, Inc. v. Thermodynetics, Inc., Connecticut Superior Court, J.D. of Hartford, Housing Session, Docket No. 7712.

In 2009, Turbotec Products filed an amended complaint adding counts for fraudulent inducement, fraudulent misrepresentation, and violation of the Connecticut Unfair Trade Practices Act (Conn. Gen. Stat. Sect. 42-110b, et seq.). Thermodynetics has completed discovery. The Company's motion to transfer the case back to the regular docket given the nature of the new claims was granted on August 5, 2009. A prejudgment hearing is scheduled for July 21, 2010.

Turbotec Products claims that it suffered damages in excess of $350,000 and such damages are continuing to accrue. Thermodynetics denies the allegations, is vigorously defending the case, and filed counterclaims for sums due under the two leases, and has claimed the case for a jury trial. Thermodynetics does not view the risk of loss in the case as probable or material.

c)	There are a number of threatened and pending actions against Vulcan, and a number of material judgments obtained against Vulcan. Thermodynetics and its other subsidiaries are not and have not been a party to any such Vulcan actions.

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.

(Registrant)

THERMODYNETICS, INC.

By: /s/ Robert A. Lerman

Robert A. Lerman, President,

Chief Executive Officer,

and Director

Date: June 10 , 2010

(Registrant)

THERMODYNETICS, INC.

Pursuant to the requirements of 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.


/s/ Robert A. Lerman		/s/ John F. Ferraro
Robert A. Lerman,		John F. Ferraro
President, Chief Executive Officer, and Director		Chairman of the Board, Treasurer, Chief Financial Officer, Secretary and Director

Date: June 10 , 2010		Date: June 10 , 2010


/s/ John J. Hughes
John J. Hughes, Director

Date: June 10 , 2010