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Notes to Consolidated Financial Statements

I. SUMMARY OF ACCOUNTING PRINCIPLES

Business - The fiscal year for TransTechnology Corporation (the "Company") ends on March 31. Accordingly, all references to years in the Notes to Consolidated Financial Statements refer to the fiscal year ended March 31 of the indicated year unless otherwise specified.

The Company develops, manufactures and sells a wide range of products in two industry segments, Specialty Fastener Products and Aerospace Products. The Company has manufacturing facilities located in the United States, Canada, Germany, the United Kingdom and Brazil. The Specialty Fastener Products Segment produces highly engineered precision metal retaining rings, gear driven band fasteners, circlips, custom cold-formed parts, head light adjusters, rivets and other threaded and non-threaded assembly fasteners primarily for the automotive, heavy truck, industrial, aerospace and consumer/durables markets and accounted for approximately 79% of the Company's consolidated 2001 net sales. Through its Aerospace Products Segment, the Company develops, manufactures, sells and services a complete line of sophisticated lifting and restraining products, principally performance critical helicopter rescue hoist and cargo hook systems, winches and hoists for aircraft and weapons systems and aircraft engine compartment hold open rods, actuators and other motion control devices. This segment accounted for approximately 21% of the Company's consolidated 2001 net sales.

Use of Estimates - The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in its consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Estimates used for asset impairment are based upon future cash flow projections or, in the case of assets to be sold, appraisals and fair market value estimates obtained from investment bankers.

Principles of Consolidation - The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, all of which, except one subsidiary in Spain, are wholly-owned. Intercompany balances and transactions are eliminated in consolidation. Investments in less than 20% owned companies are accounted for by the cost method.

Revenue Recognition Revenue is recognized at the later of 1) when products are shipped to customers, or 2) when title passes to customers.

Cash and Cash Equivalents - The Company considers all highly liquid investments with a maturity at date of acquisition of three months or less to be cash equivalents.

Inventories - Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. Cost includes material, labor and manufacturing overhead costs.

Property and Related Depreciation and Amortization - Property is recorded at cost. Provisions for depreciation are made on a straight-line basis over the estimated useful lives of depreciable assets ranging from three to thirty years. Amortization of leasehold improvements is computed on a straight-line basis over the shorter of the estimated useful lives of the improvements or the terms of the leases. The Company reviews property and equipment and assets held for sale for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Depreciation expense for the years ended March 31, 2001, 2000 and 1999 was $11.1 million, $11.2 million and $8.6 million, respectively.

Costs in Excess of Net Assets of Acquired Businesses - The difference between the purchase price and the fair value of the net assets of acquired businesses is included in the accompanying Consolidated Balance Sheets under the caption "Costs in excess of net assets of acquired businesses" and is being amortized over 40 years. The Company periodically estimates the future undiscounted cash flows of the businesses to which goodwill relates to ensure that the carrying value of such goodwill has not been impaired.

Patents and Trademarks - Patents are amortized on a straight-line basis over their remaining lives not to exceed 20 years. Trademarks are amortized on a straight-line basis over 40 years.

Earnings per Share ("EPS") - The computation of basic earnings per share is based on the weighted-average number of common shares outstanding. The computation of diluted earnings per share assumes the foregoing and, in addition, the exercise of all dilutive stock options using the treasury stock method.

The components of the denominator for basic earnings per common share and diluted earnings per common share are reconciled as follows:

	2001	2000	1999
Basic earnings per common share: Weighted-average common shares outstanding	6,167,000	6,139,000	6,249,000
Diluted earnings per common share: Weighted-average common shares outstanding	6,167,000	6,139,000	6,249,000
Stock options	-	11,000	92,000
Denominator for diluted earnings per common share	6,167,000	6,150,000	6,341,000

Options to purchase 505,971 shares of common stock at prices between $8.84 and $27.88 were outstanding during 2001 but were not included in the computation of diluted EPS because the options' exercise prices were greater than the average market price of the common shares. Similarly, during 2000 options to purchase 288,759 shares of common stock at prices between $15.13 and $30.13 were outstanding but were not included in the computation of diluted EPS. During 1999, options to purchase 169,774 shares of common stock at prices between $22.94 and $27.88 were outstanding but were not included in the computation of diluted EPS.

Research, Development and Engineering Costs - Research and development costs and engineering costs, which are charged to expense when incurred, amounted to $2.4 million, $2.0 million and $2.4 million in 2001, 2000 and 1999, respectively. Included in these amounts were expenditures of $1.2 million, $1.3 million and $1.2 million in 2001, 2000 and 1999, respectively, which represent costs related to research and development activities.

Foreign Currency Translation - The assets and liabilities of the Company's international operations have been translated into U.S. dollars at year-end exchange rates, with resulting translation gains and losses accumulated as a separate component of Accumulated other comprehensive loss. Income and expense items are converted into U.S. dollars at average rates of exchange prevailing during the year.

Income Taxes - Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. The Company periodically assesses recoverability of deferred tax assets and provisions for valuation allowances are made as required.

Investments - During 1999, the Company sold 465,000 shares of Mace Security International common stock, received in a prior transaction, for $2.0 million in cash and realized a pretax gain of $1.1 million.

In 2001, the Company wrote off its investment in an investee in the amount of $3.2 million together with a note receivable in the amount of $3.7 million as a result of a foreclosure on the investee's outstanding loans by its senior lenders.

Financial Instruments - The Company does not hold or issue financial instruments for trading purposes. Amounts to be paid or received under interest rate swap agreements are recognized as increases or reductions in interest expense in the periods in which they accrue. The Company enters into off-balance-sheet forward foreign exchange instruments in order to hedge certain intercompany loans denominated in foreign currencies, accounts receivable denominated in foreign currencies, a percentage of projected sales denominated in foreign currencies, and projected foreign currency intercompany purchases. Gains and losses on the financing transactions are included in other income-net. Gains and losses on forward foreign exchange instruments that hedge specific third party transactions are included in the cost or carrying value of the underlying transaction. Gains and losses on instruments that are hedges of projected third party transactions are included in current period income.

New Accounting Standards - In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities". In June 2000, the FASB issued SFAS No. 138, which amends certain provisions of SFAS No. 133. The Company has appointed a team to implement SFAS No. 133 and the Company has adopted SFAS No. 133 and the corresponding amendments under SFAS No. 138 on April 1, 2001. The impact on the Company of SFAS Nos. 133 and 138, adopted as of April 1, 2001, would result in a pre-tax charge to other comprehensive income of $3.2 million ($2.0 million after tax) and an offsetting liability of $3.2 million ($2.0 million net of tax benefit) at that date.

Staff Accounting Bulletin ("SAB") No.101, "Revenue Recognition in Financial Statements" was issued in December 1999. SAB No. 101b, "Second Amendment: Revenue Recognition in Financial Statements", defers implementation of SAB No. 101 until no later than the fourth quarter of fiscal 2001. These SAB's were implemented effective January 1, 2001, and did not have any material impact on the Company's revenue recognition policies.

Impairment of Long-Lived Assets - The Company, in the event that circumstances arise that indicate that it's long-lived assets may be impaired, performs evaluations of asset impairment in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The assets' carrying values are compared to the estimated future undiscounted cash flows of the assets, or expected sale proceeds for assets expected to be sold, to determine if a write-down is required. The Company reported an impairment of long-lived assets in 2001, as discussed below.

Segment Information - The Company has reported segment information in accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 requires disclosure of financial data based on the "management approach" to business decision-making. The management approach is based on internal information used for making operating decisions and assessing the performance of the Company's reportable segments. SFAS No. 131 also requires disclosures regarding products and services. Segment information is reported separately in Note 14 to the consolidated financial statements.

Reclassifications - Certain reclassifications have been made to prior years' financial statements to conform to the 2001 presentation.