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<SEC-DOCUMENT>0000950135-03-004411.txt : 20030814
<SEC-HEADER>0000950135-03-004411.hdr.sgml : 20030814
<ACCEPTANCE-DATETIME>20030814131545
ACCESSION NUMBER:		0000950135-03-004411
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		9
CONFORMED PERIOD OF REPORT:	20030630
FILED AS OF DATE:		20030814

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			LYNCH CORP
		CENTRAL INDEX KEY:			0000061004
		STANDARD INDUSTRIAL CLASSIFICATION:	TRUCKING (NO LOCAL) [4213]
		IRS NUMBER:				381799862
		STATE OF INCORPORATION:			IN
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-00106
		FILM NUMBER:		03845482

	BUSINESS ADDRESS:	
		STREET 1:		401 THEODORE FREMD AVENUE
		CITY:			RYE
		STATE:			NY
		ZIP:			10580
		BUSINESS PHONE:		9149217601

	MAIL ADDRESS:	
		STREET 1:		401 THEODORE FREMD AVENUE
		STREET 2:		SUITE 290
		CITY:			RYE
		STATE:			NY
		ZIP:			10580
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>b47168lce10vq.htm
<DESCRIPTION>LYNCH CORPORATION
<TEXT>
<HTML>
<HEAD>
<TITLE>LYNCH CORPORATION FORM 10-Q</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<HR size="4" noshade color="#000000" style="margin-top: -5px">
<HR size="1" noshade color="#000000" style="margin-top: -10px">




<P align="center"><FONT size="2"><B>SECURITIES &#038; EXCHANGE COMMISSION<BR>
WASHINGTON, D.C. 20549</B>
</FONT>

<P align="center"><FONT size="2"><B><U>FORM 10-Q</U></B>
</FONT>

<P align="left"><FONT size="2">(Mark One)
</FONT>
<P align="left"><FONT size="2">&#091;X&#093; QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
</FONT>
<P align="left"><FONT size="2">For the quarterly period ended
<U>June&nbsp;30, 2003</U>
</FONT>
<P align="center"><FONT size="2"><B>or</B>
</FONT>

<P align="left"><FONT size="2">&#091;&nbsp;&nbsp;&#093; TRANSITION
REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
</FONT>
<P align="left"><FONT size="2">For the transition period from
___________ to ___________
</FONT>
<P align="left"><FONT size="2">Commission File No.&nbsp;<u>1-106</U>
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="100%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="2"><B>LYNCH CORPORATION</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><FONT size="2">(Exact name of Registrant as specified in its charter)</FONT></TD>
</TR>
</TABLE>
</CENTER>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="2"><B>Indiana</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="2"><B>38-1799862</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><FONT size="2">(State or other jurisdiction of<BR>
incorporation or organization)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top"><FONT size="2">
I.R.S. Employer<BR>
Identification No.)</FONT></TD>
</TR>
</TABLE>
</CENTER>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="51%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="2"><B>50 Kennedy Plaza, Suite 1250, Providence, Rhode Island</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="2"><B>02903</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><FONT size="2">(Address of principal executive offices)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top"><FONT size="2">
(Zip Code)</FONT></TD>
</TR>
</TABLE>
</CENTER>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="100%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="2"><B>(401) 453-2007</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><FONT size="2">Registrant&#146;s telephone number, including area code</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Indicate by check mark whether the Registrant (1)&nbsp;has filed all reports
required to be filed by Section&nbsp;13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12&nbsp;months (or for such shorter period that the
Registrant was required to file such reports), and (2)&nbsp;has been subject to such
filing requirements for the past 90&nbsp;days.
</FONT>
<P align="left"><FONT size="2">Yes <U>&nbsp;&nbsp;X&nbsp;&nbsp;</U> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No
</FONT>
<P align="left"><FONT size="2">Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule&nbsp;12b-2 of the Exchange Act).
</FONT>
<P align="left"><FONT size="2">Yes
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No <U>&nbsp;&nbsp;X&nbsp;&nbsp;</U>
</FONT>
<P align="left"><FONT size="2">Indicate the number of shares outstanding of each of the Registrant&#146;s classes
of Common Stock, as of the latest practical date.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="2"><B>Class</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="2"><B>Outstanding at August 1, 2003</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><FONT size="2">Common Stock, $0.01 par value</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
1,497,883</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">Part 1 &#151; FINANCIAL INFORMATION &#150;</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">Item&nbsp;1 &#151; Financial Statements</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#002">CONDENSED CONSOLIDATED BALANCE SHEETS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#003"> CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#004"> CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#005">NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#006">Item&nbsp;2. Management&#146;s Discussion and Analysis of Financial Condition
and Results of Operations.</A></TD></TR>
<TR><TD colspan="9"><A HREF="#007">Item&nbsp;3. Quantitative and Qualitative Disclosure About Market Risk</A></TD></TR>
<TR><TD colspan="9"><A HREF="#008">Item&nbsp;4. Controls and Procedures</A></TD></TR>
<TR><TD colspan="9"><A HREF="#009"> PART II. OTHER INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#010"> Item&nbsp;1. Legal Proceedings</A></TD></TR>
<TR><TD colspan="9"><A HREF="#011">Item&nbsp;4. Submission of Matters to a Vote of Security Holders</A></TD></TR>
<TR><TD colspan="9"><A HREF="#012">Item&nbsp;6. Exhibits and Reports on Form&nbsp;8-K</A></TD></TR>
<TR><TD colspan="9"><A HREF="#013"> SIGNATURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="b47168lcexv10wxddy.txt">EX-10(dd) Second Amend to Restated Loan</A></TD></TR>
<TR><TD colspan="9"><A HREF="b47168lcexv10wxeey.txt">Ex-10(ee) Amendment & Waiver to Credit Agreement</A></TD></TR>
<TR><TD colspan="9"><A HREF="b47168lcexv10wxffy.txt">Ex-10(ff) Term Loan Promissory Note</A></TD></TR>
<TR><TD colspan="9"><A HREF="b47168lcexv10wxggy.txt">Ex-10.(gg) Second Amend to Deed Agreement</A></TD></TR>
<TR><TD colspan="9"><A HREF="b47168lcexv31w1.txt">Ex-31.1 Section 302 Certification of CEO</A></TD></TR>
<TR><TD colspan="9"><A HREF="b47168lcexv31w2.txt">Ex-31.2 Section 302 Certification of CFO</A></TD></TR>
<TR><TD colspan="9"><A HREF="b47168lcexv32.txt">Ex-32 Section 906 Certification of CEO and CFO</A></TD></TR>
<TR><TD colspan="9"><A HREF="b47168lcexv99w1.txt">Ex-99.1 Audit Committee Charter</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "Part 1 &#151; FINANCIAL INFORMATION &#150;" -->
<DIV align="left"><A NAME="000"></A></DIV>
<P align="left"><FONT size="2"><B>Part 1 &#151; FINANCIAL INFORMATION</B>
</FONT>

<!-- link1 "Item&nbsp;1 &#151; Financial Statements" -->
<DIV align="left"><A NAME="001"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;1 &#151; <U>Financial Statements</U></B>
</FONT>

<!-- link2 "CONDENSED CONSOLIDATED BALANCE SHEETS" -->
<DIV align="left"><A NAME="002"></A></DIV>

<P align="center"><FONT size="2"><B><U>LYNCH CORPORATION AND SUBSIDIARIES<BR>
CONDENSED CONSOLIDATED BALANCE SHEETS</U><BR>
(In Thousands except share amounts)</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>June 30,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(unaudited)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(A)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>ASSETS</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">CURRENT ASSETS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,417</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,986</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Restricted cash (Note D)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,125</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,125</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Investments &#150; Marketable Securities (Note E)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">983</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">861</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Trade accounts receivables, less allowances of $98 and $91, respectively</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,784</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,820</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Unbillable accounts receivable (Note H)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,456</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">704</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Inventories (Note F)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,755</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,624</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Recoverable income taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred income taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">207</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">207</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Prepaid expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">283</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">324</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">TOTAL CURRENT ASSETS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,542</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18,183</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">PROPERTY, PLANT AND EQUIPMENT</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Land</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Buildings and improvements</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Machinery and equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,949</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,841</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16,438</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16,330</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Less: accumulated depreciation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,987</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,504</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,451</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,826</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">OTHER ASSETS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">287</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>TOTAL ASSETS</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>$</B></FONT></TD>
    <TD align="right"><FONT size="2"><B>24,280</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>$</B></FONT></TD>
    <TD align="right"><FONT size="2"><B>23,430</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">CURRENT LIABILITIES:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Notes payable to banks (Note G)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,605</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,228</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Trade accounts payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,411</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">927</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accrued warranty expense (Note H)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,387</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,595</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accrued compensation expense</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,031</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">921</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accrued income taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">671</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accrued professional fees</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">214</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">327</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accrued commissions</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">177</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">214</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Margin liability on marketable securities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">223</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">251</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other accrued expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">418</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">659</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Customer advances</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,901</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,147</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current maturities of long-term debt (Note G)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">385</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">832</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">TOTAL CURRENT LIABILITIES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,423</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,154</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">LONG-TERM DEBT (Note G)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,723</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,089</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">OTHER LONG TERM LIABILITIES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,103</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,253</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">TOTAL LIABILITIES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,249</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,496</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">COMMITMENTS AND CONTINGENCIES (Note L)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">SHAREHOLDERS&#146; EQUITY</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>


<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Common stock, $0.01 par value &#150; 10,000,000 shares authorized; 1,513,191 shares issued;
1,497,883 shares outstanding</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Additional paid-in capital</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,645</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,645</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accumulated deficit</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5,481</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,570</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accumulated other comprehensive Income (Note J)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">310</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">302</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Treasury stock of 15,308 shares at cost</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(458</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(458</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">TOTAL SHAREHOLDERS&#146; EQUITY</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,031</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,934</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>TOTAL LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>$</B></FONT></TD>
    <TD align="right"><FONT size="2"><B>24,280</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>$</B></FONT></TD>
    <TD align="right"><FONT size="2"><B>23,430</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(A)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The Balance Sheet at December&nbsp;31, 2002 has been derived from the audited
financial statements at that date, but does not include all of the
information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>&nbsp;</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>

<P align="center"><FONT size="2"><B>See accompanying notes</B></FONT>


<P align="center"><FONT size="2">3</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2"><B>PART I &#150; FINANCIAL INFORMATION</B>
</FONT>
<P align="left"><FONT size="2"><B>Item&nbsp;1 &#151; <U>Financial Statements</U></B>
</FONT>

<!-- link2 " CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS" -->
<DIV align="left"><A NAME="003"></A></DIV>

<P align="center"><FONT size="2"><B><U>LYNCH CORPORATION AND
SUBSIDIARIES<BR>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS</U><BR>
(In Thousands, except share amounts)</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Three Months Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Six Months Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>June 30 (unaudited)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>June 30 (unaudited)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">SALES AND REVENUES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">6,714</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9,691</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">11,458</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">16,694</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cost and expenses:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Manufacturing cost of sales</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,871</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,933</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,725</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Selling and administrative</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,843</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">OPERATING LOSS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(278</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(193</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,318</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(593</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other income (expense):</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Investment Income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">155</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">177</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">63</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest expense</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(93</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(52</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(162</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(92</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">62</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(28</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(29</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>

    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>

    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">LOSS BEFORE INCOME TAXES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(216</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(221</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,303</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(622</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Benefit from income taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">113</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">222</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>

    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>

    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">NET LOSS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(173</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(108</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(911</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(400</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>


<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Weighted average shares outstanding</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,497,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,497,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,497,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,497,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">BASIC AND DILUTED LOSS PER SHARE:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.12</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.07</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.61</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.27</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><FONT size="2"><B>See accompanying notes</B></FONT>


<P align="center"><FONT size="2">4</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>PART I &#150; FINANCIAL INFORMATION</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>ITEM
1 &#150; <U>Financial Statements</U></B>
</FONT>
<!-- link2 " CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS" -->
<DIV align="left"><A NAME="004"></A></DIV>
<P align="center"><FONT size="2"><B>LYNCH CORPORATION AND SUBSIDIARIES<BR>
<U>CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS</u><BR>
(In Thousands)</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="90%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Six Months Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>June 30, (unaudited)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">OPERATING ACTIVITIES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(911</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(400</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Adjustments to reconcile net loss to net cash provided by (used in) operating activities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Restricted operating cash</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,703</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Depreciation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">483</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">518</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Amortization of definite-lived intangible assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">134</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gain realized on sale of marketable securities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(134</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Changes in operating assets and liabilities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Receivables</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(716</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,266</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Inventories</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,131</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">270</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts payable and accrued liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,363</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,064</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other assets/liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(109</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">181</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net cash provided by (used in) operating activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,021</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,575</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>


<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">INVESTING ACTIVITIES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Acquisition of minority interest</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(220</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capital expenditures</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(108</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(142</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Proceeds from sale of marketable securities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchase of marketable securities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(113</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(262</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Payment on margin liability on marketable securities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(143</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash used in investing activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(112</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(624</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">FINANCING ACTIVITIES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net borrowings of notes payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">377</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">248</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Repayment of long-term debt</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(109</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(293</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Proceeds from long-term debt</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">296</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash provided by (used in) financing activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">564</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(45</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase (decrease)&nbsp;in cash and cash equivalents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(569</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,906</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents at beginning of period</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,986</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,247</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents at end of period</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,417</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><FONT size="2"><B>See accompanying notes</B></FONT>

<P align="center"><FONT size="2">5</FONT>
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<!-- link2 "NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS" -->
<DIV align="left"><A NAME="005"></A></DIV>
<P align="left"><FONT size="2">NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
</FONT>

<P align="left"><FONT size="2">A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Subsidiaries of the Registrant</U>
</FONT>
<P align="left"><FONT size="2">Lynch Corporation dissolved its 100&nbsp;percent owned, inactive subsidiaries, Lynch
International Holding Corporation and Lynch-AMAV in Delaware, their State of
incorporation on March&nbsp;31, 2003.
</FONT>
<P align="left"><FONT size="2">As of June&nbsp;30, 2003, the Subsidiaries of the Registrant are as follows:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="78%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Owned By Lynch</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Lynch Systems, Inc.</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">M-tron Industries, Inc.</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px"><FONT size="2">M-tron Industries, Ltd.</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Basis of Presentation</U>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form&nbsp;10-Q and
Article&nbsp;10 of Regulation&nbsp;S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three month
and six month period ended June&nbsp;30, 2003 are not necessarily indicative of the
results that may be expected for the year ended December&nbsp;31, 2003.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The balance sheet at December&nbsp;31, 2002 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;23, 2002, Lynch disposed of its remaining interest in
Spinnaker Industries, Inc. (&#147;Spinnaker&#148;) for nominal consideration and
completed the deconsolidation that commenced on September&nbsp;30, 2001. As a
result, the financial statements for the periods ending June&nbsp;30, 2002, December
31, 2002, and June&nbsp;30, 2003 exclude Spinnaker. The net result of the
deconsolidation was the recording of a non-cash gain of $19.4&nbsp;million in the
third quarter of 2002 and $27.4&nbsp;million in the third quarter of 2001.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For further information, refer to the consolidated financial statements
and footnotes thereto included in the Registrant Company and Subsidiaries&#146;
annual report on Form&nbsp;10-K for the year ended December&nbsp;31, 2002.
</FONT>
<P align="left"><FONT size="2">C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Adoption of Accounting Pronouncements</U>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November 2002, the FASB issued Interpretation No.&nbsp;45 (FIN 45),
<I>Guarantor&#146;s Accounting and Disclosure Requirements for Guarantees, Including
Indirect Indebtedness of Others.</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company presently guarantees (unsecured)&nbsp;the SunTrust Bank loans of
its subsidiary, Lynch Systems, and has guaranteed a Letter of Credit issued to
the First National Bank of Omaha on behalf of its subsidiary, M-tron
Industries, Inc. These guarantees are subject to FIN 45&#146;s disclosure
requirement only. As of June&nbsp;30, 2003, there were no obligations to SunTrust
Bank. As of June&nbsp;30, 2003, the $1,000,000 Letter of Credit issued by Fleet
Bank to The First National Bank of Omaha was secured by a $1,125,000 deposit in
a Fleet Bank Treasury Fixed Income Fund.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no other financial, performance, indirect guarantees or
indemnification agreements.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July 2002, the Financial Accounting Standards Board (&#147;FASB&#148;) issued
Statement of Financial Accounting Standards No.&nbsp;146, &#147;Accounting for Costs
Associated with Exit or Disposal Activities&#148; (&#147;SFAS 146&#148;), which addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force Issue No.&nbsp;94-3, &#147;Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring).&#148; The
provisions of SFAS 146
</FONT>

<P align="center"><FONT size="2">6</FONT>





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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">are effective for exit or disposal activities that are
initiated after December&nbsp;31, 2002; the Company does not have any exit or
disposal activities underway.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;31, 2002, the FASB issued Statement of Financial Accounting
Standards No.&nbsp;148, &#147;Accounting for Stock-Based Compensation &#150; Transition and
Disclosure&#148; (&#147;SFAS 148&#148;), which amends the disclosure provisions of Financial
Accounting Standards No.&nbsp;123, &#147;Accounting for Stock-Based Compensation&#148; (SFAS
123&#148;) and APBN opinion No.&nbsp;28, &#147;Interim Financial Reporting&#148; (&#147;APB 28&#148;). See
Note I to the Consolidated Financial Statements &#150; &#147;Earnings Per Share and
Stockholders Equity&#148;.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January 2003, the FASB issued Interpretation No.&nbsp;46, &#147;Consolidation of
Variable Interest Entities, an Interpretation of ARB No.&nbsp;51&#148; (&#147;FIN 46&#148;). FIN
46 clarifies the application of Accounting Research Bulletin No.&nbsp;51,
&#147;Consolidated Financial Statements,&#148; to certain entities in which equity
investors do not have the characteristics of a controlling financial interest
or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other
parties. The Company does not have any interests in variable interest
entities.
</FONT>
<P align="left"><FONT size="2">D.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Restricted Cash</U>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At both June&nbsp;30, 2003 and December&nbsp;31, 2002, the Company had $1.1&nbsp;million
of Restricted Cash that secures a Letter of Credit issued by Fleet Bank to the
First National Bank of Omaha as collateral for its M-tron subsidiary&#146;s loans.
</FONT>
<P align="left"><FONT size="2">E.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Investments</U>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of marketable securities held by the Company
(in Thousands):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Gross</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Gross</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Estimated</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Unrealized</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Unrealized</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Fair</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left"><FONT size="1"><B>Equity Securities</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Cost</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Gains</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Losses</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Value</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">June&nbsp;30, 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">671</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">312</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">983</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">December&nbsp;31, 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">557</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">304</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">861</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has a margin liability against this investment of $223,000 at
June&nbsp;30, 2003 and of $251,000 at December&nbsp;31, 2002 which must be settled upon
the disposition of the related securities whose fair value is based on quoted
market prices. The Company has designated these investments as available for
sale pursuant to Statement of Financial Accounting Standards No.&nbsp;115,
&#147;Accounting for Certain Investments in Debt and Equity Securities&#148;.
</FONT>
<P align="left"><FONT size="2">F.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Inventories</U>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories are stated at the lower of cost or market value. At June&nbsp;30,
2003, inventories were valued by two methods: last-in, first-out (LIFO)&nbsp;59%,
and first-in, first-out (FIFO)&nbsp;41%. At December&nbsp;31, 2002, inventories were
valued by the same two methods: LIFO &#150; 63%, and FIFO -37%.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="53%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>June 30,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="7"><FONT size="1"><B>(In Thousands)</B></FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Raw materials</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,879</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,436</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Work in process</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,265</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,376</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Finished goods</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,611</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total Inventories</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">6,755</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,624</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current costs exceed LIFO value of inventories by $1,202,000 and
$1,212,000 at June&nbsp;30, 2003 and December&nbsp;31, 2002 respectively.
</FONT>
<P align="center"><FONT size="2">7</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">G.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Indebtedness</U>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lynch Systems, Inc. and M-tron Industries, Inc. maintain their own credit
facilities. The Lynch Systems facility includes an unsecured parent Company
guarantee. M-tron&#146;s revolving credit agreement is supported by a $1.0&nbsp;million
Letter of Credit that is secured by a $1.1&nbsp;million deposit in a Fleet Bank
Treasury Fixed Income Fund (see Note D &#151; &#147;Restricted Cash&#148;).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, the credit facilities are secured by property, plant and
equipment, inventory, receivables and common stock of certain subsidiaries and
contain certain covenants restricting distributions to the Company.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notes payable to banks and long-term debt consists of:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="83%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>June 30,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="7"><FONT size="1"><B>(In Thousands)</B></FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Notes payable:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">M-tron bank revolving loan at variable interest rates (4.75% at June&nbsp;30, 2003), due May 2004</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,605</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,228</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Lynch Systems bank revolving loan at variable interest rates, due June, 2004</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,605</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,228</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long-term debt:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">M-tron commercial bank term loan at variable interest rates (4.5% at June&nbsp;30, 2003), due
September, 2004</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Yankton Area Progressive Growth loan at 0.0% interest, due April 2005</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">South Dakota Board of Economic Development at a fixed rate of 3%, due December&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2007</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">290</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Yankton Areawide Business Council loan at a fixed interest rate of 5.5%, due November 2007</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Lynch Systems term loan at a fixed interest rate of 8.0%, due August 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">557</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">572</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">(see Subsequent Events footnote regarding refinancing this Lynch Systems Term Loan)
</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,108</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,921</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current maturities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(385</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(832</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,723</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,089</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">H.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Long-Term Contracts and Warranty Expense</U>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lynch Systems, a 100% wholly owned subsidiary of the Company, is engaged
in the manufacture and marketing of glass-forming machines and specialized
manufacturing machines. Certain sales contracts require an advance payment
(usually 30% of the contract price) which is accounted for as a customer
advance. The contractual sales prices are paid either (i)&nbsp;as the manufacturing
process reaches specified levels of completion or (ii)&nbsp;based on the shipment
date. Guarantees by letter of credit from a qualifying financial institution
are required for most sales contracts. Because of the specialized nature of
these machines and the period of time needed to complete production and
shipping, Lynch Systems accounts for these contracts using the
percentage-of-completion accounting method as costs are incurred compared to
total estimated project costs (cost to cost basis). At June&nbsp;30, 2003 and
December&nbsp;31, 2002, unbilled accounts receivable were $1.5&nbsp;million and $0.7
million, respectively.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lynch Systems provides a full warranty to world-wide customers who acquire
machines. The warranty covers both parts and labor and normally covers a
period of one year or thirteen months. Based upon experience, the warranty
accrual is based upon three to five percent of the selling price of the
machine. The Company periodically assesses the adequacy of the reserve and
adjusts the amounts as necessary.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="92%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance, December&nbsp;31, 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,595</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Warranties issued during the period</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">118</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Settlements made during the period</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(326</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Changes in liabilities for pre-existing warranties during the period, including
expirations</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance, June&nbsp;30, 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,387</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">I.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Earnings Per Share and Stockholders&#146; Equity</U>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s basic and diluted earnings per share are equivalent as the
options issued in May 2002 to purchase 228,000 shares of the Company&#146;s common
stock were anti-dilutive throughout 2002 and throughout the first half of 2003.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;10, 2001, the Board of Directors approved, subject to
shareholder approval at the May 2002 Annual Meeting, the 2001 Equity Incentive
Plan and the issuance of up to 300,000 options to purchase shares of Company
common stock to certain employees of the Company, of which 228,000 options were
granted (subject to
</FONT>


<P align="center"><FONT size="2">8</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">shareholder approval) at $17.50 per share on December&nbsp;10,
2001. Although the grants were approved by the shareholders on May&nbsp;2, 2002,
the shares are not considered issued until exercised or in the money, neither
event having transpired to-date. 204,000 of these options are fully vested,
with the remaining options vesting quarterly over the next six quarters.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has a stock-based employee compensation plan. The Company
accounts for the plan under the recognition and measurement principles of
Accounting Principles Board Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to
Employees,&#148; and related Interpretations. No stock-based employee compensation
cost is reflected in net income, as all options granted under those plans had
an exercise price equal to or above the market value of the underlying common
stock on the date of grant. The Company provides pro forma disclosures of the
compensation expense determined under the fair value provisions of Financial
Accounting Standards Board Statement No.&nbsp;123, &#147;Accounting for Stock-Based
Compensation&#148; as follows:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Three Months Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Six Months Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>June 30,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>June 30,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss as reported</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(173</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(108</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(911</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(400</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deduct: Total stock based
employee compensation expense
determined under fair value based
method for all awards, net of
related tax effect</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(38</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,182</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(77</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,182</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Pro forma net loss</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(211</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(1,292</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(988</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(1,582</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Basic and diluted loss per share:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">As reported</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.12</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.07</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.61</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.27</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Pro forma</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.14</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.86</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.66</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(1.06</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The net loss as reported in each period did not include any stock-based
compensation.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The weighted average fair value of options granted in 2002 is $17.50.
</FONT>
<P align="left"><FONT size="2">J.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Accumulated Other Comprehensive Income (Loss)</U>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total comprehensive loss was $140,000 in the three months ended June&nbsp;30,
2003, as opposed to a total comprehensive loss of $22,000 in the second quarter
of 2002. &#147;Other&#148; comprehensive income, resulting from gains on available for
sale securities, included in the total comprehensive loss was $33,000 in the
second quarter of 2003 and $86,000 in the quarter ending June&nbsp;30, 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total comprehensive loss was $903,000 and $282,000 for the six months
ended 6/30/03 and 6/30/02 respectively, including other comprehensive income of
$8,000 in the first half of 2003 and other comprehensive income of $118,000 in
the first half of 2002 resulting from gains on available for sale securities.
</FONT>
<P align="left"><FONT size="2">K.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Segment Information</U>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has two reportable business segments. The first segment is
Lynch Systems&#146; glass manufacturing equipment business. Frequency control
devices (quartz crystals and oscillators) manufactured and sold by M-tron is
the other segment. Both businesses are located domestically.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating loss is equal to revenues less operating expenses, excluding
investment income, interest expense and income taxes. The Company allocates a
negligible portion of its general corporate expenses to its operating segments.
</FONT>
<P align="center"><FONT size="2">9</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
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    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>THREE MONTHS ENDED</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>SIX MONTHS ENDED</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>JUNE 30,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>JUNE 30</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>(In Thousands)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>(In Thousands)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">

<TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Revenues</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Glass manufacturing equipment &#151; USA</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,077</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">380</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,693</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">770</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Glass manufacturing equipment &#151; Europe</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">386</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">797</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,876</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Glass manufacturing equipment &#151; Far East</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,065</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,317</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Glass manufacturing equipment &#151; Canada</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Glass manufacturing equipment &#151; All Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">62</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">106</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">83</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total Glass manufacturing equipment &#151; Foreign</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,105</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,354</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,972</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,279</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total Glass manufacturing equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,182</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,734</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,665</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,049</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Frequency control devices &#151; USA</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,753</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,715</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,267</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,960</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Frequency control devices &#151; Europe</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">337</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">145</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">647</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">266</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Frequency control devices &#151; Far East</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">885</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">549</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,548</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,033</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Frequency control devices &#151; Canada</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">398</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">351</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">681</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,044</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Frequency control devices &#151; All Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">159</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">197</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">650</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">342</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total Frequency control devices &#151; Foreign</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,779</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,242</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,526</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,685</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total Frequency control devices</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,957</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,793</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,645</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">6,714</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9,691</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">11,458</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">16,694</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">

<TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Operating
Profit (Loss)</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Glass manufacturing equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">146</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">854</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(337</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Frequency control devices</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(6</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(700</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(229</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,499</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total manufacturing</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">140</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">154</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(566</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Unallocated Corporate expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(418</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(347</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(752</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(674</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(278</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(193</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(1,318</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(593</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">

<TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Capital
Expenditures</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Glass manufacturing equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Frequency control devices</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">74</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">106</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">108</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">

<TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total
Assets</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Glass manufacturing equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">12,481</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">22,181</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Frequency control devices</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,383</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">General Corporate</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,477</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">24,280</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">30,891</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total operating loss of reporting segments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(278</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(193</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(1,318</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(593</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:20px; text-indent:-10px"><FONT size="2">Other profit or loss:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Investment income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">155</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">177</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">63</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Interest expense</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(93</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(52</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(162</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(92</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Loss before income taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(216</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(221</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(1,303</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(622</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
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<P align="left"><FONT size="2">L.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Commitments and Contingencies</U>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the normal course of business, subsidiaries of the Registrant are
defendants in certain product liability, worker claims and other litigation in
which the amounts being sought may exceed insurance coverage levels. The
</FONT>
<P align="center"><FONT size="2">10</FONT>
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<P align="left"><FONT size="2">resolution of these matters is not expected to have a material adverse effect
on the Company&#146;s financial condition or operations. In addition, Registrant
and/or one or more of its subsidiaries are parties to the following additional
legal proceedings:
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the normal course of business, subsidiaries of the Registrant are
defendants in certain product liability, worker claims and other litigation in
which the amounts being sought may exceed insurance coverage levels. The
resolution of these matters is not expected to have a material adverse effect
on the Registrant&#146;s consolidated financial condition or operations. In
addition, Registrant and/or one or more of its subsidiaries are parties to the
following additional legal proceedings:
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In re: Spinnaker Coating, Inc., Debtor/PACE Local 1-1069 v. Spinnaker
Coating, Inc., and Lynch Corporation, U.S. Bankruptcy Court, District of Maine,
Chapter&nbsp;11, Adv. Pro. No.&nbsp;02-2007, and PACE Local 1-1069 v. Spinnaker
Industries, Inc., Spinnaker Coating, Inc., and Spinnaker Coating-Maine, Inc.,
Cumberland County Superior Court, CV-2001-00352</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On or about June&nbsp;26, 2001, in anticipation of the July&nbsp;15, 2001 closure of
Spinnaker&#146;s Westbrook, Maine facility, Plaintiff PACE Local 1-1069 (&#147;PACE&#148;)
filed a three count complaint in Cumberland County Superior Court,
CV-2001-00352 naming the following defendants: Spinnaker Industries, Inc.,
Spinnaker Coating, Inc., and Spinnaker Coating-Maine, Inc. (collectively, the
&#147;Spinnaker Entities&#148;) and Lynch. The complaint alleged that under Maine&#146;s
Severance Pay Act both the Spinnaker Entities and Lynch would be liable to pay
approximately $1,166,000 severance pay under Maine&#146;s Severance Pay Act in
connection with the plant closure. The Defendants filed a notice of removal,
thereby creating United States District Court Civil Action case was remanded
to state court. The Spinnaker Entities also filed a separate complaint
challenging the constitutionality of the Maine Severance Pay Act, United States
District Court Civil Action No.&nbsp;01-232 which later was dismissed by stipulation
of the Spinnaker Entities. PACE also filed three separate Motions for Ex-Parte
Attachment against the Spinnaker Entities and Lynch. PACE filed the First
Motion for Attachment with its original Complaint. PACE sought to attach
$1,166,483.44, an amount large enough to cover the claims of all PACE&#146;s members
seeking severance. The Court denied that Motion as being premature. PACE then
filed a Second Motion against the Spinnaker Entities and Lynch for an
attachment large enough to cover the claims of eight individual employees
seeking severance pay in the amount of $120,736.27. On August&nbsp;20, 2001, the
Court granted that Motion in the amount of $118,500. On April&nbsp;4, 2002, PACE
subsequently recorded this attachment through UCC-1 filings with the Maine
Secretary of State against Lynch Manufacturing and Lynch Corporation. PACE
filed a Third Motion for Ex-Parte Attachment on August&nbsp;29, 2001. This Motion
sought an attachment large enough to cover the severance pay claimed by the
remaining PACE members, $1,048,003. The Court denied this Motion but permitted
PACE the opportunity to obtain an attachment after all defendants had an
opportunity to respond and after hearing.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Before any further action was taken with respect to PACE&#146;s Third Motion
for Attachment, the Spinnaker Defendants filed for relief under Chapter&nbsp;11 of
the Bankruptcy Code. Following a series of filings in the United States
District Court for the District of Maine and the United States Bankruptcy Court
for the District of Maine which, like United States District Court Case No.
01-236, later were dismissed by the parties with prejudice and without costs,
PACE&#146;s case continues to proceed against Lynch in Cumberland County Superior
Court in Maine on the issue of whether Lynch has liability to PACE&#146;s members
under the Maine Severance Pay Act.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;30, 2002, PACE requested a ruling from the Superior Court on
its Third Motion for Attachment. On October&nbsp;21, 2002, Lynch filed a Motion for
Summary Judgment which incorporated its prior objection to any attachment. PACE
filed an Opposition to Lynch&#146;s Motion for Summary Judgment<B>, </B>which included a
request for summary judgment in its favor, and a Motion for Leave to Further
Amend the Complaint on November&nbsp;12, 2002. Lynch thereafter filed a Reply
Memorandum in Support of its Motion for Summary Judgment on November&nbsp;26, 2002
and an opposition to PACE&#146;s Motion for Leave to Further Amend the Complaint on
December&nbsp;3, 2002. On December&nbsp;31, 2002, the Superior Court held a hearing on
all pending Motions. The Superior Court requested that arguments focus on
Lynch&#146;s Motion for Summary Judgment since the granting of that Motion would
render PACE&#146;s Third Motion for Attachment and Motion to Further Amend the
Complaint moot.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;28, 2003, the Superior Court issued an Order deciding both Lynch&#146;s
and PACE&#146;s Motions for Summary Judgment. The Court denied Lynch&#146;s Motion for
Summary Judgment, finding that there remained a disputed issue of material fact
regarding one of Lynch&#146;s primary defenses. The Court granted partial summary
judgment in favor of PACE to the extent that the Court found Lynch was an
&#147;employer&#148; subject to potential liability under Maine&#146;s Severance Pay Act. The
Court held, however, that PACE must still prove its entitlement to
</FONT>

<P align="center"><FONT size="2">11</FONT>



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<P align="left"><FONT size="2">severance
pay under the Act. In a separate ruling also issued on July&nbsp;28, 2003, the
Court denied PACE&#146;s Third Motion for Attachment.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lynch believes that, in addition to other defenses, it is not subject to
the Maine Severance Pay Act, as now in effect. Management does not believe that
the resolution of this case will have a material adverse effect on the
Registrant&#146;s consolidated financial condition and operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company does not believe that it has any other contingent liabilities
related to Spinnaker.
</FONT>
<P align="left"><FONT size="2"><B>2. Qui Tam Lawsuit</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There has been no material change in the status of this lawsuit as last
reported in Registrant&#146;s Form&nbsp;10-K for its fiscal year ended December&nbsp;31, 2002.
</FONT>
<P align="left"><FONT size="2"><B>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Spinnaker Chapter&nbsp;11 Reorganization Proceeding</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Spinnaker Chapter&nbsp;11 reorganization and joint plan of liquidation are
not reported herein because, on September&nbsp;23, 2002, Lynch disposed of its
entire remaining interest in Spinnaker and no longer has any economic interest
in or affiliation with Spinnaker.
</FONT>
<P align="left"><FONT size="2">M.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Reclassifications</U>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain amounts in the 2002 financial statements and segment information
(Note K) have been eliminated or reclassified to conform to the 2003
presentation. These deletions and reclassifications are immaterial to the
consolidated financial statements and segment information taken as a whole.
</FONT>
<!-- link1 "Item&nbsp;2. Management&#146;s Discussion and Analysis of Financial Condition
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<DIV align="left"><A NAME="006"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;2. <U>Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations.</U></B>
</FONT>

<P align="left"><FONT size="2"><B>Critical Accounting Policies</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has identified the accounting policies listed below that we
believe are most critical to our financial condition and results of operations,
and that require management&#146;s most difficult, subjective and complex judgements
in estimating the effect of inherent uncertainties. This section should be
read in conjunction with Note 1 to the consolidated financial statements,
included in the Company&#146;s Annual Report on Form&nbsp;10K for the year ended
December&nbsp;31, 2002, which includes other significant accounting policies.
</FONT>
<P align="left"><FONT size="2"><B><I>Accounts Receivable</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable on a consolidated basis consist principally of amounts
due from both domestic and foreign customers. Credit is extended based on an
evaluation of the customer&#146;s financial condition and collateral is not
generally required except at Lynch Systems. The Company considers
concentrations of credit risk to be minimal due to the Company&#146;s diverse
customer base. In relation to export sales, the Company requires letters of
credit supporting a significant portion of the sales price prior to production
to limit exposure to credit risk. Certain subsidiaries and business segments
have credit sales to industries that are subject to cyclical economic changes.
The Company maintains an allowance for doubtful accounts at a level that
management believes is sufficient to cover potential credit losses.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our clients to make required payments. We base
our estimates on our historical collection experience, current trends, credit
policy and relationship of our accounts receivable and revenues. In determining
these estimates, we examine historical write-offs of our receivables and review
each client&#146;s account to identify any specific customer collection issues. If
the financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payment, additional allowances may be
required. Our failure to estimate accurately the losses for doubtful accounts
and ensure that payments are received on a timely basis could have a material
adverse effect on our business, financial condition, and results of operations.
</FONT>
<P align="center"><FONT size="2">12</FONT>
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<P align="left"><FONT size="2"><B><i>Inventory
Valuation</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories are stated at the lower of cost or market value. Inventories
valued using the last-in, first-out (LIFO)&nbsp;method comprised approximately 63%
and 58% of consolidated inventories at December&nbsp;31, 2002 and 2001,
respectively. The balance of inventories at December&nbsp;31, 2002 and 2001 are
valued using the first-in-first-out (FIFO)&nbsp;method. If actual market conditions
are more or less favorable than those projected by management, including the
demand for our products, changes in technology, internal labor costs and the
costs of materials, adjustments may be required.
</FONT>
<P align="left"><FONT size="2"><B><I>Revenue Recognition and Accounting
for Long-Term Contracts</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenues, with the exception of certain long-term contracts discussed
below, are recognized upon shipment when title passes. Shipping costs are
included in manufacturing cost of sales.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lynch Systems, a 100% owned subsidiary of the Company, is engaged in the
manufacture and marketing of glass-forming machines and specialized
manufacturing machines. Certain sales contracts require an advance payment
(usually 30% of the contract price) which is accounted for as a customer
advance. The contractual sales prices are paid either (i)&nbsp;as the manufacturing
process reaches specified levels of completion or (ii)&nbsp;based on the shipment
date. Guarantees by letter of credit from a qualifying financial institution
are required for most sales contracts. Because of the specialized nature of
these machines and the period of time needed to complete production and
shipping, Lynch Systems accounts for these contracts using the
percentage-of-completion accounting method as costs are incurred compared to
total estimated project costs (cost to cost basis).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The percentage of completion method is used since reasonably dependable
estimates of the revenues and costs applicable to various stages of a contract
can be made, based on historical experience and milestones set in the contract.
These estimates include current customer contract specifications, related
engineering requirements and the achievement of project milestones. Financial
management maintains contact with project managers to discuss the status of the
projects and, for fixed-price engagements, financial management is updated on
the budgeted costs and required resources to complete the project. These
budgets are then used to calculate revenue recognition and to estimate the
anticipated income or loss on the project. In the past, we have occasionally
been required to commit unanticipated additional resources to complete
projects, which have resulted in lower than anticipated profitability or losses
on those contracts. Favorable changes in estimates result in additional profit
recognition, while unfavorable changes in estimates result in the reversal of
previously recognized earnings to the extent of the error of the estimate. We
may experience similar situations in the future. Provisions for estimated
losses on contracts are made during the period in which such losses become
probably and can be reasonably estimated. To date, such losses have not been
significant.
</FONT>
<P align="left"><FONT size="2"><B><I>Warranty Expense</I></b>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lynch Systems provides a full warranty to world-wide customers who acquire
machines. The warranty covers both parts and labor and normally covers a period
of one year or thirteen months. Based upon experience, the warranty accrual is
based upon three to five percent of the selling price of the machine. The
Company periodically assesses the adequacy of the reserve and adjusts the
amounts as necessary. Estimates used in determining the adequacy of the
reserve include the number and nature of product failures and the level of
returns of product, the cost of internal labor to address these warranty issues
and the costs of materials in repairing or replacing inventory covered under
our warranty programs. Should these estimates change, our original estimates
of warranty could increase or decrease.
</FONT>
<P align="left"><FONT size="2"><B>Results of Operations</B>
</FONT>

<P align="left"><FONT size="2"><B><I>Second Quarter 2003 and Six Months 2003 Compared to 2002</I></B>
</FONT>

<P align="left"><FONT size="2"><U>Sales and Revenues/Gross Margin</U>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenues for the second quarter of 2003 decreased by $3.0&nbsp;million from
second quarter 2002 to $6.7&nbsp;million due mainly to the low beginning backlog and
the timing of deliveries for orders booked by Lynch Systems in February, March
and April of 2003.
</FONT>
<P align="center"><FONT size="2">13</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Six months 2003 sales of $11.5&nbsp;million were $5.2&nbsp;million less than the
$16.7&nbsp;million revenue recorded in the first six months of 2002 due mainly to
the delivery schedules for glass press machines sold by Lynch Systems.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Second quarter 2003 gross margin as a percent of sales was 25.8% or 3.3
points less than the 29.1% gross margin achieved in the second quarter of 2002
due to the 31% volume reduction.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Six month 2003 gross margin as a percent of revenues of 22.0% was 7.8%
below the first half of 2002 due mainly to the low level of sales.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenues at M-tron increased by $0.6&nbsp;million, or 19.4%, to $3.5&nbsp;million
for the second quarter of 2003 and by $1.1&nbsp;million to $6.8&nbsp;million for the six
month period ending June 2003 due primarily to the acquisition of Champion
Technologies, Inc. (&#147;Champion&#148;). On October&nbsp;18, 2002, M-tron acquired certain
assets of an industry competitor, Champion Technologies, Inc., from U.S. Bank
in a transaction accounted for as a purchase.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lynch Systems&#146; second quarter 2003 revenue of $3.2&nbsp;million was $3.6
million, or 53%, below the same period of 2002. Lynch Systems&#146; revenues for
the first six months of 2003 declined by $6.4&nbsp;million from the corresponding
2002 period to $4.7&nbsp;million due mainly to depressed bookings for glass press
machines throughout 2002. However, order backlog of $10.0&nbsp;million at June&nbsp;30,
2003 represented an improvement of $6.0&nbsp;million since December&nbsp;31, 2002 and was
$5.9&nbsp;million, or 144% above last June.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M-tron&#146;s gross margin as a percentage of net sales for the second quarter
of 2003 improved over the same period of 2002 by 13.1% to 24.3%. M-tron&#146;s
gross margin of 22.2% for the six month period ending June&nbsp;30, 2003 represented
a 12.6% improvement over the 9.6% gross margin achieved in the first half of
2002. The sales improvement in the second quarter and six month period ending
June&nbsp;30, 2003 of 19.4% and 20.3% respectively more than offset the costs
incurred in manufacturing the more sophisticated Champion parts.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lynch Systems&#146; gross margin as a percentage of net sales for the second
quarter of 2003 declined 9.6% to 27.4% compared to the same period of 2002.
Lynch Systems&#146; gross margin of 21.8% for the six month period ending June, 2003
was 18.2% below the first half 2002 gross margin of 40.0&nbsp;percent. These
reductions were the result of a 52.7% sales decline in the second quarter and
57.8% less volume in the first half.
</FONT>
<P align="left"><FONT size="2"><U>Operating Loss</U>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating loss for the second quarter 2003 was $0.3&nbsp;million compared to
the second quarter 2002 operating loss of $0.2&nbsp;million, representing an
unfavorable variance of $0.1&nbsp;million on $3.0&nbsp;million less revenue.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Six months 2003 operating loss of $1.3&nbsp;million was $0.7&nbsp;million above the
first half 2002 loss of $0.6&nbsp;million due to $5.2&nbsp;million less revenue.
For the second quarter of 2003, M-tron had an operating loss of $6,000, an
improvement of $694,000 over the $700,000&nbsp;million loss in the second quarter of
2002. M-tron&#146;s six month 2003 operating loss of $229,000 represented a major
improvement of $1,270,000 when compared to M-tron&#146;s $1,499,000 operating loss
in the six month period ending June&nbsp;30, 2002. The second quarter and
year-to-date improvements were due mainly to the additional sales mentioned
above and better product mix.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the 2003 second quarter, Lynch Systems had an operating profit of
$146,000 compared to an operating profit of $854,000 in the second quarter of
2002. Lynch Systems&#146; first half 2003 operating loss of $337,000 was $1,917,000
unfavorable to the six month 2002 operating profit of $1,580,000. Although
Lynch Systems second quarter and six months 2003 operating costs were reduced
by $0.6&nbsp;million and $1.2&nbsp;million respectively from 2002, the company could not
compensate for the volume decline mentioned above and poor product mix.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lynch&#146;s corporate headquarters incurred unallocated expenses of $418,000
in the second quarter of 2003, bringing the six months 2003 headquarters
expense to $752,000. The second quarter and six month 2003 headquarters
expenses exceeded the prior year by $71,000 and $78,000 respectively due to
accrued professional fees.
</FONT>
<P align="center"><FONT size="2">14</FONT>
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<P align="left"><FONT size="2"><U>Other Income (Expense), Net</U>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Second quarter and first half 2003 investment income were $131,000 and
$114,000 respectively more than last year due to realized gains of $134,000 on
the sale of marketable securities in the second quarter of 2003.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Second quarter interest expense of $93,000 exceeded 2002 by $41,000 due to
Letter of Credit fees and higher average borrowing to fund losses and to
finance the &#147;Champion&#148; acquisition.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense of $162,000 for the first six months of 2003 was $70,000
higher than the $92,000 incurred in the first half of 2002 due to Letter of
Credit fees and higher average borrowing to fund losses and to finance the
&#147;Champion&#148; acquisition.
</FONT>
<P align="left"><FONT size="2"><U>Tax Benefit</U>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The income tax benefit includes federal, as well as state, local, and
foreign taxes. The second quarter 2003 and six months 2003 net tax benefit of
$43,000 and $392,000 respectively are the result of operating losses incurred
which are expected to be realized during the remainder of the year. Should
third quarter 2003 income fail to materialize, it may be necessary for the
Company to reverse all or part of the tax benefit recorded through June 2003.
</FONT>
<P align="left"><FONT size="2"><U>Net Loss</U>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss for the second quarter of 2003 was $0.2&nbsp;million compared to a net
loss of $0.1&nbsp;million in the quarter ending June&nbsp;30, 2002. Six month 2003 net
loss of $0.9&nbsp;million was unfavorable to the $0.4&nbsp;million net loss in the first
six months of 2002 by $0.5&nbsp;million. The $0.1&nbsp;million additional loss in the
second quarter is primarily due to the $1.1&nbsp;million reduction in gross profit
caused by less volume that was almost offset by the $1.0&nbsp;million reduction in
selling and administration expenses. As a result, fully diluted second
quarter 2003 loss per share was $0.12 compared to a loss of $0.07 per share in
the second quarter 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;First half 2003 fully diluted loss per share of $0.61 was $0.34 per share
worse than the $0.27 per share loss in the first half of 2002 due mainly to
lower sales of $5.2&nbsp;million; the resultant $2.4&nbsp;million reduction in 2003 gross
profit could not be fully offset by the $1.7 reduction in selling and
administration expenses.
</FONT>
<P align="left"><FONT size="2"><U>Backlog/New Orders</U>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
backlog of manufactured products at June&nbsp;30, 2003 was $12.5&nbsp;million,
a $6.3&nbsp;million improvement over the backlog at December&nbsp;31,
2002, and $6.4&nbsp;million more than the backlog at June&nbsp;30, 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M-tron&#146;s backlog improved by $0.5&nbsp;million since last June, due mainly to
the acquisition of Champion Technology, Inc. in October, 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lynch
Systems backlog has improved by $6.0&nbsp;million since December&nbsp;31,2002
as a result of three significant orders for glass press machines. First half
2003 bookings of $11.3&nbsp;million exceeded first half 2002 orders by $8.5&nbsp;million;
Lynch Systems continues to submit a large number of quotes, predominantly to
tableware manufacturers.
</FONT>
<P align="left"><FONT size="2"><U>Financial Condition</U>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At June&nbsp;30, 2003, the Company has current assets of $19.5&nbsp;million and
current liabilities of $11.4&nbsp;million. Working capital was therefore $8.1
million as compared to $8.0&nbsp;million at December&nbsp;31, 2002 and $9.6&nbsp;million at
June&nbsp;30, 2002. The ratio of current assets to current liabilities was 1.71 to
1.00 at June&nbsp;30, 2003; 1.79 to 1.00 at December&nbsp;31, 2002; and 1.61 to 1.00
ratio at June&nbsp;30, 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash used in operating activities was approximately $1.0&nbsp;million in the
first half of 2003 compared to cash provided of approximately $5.6&nbsp;million in
the first half of 2002. The year over year unfavorable change in operating
cash flow of $6.6&nbsp;million was mainly the result of (a) $0.5&nbsp;million additional
net loss, (b) $1.2&nbsp;million more cash used in operating assets, and (c) $4.7
million of restricted cash that was &#147;released&#148; for use in operations in the
second quarter of 2002. Capital expenditures were $108,000 in first half of
2003 compared to $142,000 in the period ending June&nbsp;30, 2002.
</FONT>
<P align="center"><FONT size="2">15</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total debt of $4.7&nbsp;million at June&nbsp;30, 2003 was $0.6&nbsp;million greater than
the amount outstanding at December&nbsp;31, 2002 and $1.7&nbsp;million more than the debt
at June&nbsp;30, 2002. The year over year increase in debt is primarily due to
increases in M-tron&#146;s loans to finance operating losses and acquire &#147;Champion&#148;
in October 2002. Debt outstanding at June&nbsp;30, 2003 included $1.2&nbsp;million of
fixed rate debt at an average interest rate of 4.9%, and $3.5&nbsp;million of
variable rate debt at a June&nbsp;30, 2003 average interest rate of 4.7%.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restrictions on dividends under the M-tron loan with First National Bank
of Omaha disallow distributions to the parent company without consent of the
bank. Lynch Systems, under its loan with Sun Trust Bank, may pay a cash
dividend to the parent company equal to 50% of LS&#146;s net income for the prior
fiscal year, subject to the minimum net worth covenant in the loan agreement.
Under the M-tron loan agreement, advances to the parent company are disallowed
without the prior written consent of the lending bank. Under its loan
agreement, LS may pay an annual management fee to the parent company in an
amount not to exceed $250,000. In addition, LS may reimburse the parent
company for expenses and taxes paid by the parent on behalf of LS.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At June&nbsp;30, 2003, the Company&#146;s total cash, cash equivalents and
investments in marketable securities total $7.5&nbsp;million (including $1.1&nbsp;million
of restricted cash). In addition, the Company had a consolidated borrowing
capacity of $4.8&nbsp;million under M-tron&#146;s and LS&#146;s revolving line of credit.
Therefore, gross cash and securities and availability under the revolving
credit loans total $12.3&nbsp;million and exceed the combined outstanding debt and
margin liability on securities of $4.9&nbsp;million by $7.4&nbsp;million. In addition,
pursuant to the Company&#146;s June&nbsp;16, 2003 filing, Lynch received a $532,319 cash
refund on July&nbsp;24, 2003 through carry-backs for prior periods operating losses.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;30, 2003, Lynch Systems renewed its SunTrust Bank loan with a
maturity date of May&nbsp;29, 2004. This long-time lender has provided a $7&nbsp;million
line-of-credit which can be used entirely for stand-by Letters of Credit or up
to $2&nbsp;million for domestic revolving credit within the credit line. This loan,
as well as the previous loan, includes an unsecured parent company guarantee.
At June&nbsp;30, 2003, there were outstanding Letters of Credit of $2.2&nbsp;million and
no borrowings under the working capital line.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;30, 2003, M-tron&#146;s long-time lending bank, First National Bank of
Omaha, has renewed the revolving credit loan that now matures on April&nbsp;30,
2004. The renewed loan includes the following conditions:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Effective May&nbsp;20, 3002, the Company subordinates its October
3, 2002, $200,000 loan to M-tron to the bank, bringing the
subordinated total to $700,000;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The bank reduces the minimum net worth and subordinated debt
limit from $3.1&nbsp;million to $2.9&nbsp;million. In return, the Company has
committed to fund any shortfall with an equity or subordinated debt
cash infusion within 45&nbsp;days of the quarter end. Since M-tron&#146;s
subordinated debt and equity total $2,961,000 as of June&nbsp;30, 2003,
no additional cash infusion is currently required.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">In addition, the Company&#146;s outstanding Letter of Credit in the
amount of $1.0&nbsp;million for the benefit of the bank can be reduced
to $500,000 when M-tron is profitable for 5 of 6 consecutive months
and the cumulative after tax profit equals or exceeds $500,000.
The remaining $500,000 Letter of Credit will be released when the
earning parameters are met for a second time.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company does not at present have credit facilities at the parent
company level. The Company believes that existing cash and cash equivalents,
cash generated from operations and available borrowings under its subsidiaries
lines of credit will be sufficient to meet its on-going working capital and
capital expenditure requirements for the foreseeable future.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See Subsequent Events regarding the August&nbsp;4, 2003 refinancing of the
Lynch Systems First Port City Bank Loan.
</FONT>
<P align="left"><FONT size="2"><U>Adoption of Accounting
Pronouncements</U>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November 2002, the FASB issued Interpretation No.&nbsp;45 (FIN 45),
<I>Guarantor&#146;s Accounting and Disclosure Requirements for Guarantees, Including
Indirect Indebtedness of Others.</I>
</FONT>
<P align="center"><FONT size="2">16</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company presently guarantees (unsecured)&nbsp;the SunTrust Bank loans of
its subsidiary, Lynch Systems, and has guaranteed a Letter of Credit issued to
the First National Bank of Omaha on behalf of its subsidiary, M-tron
Industries, Inc. These guarantees are subject to FIN 45&#146;s disclosure
requirement only. As of June&nbsp;30, 2003, there were no parent company
obligations to the SunTrust Bank. As of June&nbsp;30, 2003, the $1,000,000 Letter
of Credit issued by Fleet Bank to The First National Bank of Omaha was secured
by a $1,125,000 deposit in a Fleet Bank Treasury Fixed Income Fund.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no other financial, performance, indirect guarantees or
indemnification agreements.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July 2002, the Financial Accounting Standards Board (&#147;FASB&#148;) issued
Statement of Financial Accounting Standards No.&nbsp;146, &#147;Accounting for Costs
Associated with Exit or Disposal Activities&#148; (&#147;SFAS 146&#148;), which addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force Issue No.&nbsp;94-3, &#147;Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring).&#148; The
provisions of SFAS 146 are effective for exit or disposal activities that are
initiated after December&nbsp;31, 2002; the Company does not have any exit or
disposal activities underway.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;31, 2002, the FASB issued Statement of Financial Accounting
Standards No.&nbsp;148, &#147;Accounting for Stock-Based Compensation &#150; Transition and
Disclosure&#148; (&#147;SFAS 148&#148;), which amends the disclosure provisions of Financial
Accounting Standards No.&nbsp;123, &#147;Accounting for Stock-Based Compensation&#148; (&#147;SFAS
123&#148;) and APBN opinion No.&nbsp;28, &#147;Interim Financial Reporting&#148; (&#147;APB 28&#148;). See
Note I to the Consolidated Financial Statements &#150; &#147;Earnings Per Share and
Stockholders Equity&#148;.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January 2003, the FASB issued Interpretation No.&nbsp;46, &#147;Consolidation of
Variable Interest Entities, an Interpretation of ARB No.&nbsp;51&#148; (&#147;FIN 46&#148;). FIN
46 clarifies the application of Accounting Research Bulletin No.&nbsp;51,
&#147;Consolidated Financial Statements,&#148; to certain entities in which equity
investors do not have the characteristics of a controlling financial interest
or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other
parties. The Company does not have any variable interest entities.
</FONT>
<P align="left"><FONT size="2"><U>Market Risk</U>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is exposed to market risk relating to changes in the general
level of U.S. interest rates. Changes in interest rates affect the amount of
interest earned on the Company&#146;s cash equivalents and short-term investments
(approximately $6.5&nbsp;million at June&nbsp;30, 2003). The Company generally finances
the debt portion of the acquisition of long-term assets with fixed rate,
long-term debt. The Company generally maintains the majority of its debt in
nature by borrowing on a fixed long-term basis. The Company does not use
derivative financial instruments for trading or speculative purposes.
Management does not foresee any significant changes in the strategies used to
manage interest rate risk in the near future, although the strategies may be
reevaluated as market conditions dictate. There has been no significant change
in market risk since June&nbsp;30, 2003.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At June&nbsp;30, 2003, approximately $3.5&nbsp;million of the Company&#146;s debt bears
interest at variable rates. Accordingly, the Company&#146;s earnings and cash
flows are only slightly affected by changes in interest rates. Assuming the
current level of borrowings for variable rate debt, and assuming a two
percentage point increase in the 2003 average interest rate under these
borrowings, it is estimated that the Company&#146;s interest expense would change by
less than $0.1&nbsp;million.
</FONT>
<P align="left"><FONT size="2"><U>Risk Factors</U>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain subsidiaries and business segments of the Company sell to
industries that are subject to cyclical economic changes. Any downturns in the
economic environment would have a financial impact on the Company and its
consolidated subsidiaries and may cause the reported financial information
herein not to be indicative of future operating results, financial condition or
cash flows.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future activities and operating results may be adversely affected by
fluctuating demand for capital goods such as large glass presses, delay in the
recovery of demand for components used by telecommunications infrastructure
manufacturers, and disruption of foreign economies.
</FONT>
<P align="center"><FONT size="2">17</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments, and
trade accounts receivable.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company maintains cash and cash equivalents and short-term investments
with various financial institutions. These financial institutions are located
throughout the country and the Company&#146;s policy is designed to limit exposure
to any one institution. The Company performs periodic evaluations of the
relative credit standing of those financial institutions that are considered in
the Company&#146;s investment strategy. Other than certain accounts receivable, the
Company does not require collateral on these financial instruments. In
relation to export sales, the Company requires letters of credit supporting a
significant portion of the sales price prior to production to limit exposure to
credit risk. The Company maintains an allowance for doubtful accounts at a
level that management believes is sufficient to cover potential credit losses.
</FONT>
<P align="left"><FONT size="2"><U>Subsequent Events</U>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;4, 2003, Lynch Systems refinanced its loan with First Port City
Bank by entering into a new term loan agreement with its lead bank, SunTrust.
The new loan is in the amount of $498,000 and is secured by a lien on Lynch
Systems real estate (SunTrust Bank previously had a subordinated position on
the real estate). The new loan has a 10-year term with interest at 5.5%.
Principal payments will be $4,150 per month for 120&nbsp;months commencing August
2003.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The loan proceeds will be used to retire the First Port City loan that is
due in its entirety on August&nbsp;5, 2003 in the amount of $554,000.
</FONT>
<P align="left"><FONT size="2"><U>Forward Looking Information</U>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Included in this Management Discussion and Analysis of Financial Condition
and Results of Operations are certain forward looking financial and other
information, including without limitation matters relating to &#147;Risks&#148;. It
should be recognized that such information are projections, estimates or
forecasts based on various assumptions, including without limitation, meeting
its assumptions regarding expected operating performance and other matters
specifically set forth, as well as the expected performance of the economy as
it impacts the Company&#146;s businesses, government and regulatory actions and
approvals, and tax consequences, and the risk factors and cautionary statements
set forth in reports filed by the Company with the Securities and Exchange
Commission. As a result, such information is subject to uncertainties, risks
and inaccuracies, which could be material.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Registrant makes available, free of charge, its annual report on Form
10-K, Quarterly Reports on Form&nbsp;10-Q, and current reports, if any, on Form&nbsp;8-K.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Registrant also makes this information available on its website, who&#146;s
internet address is <U><I>www.lynchcorp.com</I></U>.
</FONT>
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<P align="left"><FONT size="2"><B>Item&nbsp;3. <U>Quantitative and Qualitative Disclosure About Market Risk</U></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Market Risk&#148; under Item&nbsp;2 above.
</FONT>
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<P align="left"><FONT size="2"><B>Item&nbsp;4. <U>Controls and Procedures</U></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Chief Executive Officer and Chief Financial Officer have concluded
that the Company&#146;s disclosure controls and procedures were effective as of the
end of the period covered by this report based on the evaluation of these
controls and procedures required by Exchange Act Rule&nbsp;13a-15.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There have been no changes in the Registrant&#146;s internal control over
financial reporting that occurred during the Registrant&#146;s last fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the
Registrant&#146;s internal control over financial reporting.
</FONT>

<P align="center"><FONT size="2">18</FONT>
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<!-- link1 " PART II. OTHER INFORMATION" -->
<DIV align="left"><A NAME="009"></A></DIV>
<P align="left"><FONT size="2"><B>PART II. <U>OTHER INFORMATION</U></B>
</FONT>

<!-- link1 " Item&nbsp;1. Legal Proceedings" -->
<DIV align="left"><A NAME="010"></A></DIV>

<P align="left"><FONT size="2"><B>Item&nbsp;1. <U>Legal Proceedings</U></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In re Spinnaker Coating, Inc., Debtor/PACE Local I-1069 v. Spinnaker
Coating, Inc., and Lynch Corporation, U.S. Bankruptcy Court, District of
Maine, Chapter&nbsp;11, Adv. Pro. No.&nbsp;02-2007; and PACE Local 1-1069 v.
Spinnaker Industries, Inc., Spinnaker Coating, Inc., and Spinnaker
Coating-Maine, Inc., Cumberland County Superior Court, CV-2001-00352:</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On or about June&nbsp;26, 2001, in anticipation of the July&nbsp;15, 2001 closure of
Spinnaker&#146;s Westbrook, Maine facility, Plaintiff PACE Local 1-1069 (&#147;PACE&#148;)
filed a three count complaint in Cumberland County Superior Court,
CV-2001-00352 naming the following defendants: Spinnaker Industries, Inc.,
Spinnaker Coating, Inc., and Spinnaker Coating-Maine, Inc. (collectively, the
&#147;Spinnaker Entities&#148;) and Lynch. The complaint alleged that under Maine&#146;s
Severance Pay Act both the Spinnaker Entities and Lynch would be liable to pay
approximately $1,166,000 severance pay under Maine&#146;s Severance Pay Act in
connection with the plant closure. The Defendants filed a notice of removal,
thereby creating United States District Court Civil Action case was remanded
to state court. The Spinnaker Entities also filed a separate complaint
challenging the constitutionality of the Maine Severance Pay Act, United States
District Court Civil Action No.&nbsp;01-232 which later was dismissed by stipulation
of the Spinnaker Entities. PACE also filed three separate Motions for Ex-Parte
Attachment against the Spinnaker Entities and Lynch. PACE filed the First
Motion for Attachment with its original Complaint. PACE sought to attach
$1,166,483.44, an amount large enough to cover the claims of all PACE&#146;s members
seeking severance. The Court denied that Motion as being premature. PACE then
filed a Second Motion against the Spinnaker Entities and Lynch for an
attachment large enough to cover the claims of eight individual employees
seeking severance pay in the amount of $120,736.27. On August&nbsp;20, 2001, the
Court granted that Motion in the amount of $118,500. On April&nbsp;4, 2002, PACE
subsequently recorded this attachment through UCC-1 filings with the Maine
Secretary of State against Lynch Manufacturing and Lynch Corporation. PACE
filed a Third Motion for Ex-Parte Attachment on August&nbsp;29, 2001. This Motion
sought an attachment large enough to cover the severance pay claimed by the
remaining PACE members, $1,048,003. The Court denied this Motion but permitted
PACE the opportunity to obtain an attachment after all defendants had an
opportunity to respond and after hearing.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Before any further action was taken with respect to PACE&#146;s Third Motion
for Attachment, the Spinnaker Defendants filed for relief under Chapter&nbsp;11 of
the Bankruptcy Code. Following a series of filings in the United States
District Court for the District of Maine and the United States Bankruptcy Court
for the District of Maine which, like United States District Court Case No.
01-236, later were dismissed by the parties with prejudice and without costs,
PACE&#146;s case continues to proceed against Lynch in Cumberland County Superior
Court in Maine on the issue of whether Lynch has liability to PACE&#146;s members
under the Maine Severance Pay Act.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;30, 2002, PACE requested a ruling from the Superior Court on
its Third Motion for Attachment. On October&nbsp;21, 2002, Lynch filed a Motion for
Summary Judgment which incorporated its prior objection to any attachment. PACE
filed an Opposition to Lynch&#146;s Motion for Summary Judgment<B>, </B>which included a
request for summary judgment in its favor, and a Motion for Leave to Further
Amend the Complaint on November&nbsp;12, 2002. Lynch thereafter filed a Reply
Memorandum in Support of its Motion for Summary Judgment on November&nbsp;26, 2002
and an opposition to PACE&#146;s Motion for Leave to Further Amend the Complaint on
December&nbsp;3, 2002. On December&nbsp;31, 2002, the Superior Court held a hearing on
all pending Motions. The Superior Court requested that arguments focus on
Lynch&#146;s Motion for Summary Judgment since the granting of that Motion would
render PACE&#146;s Third Motion for Attachment and Motion to Further Amend the
Complaint moot.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;28, 2003, the Superior Court issued an Order deciding both Lynch&#146;s
and PACE&#146;s Motions for Summary Judgment. The Court denied Lynch&#146;s Motion for
Summary Judgment, finding that there remained a disputed issue of material fact
regarding one of Lynch&#146;s primary defenses. The Court granted partial summary
judgment in favor of PACE to the extent that the Court found Lynch was an
&#147;employer&#148; subject to potential liability under Maine&#146;s Severance Pay Act. The
Court held, however, that PACE must still prove its entitlement to severance
pay under the Act. In a separate ruling also issued on July&nbsp;28, 2003, the
Court denied PACE&#146;s Third Motion for Attachment.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lynch believes that, in addition to other defenses, it is not subject to
the Maine Severance Pay Act, as now in effect. Management does not believe that
the resolution of this case will have a material adverse effect on the
Registrant&#146;s consolidated financial condition and operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company does not believe that it has any other contingent liabilities
related to Spinnaker.
</FONT>
<P align="left"><FONT size="2"><B>2. Qui Tam Lawsuit</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There has been no material change in the status of this lawsuit as last
reported in Registrant&#146;s Form&nbsp;10-K for its fiscal year ended December&nbsp;31, 2002.
</FONT>
<P align="center"><FONT size="2">19</FONT>
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<P align="left"><FONT size="2"><B>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Spinnaker Chapter&nbsp;11 Reorganization Proceeding</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Spinnaker Chapter&nbsp;11 reorganization and joint plan of liquidation are
not reported herein because, on September&nbsp;23, 2002, Lynch disposed of its
entire remaining interest in Spinnaker and no longer has any economic interest
in or affiliation with Spinnaker.
</FONT>
<!-- link1 "Item&nbsp;4. Submission of Matters to a Vote of Security Holders" -->
<DIV align="left"><A NAME="011"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;4. <U>Submission of Matters to a Vote of Security Holders</U></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the Annual Meeting of Stockholders of the Registrant held on May&nbsp;1, 2003:
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following persons were elected as Directors with the following votes:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="65%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left"><FONT size="1"><B>Name</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Votes For</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Votes Withheld</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Val Cerutti</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,367,293</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,825</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Marc J. Gabelli</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,366,769</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,349</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Mario J. Gabelli</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,363,559</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,559</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Avrum Gray</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,367,293</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,825</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Raymond H. Keller</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,363,574</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,544</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Richard E. McGrail</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,363,469</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,649</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Ralph R. Papitto</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,359,969</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,149</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Anthony R. Pustorino</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,367,188</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,930</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>


<!-- link1 "Item&nbsp;6. Exhibits and Reports on Form&nbsp;8-K" -->
<DIV align="left"><A NAME="012"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;6. <U>Exhibits and Reports on Form&nbsp;8-K</U></B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="top">
    <TD width="5%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">(a)</FONT></TD>
    <TD colspan="2"><FONT size="2">Exhibits filed herewith:</FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap><FONT size="2">10(dd)&nbsp;</FONT></TD>
    <TD><FONT size="2">Second Amendment to Restated Loan and Security Agreement
dated April&nbsp;30, 2003 between M-tron Industries, Inc. and First
National Bank of Omaha</FONT></TD>
</TR>

<TR valign="top" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap><FONT size="2">10(ee)&nbsp;</FONT></TD>
    <TD><FONT size="2">First Amendment and Waiver to Amended and Restated Credit Agreement
between Lynch Systems, Inc. and SunTrust Bank dated May&nbsp;30,
2003</FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap><FONT size="2">10(ff)&nbsp;</FONT></TD>
    <TD nowrap><FONT size="2">Term Loan Promissary Note between Lynch Systems, Inc. and SunTrust Bank
dated August&nbsp;4, 2003</FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap><FONT size="2">10(gg)&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD><FONT size="2">Second
Amendment to Security Deed and Agreement dated August&nbsp;4, 2003 between Lynch Systems, Inc. and SunTrust Bank.
</FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap><FONT size="2">31&nbsp;</FONT></TD>
    <TD><FONT size="2">Certifications of Registrant&#146;s principal
executive and principal
chief financial officer required by
Exchange Act Rule&nbsp;13a-14(a)</FONT></TD>
</TR>

<TR valign="top" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap><FONT size="2">32&nbsp;</FONT></TD>
    <TD><FONT size="2">Section&nbsp;1350 Certifications of Registrant&#146;s
principal executive
and principal financial officer&#146;s required
by Exchange Act Rule&nbsp;13a-14(b)</FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap><FONT size="2">99.1&nbsp;</FONT></TD>
    <TD><FONT size="2">Amended and Restated Audit Committee Charter</FONT></TD>
</TR>

<TR valign="top" bgcolor="#eeeeee">
    <TD><FONT size="2">(b)&nbsp;</FONT></TD>
    <TD colspan="2"><FONT size="2">Reports on Form&nbsp;8-K:</FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">1.&nbsp;</FONT></TD>
<TD><FONT size="2">Registrant&#146;s press release announcing its results
of operations for the first quarter ending March&nbsp;31, 2003 was
filed with a Form&nbsp;8-K on May&nbsp;7, 2003</FONT></TD>
</TR>
</TABLE>
</CENTER>

<!-- link1 " SIGNATURES" -->
<DIV align="left"><A NAME="013"></A></DIV>
<P align="center"><FONT size="2"><B><U>SIGNATURES</U></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="52%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">LYNCH CORPORATION<BR>
(Registrant)</FONT></TD>
</TR>
<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">August 14, 2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
By:
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">/s/ RAYMOND H. KELLER<BR>
</FONT><HR size="1" noshade><FONT size="2">
Raymond H. Keller<BR>
Chief Financial Officer</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">20</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><FONT size="2"><B><U>EXHIBIT INDEX</U></B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Exhibit</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>No.</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Description</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" width="9%" noshade></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">10(dd)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Second Amendment to Restated Loan and Security Agreement dated April&nbsp;30, 2003
between M-tron Industries, Inc. and First National Bank of Omaha. &#134;&#134;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">10(ee)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
First Amendment and Waiver to Amended and Restated Credit Agreement between Lynch Systems, Inc.
and SunTrust Bank dated May&nbsp;30, 2003. &#134;&#134;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">10(ff)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Term Loan Promissory Note between Lynch Systems, Inc. and SunTrust Bank dated August&nbsp;4, 2003. &#134;&#134;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">10(gg)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Second
Amendment to Security Deed and Agreement dated August&nbsp;4, 2003
between Lynch Systems, Inc. and SunTrust Bank.&#134;&#134;
</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Certifications of Registrant&#146;s principal executive and principal financial officers
required by Exchange Act Rule&nbsp;13a-14(a). &#134;&#134;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;1350 Certifications of Registrant&#146;s principal executive and principal
financial officers required by Exchange Act Rule&nbsp;13a-14(b). &#134;&#134;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">99.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Amended and Restated Audit Committee Charter. &#134;&#134;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">&#134;&#134; Filed herewith.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Exhibits listed above have been filed separately with the Securities
and Exchange Commission in conjunction with this Quarterly Report on Form&nbsp;10-Q
or have been incorporated by reference into this Quarterly Report on Form&nbsp;10-Q.
Upon request, Lynch Corporation will furnish to each of its shareholders a
copy of any such Exhibit. Requests should be addressed to the Office of the
Secretary, Lynch Corporation, 50 Kennedy Plaza, Suite&nbsp;1250, Providence, RI
02903.
</FONT>

<P align="center"><FONT size="2">21</FONT>




</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(DD)
<SEQUENCE>3
<FILENAME>b47168lcexv10wxddy.txt
<DESCRIPTION>EX-10(DD) SECOND AMEND TO RESTATED LOAN
<TEXT>
<PAGE>
                                                                  EXHIBIT 10(dd)

                        SECOND AMENDMENT TO RESTATED LOAN
                             AND SECURITY AGREEMENT

     This Agreement made this 30th day of April, 2003, by and between M-Tron
Industries. Inc., ("BORROWER"), a Delaware corporation, and First National Bank
of Omaha, a national banking association with principal business offices in
Omaha, Nebraska. ("BANK").

     Whereas, BANK and BORROWER executed a written Restated Loan and Security
Agreement dated August 31, 2001, (the "AGREEMENT"); and

     WHEREAS, THE PARTIES NOW DESIRE TO AMEND THE LOAN AGREEMENT.

     NOW, THEREFORE, IN CONSIDERATION OF THE AGREEMENT, AND THEIR MUTUAL
PROMISES MADE HEREIN, THE PARTIES AGREE AS FOLLOWS:

     Terms which are typed herein as all capitalized words and are not defined
herein shall have the same meanings as when described in the AGREEMENT.

     1.   SECTION I. PARAGRAPH 5.A & B IS HEREBY AMENDED TO READ, EFFECTIVE
          IMMEDIATELY:

          A.   $3,000,000.00 or

          B.   (i)Eighty (80%) of ELIGIBLE ACCOUNTS of the BORROWER, (ii) plus
               fifty percent (50%) of the Inventory of BORROWER at cost;
               provided however, no amount in excess of $1,400,000.00
               attributable to INVENTORY shall be included in Borrowing Base
               Certificate.

     2.   Section I. Paragraph 6 is hereby amended to read, effective
          immediately:

          6.   "BORROWING BASE CERTIFICATE" means a fully completed certificate
               in the form of Exhibit 1.6 to this AGREEMENT certified by the
               chief financial officer of the BORROWER to be correct and
               delivered to, and accepted by, the BANK.

     3.   Section I. Paragraph 18 is hereby amended to read, effective
          immediately:

          18.  "LOAN TERMINATION DATE" means the earliest to occur of the
               following: (i) as to the REVOLVING LOAN April 30, 2004, as to the
               TERM LOAN September 30, 2004, (ii) and the date the OBLIGATIONS
               are accelerated pursuant to this AGREEMENT, and (iii) the date
               BANK receives (a) notice in writing from BORROWER of BORROWER'S
               election to terminate this AGREEMENT and b) indefeasible payment
               in full of the OBLIGATIONS, or such other date or dates as may
               later be agreed to by BANK and BORROWER in a written amendment to
               this AGREEMENT.

     4.   Section n. Paragraph 3 is hereby amended to read, effective
          immediately:

          3.   REVOLVING LOAN. BANK agrees to lend $3,000,000.00 to BORROWER
               pursuant to this facility. BANK will credit proceeds of this
               revolving loan ("REVOLVING LOAN") to BORROWER'S deposit account
               with the BANK, bearing number 26712880.

               A.   Subject to the terms hereof the BANK will lend the BORROWER,
                    from time to time until the LOAN TERMINATION DATE such sums
                    as the BORROWER may request by reasonable same day notice to
                    the BANK, received by the BANK not later than 11:00 A.M. of
                    such day, but which shall not exceed in the aggregate
<PAGE>

                    principal amount at any one time outstanding, $3,000,000.00
                    (the "LOAN COMMITMENT"). The BORROWER may borrow, repay
                    without penalty or premium and reborrow hereunder, from the
                    date of this AGREEMENT until the LOAN TERMINATION DATE
                    either the full amount of the LOAN COMMITMENT or any lesser
                    sum. It is the intention of the parties that the outstanding
                    principal amount of the REVOLVING LOAN shall at no time
                    exceed the amount of the then existing BORROWING BASE and
                    if, at any time, an excess shall for any reasons exist, the
                    full amount of such excess, together with accrued and unpaid
                    interest thereon as herein provided, shall be immediately
                    due and payable in full.

               B.   THE NOTE. The LOAN COMMITMENT shall be evidenced by a NOTE
                    having stated maturity on the LOAN TERMINATION DATE, in the
                    form attached hereto as Exhibit II.3.B. The NOTE shall
                    specify the manner of principal and interest payments and
                    rate of interest accrual.

5.   Section VI. Paragraph 1.G. is hereby added to include subsection 2
     effective immediately:

     2.   A MINIMUM TANGIBLE NET WORTH OF $2,900,000.00.

6.   BORROWER certifies by its execution hereof that all the representations and
     warranties set forth in Section v. of the AGREEMENT are true as of this
     date, and that no EVENT OF DEFAULT under the AGREEMENT, and no event
     which, with the giving of notice or passage of time or both, would become
     such an EVENT OF DEFAULT, has occurred as of this date, except for matters
     disclosed to BANK.

7.   EXCEPT AS AMENDED HEREBY THE PARTIES RATIFY AND CONFIRM AS BINDING UPON
     THEM ALL OF THE TERMS OF THE AGREEMENT.

     IN WITNESS THEREOF, the parties have set their hands on the date first
written above.

FIRST NATIONAL BANK OF OMAHA                      M-TRON INDUSTRIES,INC.

By: /s/ Mark M. Mell                              By: /s/
   --------------------------------                  ---------------------------
Its: Vice President                               Its: Y(Y:.-~

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(EE)
<SEQUENCE>4
<FILENAME>b47168lcexv10wxeey.txt
<DESCRIPTION>EX-10(EE) AMENDMENT & WAIVER TO CREDIT AGREEMENT
<TEXT>
<PAGE>
                                                                  EXHIBIT 10(ee)

                                                                  EXECUTION COPY

       FIRST AMENDMENT AND WAIVER TO AMENDED AND RESTATED CREDIT AGREEMENT

                  THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
(this "AMENDMENT") made and entered into as of May 30, 2003 (the "EFFECTIVE
DATE"), by and among LYNCH SYSTEMS, INC., a South Dakota corporation (the
"BORROWER"), and SUNTRUST BANK, a Georgia banking corporation (the "LENDER").

                              W I T N E S S E T H:

         WHEREAS, the Borrower and the Lender are parties to a certain Amended
and Restated Credit Agreement, dated as of June 10, 2002 (as the same may be
further amended from time to time, the "CREDIT AGREEMENT"; capitalized terms
used herein and not otherwise defined herein shall have the meanings given such
terms in the Credit Agreement as amended by this Amendment), whereby the Lender
has agreed to make certain loans to the Borrower, subject to the terms,
covenants and conditions contained in the Credit Agreement; and

         WHEREAS, the Borrower has requested that the Lender amend the Credit
Agreement as set forth in this Amendment, and the Lender is willing to agree to
such modifications subject to the terms and conditions of this Amendment.

         NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

         1.       WAIVER OF DEFAULT. Subject to the terms and conditions hereof,
Lender hereby waives any Default or Event of Default under the Credit Agreement
which may have resulted from the failure of the Borrower to comply with the
minimum Consolidated Tangible Net Worth covenant set forth in Section 7.09(b) of
the Credit Agreement for all periods prior to the Effective Date. The foregoing
waiver relates solely to the specific provisions, covenants and time periods
described in the preceding sentence, and nothing in this Amendment is intended
(or shall be construed) to constitute a waiver by Lender of any other Default or
Event of Default which may now or hereafter exist under the Credit Agreement.

         2.       AMENDMENTS TO CREDIT AGREEMENT. Subject to the terms and
conditions of this Amendment, the Credit Agreement is hereby amended as follows:

         (a) by deleting the definition of the term "Maturity Date" from Section
1.01 thereof, and by substituting, in lieu thereof, the following new definition
of such term:

                  "Maturity Date" shall mean May 29, 2004, as such date may be
                  extended, accelerated or amended from time to time pursuant to
                  this Agreement.

                                       1
<PAGE>

                  (b) by deleting Section 7.09(b) thereof and by substituting,
                  in lieu thereof, the following new Section 7.09(b):

                           Borrower shall at all times after August 30, 2003
                           maintain a Consolidated Tangible Net Worth of at
                           least $4,400,000.

         3.       NO OTHER WAIVERS OR AMENDMENTS; CONDITIONS SUBSEQUENT. Except
                           for the amendment expressly set forth and referred to
                           in Section 2 above, the Credit Agreement shall remain
                           unchanged and in full force and effect. Nothing in
                           this Amendment is intended, or shall be construed, to
                           constitute a novation or an accord and satisfaction
                           of any of the Borrower's Obligations under or in
                           connection with the Credit Agreement or to modify,
                           affect or impair the perfection or continuity of
                           Lender's security interests in, security titles to or
                           other liens on any Collateral for the Obligations.

         4.       CONDITIONS TO EFFECTIVENESS. This Amendment shall become
effective, upon the Effective Date, subject to the satisfaction of the following
conditions on or prior to such date:

                           (1)      the receipt by the Lender of this Amendment,
                  duly executed, completed and delivered by the Lender and the
                  Borrower;

                           (2)      the receipt by the Lender of the
                  fully-executed promissory note, in the form of Exhibit A
                  attached hereto (the "NEW NOTE"), to replace the promissory
                  note previously delivered under the Credit Agreement;

                           (3)      the receipt by Lender of a non-refundable
                  extension fee in the amount of $8,750 (representing 0.125% of
                  the Non-Guaranteed Loan Maximum Availability), which extension
                  fee shall be deemed fully earned upon the parties' execution
                  and delivery of this Amendment; and

                           (4)      the receipt by the Lender of such other
                  documents, certificates, lien searches and instruments as the
                  Lender may reasonably request.

         5.       REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants to the Lender that (a) this Amendment and the New Note have been
duly authorized, executed and delivered by it, (b) no Default or Event of
Default has occurred and is continuing as of this date after giving effect to
the waiver granted in Section 1 hereof, and (c) all of the representations and
warranties made by it in the Credit Agreement are true and correct in all
material respects on and as of the date of this Amendment (except to the extent
that any such representations or warranties expressly referred to a specific
prior date). Any breach the Borrower of its representations and warranties
contained in this Section 5 shall be an Event of Default for all purposes of the
Credit Agreement.

         6.       RATIFICATION. The Borrower hereby ratifies and reaffirms each
and every term, covenant and condition set forth in the Credit Agreement and all
other documents delivered by the Borrower in connection therewith (including
without limitation the other Credit Documents to which the Borrower is a party),
effective as of the date hereof.

                                       2
<PAGE>

         7.       ESTOPPEL. To induce the Lender to enter into this Amendment,
the Borrower hereby acknowledges and agrees that, as of the date hereof, there
exists no right of offset, defense or counterclaim in favor of the Borrower as
against the Lender with respect to the obligations of the Borrower to the Lender
under the Credit Agreement or the other Credit Documents, either with or without
giving effect to this Amendment.

         8.       REIMBURSEMENT OF EXPENSES. The Borrower hereby agrees that it
shall reimburse the Lender on demand for all costs and expenses (including
without limitation reasonable attorney's fees) actually incurred by such parties
in connection with the negotiation, documentation and consummation of this
Amendment and the other documents executed in connection herewith and therewith
and the transactions contemplated hereby and thereby.

         9.       GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA FOR CONTRACTS TO
BE PERFORMED ENTIRELY WITHIN SAID STATE.

         10.      SEVERABILITY OF PROVISIONS. Any provision of this Amendment
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. To the extent permitted by applicable law, the Borrower hereby
waives any provision of law that renders any provision hereof prohibited or
unenforceable in any respect.

         11.      COUNTERPARTS. This Amendment may be executed in any number of
counterparts, all of which shall be deemed to constitute but one original and
shall be binding upon all parties, their successors and permitted assigns.

         12.      ENTIRE AGREEMENT. The Credit Agreement as amended by this
Agreement embodies the entire agreement between the parties hereto relating to
the subject matter hereof and supersedes all prior agreements, representations
and understandings, if any, relating to the subject matter hereof.

                  [remainder of page intentionally left blank]

                                       3
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered on their behalf and the Borrower has
caused its corporate seal to be hereunto affixed, all as of the date first above
stated.

                                              BORROWER:
(CORPORATE SEAL)
                                              LYNCH SYSTEMS, INC.

Attest:
                                              By: /s/ [ILLEGIBLE]
                                                  ------------------------------
/s/ [ILLEGIBLE]                                   Title: President
- -----------------------------
Title: Secretary

                                              LENDER:

                                              SUNTRUST BANK

                                              By: /s/ [ILLEGIBLE]
                                                  ------------------------------
                                                  Title: Vice President

                                       4
<PAGE>

                   PARENT GUARANTOR ACKNOWLEDGMENT AND CONSENT

         The undersigned hereby acknowledges and consents to, and agree to the
terms of, the foregoing First Amendment to Credit Agreement, and ratifies and
confirms its obligations under the Parent Guaranty.

         This 30th day of May, 2003.

LYNCH CORPORATION

By: /s/ [ILLEGIBLE]
    --------------------------
Name: [ILLEGIBLE]
Title: VP/CFO
                                       5
<PAGE>

                                    EXHIBIT A

                             FORM OF PROMISSORY NOTE

                                 PROMISSORY NOTE

U.S. $7,000,000                                                     MAY 30, 2003


                  FOR VALUE RECEIVED, the undersigned LYNCH SYSTEMS, INC., a
South Dakota corporation (the "Borrower"), hereby promises to pay to the order
of SUNTRUST BANK (herein, together with any subsequent holder hereof, called the
"Lender"), the lesser of SEVEN MILLION AND NO/100 U.S. DOLLARS (U.S.
$7,000,000.00) or the aggregate outstanding principal amount of the Loans made
to the Borrower by Lender pursuant to the terms of the Credit Agreement referred
to below, which principal sum shall be payable on the earlier of (i) the
Maturity Date specified in the Credit Agreement or (ii) the date on which all
amounts outstanding under this Promissory Note (this "Note") have become due and
payable pursuant to the provisions of Article IX of the Credit Agreement (as
defined below). The Borrower likewise promises to pay interest on the
outstanding principal balance of each Loan made by the Lender to the Borrower,
at such interest rates, payable at such times, and computed in such manner, as
are specified in the Credit Agreement in strict accordance with the terms
thereof.

                  This Note is issued pursuant to, and is the "Note" referred to
in, the Amended and Restated Credit Agreement dated as of June 10, 2002, between
Borrower and Lender, as amended by that certain First Amendment to Amended and
Restated Credit Agreement dated as of the date hereof (as the same may be
further amended, modified or replaced from time to time, the "Credit
Agreement"), and the Lender is and shall be entitled to all benefits thereof and
of all the Credit Documents executed and delivered to the Lender in connection
therewith. Terms defined in the Credit Agreement are used herein with the same
meaning. The Credit Agreement, among other things, contains provisions for
acceleration of the maturity hereof upon the happening of certain Events of
Default, provisions relating to prepayments on account of principal hereof prior
to the maturity hereof, and provisions for post-default interest rates.

                  This Note is issued in replacement of and substitution for
that certain Renewal Promissory Note, dated as of June 10, 2002, issued by the
Borrower in favor of the Lender (the "PRIOR NOTE"). This Note is not intended
nor shall it be construed as a novation or an accord and satisfaction of the
indebtedness evidenced by the Prior Note.

                  The Borrower agrees to make payments of principal and interest
hereon on the dates and in the amounts specified in the Credit Agreement in
strict accordance with the terms thereof.

                  In case an Event of Default shall occur and be continuing, the
principal and all accrued interest of this Note may automatically become, or may
be declared, immediately due and payable in the manner and with the effect
provided in the Credit Agreement. The Borrower agrees to pay, and save the
Lender harmless against any liability for the payment of, all costs and

                                       6
<PAGE>

expenses, including reasonable attorneys' fees, in connection with the
enforcement by the Lender of any of its rights or remedies under this Note or
the Credit Agreement.

                  This Note has been delivered in Atlanta, Georgia, and the
rights and obligations of the Lender and the Borrower hereunder shall be
construed in accordance with and governed by the laws of the State of Georgia
(without giving effect to its conflicts of law rules).

                  The Borrower expressly waives any presentment, demand, protest
or notice in connection with this Note, whether now or hereafter required by
applicable law. This Note is intended to be an instrument under seal.

                  IN WITNESS WHEREOF, the Borrower has caused this Note to be
executed, sealed and delivered by its duly authorized officers as of the date
first above written.

(CORPORATE SEAL)                              LYNCH SYSTEMS, INC.

                                              By: /s/ [ILLEGIBLE]
                                                  ------------------------------
                                                  Title: President

Attest:

/s/ [ILLEGIBLE]
- -----------------------
Secretary

                                       7

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(FF)
<SEQUENCE>5
<FILENAME>b47168lcexv10wxffy.txt
<DESCRIPTION>EX-10(FF) TERM LOAN PROMISSORY NOTE
<TEXT>
<PAGE>

                                                                 EXHIBIT 10 (ff)

                            TERM LOAN PROMISSORY NOTE

August 4, 2003                                                          $498,000

         FOR VALUE RECEIVED, the undersigned (hereinafter referred to as
"Borrower") promises to pay to the order of SUNTRUST BANK (hereinafter, together
with any subsequent holder hereof, referred to as "Lender") at Lender's office
located in Atlanta, Georgia, or at such other place as the holder hereof may
designate, the principal sum of FOUR HUNDRED NINETY-EIGHT THOUSAND DOLLARS AND
NO/100 CENTS ($ 498,000.00), together with interest on so much of the principal
balance of this Term Loan Promissory Note (this "Note") as may be outstanding
and unpaid from time to time, calculated on the basis of a 360-day year and
actual days elapsed, at the rate or rates per annum indicated below.

         The unpaid principal balance of this Note shall bear interest at a rate
per annum equal to five and one-half percent (5.50%).

         The principal balance of this Note shall be payable in one hundred
twenty (120) consecutive monthly installments of Four Thousand One Hundred Fifty
and no/100 Dollars ($4,150.00) each, commencing on September 1, 2003 and
continuing to be due on the first day of each succeeding month thereafter
together with a final installment of principal in an amount equal to the entire
remaining unpaid principal balance of this Note which shall be due on August 1,
2013 (the "Maturity Date"). Accrued and unpaid interest on this Note shall be
due on the same date or dates as indicated above on which payments of principal
are due hereunder. All remaining unpaid principal and accrued interest shall be
due in full on the Maturity Date.

         Notwithstanding any provision of this Note to the contrary, and
regardless of whether or not an Event of Default under this Note shall have
occurred and be then continuing, the Lender shall have the right, which may be
exercised in its sole discretion, to require that the Borrower repay the entire
outstanding principal and accrued interest balance of this Note in full upon the
occurrence of the date on which all "Loans" under and as defined in that certain
Amended and Restated Credit Agreement, dated as of June 10, 2002, by and between
Borrower and Lender (as amended, restated, extended or replaced from time to
time, the "Credit Agreement"), either are prepaid or become due and payable,
whether at stated maturity, by acceleration or otherwise.

         In consideration of the Lender's acceptance of this Note and making the
loan evidenced hereby, Borrower shall pay to Lender a non-refundable origination
fee on the date hereof in the amount of $622.50, which fee shall be deemed fully
earned upon the Borrower's execution and delivery of this Note.

         During the existence of any Event of Default (as defined below) under
this Note, the unpaid principal and accrued interest balance of this Note shall
bear interest on each day until paid at the interest rate otherwise in effect
under this Note plus, in Lender's discretion, up to an additional two percentage
points (2.0%), but only to the extent that payment of such interest on such
principal or interest is enforceable under applicable law. All payments or
prepayments on this Note shall be applied, first, to interest accrued on this
Note through the date of such payment or prepayment and then to principal (and,
if principal is payable in installments, partial principal prepayments shall be
applied to such installments in the inverse order of their maturity).

<PAGE>

         Borrower hereby agrees and acknowledges that this Note and Borrower's
indebtedness hereunder are secured by (1) that certain Amended and Restated
Security Agreement, dated as of June 10, 2002, by and between the Borrower and
the Lender (as the same may be amended, modified, extended or replaced from time
to time, the "Security Agreement"), and (2) that certain Security Deed and
Agreement, dated March 30, 2001, and recorded in Deed Book Z22, beginning at
Page 21, in the Office of the Clerk of the Superior Court of Decatur County,
Georgia (as the same may be amended, modified, extended or replaced from time to
time, the "Security Deed").

         Borrower may prepay the principal balance of this Note in whole or in
part without premium or penalty.

         The occurrence of any one or more of the following events will
constitute a default by Borrower hereunder (hereinafter referred to as an "Event
of Default"): (i) Borrower fails to pay when due any amount payable under this
Note or otherwise fails to perform or breaches a covenant in this Note; (ii) any
"Event of Default" (as such term is defined in the Credit Agreement) shall have
occurred under the Credit Agreement; or (iii) the Lender shall at any time cease
to have an effective and enforceable first priority lien in the real property
covered by the Security Deed.

         Upon the occurrence of an Event of Default, Lender, at its option,
without demand or notice of any kind, may declare this Note immediately due and
payable, whereupon all outstanding principal and accrued interest shall become
immediately due and payable; provided, however, that (a) if this Note is payable
on demand or on the earlier of demand or an alternative maturity date, then the
occurrence of an Event of Default shall not be a condition precedent to Lender's
exercise of its unqualified right to demand immediate payment in full of this
Note at any time and (b) upon the occurrence of any Event of Default described
in clause (vii) or (viii) above, this Note, without demand, notice or
declaration by Lender of any kind, shall automatically and immediately become
due and payable.

         In case this Note is collected by or through an attorney-at-law, all
costs of such collection incurred by the Lender, including reasonable attorney's
fees actually incurred by Lender, shall be paid by Borrower.

         Upon the occurrence of an Event of Default hereunder, Lender, without
notice or demand of any kind, may hold and set off against any or all
outstanding principal or interest owing under this Note as Lender may elect, any
balance or amount to the credit of Borrower in any deposit, agency, reserve,
holdback or other account of any nature whatsoever maintained by or on behalf of
Borrower with Lender at any of its offices, regardless of whether such accounts
are general or special and regardless of whether such accounts are individual or
joint.

                                       -2-

<PAGE>

         In no event shall the amount or rate of interest due and payable under
this Note exceed the maximum amount or rate of interest allowed by applicable
law (including, without limitation, O.C.G.A. Section 7-4-18) and, in the event
any such excess payment is made by Borrower or received by Lender, such excess
sum shall be credited as a payment of principal (or if no principal shall
remain outstanding, shall be refunded to Borrower). It is the express intent
hereof that Borrower not pay and Lender not receive, directly or indirectly or
in any manner, interest in excess of that which may be lawfully paid under
applicable law. All interest (including all charges, fees or other amounts
deemed to be interest) which is paid or charged under this Note shall, to the
maximum extent permitted by applicable law, be amortized, allocated and spread
on a pro rata basis throughout the actual term of this Note and any extension
or renewal hereof.

         Time is of the essence of this Note. Demand, presentment, notice,
notice of demand, notice for payment, protest and notice of dishonor are hereby
waived by each and every maker, guarantor, surety and other person or entity
primarily or secondarily liable on this Note. Lender shall not be deemed to
waive any of its rights under this Note unless such waiver be in writing and
signed by Lender. No delay or omission by Lender in exercising any of its rights
under this Note shall operate as a waiver of such rights and a waiver in writing
on one occasion shall not be construed as a consent to or a waiver of any right
or remedy on any future occasion.

         This Note shall be governed by and construed and enforced in accordance
with the laws of the State of Georgia (without giving effect to its conflicts of
law rules). Whenever possible, each provision of this Note shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note.

         Words importing the singular number hereunder shall include the plural
number and vice versa, and any pronoun used herein shall be deemed to cover all
genders. Without limiting the generality of the foregoing, should more than one
person execute this Note as maker, the word "Borrower" as used herein shall
include all such persons collectively and each such person individually, and
each Borrower shall be jointly and severally liable hereunder. "Person" as used
herein means any individual, corporation, partnership, joint venture, limited
liability company, association, joint stock company, trust or other entity, or
any government or any agency or political subdivision thereof. The word "Lender"
as used herein shall include transferees, successors and assigns of Lender, and
all rights of Lender hereunder shall inure to the benefit of its transferees,
successors and assigns. All obligations of Borrower hereunder shall bind such
Person's heirs, legal representatives, successors and assigns.

         BORROWER AND LENDER HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT BORROWER OR LENDER MAY HAVE UNDER ANY APPLICABLE LAW
TO A TRIAL BY JURY WITH RESPECT TO ANY SUIT OR LEGAL ACTION WHICH MAY BE
COMMENCED BY OR AGAINST BORROWER OR LENDER CONCERNING THE INTERPRETATION,
CONSTRUCTION, VALIDITY, ENFORCEMENT OR PERFORMANCE OF THIS NOTE OR ANY OTHER
AGREEMENT OR INSTRUMENT EXECUTED IN CONNECTION HEREWITH. IN THE EVENT ANY SUCH
SUIT OR LEGAL ACTION IS COMMENCED BY BORROWER OR LENDER, BORROWER AND LENDER
HEREBY EXPRESSLY AGREE, CONSENT AND SUBMIT TO THE PERSONAL JURISDICTION OF ANY
STATE OR FEDERAL COURT SITTING IN THE COUNTY IN WHICH LENDER'S ADDRESS SHOWN
ABOVE IS

                                       -3-

<PAGE>

LOCATED WITH RESPECT TO SUCH SUIT OR LEGAL ACTION, AND THE BORROWER AND LENDER
ALSO EXPRESSLY CONSENT AND SUBMIT TO AND AGREE THAT VENUE IN ANY SUCH SUIT OR
LEGAL ACTION IS PROPER IN SAID COURTS AND COUNTY AND THE BORROWER AND LENDER
HEREBY EXPRESSLY WAIVE ANY AND ALL PERSONAL RIGHTS UNDER APPLICABLE LAW OR IN
EQUITY TO OBJECT TO THE JURISDICTION AND VENUE IN SAID COURTS AND COUNTY. THE
JURISDICTION AND VENUE OF THE COURTS CONSENTED AND SUBMITTED TO AND AGREED UPON
IN THIS PARAGRAPH ARE NOT EXCLUSIVE BUT ARE CUMULATIVE AND IN ADDITION TO THE
JURISDICTION AND VENUE OF ANY OTHER COURT UNDER ANY APPLICABLE LAWS OR IN
EQUITY.

                  [Remainder of page intentionally left blank]

                                       -4-

<PAGE>

         SIGNED, SEALED AND DELIVERED by the undersigned Borrower as of the day
and year first above set forth.

(CORPORATE SEAL)                         LYNCH SYSTEMS, INC.

                                         By: /s/ [ILLEGIBLE]
                                             -----------------------------------
                                         Title: President

Attest:

/s/ [ILLEGIBLE]
- --------------------------
Secretary

                                       -5-

<PAGE>

                             CERTIFICATE OF BORROWER

                  The undersigned officers of LYNCH SYSTEMS, INC. (the
"Corporation"), a South Dakota corporation, hereby certify and covenant in their
respective capacities on behalf of the Corporation as follows:

                  1.       The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of South
Dakota, with all requisite corporate power and authority to own, operate and
lease its properties and to carry on its business, and is duly qualified to do
business in every jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary.

                  2.       Attached hereto as Exhibit A is a true, correct and
complete copy of resolutions of the Directors of the Corporation which were duly
adopted on July 28, 2003 (the "Resolutions"). Attached hereto as Exhibit B and
Exhibit C are true, correct and complete copies of the Corporation's certificate
or articles of incorporation and the Corporation's by-laws respectively,
including all amendments thereof through the date hereof (collectively, the
"Corporate Documents"). A signed original of the Resolutions appears in the
minute book of the Corporation. The Resolutions were adopted in accordance with
law and in accordance with the certificate or articles of incorporation and the
by-laws of the Corporation. The Resolutions and the Corporate Documents are in
full force and effect as of this date and have not been amended, altered or
repealed as of the date hereof except as expressly disclosed on the attached
exhibits.

                  3.       The Corporation has duly authorized, executed and
delivered, and approved by all necessary corporate action, the following
documents (hereinafter collectively referred to as the "Financing Documents")
pursuant to, and in full compliance with, authority granted by the Directors of
the Corporation in the Resolutions:

<TABLE>
<CAPTION>
Document                                                              Date
- --------                                                              ----
<S>                                                                <C>
$498,000 Term Loan Promissory Note from Borrower to Lender         August 4, 2003

Second Amendment to Security Deed and Agreement                    August 4, 2003
</TABLE>

                  4.       The Corporation hereby acknowledges receipt of an
executed counterpart or photocopy (as executed) of each of the Financing
Documents.

<PAGE>

                  5.       The persons named below are on the date hereof the
duly elected and qualified incumbents of the offices of the Corporation set
forth below next to their respective names, and the signatures appearing at the
right of their respective names below are the genuine signatures of such
officers:

<TABLE>
<CAPTION>
     NAME                                  TITLE                                SIGNATURES
     ----                                  -----                                ----------
<S>                                      <C>                         <C>
Arnold Bowling                           President                    /s/ Arnold Bowling
                                                                     --------------------------------

Janet Grimsley                           Secretary                   /s/ Janet Grimsley
                                                                     --------------------------------
</TABLE>

                  6.       Each of the representations and warranties of the
Corporation contained in the Financing Documents is accurate and complete in all
respects as of the date of this certificate, and no Default or Event of Default
(as such terms are defined in any of the Financing Documents) has occurred and
is continuing as of this date.

                  7.       The seal affixed to this certificate and the
Financing Documents is the legally adopted, proper and only official corporate
seal of the Corporation.

                  8.       The Corporation's chief executive office and
principal place of business are located in Decatur County, Georgia, and its
principal executive office (within the meaning of Section 6323(f) of the
Internal Revenue Code of 1954, as amended) is located in Decatur County,
Georgia. The Corporation is incorporated in the State of South Dakota.

                  9.       The federal taxpayer identification number of the
Corporation is 46-0334545.

                  IN WITNESS WHEREOF, the undersigned have hereunto set their
signatures and the seal of the Corporation as of the 4TH day of August, 2003.

(CORPORATE SEAL)

                                 /s/ Arnold Bowling
                                ------------------------------------------------
                                Arnold Bowling, President of Lynch Systems, Inc.

/s/ Janet Grimsley
- ----------------------------------
Janet Grimsley, Secretary of Lynch
Systems, Inc.

                                       -2-

<PAGE>

                                OWNER'S AFFIDAVIT

         Before the undersigned attesting officer, duly authorized by law to
administer oaths in the State of Georgia, personally appeared
ARNOLD BOWLING (hereinafter referred to as "Affiant"), who, being first
duly sworn according to law, deposes and says:

1.       That Affiant has personal knowledge of the facts set forth herein.

2.       That Affiant has the power and authority, without the consent of any
other party, to execute and deliver this affidavit.

3.       That Affiant is a representative of Lynch Systems, Inc., a South Dakota
corporation ("Borrower"), which owns fee simple title to that certain real
property situated in Decatur County, Georgia, more particularly described in
EXHIBIT A attached hereto and made a part hereof by this reference (said real
property, together with all improvements and fixtures thereon, hereinafter
referred to as the "Property").

4.       That the organizational documents for Borrower are attached hereto as
EXHIBIT C and made a part hereof by this reference and such organizational
documents attached hereto as EXHIBIT C are true, correct and complete, including
all amendments and modifications of such organizational documents.

5.       That since acquiring the Property, Borrower has been, and is now, in
open and peaceable possession of the Property, that the Affiant knows of no
adverse claims to Borrower's claim of title to the Property (including, without
limitation, easement and occupancy rights which do not appear in the public real
estate records) other than as referred to on EXHIBIT B attached hereto and made
a part hereof by this reference.

6.       If any improvements or repairs have been made to the Property, or
services of architects, surveyors or engineers performed on or with respect to
the Property, by or on behalf of Borrower, within ninety five (95) days prior to
this date, the agreed price or the reasonable value of all labor, services and
materials has been paid in full to all persons or parties who have provided such
labor, services or materials

7.       That there is no pending litigation or to the knowledge of Borrower any
existing dispute regarding the lines and corners of the Property.

8.       That, to the knowledge of Affiant, there are no pending suits,
judgments, bankruptcies, executions, liens (other than ad valorem property taxes
for the Property not yet due and payable), assessments, restrictions,
encroachments, special assessments, special taxing districts, or other
encumbrances that do, or could, affect the title to the Property, or constitute
a lien thereon, except for the matters set forth in EXHIBIT B attached hereto
and made a part hereof.

<PAGE>

9.       That all charges for water, sewer and other utility services furnished
to the Property which are currently due and payable have been paid in full or
are being paid from the proceeds of the sale of the Property.

10.      That this Affidavit is made with full understanding of the laws
concerning the making of affidavits in the State of Georgia and full faith and
credit may be given hereto.

11.      That, except for those parties listed on EXHIBIT D attached hereto and
made a part hereof by this reference no brokers have been engaged by Borrower,
with regard to the management, sale, purchase, lease, option or other conveyance
of any interest in the Property, and that no notices of lien for any such
services has been received by Borrower, and no commission, fee, payment or other
compensation except as set forth on the attached EXHIBIT D is owed to any broker
(as such term is defined in O.C.G.A. ss.43-40-10) for any services rendered up
to and including the date hereof in connection with the Property.

12.      That this Affidavit is made for the purpose of inducing SunTrust Bank,
a Georgia banking corporation ("Lender"), to make the loan to Borrower evidenced
by that certain promissory note in the original principal amount of $498,000.00
dated as of the date hereof, made and delivered by Borrower in favor of Lender
(the "Loan"), and Chicago Title Insurance Company to issue a mortgagee policy of
title insurance with respect to the Loan.

Sworn to and subscribed before me this [ILLEGIBLE] day of August, 2003.

 [ILLEGIBLE]                               [ILLEGIBLE](SEAL)
- ----------------------------------        --------------------------------------
             [STAMP]
                   [NOTARIAL SEAL]


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(GG)
<SEQUENCE>6
<FILENAME>b47168lcexv10wxggy.txt
<DESCRIPTION>EX-10.(GG) SECOND AMEND TO DEED AGREEMENT
<TEXT>
<PAGE>
                                                                  EXHIBIT 10(gg)


                    SPACE ABOVE THIS LINE FOR RECORDER'S USE

                                              After recording, please return to:
                                              M. Arthur Gambill, Esq.
                                              Kilpatrick Stockton LLP
                                              1100 Peachtree Street, Suite 2800
                                              Atlanta, Georgia 30309-4530

STATE OF GEORGIA

COUNTY OF DECATUR

STATE OF GEORGIA                                                 CROSS REFERENCE

COUNTY OF FULTON                                          Deed Book Z22, Page 21
                                                 Decatur County, Georgia Records

                                                         Deed Book A 26, Page 79
                                                 Decatur County, Georgia Records

                               SECOND AMENDMENT TO
                           SECURITY DEED AND AGREEMENT

                  THIS SECOND AMENDMENT TO SECURITY DEED AND AGREEMENT (this
"SECOND AMENDMENT") is made effective as of the 4th day of August, 2003, by and
between LYNCH SYSTEMS, INC., a South Dakota corporation ("GRANTOR"), and
SUNTRUST BANK, a Georgia banking corporation ("GRANTEE").

                                   WITNESSETH:

                  WHEREAS, Grantor executed and delivered to Grantee that
certain Security Deed and Agreement dated as of March 30, 2001, and recorded in
Deed Book Z22, beginning at Page 21, in the Office of the Clerk of the Superior
Court of Decatur County, Georgia (the "SECURITY DEED"), covering and conveying
all right, title and interest of Grantor in and to all that tract of land
described on Exhibit "A" thereto located in Decatur County, Georgia (the
"ORIGINAL

<PAGE>

ENCUMBERED PROPERTY") and securing Grantor's payment and performance of that
certain promissory note dated March 30, 2001, made by Grantor in favor of
Grantee, in the original principal amount of Ten Million and No/100 Dollars
($10,000,000.00), bearing interest and being due and payable as therein
provided, with a final payment being due thereunder on August 30, 2002
(hereinafter called the "2001 REVOLVER NOTE");

                  WHEREAS, Grantor also made and delivered to Grantee that
certain promissory note dated June 10, 2002, in the original principal amount of
Seven Million and No/100 Dollars ($7,000,000.00), bearing interest and being due
and payable as therein provided, which promissory note was issued in replacement
of and substitution for the 2001 Revolver Note with a final payment being due
thereunder on May 30, 2003 (the "2002 REVOLVER NOTE");

                  WHEREAS, in order to modify and amend the Security Deed to
reflect that the indebtedness secured by the Security Deed was evidenced by the
2002 Revolver Note, Grantor and Grantee executed that certain First Amendment to
Security Deed and Agreement dated June 10, 2002, which was recorded in Deed Book
A-26, beginning at Page 79, in the Office of the Clerk of the Superior Court of
Decatur County, Georgia (the "FIRST AMENDMENT");

                  WHEREAS, Grantor also made and delivered to Grantee that
certain promissory note dated May 30, 2003, in the original principal amount of
Seven Million and No/100 Dollars ($7,000,000.00), bearing interest and being due
and payable as therein provided, which promissory note was issued in replacement
of and substitution for the 2002 Revolver Note with a final payment being due
thereunder on May 29, 2004 (the "2003 REVOLVER NOTE");

                  WHEREAS, Grantor contemporaneously with the execution and
delivery of this Second Amendment, has also made and delivered to Grantee that
certain promissory note dated as of August 4, 2003, in favor of Grantee, in the
original principal amount of Four Hundred Ninety-Eight Thousand And No/100
Dollars ($498,000.00), bearing interest and being due and payable as therein
provided, with a final payment being due thereunder on August 1, 2013 (the "TERM
NOTE");

                  WHEREAS, after the recording of the First Amendment, Grantor
and Grantee determined that certain tracts or parcels of land in the City of
Bainbridge, Georgia lying in Land Lot 223 of the 15th Land District of Decatur
County, Georgia were inadvertently omitted from Exhibit "A" attached to the
Security Deed (such inadvertently omitted tracts or parcels of land are
described in Exhibit "A" attached hereto and made a part hereof by reference and
are hereinafter referred to as the "ADDITIONAL ENCUMBERED PROPERTY");

                  WHEREAS, Grantor and Grantee now desire to modify and amend
the Security Deed in order to reflect that: (i) the lien and security title of
the Security Deed shall also cover and convey the Additional Encumbered
Property; and (ii) to reflect that the indebtedness secured by the Security Deed
is now evidenced by the 2003 Revolver Note and the Term Note.

                  NOW THEREFORE, for and in consideration of the foregoing
premises and the sum of Ten and No/100 Dollars ($10.00) cash in hand paid by
each party hereto to the other, and

<PAGE>

other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Grantor and Grantee hereby agree as follows:

1.       AMENDMENT TO DEFINITION OF NOTE. The Security Deed, as previously
modified and amended by the First Amendment, is hereby further modified and
amended (i) by deleting the following from the third page thereof:

                  "THIS INSTRUMENT IS A DEED passing legal title pursuant to the
         laws of the State of Georgia governing deeds to secure debt, and is
         also a security agreement granting a present and continuing security
         interest and security title in the portion of the Premises constituting
         personal property or fixtures, pursuant to the Uniform Commercial Code
         of the State of Georgia, and it is not a mortgage. This security deed
         and agreement is made and intended to secure payment and performance of
         the following: (i) any indebtedness of Grantor to Grantee evidenced by
         that certain Promissory Note dated as of June 10, 2002, made by Grantor
         and payable to the order of Grantee, in the original principal amount
         of SEVEN MILLION AND NO/100 DOLLARS ($7,000,000.00), bearing interest
         and being due and payable as therein provided, with a final payment
         being due thereunder on May 30, 2003 (hereinafter called the "Note");
         (ii) any and all renewal or renewals, extension or extensions,
         replacement or replacements, modification or modifications thereof, and
         substitution or substitutions therefor, either in whole or in part;
         (iii) all advances, if any, made by Grantee pursuant to the terms of
         this security deed and agreement; (iv) all expenses incident to the
         collection of the indebtedness secured by this security deed and
         agreement; and (v) all duties and obligations of Grantor under this
         security deed and agreement. The obligations and indebtedness which
         this security deed and agreement is given to secure are hereinafter
         sometimes collectively called the "Indebtedness". This security deed
         and agreement is hereinafter sometimes called this "Security Deed".

and (ii) by simultaneously substituting in lieu thereof the following:

                  "THIS INSTRUMENT IS A DEED passing legal title pursuant to the
         laws of the State of Georgia governing deeds to secure debt, and is
         also a security agreement granting a present and continuing security
         interest and security title in the portion of the Premises constituting
         personal property or fixtures, pursuant to the Uniform Commercial Code
         of the State of Georgia, and it is not a mortgage. This security deed
         and agreement is made and intended to secure payment and performance of
         the following: (i) any indebtedness of Grantor to Grantee evidenced by
         (1) that certain promissory note dated as of May 30, 2003 in the
         principal amount of SEVEN MILLION AND NO/100 DOLLARS ($7,000,000.00)
         bearing interest as provided therein, and providing, among other
         things, for final payment of principal and interest thereunder, if
         not sooner paid, to be due on or before May 29, 2004 (the "Revolver
         Note") and (2) and that certain promissory note dated August 4, 2003
         in the principal amount of FOUR HUNDRED NINETY EIGHT THOUSAND AND
         NO/100 DOLLARS ($498,000.00) bearing interest as

<PAGE>

         provided therein, and providing, among other things, for final
         payment of principal and interest thereunder, if not sooner paid or
         payable as provided therein, to be due on or before August 1, 2013
         (the "Term Note" ) (the Revolver Note and the Term Note, together
         with all notes issued and accepted in substitution or exchange
         therefor, and as any of the foregoing may from time to time be
         modified, extended, renewed, consolidated, restated or replaced, are
         hereinafter sometimes collectively referred to as the "Note"), the
         Note by this reference thereto being incorporated herein; (ii) any
         and all renewal or renewals, extension or extensions, replacement or
         replacements, modification or modifications thereof, and substitution
         or substitutions therefor, either in whole or in part; (iii) all
         advances, if any, made by Grantee pursuant to the terms of this
         security deed and agreement; (iv) all expenses incident to the
         collection of the indebtedness secured by this security deed and
         agreement; and (v) all duties and obligations of Grantor under this
         security deed and agreement. The obligations and indebtedness which
         this security deed and agreement is given to secure are hereinafter
         sometimes collectively called the "Indebtedness". This security deed
         and agreement is hereinafter sometimes called this "Security Deed".

2.       ADDITIONAL ENCUMBERED PROPERTY.

         (a)      The security lien, security interest, security title and
assignments created and conveyed by the Security Deed are hereby extended and
spread to cover the Additional Encumbered Property described in EXHIBIT "A"
attached hereto.

         (b)      The Security Deed is hereby modified and amended by (i)
deleting in its entirety the description of the Original Encumbered Property
contained in EXHIBIT "A" attached thereto, and (ii) substituting in lieu thereof
the description of real property contained in EXHIBIT "B", attached hereto and
incorporated herein by reference, which description includes the Original
Encumbered Property and the Additional Encumbered Property.

         (c)      All references in the Security Deed to "Property" shall from
and after the date hereof be deemed references to the Original Encumbered
Property and the Additional Encumbered Property as described in EXHIBIT "B"
attached hereto.

         (d)      Grantor hereby irrevocably and absolutely does by these
presents GRANT, BARGAIN, CONVEY, TRANSFER, ASSIGN AND SELL to Grantee, its
successors and assigns, with all powers of sale (if any) and all statutory
rights under the laws of the State of Georgia, and grants to Grantee a security
interest in, all of Grantor's present and hereafter acquired estate, right,
title and interest in, to and under the Additional Encumbered Property, together
with: (i) all buildings, structures and other improvements now or hereafter
located on the Additional Encumbered Property or on any part or parcel of the
Additional Encumbered Property, hereinafter called the "Additional
Improvements"; (ii) all and singular the tenements, hereditaments, easements and
appurtenances belonging to the Additional Encumbered Property or in anywise
appertaining to the Additional Encumbered Property, and the reversion or
reversions, remainder or remainders thereof; (iii) all leases, undertakings to
lease, contracts to rent, usufructs and other agreements for use, occupancy or
possession now or hereafter in force with respect to the

<PAGE>

Additional Encumbered Property or any part or parcel of the Additional
Encumbered Property or any of the Additional Improvements, and any and all other
agreements, contracts, licenses, permits and arrangements now or hereafter
affecting the Additional Encumbered Property or any part or parcel of the
Additional Encumbered Property or any of the Additional Improvements, whether
written or oral and whether now or hereafter made or executed and delivered,
hereinafter collectively called the "Additional Leases"; (iv) all rents, issues,
income, revenues and profits now or hereafter accruing from, and all accounts
and contract rights now or hereafter arising in connection with, the Additional
Encumbered Property or any part or parcel of the Additional Encumbered Property
or any of the Additional Improvements, including without limitation all rents,
issues, income, revenues and profits accruing from, and all accounts and
contract rights arising in connection with, the Additional Leases, together with
all monies and proceeds now or hereafter due or payable with respect thereto or
on account thereof, and all security deposits, damage deposits and other funds
paid by any lessee, sublessee, tenant, subtenant, licensee, permittee or other
obligee under any of the Additional Leases, whether paid in a lump sum or
installments, all of which are hereinafter collectively called the "Additional
Rents"; (v) all minerals, flowers, crops, trees, timber, shrubbery and other
emblements now or hereafter located on the Additional Encumbered Property or
under the Additional Encumbered Property or on or under any part or parcel of
the Additional Encumbered Property; (vi) all estates, rights, title and interest
in the Additional Encumbered Property, or in any part or parcel of the
Additional Encumbered Property; (vii) all equipment, machinery, apparatus,
fittings, furniture, furnishings and personal property of every kind or
description whatsoever owned by Grantor or in which Grantor has an interest, now
or hereafter located on the Additional Encumbered Property or on any part or
parcel of the Additional Encumbered Property or in or on any of the Additional
Improvements, and used in connection with the operation or maintenance of the
Additional Encumbered Property or any of the Additional Improvements, all
accessions and additions to and replacements of the foregoing and all proceeds
(direct and remote) of the foregoing, including without limitation all plumbing,
heating, lighting, ventilating, refrigerating, water-heating, incinerating,
air-conditioning and heating, and sprinkling equipment and systems, and all
screens, awnings and signs; (viii) all fixtures (including all trade, domestic
and ornamental fixtures) owned by Grantor or in which Grantor has an interest,
now or hereafter on the Additional Encumbered Property or on any part or parcel
of the Additional Encumbered Property or in or on any of the Additional
Improvements, whether actually or constructively attached or affixed, including
without limitation all plumbing, heating, lighting, ventilating, refrigerating,
water-heating, incinerating, air-conditioning and heating, and sprinkling
fixtures, and all screens, awnings and signs which are fixtures; (ix) all
building materials, supplies, goods, machinery and equipment delivered to the
Additional Encumbered Property and placed on the Additional Encumbered Property
for the purpose of being affixed to or installed or incorporated or otherwise
used in or on the Additional Encumbered Property or any part or parcel of the
Additional Encumbered Property or any of the Additional Improvements, and all
accessions and additions to and replacements of the foregoing and all proceeds
(direct or remote) of the foregoing; (x) all payments, awards, judgments and
settlements (including interest thereon) to which Grantor may be or become
entitled as a result of the exercise of the right of eminent domain with respect
to the Additional Encumbered Property or any part or parcel of the Additional
Encumbered Property or any of the Additional Improvements; and (xi) all policies
of insurance which insure against loss or damage to any property described above
and all proceeds from and payments under such

<PAGE>

policies. The Additional Encumbered Property and all of the foregoing are
hereinafter sometimes collectively called the "Additional Premises".

         TO HAVE AND TO HOLD the Additional Premises with all rights, privileges
and appurtenances thereunto belonging, and all income, rents, royalties,
revenues, issues, profits and proceeds therefrom, unto Grantee, its successors
and assigns, forever, for the uses and purposes herein expressed.

         (e)      All references in the Security Deed to "Improvements" shall
from and after the date hereof be deemed references to the Improvements (as
defined in the Security Deed) and the Additional Improvements, as defined
herein.

         (f)      All references in the Security Deed to "Premises" shall from
and after the date hereof be deemed references to the Premises (as defined in
the Security Deed) and the Additional Premises, as defined herein.

         (g)      All references in the Security Deed to "Leases" shall from and
after the date hereof be deemed references to the Leases (as defined in the
Security Deed) and the Additional Leases, as defined herein.

         (h)      All references in the Security Deed to "Rents" shall from and
after the date hereof be deemed references to the Rents (as defined in the
Security Deed) and the Additional Rents, as defined herein.

         (i)      Grantor warrants that Grantor has fee simple title to the
Additional Premises, that Grantor is lawfully seized and possessed of the
Additional Premises, that Grantor has the right to convey the Additional
Premises, that the Additional Premises are unencumbered except by the matters
set forth in Exhibit "C" attached hereto and incorporated herein by reference
and that Grantor shall forever warrant and defend the title to the Additional
Premises unto Grantee against the claims of all persons whomsoever, other than
claims arising under any matter set forth on Exhibit "C" hereof.

3.       INTANGIBLE RECORDING TAX.

         (a)      The Revolver Note constitutes a "short-term note secured by
real estate" as defined by O.C.G.A. Section 48-6-60(4). Accordingly, no State of
Georgia intangible recording tax shall be payable with respect to the Revolver
Note.

         (b)      The Term Note constitutes a "long term note secured by real
estate" as defined by O.C.G.A. Section 48-6-60(3). Accordingly, a State of
Georgia intangible recording tax shall be payable with respect to the Term Note
at the rate of $1.50 per $500 of the principal amount of the Term Note. Upon
the filing for recordation of this Second Amendment in Decatur County, Georgia,
the State of Georgia intangible recording tax shall be payable to the Clerk of
the Superior Court of Decatur County, Georgia in the amount of $1,494.00.

<PAGE>

         4.       RATIFICATION. Except as expressly modified and amended by the
First Amendment and this Second Amendment, the Security Deed is and shall remain
in full force and effect. This Second Amendment is not intended to be nor shall
it constitute a novation of the Security Deed or of the indebtedness secured
thereby. Grantor hereby ratifies, confirms and approves the Security Deed as
previously modified in the First Amendment, and as further modified herein and
agrees that the same constitutes the valid and binding obligation of Grantor and
is enforceable by Grantee in accordance with its terms.

         5.       GOVERNING LAW. This Second Amendment shall be governed by,
construed, interpreted and enforced in accordance with the laws of the State of
Georgia.

         6.       BINDING EFFECT. This Second Amendment shall be binding upon
and shall inure to the benefit of the parties hereto and their respective legal
representatives, successors and assigns.

         7.       DEFINITIONS. Each capitalized term used in this Second
Amendment shall have the meaning ascribed to it in the Security Deed, as
previously modified and amended by the First Amendment, unless such term is
otherwise defined in this Second Amendment or the context requires otherwise.

         8.       COUNTERPARTS. This Second Amendment may be executed and
acknowledged in counterparts, all of which executed and acknowledged
counterparts shall together constitute a single document.

                  [Remainder of page intentionally left blank]

<PAGE>

                  IN WITNESS WHEREOF, Grantor and Grantee have executed and
delivered this Second Amendment, and have affixed their seals hereto, all as of
the day and year first written above.

                                             GRANTOR:

Signed, sealed and delivered in              LYNCH SYSTEMS, INC.,
the presence of:                             a South Dakota corporation

[ILLEGIBLE]                                  By: /s/ [ILLEGIBLE]
- ---------------------------                  -------------------------------
Unofficial Witness                           President

[ILLEGIBLE]
- ---------------------------
Notary Public                                 Attest:

My Commission Expires:
          [STAMP]                             [ILLEGIBLE]
- ---------------------------                   ----------------------------------
                                              Secretary

(NOTARIAL SEAL)                                                 (CORPORATE SEAL)

       [Signature Page to Second Amendment to Security Deed and Agreement]

<PAGE>

IN WITNESS WHEREOF, Grantor and Grantee have executed and delivered this Second
Amendment, and have affixed their seals hereto, all as of the day and year first
written above.

                                        GRANTEE:

Signed, sealed and delivered in         LYNCH SYSTEMS, INC., a South Dakota
presence of:                            corporation

_______________________________         By:_____________________________________
Unofficial Witness                         Chief Financial Officer

_______________________________
Notary Public                             (CORPORATE SEAL)

My Commission Expires:
_______________________________
(NOTARIAL SEAL)

                                        GRANTEE:

Signed, sealed and delivered in         SUNTRUST BANK,
the presence of:

[ILLEGIBLE]                             By: /s/ Valerie Whiteman
- -------------------------------             ------------------------------------
Unofficial Witness                          Valerie Whiteman, Its Vice President

[ILLEGIBLE]
- -------------------------------
Notary Public

My Commission Expires:
[STAMP]
- -------------------------------
(NOTARIAL SEAL)
1

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>7
<FILENAME>b47168lcexv31w1.txt
<DESCRIPTION>EX-31.1 SECTION 302 CERTIFICATION OF CEO
<TEXT>
<PAGE>


                                                                      EXHIBIT 31


                                 CERTIFICATIONS

I, Ralph R. Papitto, certify that:

     1.   I have reviewed this quarterly report on Form 10-Q of Lynch
     Corporation;

     2.   Based on my knowledge, this quarterly 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 quarterly 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 operation 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-15e) and 15d-15(e))(inapplicable language
     intentionally omitted) 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 quarterly report is being prepared;

     (b)  [Intentionally omitted]

     (c)  Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     (d)  Disclosed in this report any change in the Registrant's internal
          control over financial reporting that occurred during the Registrant's
          most recent fiscal quarter that has materially affected, or is
          reasonable 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 Registrant's board
     of directors (or persons performing the equivalent function):

     (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
          controls over financial reporting.



Date: August 14, 2003                       /s/ Ralph R. Papitto
                                            ------------------------------------
                                            RALPH R. PAPITTO
                                            Chairman and Chief Executive Officer






</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>8
<FILENAME>b47168lcexv31w2.txt
<DESCRIPTION>EX-31.2 SECTION 302 CERTIFICATION OF CFO
<TEXT>
<PAGE>


                                                                      EXHIBIT 31


                                 CERTIFICATIONS

I, Raymond H. Keller, certify that:

     1.   I have reviewed this quarterly report on Form 10-Q of Lynch
     Corporation;

     2.   Based on my knowledge, this quarterly 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 quarterly 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 operation 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-15e) and 15d-15(e))(inapplicable language
     intentionally omitted) 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 quarterly report is being prepared;

     (b)  [Intentionally omitted]

     (c)  Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     (d)  Disclosed in this report any change in the Registrant's internal
          control over financial reporting that occurred during the Registrant's
          most recent fiscal quarter that has materially affected, or is
          reasonable 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 Registrant's board
     of directors (or persons performing the equivalent function):

     (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
          controls over financial reporting.



Date: August 14, 2003                      /s/  Raymond H. Keller
                                           -------------------------------------
                                           RAYMOND H. KELLER
                                           Chairman and Chief Financial Officer






</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>9
<FILENAME>b47168lcexv32.txt
<DESCRIPTION>EX-32 SECTION 906 CERTIFICATION OF CEO AND CFO
<TEXT>
<PAGE>


                                                                      Exhibit 32

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


     In connection with the Quarterly Report of Lynch Corporation (the
"Company") on Form 10-Q for the period ending June 30, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Ralph
R. Papitto, Chief Executive Officer of the Company, and I, Raymond H. Keller,
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that to the best of our knowledge:

     (1)  The Report 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 the Report fairly presents, in all
          material respects, the financial condition and result of operations of
          the Company.


/s/ RALPH R. PAPITTO
/s/ RAYMOND H. KELLER



Ralph R. Papitto
Chief Executive Officer
August 14, 2003



Raymond H. Keller
Chief Financial Officer
August 14, 2003


     A signed original of this written statement required by Section 906 has
been provided to Lynch Corporation and will be retained by Lynch Corporation and
furnished to the Securities and Exchange Commission or its staff upon request.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>10
<FILENAME>b47168lcexv99w1.txt
<DESCRIPTION>EX-99.1 AUDIT COMMITTEE CHARTER
<TEXT>
<PAGE>
                                                                    EXHIBIT 99.1

                                LYNCH CORPORATION

                             AUDIT COMMITTEE CHARTER
                    (Amended and Restated as of May 9, 2003)

Organization

This Charter governs the operations of the Lynch Corporation (the "Company")
Audit Committee (the "Committee"). The Committee shall be appointed by the Board
of Directors and shall consist of at least three directors, each of whom are
"independent" of management and the Company and are "financially literate" as
those terms are used by the Securities and Exchange Commission.

Statement of Purpose

The Committee shall provide assistance to the Board in fulfilling its oversight
responsibility to the shareholders, potential shareholders, the investment
community, and others, with respect to the Company's financial statements and
financial reporting process, the systems of internal accounting and financial
controls, the annual independent audit of the Company's financial statements,
and the legal compliance, conflict of interest and ethics programs as
established by management and the Board. In so doing, it is the responsibility
of the Committee to maintain free and open communication between the Committee,
independent auditors and management of the Company. In discharging its oversight
role, the Committee is empowered to investigate any matter brought to its
attention with full access to all books, records, facilities, and personnel of
the Company and the power to retain outside counsel, or other experts for this
purpose.

Responsibilities and Processes

The Committee's responsibility is oversight of the Company's financial reporting
process. The Company's management is responsible for maintaining appropriate
systems for accounting and internal control and for the preparation,
presentation and


                                       1
<PAGE>

integrity of the Company's financial statements. The independent auditors are
responsible for auditing those financial statements and are ultimately
responsible to the Board and the Committee as representatives of shareholders.
The Committee recognizes that financial management and the independent auditors
have more time, knowledge and detailed information on the Company than do
Committee members; consequently, in carrying out its oversight responsibilities,
the Committee does not provide any expert or special assurance as to the
Company's financial statements or any professional certification as to the
independent auditor's work.

The Committee, in carrying out its responsibilities, believes its policies and
procedures should remain flexible, in order best to react to changing conditions
and circumstances. The Committee should take the appropriate actions to set the
overall corporate "tone" for quality financial reporting, sound business risk
practice, and ethical behavior. At least annually, it shall perform an
evaluation of its performance to determine whether it is functioning effectively
and shall review and reassess the adequacy of this Charter and obtain approval
for its continued adoption by the full Board of Directors.

The Committee is authorized to investigate any matters within its scope of
responsibilities or as delegated to it by the Board of Directors.

The following are the principal processes of the Committee in carrying out its
oversight responsibilities. They are set forth as guides with the understanding
that the Committee may amend or supplement them as appropriate.

o    The Committee is responsible for the appointment, retention, termination,
     compensation and evalution of the independent auditors.

o    The Committee shall pre-approve all audit and non-audit services provided
     by the independent auditors and shall not engage the independent auditors
     to perform the specific non-audit services proscribed by law or regulation.
     The Committee may delegate pre-approval authority to a member of the Audit
     Committee. The decisions


                                       2
<PAGE>

     of any Committee member to whom pre-approval authority is delegated must be
     presented to the full Committee at its next scheduled meeting.

o    The Committee is authorized to retain independent counsel and other
     advisors to assist it in carrying out its responsibilities under this
     Charter.

o    The Committee shall discuss with the independent auditors the overall scope
     and plans for their respective audits, including the adequacy of staffing.
     It shall discuss with management and the independent auditors, the adequacy
     and effectiveness of the accounting and financial controls, including the
     Company's system to monitor business risk, and legal and ethical compliance
     programs. It shall meet separately with the independent auditors, with and
     without management present, to discuss the results of their examinations
     and any other matters required to be communicated to the Committee under
     generally accepted auditing standards.

o    At least annually, the Committee shall obtain and review formal written
     reports by the independent auditors describing:

     o    the firm's internal quality control procedures.

     o    any material issues raised by the most recent internal quality control
          review, or peer review, of the firm, or by any inquiry or
          investigation by governmental or professional authorities.

     o    all relationships between the independent auditors and the Company,
          consistent with Independence Standards Board Standard 1, to enable the
          Committee to evaluate the auditors' attestation of their independence.

     o    their reasoning in accepting or questioning sensitive accounting
          estimates by management.

     o    their conclusions regarding any serious disagreements with management
          encountered during the course of the audit.


                                       3
<PAGE>

     o    The Committee shall review management's assertion on its assessment of
          the effectiveness of internal accounting and financial controls as of
          the end of the most recent fiscal year and the independent auditors'
          report on management's assertions.

     o    The Committee shall discuss with management, the internal auditors,
          and the independent auditors the adequacy and effectiveness of the
          Company's policies and procedures to assess, monitor, and manage
          business risk, and legal and ethical compliance programs (e.g.,
          Company's Business Conduct Policy).

     o    The Committee shall receive regular reports from the independent
          auditors delineating the critical accounting policies and practices of
          the Company; all alternative treatments of financial information
          within generally accepted accounting principles that have been
          discussed with management; and their reasoning for not recognizing
          material audit adjustments the auditors proposed.

     o    The Committee shall resolve disagreements between management and the
          independent auditors regarding financial reporting.

     o    The Committee shall adopt procedures for handling confidential,
          anonymous submissions by employees regarding accounting, internal
          accounting controls, or auditing matters. It shall receive corporate
          attorneys' reports of evidence of a material violation of securities
          laws or breaches of fiduciary duty.

     o    The Committee shall set hiring policies for employees or former
          employees of the independent auditors that meet the SEC regulations
          and stock exchange listing standards.

     o    The Committee shall review the interim financial statements with
          management and the independent auditors prior to any earnings release
          and prior to the filing of the Company's Quarterly Report on Form
          10-Q. It shall discuss the results of the quarterly review and any
          other matters required to be communicated to the


                                      4
<PAGE>

          Committee by the independent auditors under generally accepted
          auditing standards. The chair of the Committee may represent the
          entire Committee for the purposes of its review.

     o    The Committee shall meet separately with management, the internal
          auditors, and the independent auditors to discuss issues and concerns
          warranting Committee attention. The Committee shall provide sufficient
          opportunity for the internal auditors and the independent auditors to
          meet privately with the members of the Committee.

     o    The Committee shall review with management and the independent
          auditors, prior to any press release and prior to filing, the
          financial statements to be included in the Company's annual report on
          Form 10-K (or the annual report to shareholders if distributed prior
          to the filing of Form 10-K), including their judgment about the
          quality and appropriateness, not just the acceptability, of accounting
          principles, the reasonableness of significant judgments, and the
          clarity and completeness of the disclosures in the financial
          statements. It shall discuss the results of the annual audit and any
          other matters required to be communicated to the Committee by the
          independent auditors under generally accepted auditing standards.

     o    The Committee shall review the management discussion and analysis of
          financial condition and results of operations included in the
          Company's annual report and oversee the CEO and CFO's certifications
          of periodic reports required under the Securities and Exchange Act of
          1934.

     o    The Committee shall prepare its report to be included in the Company's
          annual proxy statement, as required by SEC regulations.

     o    The Company must provide appropriate funding for the Committee in
          order for the Committee to carry out its duties.

     o    The Committee will report to the Board of Directors on a regular and
          timely basis.


                                       5
<PAGE>

Limitation

Nothing in this Charter is intended to alter in any way the standard of conduct
that applies to any of the directors of the Corporation under the Indiana
Business Corporation Law, as amended, and this Charter does not impose, nor
shall it be interpreted to impose, any duty on any director greater than, or in
addition to, the duties or standards established by the Indiana Business
Corporation Law.

                                       6

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
