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<SEC-DOCUMENT>0000950135-04-003950.txt : 20040812
<SEC-HEADER>0000950135-04-003950.hdr.sgml : 20040812
<ACCEPTANCE-DATETIME>20040812100814
ACCESSION NUMBER:		0000950135-04-003950
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20040630
FILED AS OF DATE:		20040812

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:		04968740

	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>b51118lce10vq.htm
<DESCRIPTION>LYNCH CORPORATION
<TEXT>
<HTML>
<HEAD>
<TITLE>LYNCH CORPORATION</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


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





<P align="center" style="font-size: 14pt"><B>SECURITIES &#038; EXCHANGE COMMISSION</B>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, D.C. 20549</B>
</DIV>

<P align="center" style="font-size: 18pt"><B><U>FORM 10-Q</U></B>


<P align="left" style="font-size: 10pt">(Mark One)


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="95%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">[X]
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="justify" valign="top" style="font-size: 12pt">QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">For the quarterly period ended <U>June&nbsp;30, 2004</U>



<P align="center" style="font-size: 10pt">or


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%" >
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="95%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">[&nbsp;&nbsp;&nbsp;]
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="justify" valign="top" style="font-size: 12pt">TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">For the transition period
from &nbsp;&nbsp;<U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>
&nbsp;&nbsp;&nbsp; to &nbsp;&nbsp;&nbsp; <U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>



<P align="left" style="font-size: 10pt">Commission File No.&nbsp;<U>1-106</U>



<P align="center" style="font-size: 24pt"><B>LYNCH CORPORATION</B>


<DIV align="center" style="font-size: 10pt"><HR size="1" noshade width="100%" ></DIV>


<DIV align="center" style="font-size: 10pt">(Exact name of Registrant as specified in its charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

<TD align="center" valign="top">Indiana&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">38-1799862</TD>
</TR>

<TR style="font-size: 1px">
    <TD align="center" valign="top"><HR size="1" noshade>&nbsp;
</TD>
    <TD><HR size="1" noshade>&nbsp;</TD>
    <TD align="center" valign="top"><HR size="1" noshade>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">(State or other jurisdiction of<BR>
incorporation or organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">I.R.S. Employer<BR>
Identification No.)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">50 Kennedy Plaza, Suite&nbsp;1250, Providence, Rhode Island
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">02903</TD>
</TR>

<TR style="font-size: 1px">
    <TD align="center" valign="top"><HR size="1" noshade>&nbsp;
</TD>
    <TD><HR size="1" noshade>&nbsp;</TD>
    <TD align="center" valign="top"><HR size="1" noshade>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><BR>(Address of principal executive offices)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><BR>(Zip Code)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">(401)&nbsp;453-2007


<DIV align="center" style="font-size: 10pt"><HR size="1" noshade width="100%"></DIV>


<DIV align="center" style="font-size: 10pt">Registrant&#146;s telephone number, including area code</DIV>



<P align="left" style="font-size: 10pt">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.



<P align="left" style="font-size: 10pt">Yes [X] &nbsp; No
[&nbsp;&nbsp;&nbsp;]



<P align="left" style="font-size: 10pt">Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule&nbsp;12b-2 of the Exchange Act).



<P align="left" style="font-size: 10pt">Yes [&nbsp;&nbsp;&nbsp;] &nbsp; No [X]



<P align="left" style="font-size: 10pt">Indicate the number of shares outstanding of each of the Registrant&#146;s classes
of Common Stock, as of the latest practical date.


<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="90%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="bottom"><DIV style="margin-left:0px; text-indent:-0px">Class
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">Outstanding at August&nbsp;1, 2004
</TD>
</TR>

<TR style="font-size: 1px">
    <TD align="center" valign="bottom"><HR size="1" noshade><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" colspan="3"><HR size="1" noshade>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="bottom" nowrap><DIV style="margin-left:0px; text-indent:-0px">Common Stock, $0.01 par value
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">1,495,483</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">1
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><U>INDEX</U>



<P align="center" style="font-size: 10pt">LYNCH CORPORATION AND SUBSIDIARIES


<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="12%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#101">PART I.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#101">FINANCIAL INFORMATION</A></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" align="left"><A href="#102">Item&nbsp;1.</A>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<A href="#102">Financial Statements (Unaudited)</A></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#103">Condensed Consolidated Balance Sheets:</A><BR>
- -&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; June 30, 2004<BR>
- -&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; December 31, 2003</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#104">Condensed Consolidated Statements of Operations:</A><BR>
- -&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Three months ended June 30, 2004 and 2003<BR>
- -&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Six months ended June 30, 2004 and 2003</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#105"> Condensed Consolidated Statements of Cash Flows:</A><BR>
- -&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Six months ended June 30, 2004 and 2003</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#106">Notes to Condensed Consolidated Financial Statements:</A></TD>
</TR>

<TR valign="bottom">

<TD colspan="3" align="left"><A href="#107">Item&nbsp;2.</A>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<A href="#107">Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</A></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" align="left"><A href="#108">Item&nbsp;3.</A>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<A href="#108">Quantitative and Qualitative Disclosure About Market Risk</A></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" align="left"><A href="#109">Item&nbsp;4.</A>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<A href="#109">Controls and Procedures</A></TD>
</TR>

<TR valign="bottom">



    <TD  align="left"><A href="#110">PART II.</A></TD>
<TD>&nbsp;</TD>
<TD align="left"> <A href="#110"> OTHER INFORMATION</A></TD>

</TR>

<TR valign="bottom">
    <TD colspan="3" align="left"><A href="#111">Item&nbsp;1.</A>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<A href="#111">Legal Proceedings</A></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" align="left"><A href="#112">Item&nbsp;2.</A>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<A href="#112">Issuer Purchase of Its Equity Securities</A></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" align="left"><A href="#113">Item&nbsp;4.</A>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<A href="#113">Submission of Matters to a Vote of Security Holders</A></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" align="left"><A href="#114">Item&nbsp;6.</A>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<A href="#114">Exhibits and Reports on Form&nbsp;8-K</A></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#115">SIGNATURES</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="b51118lcexv10wxnny.txt">EX-10.(NN) THIRD AMEND. TO RESTATED LOAN AND SECURITY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="b51118lcexv10wxooy.txt">EX-10.(OO) SECOND AMEND. TO AMENDED & RESTATED CREDIT AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="b51118lcexv10wxppy.txt">EX-10.(PP) TERM LOAN NOTE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="b51118lcexv31.txt">EX-31 SECTION 302 CERTIFICATIONS OF CEO & CFO</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="b51118lcexv32.txt">EX-32 SECTION 906 CERTIFICATIONS OF CEO & CFO</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>


<P align="right" style="font-size: 10pt">2
</DIV>

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

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="101"></A>
</DIV>

<P align="left" style="font-size: 10pt"><B>Part 1 - FINANCIAL INFORMATION &#150;</B>


<DIV align="left">
<A name="102"></A>
</DIV>

<P align="left" style="font-size: 10pt"><B>Item&nbsp;1 - <U>Financial Statements</U></B>




<P align="center" style="font-size: 10pt"><B><U>LYNCH CORPORATION AND SUBSIDIARIES</U></B>
<DIV align="left">
<A name="103"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>
<U>CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED</U></B><BR>
(In thousands except share amounts)</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="90%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(A)</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

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

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,055</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,981</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Restricted cash (Note D)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,125</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Investments &#150; Marketable Securities (Note E)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,311</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Trade accounts receivables, less allowances of $96 and $91, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,622</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,366</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Unbilled accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,431</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Inventories (Note F)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,911</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">456</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">TOTAL CURRENT ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,638</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">PROPERTY, PLANT AND EQUIPMENT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">291</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Buildings and improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,198</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Machinery and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,377</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,866</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Less: accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,117</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,689</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,177</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">OTHER ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>TOTAL ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>21,798</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>23,019</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">CURRENT LIABILITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Notes payable to banks (Note G)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,976</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Trade accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,290</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,054</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Accrued warranty expense (Note H)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">424</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">585</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Accrued compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">766</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,219</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Accrued income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">862</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">716</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Accrued professional fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">273</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Accrued commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">429</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Margin liability on marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,033</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Other accrued expenses (Note L)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">664</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Customer advances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,206</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Current maturities of long-term debt (Note G)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">998</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">TOTAL CURRENT LIABILITIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,153</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">LONG-TERM DEBT (Note G)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">833</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">TOTAL LIABILITIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,986</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


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


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

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Common stock, $0.01 par value &#150; 10,000,000 shares authorized; 1,513,191 shares issued;
1,495,483 shares outstanding at June&nbsp;30, 2004, 1,497,883 shares outstanding at
December&nbsp;31,2003.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,645</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Accumulated deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,828</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,460</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Accumulated other comprehensive Income (Note J)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">291</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Treasury stock, at cost, of 17,708 shares at June&nbsp;30, 2004, and 15,308 shares at
December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(490</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(458</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">TOTAL SHAREHOLDERS&#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,944</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,033</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px"><B>TOTAL LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>21,798</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>23,019</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">(A)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Balance Sheet at December&nbsp;31, 2003 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.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><B>See accompanying notes</B>



<P align="right" style="font-size: 10pt">3
</DIV>

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

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><B>PART I &#150; FINANCIAL INFORMATION</B>



<P align="left" style="font-size: 10pt"><B>Item&nbsp;1 - <U>Financial Statements</U></B>




<P align="center" style="font-size: 10pt"><B><U>LYNCH CORPORATION AND SUBSIDIARIES</U></B>
<DIV align="left">
<A name="104"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>
<U>CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS &#150; UNAUDITED</U><BR>
(In Thousands, except share amounts)</B></DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&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="5%">&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="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Six Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>June 30</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>June 30</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">SALES AND REVENUES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,458</TD>
    <TD>&nbsp;</TD>
</TR>

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

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Manufacturing cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,982</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,933</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Selling and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,843</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Lawsuit settlement provision (Note L)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">OPERATING LOSS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(467</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(278</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,230</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,318</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other income (expense):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Investment Income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(62</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(93</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(113</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(162</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other income (expense)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(63</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(83</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">LOSS BEFORE INCOME TAXES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(530</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(216</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,313</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,303</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">(Provision for) benefit from income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(30</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(55</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">392</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">NET LOSS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(560</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(173</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,368</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(911</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Weighted average shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,495,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,497,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,496,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,497,900</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">BASIC AND DILUTED LOSS PER SHARE:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.37</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.12</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.91</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.61</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><B>See accompanying notes</B>



<P align="right" style="font-size: 10pt">4
</DIV>

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

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><B>PART I &#150; FINANCIAL INFORMATION</B>



<P align="left" style="font-size: 10pt"><B>ITEM 1 &#150; <U>Financial Statements</U></B>




<P align="center" style="font-size: 10pt"><B><U>LYNCH CORPORATION AND SUBSIDIARIES</U></B>
<DIV align="left">
<A name="105"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>
<U>CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - UNAUDITED</U><BR>
(In Thousands)</B></DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="90%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="82%">&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 style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Six Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>June 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">OPERATING ACTIVITIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>

    <TD nowrap align="right">$</TD>
    <TD align="right">(1,368</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(911</TD>
    <TD nowrap>)</TD>
</TR>

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

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">483</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Amortization of definite-lived intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Lawsuit settlement provision (Note L)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

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

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

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,094</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(716</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,104</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,131</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(98</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,363</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other assets/liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(109</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net cash provided by (used in) operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,021</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">INVESTING ACTIVITIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(184</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(108</TD>
    <TD nowrap>)</TD>
</TR>

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

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Purchase of marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(754</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(113</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Payment on margin liability on marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(300</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(143</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash (used in) investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,238</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(112</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">FINANCING ACTIVITIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net borrowings (repayments)&nbsp;of notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(97</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">377</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Repayment of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(62</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(109</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Proceeds from long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">296</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Purchase of treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(32</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net cash (used in) provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(191</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">564</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Increase (decrease)&nbsp;in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(926</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(569</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,986</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,055</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,417</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><B>See accompanying notes</B>



<P align="right" style="font-size: 10pt">5
</DIV>

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

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="106"></A>
</DIV>

<P align="justify" style="font-size: 10pt">NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



<P align="justify" style="font-size: 10pt">A. <U>Subsidiaries of the Registrant</U>



<P align="justify" style="font-size: 10pt">Lynch Corporation dissolved its 100&nbsp;percent owned, inactive subsidiaries, Lynch
International Holding Corporation and Lynch-AMAV in Delaware, their State of
incorporation on June&nbsp;30, 2004.



<P align="justify" style="font-size: 10pt">As of June&nbsp;30, 2004, the Subsidiaries of the Registrant are as follows:


<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<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 style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Owned By Lynch</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Lynch Systems, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>

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

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">M-tron Industries, Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="justify" style="font-size: 10pt">B. <U>Basis of Presentation</U>



<P align="justify" style="font-size: 10pt">&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 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, 2004 are not necessarily indicative of the
results that may be expected for the year ended December&nbsp;31, 2004.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The balance sheet at December&nbsp;31, 2003 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.


<P align="justify" style="font-size: 10pt">&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 10-K for the year ended December&nbsp;31, 2003.


<P align="justify" style="font-size: 10pt">C. <U>Adoption of Accounting Pronouncements</U>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2003, the FASB issued Interpretation No.&nbsp;46, &#147;Consolidation of
Variable Interest Entities, an Interpretation of ARB No 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 consolidation requirements of FIN 46, as revised, are required
for periods ending after December&nbsp;15, 2003 for interests in structures that are
commonly referred to as special-purpose entities, while the application of this
Interpretation for all other types of variable interest entities is required
for periods ended March&nbsp;15, 2004. The Company does not have any interests in
variable interest entities.


<P align="justify" style="font-size: 10pt">D. <U>Restricted Cash</U>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At both June&nbsp;30, 2004 and December&nbsp;31, 2003, 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.


<P align="right" style="font-size: 10pt">6
</DIV>

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


<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">E. <U>Investments</U>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of marketable securities (investments)&nbsp;held by
the Company (in Thousands):

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&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="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Estimated</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unrealized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unrealized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fair</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Equity Securities</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Cost</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gains</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Losses</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Value</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">June&nbsp;30, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,376</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,311</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has a margin liability against this investment of $1,535,000
at June&nbsp;30, 2004 and of $1,033,000 at December&nbsp;31, 2003 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;.


<P align="justify" style="font-size: 10pt">F. <U>Inventories</U>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories are stated at the lower of cost or market value. At June&nbsp;30,
2004, inventories were valued by two methods: last-in, first-out (LIFO)&nbsp;74%,
and first-in, first-out (FIFO)&nbsp;26%. At December&nbsp;31, 2003, inventories were
valued by the same two methods: LIFO &#150; 73%, and FIFO - 27%.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="58%">&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 style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(In Thousands)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Raw materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,394</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Work in process</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,641</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Finished goods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,876</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,911</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current costs exceed LIFO value of inventories by $1,031,000 and $930,000
at June&nbsp;30, 2004 and December&nbsp;31, 2003 respectively.


<P align="right" style="font-size: 10pt">7
</DIV>

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

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="justify" style="font-size: 10pt">G. <U>Indebtedness</U>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On a consolidated basis, at June&nbsp;30, 2004, Lynch maintains short-term
credit facilities totaling $10.0&nbsp;million, of which $3.6&nbsp;million was available
for future borrowings, including up to $3.6&nbsp;million for working capital and/or
up to $2.4&nbsp;million for Letters of Credit. These facilities generally limit the
credit available under the lines of credit to certain variables, such as
inventories and receivables, and are secured by the operating assets of the
respective subsidiary borrower, and include various financial covenants, which
currently restrict the transfer of substantially all the assets of the
subsidiaries. Both M-tron and Lynch Systems renewed the credit agreements that
expired on April&nbsp;30, 2004 and May&nbsp;30, 2004 respectively with the incumbent
lenders for another year.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lynch Systems, Inc. and M-tron Industries, Inc. maintain their own credit
facilities. The Lynch Systems facilities 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 &#150; &#147;Restricted Cash&#148;).


<P align="justify" style="font-size: 10pt">&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.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notes payable to banks and long-term debt consists of:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="86%">&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 style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(In Thousands)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Notes payable:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">M-tron bank revolving loan at variable interest rates (4.5% at June&nbsp;30, 2004), due May&nbsp;2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,976</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Lynch Systems bank revolving loan at variable interest rates, due June, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,976</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Long-term debt:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">M-tron commercial bank term loan at variable interest rates (4.5% at June&nbsp;30, 2004), due
May, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">829</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Yankton Area Progressive Growth loan at 0.0% interest, due April&nbsp;2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">South Dakota
Board of Economic Development at a fixed rate of 3%, due
December&nbsp;&nbsp;, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">285</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Yankton Areawide Business Council loan at a fixed interest rate of 5.5%, due November&nbsp;2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Lynch Systems term loan at a fixed interest rate of 5.5%, due August&nbsp;2013</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">477</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,831</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current maturities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(331</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(998</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">833</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="justify" style="font-size: 10pt">H. <U>Long-Term Contracts and Warranty Expense</U>



<P align="justify" style="font-size: 10pt">&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 or (iii)&nbsp;negotiated terms of sale. 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, 2004 and December&nbsp;31, 2003, unbilled accounts receivable were $0.1
million and $2.4&nbsp;million, respectively.


<P align="justify" style="font-size: 10pt">&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.



<P align="right" style="font-size: 10pt">8
</DIV>

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

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">
<!-- Begin Table Head -->
<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>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance, December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">585</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Warranties issued during the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">162</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Settlements made during the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(272</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Changes in liabilities for pre-existing warranties during the period, including
expirations
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(51</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance, June&nbsp;30,
2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">424</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="justify" style="font-size: 10pt">I. <U>Earnings Per Share and Stockholders&#146; Equity</U>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s basic and diluted earnings per share are equivalent as the
options issued in May&nbsp;2002 to purchase 228,000 shares of the Company&#146;s common
stock were anti-dilutive throughout 2003 and throughout the first half of 2004.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;10, 2001, the Board of Directors approved, subject to
shareholder approval at the May&nbsp;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 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. 220,000 of these options are fully vested,
with the remaining options vesting quarterly over the next two quarters.


<P align="justify" style="font-size: 10pt">&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:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<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="4%">&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="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Six Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>June 30,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>June 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(560</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(173</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,368</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(911</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deduct: Total stock based
employee compensation expense
determined under fair value based
method for all awards, net of
related tax
effect</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(38</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(38</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(77</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(77</TD>
    <TD nowrap>)</TD>
</TR>

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

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Pro forma net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(598</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(211</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,445</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(988</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Basic and diluted loss per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">As reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.37</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.12</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.91</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.61</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.40</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.97</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.66</TD>
    <TD nowrap>)</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The net loss as reported in each period did not include any stock-based
compensation.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the quarter, the Company paid $382,000 to settle a previously
recorded liability related to the stock appreciation rights for certain
employees at Lynch Systems.


<P align="justify" style="font-size: 10pt">J. <U>Accumulated Other Comprehensive Income (Loss)</U>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total comprehensive loss was $835,000 in the three months ended June&nbsp;30,
2004, as opposed to a total comprehensive loss of $140,000 in the second
quarter of 2003. &#147;Other&#148; comprehensive loss, resulting from losses


<P align="right" style="font-size: 10pt">9
</DIV>

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

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="justify" style="font-size: 10pt">on available for sale securities, included in the total comprehensive loss was
$275,000 in the second quarter of 2004 as opposed to a gain of $33,000 in the
quarter ending June&nbsp;30, 2003.



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total comprehensive loss was $1,057,000 and $903,000 for the six months
ended 6/30/04 and 6/30/03 respectively, including other comprehensive income of
$311,000 in the first half of 2004 and other comprehensive income of $8,000 in
the first half of 2003 resulting from gains on available for sale securities.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&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="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Six Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>June 30,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>June 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(560</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(173</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,368</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(911</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Unrealized gain
(loss)&nbsp;on available
for sale securities
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(275</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total comprehensive
loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(835</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(140</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,057</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(903</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="justify" style="font-size: 10pt">The components of accumulated other comprehensive income (loss), net of related
tax, at June&nbsp;30, 2004 and December&nbsp;31, 2003, and June&nbsp;30, 2003 are as follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">302</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Unrealized gain (loss)&nbsp;on
available for-sale securities
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accumulated other comprehensive
income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">310</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="justify" style="font-size: 10pt">K. <U>Segment Information</U>



<P align="justify" style="font-size: 10pt">&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. Except for M-tron&#146;s Hong Kong subsidiary which acts as a
buying agent and sales representative, the businesses are located domestically.


<P align="justify" style="font-size: 10pt">&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.


<P align="right" style="font-size: 10pt">10
</DIV>

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

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="58%">&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="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Six Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>June 30,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>June 30</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(In Thousands)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(In Thousands)</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Revenues</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Glass manufacturing equipment &#150; USA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,693</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>






<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"> Glass manufacturing equipment - Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,972</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total Glass manufacturing equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,665</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Frequency control devices &#150; USA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,267</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>




<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Frequency control devices - Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,526</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total Frequency control devices</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,793</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Consolidated Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,458</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Operating Profit (Loss)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Glass manufacturing equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(130</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(522</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(337</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Frequency control devices</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(229</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total manufacturing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(53</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(566</TD>
    <TD nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Unallocated Corporate expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(744</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(418</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,177</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(752</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Consolidated Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(467</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(278</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,230</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,318</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Capital Expenditures</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Glass manufacturing equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Frequency control devices</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Consolidated Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">108</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Total Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Glass manufacturing equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,902</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12,481</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Frequency control devices</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,383</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">General Corporate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,416</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Consolidated Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">21,798</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">24,280</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total operating loss of reporting segments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(467</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(278</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,230</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,318</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other profit or loss:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Investment income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">177</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(62</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(93</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(113</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(162</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other income (expense)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Loss before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(530</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(216</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,313</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,303</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">11
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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="justify" style="font-size: 10pt">L. <U>Commitments and Contingencies</U>



<P align="justify" style="font-size: 10pt">&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 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:


<P align="justify" style="font-size: 10pt"><B>1. 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>



<P align="justify" style="font-size: 10pt">&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 C.V. No.&nbsp;01-236. The
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.


<P align="justify" style="font-size: 10pt">&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.


<P align="justify" style="font-size: 10pt">&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.


<P align="justify" style="font-size: 10pt">&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.


<P align="right" style="font-size: 10pt">12
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<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;8, 2004, Lynch filed a Motion for Summary Judgment on the issue
of an exemption under the Maine Severance Pay Act, based upon the nexus between
the plant closure in Westbrook, Maine and the Spinnaker defendants&#146; bankruptcy
filing. PACE concurrently filed a Motion for Summary Judgment on Count II of
the complaint on March&nbsp;8, 2004.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During a trial management conference on March&nbsp;24, 2004, the parties agreed
to submit a Stipulation of Facts to the Court in lieu of a trial on any
remaining issues in the case. The Court has not yet scheduled oral arguments
from the parties related to the pending motions for summary judgment and
related to any remaining issues in the case.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At a Settlement Conference held in the Cumberland County Superior Court
(Portland, Maine), the Company offered $425,000 in full settlement of the PACE
claim. Both parties have continued negotiations that could lead to a
settlement. During the 2<SUP>nd</SUP> quarter of 2004, the Company has provided for this
$425,000 potential settlement.


<P align="justify" style="font-size: 10pt">&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.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company does not believe that it has any other contingent liabilities
related to Spinnaker.


<P align="justify" style="font-size: 10pt"><B>2. Qui Tam Lawsuit</B>



<P align="justify" style="font-size: 10pt">&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 10-K for its fiscal year ended December&nbsp;31, 2003.


<P align="justify" style="font-size: 10pt">M. <U>Income Taxes</U>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company files consolidated federal income tax returns. The Company
has a $2,375,000 net operating loss (&#147;NOL&#148;) carry-forward as of December&nbsp;31,
2003. This NOL expires in 2024 if not utilized prior to that date.


<P align="justify" style="font-size: 10pt">N. <U>Guarantees</U>



<P align="justify" style="font-size: 10pt">&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. (see Note G &#150; &#147;Indebtedness Debt&#148;). As of June&nbsp;30, 2004,
there were no obligations to the SunTrust Bank. As of June&nbsp;30, 2004, 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. (See Note D &#150; &#147;Restricted Cash&#148;).


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There were no other financial, performance, indirect guarantees or
indemnification agreements.

<DIV align="left">
<A name="107"></A>
</DIV>

<P align="justify" style="font-size: 10pt"><B>Item&nbsp;2. <U>Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations.</U></B>



<P align="justify" style="font-size: 10pt"><B>Critical Accounting Policies</B>



<P align="justify" style="font-size: 10pt">&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, 2003, which includes other significant accounting policies.


<P align="justify" style="font-size: 10pt"><B><I>Accounts Receivable</I></B>



<P align="justify" style="font-size: 10pt">&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


<P align="right" style="font-size: 10pt">13
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="justify" style="font-size: 10pt">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.



<P align="justify" style="font-size: 10pt">&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.


<P align="justify" style="font-size: 10pt"><B><I>Inventory Valuation</I></B>



<P align="justify" style="font-size: 10pt">&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 74%,
73% and 63% of consolidated inventories at June&nbsp;30, 2004, December&nbsp;31, 2003 and
2002, respectively. The balance of inventories 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.


<P align="justify" style="font-size: 10pt"><B><I>Revenue Recognition and Accounting for Long-Term Contracts</I></B>



<P align="justify" style="font-size: 10pt">&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.


<P align="justify" style="font-size: 10pt">&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 or (iii)&nbsp;negotiated terms of sale. 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,
2004, and December&nbsp;31, 2003, unbilled accounts receivable were $0.1 and $2.4
million respectively.


<P align="justify" style="font-size: 10pt">&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.


<P align="justify" style="font-size: 10pt"><B><I>Warranty Expense</I></B>



<P align="justify" style="font-size: 10pt">&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.



<P align="right" style="font-size: 10pt">14
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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="93%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance, December&nbsp;31, 2003
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">585</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Warranties issued during the period
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">162</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Settlements made during the period
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(272</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Changes in liabilities for pre-existing warranties during the period, including expirations
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(51</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance, June&nbsp;30, 2004 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">424</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="justify" style="font-size: 10pt"><B>Results of Operations</B>



<P align="justify" style="font-size: 10pt"><B><I>Second Quarter 2004 and Six Months 2004 Compared to 2003</I></B>



<P align="justify" style="font-size: 10pt"><U>Sales and Revenues/Gross Margin</U>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenues for the second quarter of 2004 of $6.7&nbsp;million were equal to
second quarter 2003 revenues. Improvements in M-tron&#146;s sales were offset by
reduced sales at Lynch Systems that was caused by Lynch Systems&#146; low backlog at
December&nbsp;31, 2003 and the timing of deliveries for orders booked by Lynch
Systems in April of 2004 that combined to depress System&#146;s second quarter and
first half 2004 revenue.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Six months 2004 sales of $13.5&nbsp;million were $2.1&nbsp;million greater than the
$11.4&nbsp;million revenue recorded in the first six months of 2003 due to the low
opening backlog and the delivery schedules for glass press machines that
depressed Lynch Systems&#146; first half 2004 sales by $1.2&nbsp;million that was
overcome by improvements in the telecommunications market that resulted in $3.3
million higher sales at M-tron.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Second quarter 2004 gross margin as a percent of sales was 29.5% or 3.7
points better than the 25.8% gross margin achieved in the second quarter of
2003 due to mainly (a)&nbsp;the 58% volume increase at M-tron, (b)&nbsp;additional
absorption of fixed manufacturing costs at M-tron, and (c)&nbsp;efficiently
producing Champion products that had caused unfavorable variances in the prior
year.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Six month 2004 gross margin as a percent of revenues of 25.8% was 3.8%
above the first half of 2003 due mainly to the higher level of sales at M-tron.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenues at M-tron increased by $2.1&nbsp;million, or 58.1%, to $5.6&nbsp;million
for the second quarter of 2004 and by $3.3&nbsp;million, or 48.7%, to $10.1&nbsp;million
for the six month period ending June&nbsp;2004 due primarily (a)&nbsp;a stronger general
economy, (b)&nbsp;improvements in the infrastructure segment of the
telecommunications market; and (c)&nbsp;landing new customers.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lynch Systems&#146; second quarter 2004 revenue of $1.2&nbsp;million was $2.0
million, or 63.8%, below the same period of 2003. Lynch Systems&#146; revenues for
the first six months of 2004 declined by $1.2&nbsp;million from the corresponding
2003 period to $3.5&nbsp;million due mainly to depressed bookings for glass press
machines throughout the second half of 2003. However, order backlog of $8.8
million at June&nbsp;30, 2004 represented an improvement of $6.0&nbsp;million since
December&nbsp;31, 2003. The Company expects to recognize half of the $6.6&nbsp;million
tableware order that was booked on April&nbsp;27, 2004 in fiscal 2004, the gross
margin on this contract may be less than historical rates.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M-tron&#146;s gross margin as a percentage of net sales for the second quarter
of 2004 improved over the same period of 2003 by 2.1% to 26.4%. M-tron&#146;s gross
margin of 25.0% for the six month period ending June&nbsp;30, 2004 represented a
2.8% improvement over the 22.2% gross margin achieved in the first half of
2003. The sales improvement in the second quarter and six month period ending
June&nbsp;30, 2004 of 58.1% and 48.7% respectively combined with selective price
increases and operational efficiencies caused the improved gross margin rates.
M-tron achieved an incremental gross profit rate of 30.8% in the first half of
2004.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lynch Systems&#146; gross margin as a percentage of net sales for the second
quarter of 2004 improved 17.0% to 44.4% compared to the same period of 2003.
Lynch Systems&#146; gross margin of 28.1% for the six month period ending June, 2004
was 6.3% better than the first half 2003 gross margin of 21.8&nbsp;percent. These
improvements in the second quarter and in the first half of 2004 were the
result of high margin repair part sales that represented a much higher
proportion of total sales (80% in 2Q 2004 versus 25% in 2Q 2003; 49%
year-to-date versus 30% in first half 2003 at a gross margin rate of 49.6% in
the second quarter and 38.5% in the period ending June&nbsp;30, 2004).


<P align="right" style="font-size: 10pt">15
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="justify" style="font-size: 10pt"><U>Operating Loss</U>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating loss for the second quarter 2004 including a $425,000 expense
provision for a potential legal settlement was $0.5&nbsp;million compared to the
second quarter 2003 operating loss of $0.3&nbsp;million, representing an unfavorable
variance of $0.2&nbsp;million on equal revenue.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Six months 2004 operating loss of $1.2&nbsp;million was $0.1&nbsp;million less than
the first half 2003 loss of $1.3&nbsp;million because the gross margin on $2.1
million additional revenue was virtually offset by the $425,000 provision for a
potential legal settlement.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the second quarter of 2004, M-tron had an operating profit of
$407,000, an improvement of $413,000 over the $6,000 loss in the second quarter
of 2003. M-tron&#146;s six month 2004 operating profit of $469,000 represented a
major improvement of $698,000 when compared to M-tron&#146;s $229,000 operating loss
in the six month period ending June&nbsp;30, 2003. The operating profit
improvements were due mainly to the 58.1% sales increase in the second quarter
and 48.7% six month increase mentioned above and better product mix.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the 2004 second quarter, Lynch Systems had an operating loss of
$130,000 compared to an operating profit of $146,000 in the second quarter of
2003. Lynch Systems&#146; first half 2004 operating loss of $522,000 was $185,000
unfavorable to the six month 2003 operating loss of $337,000. Although Lynch
Systems second quarter and six months 2004 gross margin rate improved by 17.0%
and 6.3% respectively, the company could not compensate for the volume decline
mentioned above and higher variable selling and engineering expenses incurred
in the first quarter of 2004.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lynch&#146;s corporate headquarters incurred unallocated expenses of $744,000
in the second quarter of 2004, bringing the six months 2004 headquarters
expense to $1,177,000. The second quarter and six month 2004 headquarters
expenses exceeded the prior year by $326,000 and $425,000 respectively due to
higher professional fees, liability insurance (D&#038;O), directors fees, and a
$425,000 provision in second quarter 2004 for the potential settlement of the
PACE suit as previously described in Note L.


<P align="justify" style="font-size: 10pt"><U>Other Income (Expense), Net</U>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Second quarter and first half 2004 investment income was $149,000 and
$160,000 respectively less than 2003 due to (a)&nbsp;lower average cash balances,
(b)&nbsp;investment in non-dividend paying securities, and (c)&nbsp;a realized gain on
sale of marketable securities in 2Q 2003 in the amount of $134,000.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Second quarter interest expense of $62,000 was less than 2003 by $31,000
due to fewer and lower Letter of Credit fees and lower average borrowing to
fund M-tron&#146;s losses.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense of $113,000 for the first six months of 2004 was $49,000
less than the $162,000 incurred in the first half of 2003 due to fewer Letter
of Credit fees, lower average borrowing to fund M-tron&#146;s losses, and lower
interest rates.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Six month 2004 other income of $22,000 was mainly the result of selling
excess equipment that had no book value for $27,000 in the first quarter.


<P align="justify" style="font-size: 10pt"><U>Income Taxes</U>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company files consolidated federal income tax returns, which includes
all subsidiaries.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;First half 2004 income tax includes federal, state, local and foreign
taxes. There was no state income tax benefit in first six months of 2004
because tax carry-back is not available to the Company&#146;s Georgia business.
There was no federal tax benefit in the first half of 2004 as a result of net
operating losses (&#147;NOL&#146;s&#148;) because the Company had previously been refunded all
taxes in its carry-back period and there is uncertainty regarding the
utilization of the NOL carry-forward. The Company recorded a $30,000 tax
provision in second quarter 2004 and $55,000 for the six month period ending
June&nbsp;30, 2004 for taxes at the Hong Kong tax rate on M-tron&#146;s foreign
subsidiaries&#146; earnings.


<P align="right" style="font-size: 10pt">16
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The six month 2003 income tax benefit included federal, as well as state,
local, and foreign taxes. The second quarter 2003 and six month 2003 net tax
benefit of $43,000 and $392,000 respectively was the result of operating losses
incurred which were expected to be realized during the remainder of 2003.


<P align="justify" style="font-size: 10pt"><U>Net Loss</U>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net loss for the second quarter of 2004 was $560,000&nbsp;compared to a
net loss of $173,000 in the quarter ending June&nbsp;30, 2003. Six month 2004 net
loss of $1,368,000 was unfavorable to the $911,000 net loss in the first six
months of 2003 by $457,000. The $387,000&nbsp;additional loss in the second
quarter is primarily due to income tax expense of $30,000 versus a $43,000 tax
benefit last year and the $425,000 legal settlement provision recorded in the
second quarter of 2004. As a result, fully diluted second quarter 2004 loss
per share was $0.37 compared to a loss of $0.12 per share in the second quarter
2003.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;First half 2004 fully diluted loss per share of $0.91 was $0.30 per share
worse than the $0.61 per share loss in the first half of 2003 due mainly to the
2004 sales increase of $2.1&nbsp;million that resulted in additional gross profit
being more than offset by (a)&nbsp;the $425,000 legal settlement provision in 2004;
(b)&nbsp;a tax provision in 2004 of $55,000 compared to a $392,000 tax benefit in
2003; and (c) $160,000 less investment income due mainly to a realized gain on
sale of marketable securities in 2003 of $134,000.


<P align="justify" style="font-size: 10pt"><U>Backlog/New Orders</U>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total backlog of manufactured products at June&nbsp;30, 2004 was $12.1&nbsp;million,
a $6.5&nbsp;million improvement over the backlog at December&nbsp;31, 2003, and $0.5
million less than the backlog at June&nbsp;30, 2003.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M-tron&#146;s backlog improved by $0.7&nbsp;million since last June and $0.5 since
December&nbsp;31, 2003, due mainly to increasing demand for telecommunications
hardware.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lynch Systems backlog has improved by $6.0&nbsp;million since December&nbsp;31, 2003
as a result of a $6.6&nbsp;million order for tableware manufacturing equipment.
First half 2004 bookings of $9.5&nbsp;million were $1.8&nbsp;million less than first half
2003 due to the lack of glass press machine orders in 2004.


<P align="justify" style="font-size: 10pt"><U>Financial Condition</U>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At June&nbsp;30, 2004, the Company has current assets of $17.8&nbsp;million and
current liabilities of $10.4&nbsp;million. Working capital was therefore $7.4
million as compared to $7.5&nbsp;million at December&nbsp;31, 2003 and $8.1&nbsp;million at
June&nbsp;30, 2003. The ratio of current assets to current liabilities was 1.71 to
1.00 at June&nbsp;30, 2004; 1.67 to 1.00 at December&nbsp;31, 2003; and 1.71 to 1.00
ratio at June&nbsp;30, 2003.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash provided in operating activities was approximately $0.5&nbsp;million in
the first half of 2004 compared to cash used of approximately $1.0&nbsp;million in
the first half of 2003. The year over year favorable change in operating cash
flow of $1.5&nbsp;million was mainly the result of $1.4&nbsp;million less cash used in
working capital. Capital expenditures were $184,000 in the first half of 2004
compared to $108,000 in the period ending June&nbsp;30, 2003.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total debt of $3.6&nbsp;million at June&nbsp;30, 2004 was $0.2&nbsp;million less than the
amount outstanding at December&nbsp;31, 2003 and $1.1&nbsp;million less than the debt at
June&nbsp;30, 2003. The year over year reduction in debt is primarily due to
M-tron&#146;s improved operating results that enabled it to reduce its revolving
credit loan by $735,000 while at the same time reducing its funded debt by
$305,000. Debt outstanding at June&nbsp;30, 2004 included $0.9&nbsp;million of fixed
rate debt at an average interest rate of 3.9%, and $2.7&nbsp;million of variable
rate debt at a June&nbsp;30, 2004 average interest rate of 4.5%.


<P align="justify" style="font-size: 10pt">&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.


<P align="right" style="font-size: 10pt">17
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At June&nbsp;30, 2004, the Company&#146;s total cash, cash equivalents and
investments in marketable securities total $7.6&nbsp;million (including $1.1&nbsp;million
of restricted cash). In addition, the Company had a consolidated borrowing
capacity of $3.6&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 $11.2&nbsp;million and exceed the combined outstanding debt and
margin liability on securities of $5.2&nbsp;million by $6.0&nbsp;million.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;29, 2004, Lynch Systems renewed its SunTrust Bank loan with a new
maturity date of May&nbsp;31, 2005. 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 $4&nbsp;million (formerly $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, 2004, there were outstanding Letters of
Credit of $35,000 and no borrowings under the working capital line.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;30, 2004, M-tron&#146;s long-time lending bank, First National Bank of
Omaha, renewed the $3&nbsp;million revolving credit loan that now matures on April
30, 2005. On May&nbsp;14, 2004, M-tron and First National Bank of Omaha also
entered into a new term loan arrangement in the amount of $1,200,000. A
portion of the proceeds from this new term loan were used to pay off the term
loan that had a September&nbsp;2004 maturity date. This new loan has an April&nbsp;30,
2007 maturity date and bears interest at the bank&#146;s base rate plus 0.50%.
$800,000 is outstanding on the new loan as of June&nbsp;30, 2004. This loan is
secured by the August&nbsp;31, 2001 loan agreement and $1,000,000 Letter of Credit
dated September&nbsp;9, 2002 issued by Fleet Bank on behalf of Lynch.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has guaranteed a Letter of Credit issued to the First National
Bank of Omaha on behalf of its subsidiary, M-tron Industries, Inc. As of March
31, 2004, 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. 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 earnings parameters are met for a second time.
These thresholds were not met in 2003 or the first half of 2004 and there is
no assurance they will be met in 2004.


<P align="justify" style="font-size: 10pt">&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.


<P align="justify" style="font-size: 10pt"><U>Adoption of Accounting Pronouncements</U>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;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 consolidation requirements of FIN 46, as revised, are required to
be applied for periods ending after December&nbsp;15, 2003 for interests in
structures that are commonly referred to as special-purpose entities, while the
application of this Interpretation for all other types of variable interest
entities is required for periods ending after March&nbsp;15, 2004. The Company does
not have any interests in variable interest entities.


<P align="justify" style="font-size: 10pt"><B>Off-Balance Sheet Arrangements</B>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aside from the Company&#146;s stand-by Letter of Credit in the amount of
$1,000,000, the Company does not have any off-balance sheet arrangements.


<P align="justify" style="font-size: 10pt"><B>Aggregate Contractual Obligations</B>
<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Details of the Company&#146;s contractual obligations for short-term debt,
long-term debt, leases, purchases and other long term obligations are as
follows:


<P align="right" style="font-size: 10pt">18
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&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="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>Payments Due by Period
&#150; Including Interest (in 000&#146;s)</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Less Than</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1 &#150; 3</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>3 &#150; 5</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>More Than</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Contractual Obligations</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1 Year</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Years</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Years</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>5 Years</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Short-term Debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Long-term Debt Obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">170</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Capital Lease Obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating Lease Obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Purchase Obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other Long-term
Liabilities Reflected on
the Registrant&#146;s Balance
Sheet under GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">TOTAL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,713</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">170</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="justify" style="font-size: 10pt"><U>Market Risk</U>



<P align="justify" style="font-size: 10pt">&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 amounts of
interest earned on the Company&#146;s cash equivalents and short-term investments
(approximately $4.2&nbsp;million at June&nbsp;30, 2004). The Company generally finances
the debt portion of the acquisition of long-term assets with fixed rate,
long-term debt. 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, 2004.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since the Company&#146;s international sales are in U.S. Dollars, there is no
monetary risk.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At June&nbsp;30, 2004, approximately $2.7&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 2004 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. In the event of an adverse change in interest rates,
management would take actions to further mitigate its exposure.


<P align="justify" style="font-size: 10pt"><U>Risk Factors</U>



<P align="justify" style="font-size: 10pt">&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.


<P align="justify" style="font-size: 10pt">&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, disruption of foreign economies and the inability to renew or
obtain new financing for expiring loans.


<P align="justify" style="font-size: 10pt">&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.


<P align="justify" style="font-size: 10pt">&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.


<P align="right" style="font-size: 10pt">19
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="justify" style="font-size: 10pt"><U>Forward Looking Information</U>



<P align="justify" style="font-size: 10pt">&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.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Registrant makes available, free of charge, its annual report on Form
10-K, Quarterly Reports on Form 10-Q, and current reports, if any, on Form 8-K.


<P align="justify" style="font-size: 10pt">&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>.

<DIV align="left">
<A name="108"></A>
</DIV>

<P align="justify" style="font-size: 10pt"><B>Item&nbsp;3. <U>Quantitative and Qualitative Disclosure About Market Risk</U></B>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Market Risk&#148; under Item&nbsp;2 above.

<DIV align="left">
<A name="109"></A>
</DIV>

<P align="justify" style="font-size: 10pt"><B>Item&nbsp;4. <U>Controls and Procedures</U></B>



<P align="justify" style="font-size: 10pt">&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.


<P align="justify" style="font-size: 10pt">&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.

<DIV align="left">
<A name="110"></A>
</DIV>

<P align="justify" style="font-size: 10pt"><B><U>PART II.</U> <U>OTHER INFORMATION</U></B>


<DIV align="left">
<A name="111"></A>
</DIV>

<P align="justify" style="font-size: 10pt"><B>Item&nbsp;1. <U>Legal Proceedings</U></B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>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></TD>
</TR>

</TABLE>


<P align="justify" style="font-size: 10pt">&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 C.V. No.&nbsp;01-236. The
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


<P align="right" style="font-size: 10pt">20
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="justify" style="font-size: 10pt">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.



<P align="justify" style="font-size: 10pt">&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.


<P align="justify" style="font-size: 10pt">&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.


<P align="justify" style="font-size: 10pt">&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.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;8, 2004, Lynch filed a Motion for Summary Judgment on the issue
of an exemption under the Maine Severance Pay Act, based upon the nexus between
the plant closure in Westbrook, Maine and the Spinnaker defendants&#146; bankruptcy
filing. PACE concurrently filed a Motion for Summary Judgment on Count II of
the complaint on March&nbsp;8, 2004.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During a Trial Management Conference on March&nbsp;24, 2004, the parties agreed
to submit a Stipulation of Facts to the Court in lieu of a trial on any
remaining issues in the case. The Court has not yet scheduled oral arguments
from the parties related to the pending motions for summary judgment and
related to any remaining issues in the case.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At a settlement conference held in the Cumberland County Superior Court
(Portland, Maine), the Company offered $425,000 in full settlement of the PACE
claim. Both parties have continued negotiations that could lead to a
settlement. During the 2<SUP>nd</SUP> quarter of 2004, the Company has provided for this
$425,000 potential settlement.


<P align="justify" style="font-size: 10pt">&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.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company does not believe that it has any other contingent liabilities
related to Spinnaker.


<P align="justify" style="font-size: 10pt"><B>2. Qui Tam Lawsuit</B>



<P align="justify" style="font-size: 10pt">&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 10-K for its fiscal year ended December&nbsp;31, 2002.


<P align="right" style="font-size: 10pt">21
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="112"></A>
</DIV>

<P align="justify" style="font-size: 10pt"><B>Item&nbsp;2. <U>Issuer Purchase of Its Equity Securities</U></B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Maximum Number (or</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Approximate Dollar</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares Purchased as</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Value) of Shares</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Part of Publicly</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>that May Yet Be</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average Price Paid</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Announced Plans or</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Purchased Under the</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Period</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares Purchased</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>per Share</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Programs</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Plans or Programs</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD align="center"><DIV style="margin-left:10px; text-indent:-10px">February&nbsp;4, 2004<BR>
To<BR>
February&nbsp;29, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12.5125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">49,600 Shares</TD>
</TR>

<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:10px; text-indent:-10px">March&nbsp;1, 2004 &#150;<BR>
March&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13.5000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">47,600 Shares</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD align="center"><DIV style="margin-left:10px; text-indent:-10px">April&nbsp;1, 2004 &#150;<BR>
June&nbsp;30, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">47,600 Shares</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13.3770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">47,600 Shares</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;4, 2004, Lynch announced that on January&nbsp;23, 2004, the Board
of Directors authorized the repurchase of up to 50,000 shares of the Company&#146;s
outstanding common stock. The timing of the buy-back and the exact number of
shares purchased will depend on market conditions; this program does not have
an expiration date. The Company will buy back shares through both public and
private channels at prices believed to be appropriate and in the best interest
of shareholders.


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of June&nbsp;30, 2004, the Company has repurchased 2,400 shares in the
amount of $32,105, at an average price of $13.377 per share. 47,600 shares may
yet be purchased under this program.

<DIV align="left">
<A name="113"></A>
</DIV>

<P align="justify" style="font-size: 10pt"><B>Item&nbsp;4. <U>Submission of Matters to a Vote of Security Holders</U></B>



<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the Annual Meeting of Stockholders of the Registrant held on May&nbsp;6, 2004:


<P align="justify" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following persons were elected as Directors with the following votes:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Votes For</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Votes Withheld</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Val Cerutti</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,399,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,291</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Mario J. Gabelli</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,399,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,291</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Avrum Gray</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,402,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,591</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Ralph R. Papitto</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,401,637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,243</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Anthony R. Pustorino</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,399,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,291</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left">
<A name="114"></A>
</DIV>

<P align="justify" style="font-size: 10pt"><B>Item&nbsp;6. <U>Exhibits and Reports on Form&nbsp;8-K</U></B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">(a)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" nowrap valign="top" align="left">Exhibits filed herewith:</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">10(nn)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Third Amendment to Restated Loan and Security Agreement
dated April&nbsp;30, 2004 between M-tron Industries, Inc. and First
National Bank of Omaha.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">10(oo)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment to Amended and Restated Credit Agreement
between Lynch Systems, Inc. and SunTrust Bank dated May&nbsp;29,
2004.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">10(pp)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Term Loan Note between M-tron Industries, Inc. and First
National Bank of Omaha dated May&nbsp;14, 2004.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">31</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certifications of Registrant&#146;s principal
executive and principal chief financial officer required by
Exchange Act Rule&nbsp;13a-14(a).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">32</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">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).</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">22
</DIV>

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

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="90%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">(b)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" nowrap valign="top" align="left">Reports on Form&nbsp;8-K:</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">1.</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Registrant&#146;s press release announcing its results
of operations for the first quarter ending March&nbsp;31, 2004 was
filed with a Form&nbsp;8-K on May&nbsp;13, 2004.</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">2.</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Registrant&#146;s press release announcing its results
of operations for the fourth quarter and year-ending December 31, 2003 was
filed with a Form&nbsp;8-K on April&nbsp;14, 2004.</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left">
<A name="115"></A>
</DIV>

<P align="center" style="font-size: 10pt"><U>SIGNATURES</U>



<P align="left" style="font-size: 10pt">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.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="38%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">LYNCH CORPORATION</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(Registrant)<BR><BR></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:<BR><BR></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">August&nbsp;11, 2004
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ RAYMOND H. KELLER</TD>
</TR>

<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><HR size="1" noshade width="50%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Raymond H. Keller</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">23
</DIV>

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

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><U><B>EXHIBIT INDEX</B></U>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>No.</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Description</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(nn)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Third Amendment to Restated Loan and Security Agreement dated
April&nbsp;30, 2004 between M-tron Industries, Inc. and First National
Bank of Omaha. &#134;&#134;
</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
10(oo)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment to Amended and Restated Credit Agreement between
Lynch Systems, Inc. and SunTrust Bank dated May&nbsp;29, 2004. &#134;&#134;
</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(pp)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Term Loan Note between M-tron Industries, Inc. and First National
Bank of Omaha dated May&nbsp;14, 2004. &#134;&#134;
</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certifications of Registrant&#146;s principal executive and principal
financial officers required by Exchange Act Rule&nbsp;13a-14(a). &#134;&#134;
</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;1350 Certifications of Registrant&#146;s principal executive
and principal financial officers required by Exchange Act Rule
13a-14(b). &#134;&#134;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&#134;&#134;&nbsp;&nbsp; Filed herewith.



<P align="left" style="font-size: 10pt">&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 10-Q
or have been incorporated by reference into this Quarterly Report on Form 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.



<P align="center" style="font-size: 10pt">24
</DIV>

</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(NN)
<SEQUENCE>2
<FILENAME>b51118lcexv10wxnny.txt
<DESCRIPTION>EX-10.(NN) THIRD AMEND. TO RESTATED LOAN AND SECURITY AGREEMENT
<TEXT>
<PAGE>
                                                                               .
                                                                               .
                                                                               .

                                                                 EXHIBIT 10.(nn)

[FIRST NATIONAL BANK  LOGO]

<TABLE>
<CAPTION>
    LOAN NUMBER           LOAN NAME                ACCT. NUMBER       NOTE DATE       INITIALS
<S>                    <C>                       <C>                 <C>             <C>
2000001751/5 Renewal   M-Tron Industries, Inc.                         04/30/04           JRK
     NOTE AMOUNT          INDEX (w/Margin)             RATE          MATURITY DATE   LOAN PURPOSE
   $3,000, 000.00      FNBO National Base Rate         4.5%            04/30/05       Commercial
                                                 Creditor Use Only
</TABLE>

                                PROMISSORY NOTE
                 (Commercial - Revolving Draw - Variable Rate)

DATE AND PARTIES. The date of this Promissory Note (Note) is April 30, 2004. The
parties and their addresses are:

  LENDER:
   FIRST NATIONAL BANK OF OMAHA
   Stop Code 1030
   1620 Dodge St
   Omaha, Nebraska 68197
   Telephone: (402) 633-3555

  BORROWER:
   M-TRON INDUSTRIES, INC.
   a Delaware Corporation
   100 Douglas Avenue
   Yankton, South Dakota 57078

1. DEFINITIONS. As used in this Note, the terms have the following meanings:

   A. PRONOUNS. The pronouns "I," "me," and "my" refer to each Borrower signing
   this Note, individually and together with their heirs, successors and
   assigns, and each other person or legal entity (including guarantors,
   endorsers, and sureties) who agrees to pay this Note. "You" and "Your" refer
   to the Lender, with its participants or syndicators, successors and assigns,
   or any person or company that acquires an interest in the Loan.

   B. NOTE. Note refers to this document, and any extensions, renewals,
   modifications and substitutions of this Note.

   C. LOAN. Loan refers to this transaction generally, including obligations and
   duties arising from the terms of all documents prepared or submitted for this
   transaction such as applications, security agreements, disclosures or notes,
   and this Note.

   D. PROPERTY. Property is any property, real, personal or intangible, that
   secures my performance of the obligations of this Loan.

   E. PERCENT. Rates and rate change limitations are expressed as annualized
   percentages.

2. PROMISE TO PAY. For value received, I promise to pay you or your order, at
your address, or at such other location as you may designate, amounts advanced
from time to time under the terms of this Note up to the maximum outstanding
principal balance of $3,000,000.00 (Principal), plus interest from the date of
disbursement, on the unpaid outstanding Principal balance until this Note
matures or this obligation is accelerated.

I may borrow up to the Principal amount more than one time.

3.ADVANCES. Advances under this Note are made according to the following terms
and conditions.

   A. REQUESTS FOR ADVANCES. My requests are a warranty that I am in compliance
   with all the Loan documents. When required by you for a particular method of
   advance, my requests for an advance must specify the requested amount and the
   date and be accompanied with any agreements, documents, and instruments that
   you require for the Loan. Any payment by you of any check, share draft or
   other charge may, at your option, constitute an advance on the Loan to me.
   All advances will be made in United States dollars. I will indemnify you and
   hold you harmless for your reliance on any request for advances that you
   reasonably believe to be genuine. To the extent permitted by law, I will
   indemnify you and hold you harmless when the person making any request
   represents that I authorized this person to request an advance even when this
   person is unauthorized or this person's signature is not genuine.

   I or anyone I authorize to act on my behalf may request advances by the
   following methods.

      (1) I make a request in person.

      (2) I make a request by phone.

      (3) I make a request by mail.

      (4) I write a check or share draft.

   B. ADVANCE LIMITATIONS. In addition to any other Loan conditions, requests
   for, and access to, advances are subject to the following limitations.

      (1) Obligatory Advances. You will make all Loan advances subject to this
      Agreement's terms and conditions.

      (2) Advance Amount. Subject to the terms and conditions contained in this
      Note, advances will be made in exactly the amount I request.

      (3) Disbursement of Advances. On my fulfillment of this Note's terms and
      conditions, you will disburse the advance in any manner as you and I
      agree.

      (4) Credit Limit. I understand that you will not ordinarily grant a
      request for an advance that would cause the unpaid principal of my Loan to
      be greater than the Principal limit. You may, at your option, grant such a
      request without obligating yourselves to do so in the future.

      (5) Records. Your records will be conclusive evidence as to the amount of
      advances, the Loan's unpaid principal balances and the accrued interest.

4. INTEREST. Interest will accrue on the unpaid Principal balance of this Note
at the rate of 4.5 percent (Interest Rate) until May 1, 2004, after which time
it may change as described in the Variable Rate subsection.

   A. INTEREST AFTER DEFAULT. If you declare a default under the terms of this
   Loan, including for failure to pay in full at maturity, you may increase the
   Interest Rate payable on the outstanding Principal balance of this Note. In
   such event, interest will accrue on the outstanding Principal balance at the
   variable Interest Rate in effect from time to time, plus an additional 6.000
   percent, until paid in full.

   B. MAXIMUM INTEREST AMOUNT. Any amount assessed or collected as interest
   under the terms of this Note or obligation will be limited to the Maximum
   Lawful Amount of interest allowed by state or federal law. Amounts collected
   in excess of the Maximum Lawful Amount will be applied first to the unpaid
   Principal balance. Any remainder will be refunded to me.

M-Tron Industries, Inc.
Nebraska Promissory Note                                            Initials____
NE/4XX270735007252000043    (c)1996 Bankers Systems, Inc.,                Page 1
64005051404N                 St. Cloud, MN  [ILLEGIBLE](TM)

<PAGE>

C. STATUTORY AUTHORITY. The amount assessed or collected on this Note is
authorized by the Nebraska usury laws under Neb. Rev. Stat. S 45.101.03.

D. ACCRUAL. During the scheduled term of this Loan interest accrues using an
Actual/360 days counting method.

E. VARIABLE RATE. The Interest Rate may change during the term of this
transaction.

   (1) Index. Beginning with the first Change Date, the Interest Rate will be
   based on the following index: the base rate in effect from time to time and
   designated by First National Bank of Omaha as its National Base Rate.

   The Current Index is the most recent index figure available on each Change
   Date. You do not guaranty by selecting this index, or the margin, that the
   interest Rate on this Note will be the same rate you charge on any other
   loans or class of loans you make to me or other borrowers. If this Index is
   no longer available, you will substitute a similar index. You will give me
   notice of your choice.

   (2) Change Date. Each date on which the Interest Rate may change is called a
   Change Date. The Interest Rate may change May 15, 2004 and daily thereafter.

   (3) Calculation Of Change. On each Change Data, you will calculate the
   Interest Rate, which will be the Current Index plus 0.500 percent. The result
   of this calculation will be rounded to the nearest .001 percent. Subject to
   any limitations, this will be the Interest Rate until the next Change Date.
   The new Interest Rate will become effective on each Change Date. The Interest
   Rate and other charges on this Note will never exceed the highest rate or
   charge allowed by law for this Note.

   (4) Limitations. The Interest Rate changes are subject to the following
   limitations:

      (a) Lifetime. The Interest Rate will never be less than 4.500 percent.

   (5) Effect Of Variable Rate. A change in the Interest Rate will have the
   following effect on the payments: The amount of the final payment will
   change.

5. PAYMENT. I agree to pay this Note as follows: I agree to pay this Note in 36
payments. This Note is amortized over 60 payments. A payment of $22,369.76 will
be due May 31, 2004. and on the last day of each month thereafter. A final
payment of the entire unpaid balance of Principal and interest will be due April
30, 2007. Any changes in the Interest Rate will affect the amount of this
payment.

Payments will be rounded to the nearest $.01. With the final payment I also
agree to pay any additional fees or charges owing and the amount of any advances
you have made to others on my behalf. Payments scheduled to be paid on, the
29th, 30th or 31st day of a month that contains no such day will, instead, be
made on the last day of such month.

Each payment I make on this Note will be applied first to interest that is due
then 10 principal that is due, and finally to any charges that I owe other than
principal and interest If you and I agree to a different application of
payments, we will describe our agreement on this Note. The actual amount of my
final payment will depend on my payment record.

6. PREPAYMENT. I may prepay this Loan in full or in part at any time. Any
partial prepayment will not excuse any later scheduled payments until I pay in
full.

7. LOAN PURPOSE. The purpose of this Loan is to fund the purchase of new and
used equipment.

8. SECURITY. This Loan is secured by the following, previously executed,
security instruments or agreements: Restated Loan/Security Agreement dated
August 31, 2001. Letter of Credit #RS1361047 issued by Fleet National Bank on
behalf of Lynch Corporation in the amount of $1,000,000.00 dated September 9,
2002.

 9. DEFAULT. I will be in default if any of the following occur:

   A. PAYMENTS. I fail to make a payment in full when due.

   B. INSOLVANCY OR BANKRUPTCY. I make an assignment for the benefit of
   creditors or become Insolvent, either because my liabilities exceed my assets
   or I am unable to pay my debts as they become due; or I petition for
   protection under federal, state or local bankruptcy, insolvency or debtor
   relief laws, or am the subject of a petition or action under such laws and
   fail to have the petition of action dismissed within a reasonable period of
   time not to exceed 60 days.

   C. BUSINESS TERMINATION. I merge, dissolve, reorganize, and my business or
   existence, or a partner or majority owner dies or is declared legally
   incompetent.

   D. FAILURE TO PERFORM. I fail to perform any condition or to keep any promise
   or covenant of this Note.

   E. OTHER DOCUMENTS. A default occurs under the terms of any other transaction
   document.

   F. OTHER AGREEMENTS. I am in default or any other debt or agreement I have
   with you.

   G. MISREPRESENTATION. I make any verbal Of written statement or provide any
   financial information that is untrue, inaccurate, or conceals a material fact
   at the time it is made or provided.

   H. JUDGMENT. I fail to satisfy or appeal any judgment against me.

   I. FORFEITURE. The Property is used in a manner or for a purpose that
   threatens confiscation by a legal authority.

   J. NAME CHANGE. I change my name or assume an additional name without
   notifying you before making such a change.

   K. PROPERTY TRANSFER. I transfer all or a substantial part of my money or
   property.

   L. PROPERTY VALUE. The value of the Property declines or is impaired.

   M. MATERIAL CHANGE. Without first notifying you, there is a material change
   in my business, including ownership, management, and financial conditions.

   N. INSECURITY. You reasonably believe that you are insecure.

10. ASSUMPTIONS. Someone buying the Property cannot assume the obligation. You
may declare the entire balance of the Note to be immediately due and payable
upon the creation of, or contract for the creation of, any lien, encumbrance, or
transfer of the property.

11. WAIVERS AND CONSENT. To the extent not prohibited by law, I waive protest,
presentment for payment, demand, notice of acceleration, notice of intent to
accelerate and notice of dishonor.

   A. ADDITIONAL WAIVERS BY BORROWER. In addition, I, and any party to this Note
   and Loan, to the extent permitted by law. consent to certain actions you may
   take, and generally waive defenses that may be available based on these
   actions or based on the status of a party to this Note.

      (1) You may renew or extend payments on this Note, regardless of the
      number of such renewals or extensions.

      (2) You may release any Borrower, endorser, guarantor, surety,
      accommodation maker or any other co-signer.

      (3) You may release, substitute or impair any Property securing this Note.

      (4) You, or any institution participating in this Note, may invoke your
      right of set-off.

      (5) You may enter into any sales, repurchases or participations of this
      Note to any person in any amounts and I waive notice of such sales,
      repurchases or participations.

      (6) I agree that any of us signing this Note as a Borrower is authorized
      to modify the terms of this Note or any instrument securing, guarantying
      or relating to this Note.

   B. NO WAIVER BY LENDER. Your course of dealing, or your forbearance from, or
   delay in, the exercise of any of your rights, remedies, privileges or right
   to insist upon my strict performance of any provisions contained in this
   Note, or other Loan documents, shall not be construed as a waiver by you,
   unless any such waiver is in writing and is signed by you.

12. REMEDIES, After I default, and after you give any legally required notice
and opportunity to cure the default, you may at your option do any one or more
of the following.

   A. ACCELERATION. You may make all or any part of the amount owing by the
   terms of this Note immediately due.

   B. SOURCES. You may use any and all remedies you have under state or federal
   law or in any instrument securing this Note.

M-Tron Industries, Inc.
Nebraska Promissory Note                                            Initials____
NE/4XX270735007252000043    (c)1996 Bankers Systems, Inc.,                Page 2
64003051404N                 St. Cloud, MN  [ILLEGIBLE](TM)

<PAGE>

   C. INSURANCE BENEFITS. You may make a claim for any and all insurance
   benefits or refunds that may be available on my default.

   D. PAYMENTS MADE ON MY BEHALF. Amounts advanced on my behalf will be
   immediately due and may be added to the balance owing under the terms of this
   Note, and accrue interest at the highest post-maturity interest rate.

   E. TERMINATION. You may terminate my right to obtain advances and may refuse
   to make any further extensions of credit.

   F. SET-OFF. You may use the right of set-off. This means you may set-off any
   amount due and payable under the terms of this Note against any right I have
   to receive money from you.

   My right to receive money from you includes any deposit or share account
   balance I have with you: any money owed to me on an item presented to you or
   in your possession for collection or exchange; end any repurchase agreement
   or other non-deposit obligation, "Any amount due and payable under the terms
   of this Note" means the total amount to which you are entitled to demand
   payment under the terms of this Note at the time you set-off.

   Subject to any other written contract, if my right to receive money from you
   is also owned by someone who has not agreed to pay this Note, your right of
   set-off will apply to my interest in the obligation and to any other amounts
   I could withdraw on my sole request or endorsement.

   Your right of set-off does not apply to an account or other obligation where
   my rights arise only in a representative capacity, It also does not apply to
   any individual Retirement Account or other tax-deferred retirement account.

   You will not be liable for the dishonor of any check when the dishonor occurs
   because you set-off against any of my accounts. I agree to hold you harmless
   from any such claims arising as a result of your exercise of your right of
   set-off.

   G. WAIVER. Except as otherwise required by law. by choosing any one or more
   of these remedies you do not give up your right to use any other remedy. You
   do not waive a default if you choose not to use a remedy. By electing not to
   use any remedy, you do not waive your right to later consider the event a
   default and to use any remedies if The default continues or occurs again.

13. COLLECTION EXPENSES AND ATTORNEYS' FEES. On or after Default, to the extent
permitted by law, I agree to pay all expenses of collection, enforcement or
protection of your rights and remedies under this Note. Expenses include, but
are not limited to, attorneys' fees, court costs and other legal expenses. These
expenses are due and payable immediately, If not paid immediately, these
expenses will bear interest from the date of payment until paid in full at the
highest interest rate In effect as provided for in the terms of this Note. All
fees and expenses will be secured by the Property I have granted to you, if any.
To the extent permitted by the United States Bankruptcy Code. I agree to pay the
reasonable attorneys' fees you incur to collect this Debt as awarded by any
court exercising jurisdiction under the Bankruptcy Code.

14. WARRANTIES AND REPRESENTATIONS. I make to you the following warranties and
representations which will continue as long as this Note is in effect:

   A. POWER. I am duly organised, and validly existing and in good standing in
   all jurisdictions in which I operate. I have the power and authority to enter
   into this transaction and to carry on my business or activity as it is now
   being conducted and, as applicable, am qualified to do so in each
   jurisdiction in which I operate.

   B. AUTHORITY. The execution, delivery end performance of this Note and the
   obligation evidenced by this Note are within my powers, have been duly
   authorized, have received all necessary governmental approval, will not
   violate any provision of law, or order of court or governmental agency, and
   will not violate any agreement to which I am a party or to which I am or any
   of my Property is subject.

   C. NAME AND PLACE OF BUSINESS. Other than previously disclosed in writing to
   you I have not changed my name or principal place of business within the last
   10 years and have not used any other trade or fictitious name. Without your
   prior written consent, I do not and will not use any other name end will
   preserve my existing name, trade names and franchises.

15. APPLICABLE LAW. This Note is governed by the laws of Nebraska, the United
States of America and to the extent required, by the laws of the jurisdiction
where the Property is located. In the event of a dispute, the exclusive forum,
venue and place of jurisdiction will be in Nebraska, unless otherwise required
by law.

16. JOINT AND INDIVIDUAL LIABILITY AND SUCCESSORS. My obligation to pay this
Loan is independent of the obligation of any other person who has also agreed to
pay it, You may sue me alone, or anyone else who is obligated on this Loan, or
any number of us together, to collect this Loan, Extending this Loan or new
obligations under this Loan, will not affect my duty under this Loan and I will
still be obligated to pay this loan. The duties and benefits of this Loan will
bind and benefit the successors and assigns of you and me.

17. AMENDMENT, INTEGRATION AND SEVERABILITY. This Note may not be amended or
modified by oral agreement. No amendment or modification of this Note is
effective unless made in writing and executed by you and me. This Note is the
complete and final expression of the agreement. If any provision of this Note is
unenforceable, then the unenforceable prevision will be severed and the
remaining provisions will still be enforceable.

18. INTERPRETATION. Whenever used, the singular includes the plural and the
plural includes the singular. The section headings are for convenience only and
are not to be used to interpret or define the terms of this Note.

19. NOTICE, FINANCIAL REPORTS AND ADDITIONAL DOCUMENTS. Unless otherwise
required by law, any notice will be given by delivering it or mailing it by
first class mail to the appropriate party's address listed in the DATE AND
PARTIES section, or to any other address designated in writing. Notice to one
party will be deemed to be notice to all parties. I will inform you in writing
of any change in my name, address or other application information. I will
provide you any financial statement or information you request. All financial
statements and information I give you will be correct and complete. I agree to
sign, deliver, and file any additional documents or certifications that you may
consider necessary to perfect, continue, and preserve my obligations under this
Loan and to confirm your lien status on any Property. Time is of the essence.

20. CREDIT INFORMATION. I agree to supply you with whatever information you
reasonably request. You will make requests for this information without undue
frequency, and win give me reasonable time in which to supply the Information.

21. ERRORS AND OMISSIONS. I agree, if requested by you, to fully cooperate in
the correction, if necessary, in the reasonable discretion of you of any and all
loan closing documents so that all documents accurately describe the loan
between you and me. I agree to assume all costs including by way of illustration
and not limitation, actual expenses, legal fees and marketing losses for failing
to reasonably comply with your requests within thirty (30) days.

M-Tron Industries, Inc.
Nebraska Promissory Note                                            Initials____
NE/4XX270735007252000043    (c)1996 Bankers Systems, Inc.,                Page 3
64003051404N                 St. Cloud, MN  [ILLEGIBLE](TM)

<PAGE>

A CREDIT AGREEMENT MUST BE IN WRITING TO BE ENFORCEABLE UNDER NEBRASKA LAW. TO
PROTECT YOU AND US FROM ANY MISUNDERSTANDINGS OR DISAPPOINTMENTS, ANY CONTRACT,
PROMISE, UNDERTAKING, OR OFFER TO FOREBEAR REPAYMENT OF MONEY OR TO MAKE ANY
OTHER FINANCIAL ACCOMMODATION IN CONNECTION WITH THIS LOAN OF MONEY OR GRANT OR
EXTENSION OF CREDIT, OR ANY AMENDMENT OF CANCELLATION OF, WAIVER OF, OR
SUBSTITUTION FOR ANY OR ALL OF THE TERMS OR PROVISIONS OF ANY INSTRUMENT OR
DOCUMENT EXECUTED IN CONNECTION WITH THIS LOAN OF MONEY OR GRANT OR EXTENSION OF
CREDIT, MUST BE IN WRITING TO BE EFFECTIVE.

   BORROWER:

      M-Tron Idustries, Inc.

         By /s/ DAVID L. REIN
         -----------------------------------
         Authorized Signer

22. SIGNATURES. By signing. I agree to the terms contained in this Note. I also
acknowledge receipt of copy of this Note.

   BORROWER:

      M-Tron Idustries, Inc.

         By /s/ DAVID L. REIN
         -----------------------------------
         Authorized Signer

   LENDER:

      First National Bank of Omaha

      By /s/ James R. Kamm
         -----------------------------------
         James R. Kamm, Vice President

M-Tron Industries, Inc.
Nebraska Promissory Note                                            Initials____
NE/4XX270735007252000043    (c)1996 Bankers Systems, Inc.,                Page 4
64005051404N                 St. Cloud, MN  EXPERTS(TM)

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(OO)
<SEQUENCE>3
<FILENAME>b51118lcexv10wxooy.txt
<DESCRIPTION>EX-10.(OO) SECOND AMEND. TO AMENDED & RESTATED CREDIT AGREEMENT
<TEXT>
<PAGE>

                                                                 EXHIBIT 10.(OO)

      SECOND AMENDMENT AND WAIVER TO AMENDED AND RESTATED CREDIT AGREEMENT

            THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"AMENDMENT") made and entered into as of May 29, 2004 (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 amended by that certain
First Amendment to Amended and Restated Credit Agreement, dated as of May 30,
2003 (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. RESERVED.

      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 31, 2005, as such date may be
            extended, accelerated or amended from time to time pursuant to this
            Agreement.

      (b) by deleting the language "Two Million Dollars ($2,000,000)" from
      Section 2.01(a)(i) thereof, and by substituting, in lieu thereof, the
      following new language: "Four Million Dollars ($4,000,000)."

      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

                                       1
<PAGE>

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.

      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.

                                       2
<PAGE>

      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/ A. BOWLING
                                                 -------------------------------
/s/ JANET T. GRIMSLEY                         Title: President
- -----------------------------------
Title: Secretary

                                             LENDER:

                                             SUNTRUST BANK

                                             By:/S/ CATHERINE M. MATHIS
                                                --------------------------------
                                              Title: Group Vice President

                                       4
<PAGE>

                  PARENT GUARANTOR ACKNOWLEDGMENT AND CONSENT

      The undersigned hereby acknowledges and consents to, and agree to the
terms of, the foregoing Second Amendment to Amended and Restated Credit
Agreement, and ratifies and confirms its obligations under the Parent Guaranty
(as defined in the Amended and Restated Credit Agreement).

      This 29th day of May, 2004.

LYNCH CORPORATION

By: /s/ Raymond H. Keller
    ------------------------------------
Name: Raymond H. Keller
Title: VP/CFO

                                       5
<PAGE>

                                   EXHIBIT A

                            FORM OF PROMISSORY NOTE

                                PROMISSORY NOTE

U.S. $7,000,000                                                     MAY 29, 2004

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 May 30, 2003, and as amended by that
certain Second Amendment to Amended and Restated Credit Agreement dated as 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 Promissory Note, dated as of May 30, 2003, 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

                                       6
<PAGE>

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 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/ A. Bowling
                                                 -------------------------------
                                             Title: President

Attest:

/s/ JANET T. GRIMSLEY
- ------------------------------------
Secretary

                                       7

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(PP)
<SEQUENCE>4
<FILENAME>b51118lcexv10wxppy.txt
<DESCRIPTION>EX-10.(PP) TERM LOAN NOTE
<TEXT>
<PAGE>
                                                                               .
                                                                               .
                                                                               .

                                                                EXHIBIT 10. (pp)

[FIRST NATIONAL BANK LOGO]

<TABLE>
<CAPTION>
<S>                <C>                          <C>                <C>                  <C>
  LOAN NUMBER          LOAN NAME                ACCT, NUMBER         NOTE DATE            INITIALS
 2000001751/6       M-Tron Industries, Inc.
 Renewal Plus        INDEX (w/Margin)                                06/14/04               JRK
  NOTE AMOUNT      FNBO National                    RATE           MATURITY DATE        LOAN PURPOSE
$1, 200,000, 00    Base Rate plus 0.500%            4.5%             04/30/07            Commercial

                                          Creditor Use Only
</TABLE>

                                 PROMISSORY NOTE
                        (Commercial-Draw-Variable Rate)

DATE AND PARTIES. The date of this Promissory Note (Note) is May 14, 2004. The
parties and their addresses are:

    LENDER:
        FIRST NATIONAL BANK OF OMAHA
        STOP CODE 1030
        1620 Dodge St
        Omaha, Nebraska 68197
        Telephone: (402) 633-3555

    BORROWER:
        M-TRON INDUSTRIES, INC.
        a Delaware Corporation
        100 Douglas Avenue
        Yankton, South Dakota 57078

1.    DEFINITIONS. As used in this Note, the terms have the following meanings;

      A. PRONOUNS. The pronouns "I," "me," and "my" refer to each Borrower
      signing this Note, individually end together with their heirs, successors
      and assigns, and each other person of legal entity (including guarantors,
      endorsers, end sureties) who agrees to pay this Note. "You" and "Your"
      refer to the Lender, with its participants or syndicators, successors and
      assigns, or any person or company that acquires an interest in the Loan.

      B. NOTE. Note refers to this document, and any extensions, renewals,
      modifications and substitutions of this Note.

      C. LOAN. Loan refers to this transaction generally, including obligations
      and duties arising from the terms of all documents prepared or submitted
      for this transaction such as applications, security agreements,
      disclosures or notes, and this Note.

      D. PROPERTY. Property is any property, real, personal or intangible, that
      secures my performance of the obligations of this Loan,

      E. PERCENT. Rates and rate change limitations are expressed as annualized
      percentages.

2. PROMISE TO PAY. For value received I promise to pay you or your order, at
your address, or at such other location as you may designate, amount advanced
from time to time under the terms of this Note up to the maximum total principal
balance of $1,200,000.00 [Principal]. plus interest from the data of
disbursement, on the unpaid outstanding Principal balance until this Note
matures or this obligation is accelerated.

3.    ADVANCES. Advances under this Note are made according to the following
      terms and conditions.

      A. REQUESTS FOR ADVANCES. My requests are a warranty that I am in
      compliance with all the Loan documents. When required by you for a
      particular method of advance, my requests for an advance must specify the
      requested amount and the date and be accompanied with any agreements,
      documents, and instruments that you require for the Loan. Any payment by
      you of any check, share draft or other charge may, at your option,
      constitute an advance on the Loan to me. All advances will be made in
      United States dollars. I will indemnity you and hold you harmless for your
      reliance on any request for advances that you reasonably believe to be
      genuine. To the extent permitted by law, I will indemnify you and hold you
      harmless when the person making any request represents that I authorized
      this person to request an advance even when this person is unauthorized or
      this person's signature is not genuine.

      I or anyone I authorize to act on my behalf may request advances by the
      following methods.

            (1) I make a request in person.

            (2) I make a request by phone.

            (3) I make a request by mail.

            (4) I write a check or share draft.

      B. ADVANCE LIMITATIONS. In addition to any other Loan conditions, requests
      for, and access to, advances are subject to the following limitations.

            (1) OBLIGATORY ADVANCES. You will make all Loan advances subject to
            this Agreement's terms and conditions. :

            (2) ADVANCE AMOUNT. Subject to the terms and conditions contained in
            this Note, advances will be made in exactly the amount I request.

            (3) DISBURSEMENT OF ADVANCES. On my fulfilment of this Note's terms
            and conditions, you will disburse the advance in any manner as you
            and I agree.

            (4) CREDIT LIMIT. I understand that you will not ordinarily grant a
            request for an advance that would cause the unpaid principal of my
            Loan to be greater than the Principal limit. You may, at your
            option, grant such a request without obligating yourselves to do so
            in the future.

            (5) RECORDS. Your records will be conclusive evidence as to the
            amount of advances, the Loan's unpaid principal balances and the
            accrued interest.

4. INTEREST. interest will accrue on the unpaid Principal balance of this Note
at the rate of 4.5 percent (Interest Rate) until May 15, 2004. after which time
it may change as described in the Variable Rate subsection.

      A. INTEREST AFTER DEFAULT. If you declare a default under the terms of
      this Loan, including for failure to pay in full at maturity, you may
      increase the Interest Rate payable on the outstanding Principal balance of
      this Note. In such event, interest win accrue on the outstanding Principal
      balance at the variable Interest Rate in effect from time to time, plus an
      additional 6.000 percent, until paid in full.

      B. MAXIMUM INTEREST AMOUNT. Any amount assessed or collected as interest
      under the terms of this Note or obligation will be limited to the Maximum
      Lawful Amount of interest allowed by state or federal law. Amounts
      collected in excess of the Maximum Lawful Amount will be applied first to
      the unpaid Principal balance. Any remainder will be refunded to me,

<TABLE>
<S>                                   <C>                                                          <C>
M-Tron Industries, Inc.
Nebraska Promissory Note                                                                   Initials______
NE/4XX27073500725200004364003051404N  (c)(1996) Bankers Systems, Inc., St. Cloud, MN [ILLEGIBLE]   Page 1
</TABLE>
<PAGE>

      C. STATUTORY AUTHORITY. The amount assessed or collected on this Note is
      authorized by the Nebraska usury laws under Neb, Rev. Stot. ! 45.101.03.

      D. ACCRUAL. During the scheduled term of this Loan Interest accrues using
      an Actual/360 days counting method.

      E. VARIABLE RATE. The Interest Rate may change during the term of this
      transaction.

            (1) INDEX. Beginning with the first Change Date, the Interest Rate
            will be based on the following index: the base rate in effect from
            time to time and designated by First National Bank of Omaha
            [ILLEGIBLE] its National Base Rate.

            The Current Index is the most recent index figure available on each
            Change Date. You do not guaranty by selecting this Index, or the
            margin, that the Interest Rate on this Note will be the same rate
            you charge on any other loans or class of loans you make to me or
            other borrowers. If this Index is no longer available, you will
            substitute a similar index. Yog will give me notice of your choice.

            (2) CHANGE DATE. Each date on which the Interest Rate may change is
            called a Change Date. The Interest Rate may change May 15, 2004 and
            daily thereafter.

            (3) CALCULATION OF CHANGE. On each Change Date, you will calculate
            the Interest Rate, which will be the Current Index plus 0.500
            percent. The result of this calculation will be rounded to the
            nearest .001 percent. Subject to any limitations, this will be the
            Interest Rate until the next Change Date. The new Interest Rate will
            become effective on each Change Date. The Interest Rate and other
            charges on this Note will never exceed the highest rate or charge
            allowed by law for this Note.

            (4) LIMITATIONS. The Interest Rate change* era subject to the
            following limitations.

            (a) LIFETIME. The Interest Rate will never be less than 4.500
            percent.

            5. EFFECT OF VARIABLE RATE. A change in the Interest Rate will have
            the following effect on the payments: The amount of the final
            payment will change.

5. PAYMENT. I agree to pay this Note as follows: I agree to pay this Note in 36
payments. This Note is amortized over 60 payments. A payment of 422,369.76 will
be due May 31, 2004, and on the last day of each month thereafter. A final
payment of the entire unpaid balance of Principal and interest will be due April
30, 2007. Any changes in the Interest Rate will affect the amount of this
payment.

Payment will be rounded to the nearest 4.01. With the final payment I
also agree to pay any additional fees or charges owing and the amount of any
advances you have made to others on my behalf. Payments scheduled to be paid on
the 29th, 30th or 3lst day of a month that contains no such day will, instead,
be made on the last day of such month.

Each payment I make on this Note will be applied first to interest that is due
then to principal that is due, and finally to any charges that I owe other than
principal and interest. If you and I agree to a different application of
payments, we will describe our agreement on this Note. The actual amount of my
final payment will depend on my payment record,

6. PREPAYMENT. I may prepay this Loan in full or in part at any time. Any
partial prepayment will not excuse any later scheduled payments until I pay in
full.

7. LOAN PURPOSE. The purpose of this Loan is to fund the purchase of new and
used equipment.

8. SECURITY. This Loan is secured by the following, previously executed,
security instruments or agreements: Restated Loan/Security Agreement dated
August 31, 2001. Letter of Credit IRS1351047 issued by Fleet National Bank on
behalf of Lynch Corporation in the amount of $ 1,000,000.00 dated September 9,
2002.

9. DEFAULT. I will be in default if any of the following occur:

      A. PAYMENT. I fail to make a payment in full when due.

      B. INSOLVENCY OR BANKRUPTCY. I make an assignment for the benefit of
      creditors or become insolvent, either because my liabilities exceed my
      assets or I am unable to pay my debts as they become due; or I petition
      for protection under federal, state or local bankruptcy, insolvency or
      debtor relief laws, or am the subject of a petition or action under such
      laws and fail to have the petition or action dismissed within a reasonable
      period of time not to exceed 60 days.

      C. BUSINESS TERMINATION. I merge, dissolve, reorganize, end my business or
      existence, or a partner or majority owner dies or is declared legally
      incompetent.

      D. FAILURE TO PERFORM. I fail to perform any condition or to keep any
      promise or covenant of this Note.

      E. OTHER DOCUMENTS. A default occurs under the terms of any other
      transaction document.

      F. OTHER AGREEMENTS. I am in default on any other debt or agreement I have
      with you.

      G. MISREPRESENTATION. I make any verbal or written statement or provide
      any financial information that is untrue, inaccurate, or conceals a
      material fact at the time it is made or provided.

      H. JUDGMENT. I fail to satisfy or appeal any judgment against me.

      I. [ILLEGIBLE] The Property is used in a manner or for a purpose that
      threatens confiscation by a legal authority.

      J. NAME CHANGE. I change my name or assume an additional name without
      notifying you before making such a change.

      K. PROPERTY TRANSFER. I transfer all or a substantial part of my money or
      property.

      L. PROPERTY VALUE. The value of the Property declines or is impaired.

      M. MATERIAL CHANGE. Without first notifying you, there is a material
      change in my business, including ownership, management, and financial
      conditions.

      N. INSECURITY. You reasonably believe that you are insecure.

10. ASSUMPTIONS. Someone buying the Property cannot assume the obligation. You
may declare the entire balance of the Note to be immediately due and payable
upon the creation of, or contract for the creation of, any lien, encumbrance, or
transfer of the Property.

11. WAIVERS AND CONSENT. To the extent not prohibited by law, I waive protest,
presentment for payment, demand, notice of acceleration, notice of intent to
accelerate and notice of dishonor.

      A. Additional Waivers By Borrower. In addition, I, and any party to this
      Note and Loan, to the extent permitted by law. consent to certain actions
      you may take, and generally waive defenses that may be available based on
      these actions or based on the status of a party to this Note.

            (1) You may renew or extend payments on this Note, regardless of the
            number of such renewals or extensions.

            (2) You may release any Borrower, endorser, guarantor, surety,
            accommodation maker or any other co-signer.

            (3) You may release, substitute or impair any Property securing this
            Note.

            (4) You, or any institution participating in this Note, may invoke
            your right of set-off.

            (5) You may enter into any sales, repurchases or participations of
            this Note to any person in any amounts and I waive notice of such
            sales, repurchases or participations.

            (6) I agree that any of us signing this Note as a Borrower is
            authorized to modify the terms of this Note or any instrument
            securing, guarantying or relating to this Note.

      B. NO WAIVER BY LENDER. Your course of dealing, or your forbearance from,
      or delay in, the exercise of any of your rights, remedies, prevelages or
      right to insist upon my strict performance of any provisions contained in
      this Note, or other Loan documents, shall not be construed as a waiver by
      you, unless any such waiver is in writing and is signed by you.

12. REMEDIES. After I default, and after you give any legally required notice
and opportunity to cure the default, you may at your option do any one or more
of the following.

      A. Acceleration. You may make all or any part of the amount owing by the
      terms of this Note immediately due.

      B. Sources. You may use any and all remedies you have under state or
      federal law or in any instrument securing this Note.

<TABLE>
<S>                                   <C>                                                         <C>
M-Tron Industries, Inc.
Nebraska Promissory Note                                                                    Initials___
NE/4XX27073500725200004364003051404N  (c)1996, Bankers Systems, Inc., St. Cloud, MN [ILLEGIBLE]   Page 2
</TABLE>

<PAGE>

      C. INSURANCE BENEFITS. You may make a claim for any and all insurance
      benefits or refunds that may be available on my default.

      D. PAYMENTS MADE ON MY BEHALF. Amounts advanced on my behalf will be
      immediately due and may be added to the balance owing under the terms of
      this Note, and accrue interest at the highest post-maturity interest rate.

      E. TERMINATION. You may terminate my right to obtain advances and may
      refuse to make any further extensions of credit.

      F. SET-OFF. You may use the right of set-off. This means you may set-off
      any amount due and payable under the terms of this Note against any right
      I have to receive money from you.

      My right receive money from you includes any deposit or share account
      balance I have with you; any money owed to me on an item presented to you
      or in your possession for collection or exchange; and any repurchase
      agreement or other non-deposit obligation. "Any amount due and payable
      under the terms of this Note" means the total amount to which you are
      entitled to demand payment under the terms of this Note at the time you
      set-off.

      Subject to any other written contract, if my right to receive money from
      you is also owned by someone who has not agreed to pay this Note, your
      right of set-off will apply to my interest in the obligation and to any
      other amounts I could withdraw on my sole request or endorsement.

      Your right of set-off does not apply to an account or other obligation
      where my rights arise only in a representative capacity. It also does not
      apply to any individual Retirement Account or other tax-deferred
      retirement account.

      You will not be liable for the dishonor of any check when the dishonor
      occurs because you set-off against any of my account. I agree to hold you
      harmless from any such claims arising as a result of your exercise of your
      right of set-off.

      G. WAIVER. Except as otherwise required by law, by choosing any one or
      more of these remedies you do not give up your right to use any other
      remedy. You do not waive a default if you choose not to use a remedy. By
      electing not to use any remedy, you do not waive your right to later
      consider the event a default and to use any remedies if the default
      continues or occurs again.

13. COLLECTION EXPENSES AND ATTORNEYS' FEES. On or after Default, to the extent
permitted by law, I agree to pay all expenses of collection, enforcement or
protection of your rights and remedies under this Note. Expenses include, but
are not limited to, attorneys' fees, court costs and other legal expenses. These
expenses are due and payable immediately. If not paid immediately, these
expenses will bear interest from the date of payment until paid in full at the
highest interest rate in effect as provided for in the terms of this Note. All
fees and expenses will be secured by the Property I have granted to you, if any.
To the extent permitted by the United States Bankruptcy Code. I agree to pay the
reasonable attorneys' fees you incur to collect this Debt as awarded by any
court exercising jurisdiction under the Bankruptcy Code.

14. WARRANTIES AND REPRESENTATIONS. I make to you the following warranties and
representations which will continue as long as this Note is in effect:

      A. POWER. I am duly organised, and validly existing and in good standing
      in all jurisdictions in which I operate. I have the power and authority to
      enter into this transaction and to carry on my business or activity as it
      is now being conducted and, as applicable, am qualified to do so in each
      jurisdiction in which I operate.

      B. AUTHORITY. The execution, delivery and performance of this Note and the
      obligation evidenced by this Note are within my powers, have been duly
      authorized, have received all necessary governmental approval, will not
      violate any provision of law, or order of court or governmental agency,
      end will not violate any agreement to which I am a party or to which I am
      or any of my Property is subject.

      C. NAME AND PLACE OF BUSINESS. Other than previously disclosed in writing
      to you I have not changed my name or principal place of business within
      the last 10 years and have not used any other trade or fictitious name.
      Without your prior written consent, I do not and will not use any other
      name and will preserve my existing name, trade names and franchises.

15. APPLICABLE LAW. This Note is governed by the laws of Nebraska, the United
States of America and to the extent required, by the laws of the jurisdiction
where the Property is located. In the event of a dispute, the exclusive forum,
venue and place of jurisdiction will be in Nabraska, unless otherwise required
by law.

16. JOINT AND INDIVIDUAL LIABILITY AND SUCCESSORS. My obligation to pay this
Loan is independent of the obligation of any other person who has also agreed to
pay it. You may sue me alone, or anyone else who is obligated on this Loan, or
any number of us together, to collect this Loan. Extending this Loan or new
obligations under this Loan, will not affect my duty under this Loan and I will
still be obligated to pay this Loan. The duties and benefits of this Loan will
bind and benefit the Successors and assigns of you and me.

17. AMENDMENT, INTEGRATION AND SEVERABILITY. This Note may not be amended or
modified by oral agreement. No amendment or modification of this Note is
effective unless made in writing and executed by you and me. This Note is the
complete and final expression of the agreement. If any provision of this Note is
unenforceable, then the unenforceable provision will be severed and the
remaining provisions will still be enforceable.

18. INTERPRETATION. Whenever used, the singular includes the plural and the
plural includes the singular. The section headings are for convenience only and
are not to be used to interpret or define the terms of this Note.

19. NOTICE, FINANCIAL REPORTS AND ADDITIONAL DOCUMENTS. Unless otherwise
required by law, any notice will be given by delivering it or mailing it by
first class mail to the appropriate party's address listed in the DATE AND
PARTIES section, or to any other address designated in writing. Notice to one
party will be deemed to be notice to all parties. I will inform you in writing
of any change in my name, address or other application information. I will
provide you any financial statement or information you request. All financial
statements and information I give You will be correct and complete. I agree to
sign, deliver, and file any additional documents or certifications that you may
consider necessary to perfect, continue, and preserve my obligations under this
Loan and to confirm your lien status on any Property. Time is of the essence.

20. CREDIT INFORMATION. I agree to supply you with whatever information you
reasonably request. You will make requests for this information without undue
frequency, and will give me reasonable time in which to supply the information.

21. ERRORS AND OMISSIONS. I agree, if requested by you, to fully cooperate in
the correction, if necessary, in the reasonable discretion of you of any and all
loan closing documents so that all documents accurately describe the loan
between you and me. I agree to assume all costs including by way of illustration
and not limitation, actual expenses, legal fees and marketing losses for failing
to reasonably comply with your requests within thirty (30) days.

<TABLE>
<S>                                   <C>                                                         <C>
M-Tron Industries, Inc.
Nebraska Promissory Note                                                                  Initials_____
NE/4XX27073500725200004364003051404N  (c)1996, Bankers Systems, Inc., St. Cloud, MN [ILLEGIBLE]   Page 3
</TABLE>

<PAGE>

A CREDIT AGREEMENT MUST BE IN WRITING TO BE ENFORCEABLE UNDER NEBRASKA LAW. TO
PROTECT YOU AND US FROM ANY MISUNDERSTANDINGS OR DISAPPOINTMENTS, ANY CONTRACT,
PROMISE, UNDERTAKING, OR OFFER TO FOREBEAR REPAYMENT OF MONEY OR TO MAKE ANY
OTHER FINANCIAL ACCOMMODATION IN CONNECTION WITH THIS LOAN OF MONEY OR GRANT OR
EXTENSION OF CREDIT, OR ANY AMENDMENT OF, CANCELLATION OF, WAIVER OF, OR
SUBSTITUTION FOR ANY OR ALL OF THE TERMS OR PROVISIONS OF ANY INSTRUMENT OR
DOCUMENT EXECUTED IN CONNECTION WITH THIS LOAN OF MONEY OR GRANT OR EXTENSION OF
CREDIT, MUST BE IN WRITING TO BE EFFECTIVE.

BORROWER:

  M-Tron Industries, Inc.

    By  DAVID L. REIN
       -------------------------
    Authorized Signer

22. SIGNATURES. By signing, I agree to the terms contained in this Note. I also
acknowledge receipt of a copy of this Note.

BORROWER:

  M-Tron Industries, Inc.

    By  DAVID L. REIN
       -------------------------
    Authorized Signer

LENDER:

  First National Bank of Omaha

    By: /s/ James R. Kamm
        -----------------------------
        James R. Kamm, Vice President

<TABLE>
<S>                                   <C>                                                          <C>
M-Tron Industries, Inc.
Nebraska Promissory Note                                                                   Initials______
NE/4XX27073500725200004364003051404N  (c)(1996) Bankers Systems, Inc., St. Cloud, MN [ILLEGIBLE]   Page 4
</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>5
<FILENAME>b51118lcexv31.txt
<DESCRIPTION>EX-31 SECTION 302 CERTIFICATIONS OF CEO & CFO
<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 quarterly
      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
            requirements 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 11, 2004                     /s/ Ralph R. Papitto
                                          --------------------------------------
                                          RALPH R. PAPITTO
                                          Chairman and Chief Executive Officer

<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 quarterly 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 11, 2004                /s/ Raymond H. Keller
                                      ------------------------------------------
                                      RAYMOND H. KELLER
                                      Vice President and Chief Financial Officer


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>6
<FILENAME>b51118lcexv32.txt
<DESCRIPTION>EX-32 SECTION 906 CERTIFICATIONS OF CEO & 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, 2004, 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:

      (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 11, 2004

Raymond H. Keller
Chief Financial Officer
August 11, 2004

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