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<SEC-DOCUMENT>0000061004-08-000012.txt : 20081114
<SEC-HEADER>0000061004-08-000012.hdr.sgml : 20081114
<ACCEPTANCE-DATETIME>20081114081353
ACCESSION NUMBER:		0000061004-08-000012
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20080930
FILED AS OF DATE:		20081114
DATE AS OF CHANGE:		20081114

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			LGL GROUP INC
		CENTRAL INDEX KEY:			0000061004
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTRONIC COMPONENTS, NEC [3679]
		IRS NUMBER:				381799862
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-00106
		FILM NUMBER:		081187078

	BUSINESS ADDRESS:	
		STREET 1:		2525 SHADER ROAD
		CITY:			ORLANDO
		STATE:			FL
		ZIP:			32804
		BUSINESS PHONE:		(407) 298-2000

	MAIL ADDRESS:	
		STREET 1:		2525 SHADER ROAD
		CITY:			ORLANDO
		STATE:			FL
		ZIP:			32804

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	LYNCH CORP
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>sept30200810qv5clean.htm
<DESCRIPTION>SEP30200810Q
<TEXT>
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<HTML><HEAD><TITLE>UNITED STATES</TITLE>
<META content="Lynch Corp" name=author>
<META content=11/13/2008 name=date>
</HEAD>
<BODY
style="FONT-SIZE: 10pt; COLOR: #000000; LINE-HEIGHT: 12pt; FONT-FAMILY: Times New Roman">
<DIV style="WIDTH: 624px">
<P style="FONT-SIZE: 14pt; MARGIN: 0px; LINE-HEIGHT: 16pt"
align=center><B>UNITED STATES</B></P>
<P style="FONT-SIZE: 14pt; MARGIN: 0px; LINE-HEIGHT: 16pt"
align=center><B>SECURITIES &amp; EXCHANGE COMMISSION</B></P>
<P style="FONT-SIZE: 14pt; MARGIN: 0px; LINE-HEIGHT: 16pt"
align=center><B>WASHINGTON, D.C. 20549</B></P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 14pt; MARGIN: 0px; LINE-HEIGHT: 16pt"
align=center><B><U>FORM 10-Q</U></B></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=81></TD>
<TD width=553></TD></TR>
<TR>
<TD vAlign=top width=81>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">(Mark One)</P></TD>
<TD vAlign=top width=553>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=81>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 13.25pt; FONT-FAMILY: Wingdings">x</P></TD>
<TD vAlign=top width=553>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</P></TD></TR>
<TR>
<TD vAlign=top width=81>
<P>&nbsp;</P></TD>
<TD vAlign=top width=553>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=81>
<P>&nbsp;</P></TD>
<TD vAlign=top width=553>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">For the quarterly period ended
<U>September 30, 2008</U></P></TD></TR>
<TR>
<TD vAlign=top width=634 colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt" align=center>OR </P></TD></TR>
<TR>
<TD vAlign=top width=81>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 13.25pt; FONT-FAMILY: Wingdings">o</P></TD>
<TD vAlign=top width=553>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934</P></TD></TR></TABLE>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px">For the transition period from ____________ to
____________</P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px">Commission File No. <U>1-106</U></P>
<P style="FONT-SIZE: 20pt; MARGIN: 0px; LINE-HEIGHT: 22pt" align=center><B>THE
LGL GROUP, INC.</B></P>
<P
style="BORDER-TOP: #000000 1px solid; MARGIN-TOP: 2px; MARGIN-BOTTOM: 0px; LINE-HEIGHT: 2pt; PADDING-TOP: 4px"
align=justify><BR></P>
<P style="MARGIN: 0px" align=center>(Exact Name of Registrant as Specified in
Its Charter)</P>
<P style="MARGIN: 0px" align=center><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=291></TD>
<TD width=336></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=291>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">Delaware</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=336>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">38-1799862</P></TD></TR>
<TR>
<TD vAlign=top width=291>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">(State or Other Jurisdiction
of</P></TD>
<TD vAlign=top width=336>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">(I.R.S. Employer
Identification No.) </P></TD></TR>
<TR>
<TD vAlign=top width=291>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">Incorporation or
Organization)</P></TD>
<TD vAlign=top width=336>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=291>
<P>&nbsp;</P></TD>
<TD vAlign=top width=336>
<P>&nbsp;</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=291>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">2525 Shader Rd., Orlando,
Florida</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=336>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">32804</P></TD></TR>
<TR>
<TD vAlign=top width=291>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">(Address of principal
executive offices)</P></TD>
<TD vAlign=top width=336>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">(Zip Code)</P></TD></TR>
<TR>
<TD vAlign=top width=627 colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=627
colSpan=2><P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt" align=center>(407)
298-2000</P></TD></TR>
<TR>
<TD vAlign=top width=627 colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt" align=center>(Registrant&#146;s
telephone number, including area code)</P></TD></TR>
<TR>
<TD vAlign=top width=291>
<P>&nbsp;</P></TD>
<TD vAlign=top width=336>
<P>&nbsp;</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=291>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=336>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=627 colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt" align=center>(Former name,
former address, and former fiscal year<FONT style="COLOR: #0000ff"><U> ,
</U></FONT>if changed since last report)</P></TD></TR></TABLE>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px">Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.</P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px; LINE-HEIGHT: normal">Yes <FONT
style="FONT-SIZE: 12pt; FONT-FAMILY: Wingdings">x</FONT> &nbsp;&nbsp;No <FONT
style="FONT-SIZE: 12pt; FONT-FAMILY: Wingdings">o</FONT> </P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px" align=justify>Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company. &nbsp;See the
definitions of &#147;large accelerated filer,&#148; &#147;accelerated filer&#148; and &#147;smaller
reporting company&#148; in Rule 12b-2 of the Exchange Act. &nbsp;(Check one):</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: -16px; TEXT-INDENT: 48px"
align=justify>Large accelerated filer <FONT
style="FONT-FAMILY: Wingdings">o</FONT> </P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 336px"
align=justify>Accelerated filer <FONT style="FONT-FAMILY: Wingdings">o</FONT>
</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: -16px; TEXT-INDENT: 48px"
align=justify>Non-accelerated filer <FONT
style="FONT-FAMILY: Wingdings">o</FONT></P>
<P style="MARGIN: 0px; TEXT-INDENT: 336px; LINE-HEIGHT: normal"
align=justify>Smaller reporting company <FONT
style="FONT-SIZE: 12pt; FONT-FAMILY: Wingdings">x</FONT></P>
<P style="MARGIN: 0px; TEXT-INDENT: 48px">(Do not check if a smaller reporting
company) </P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px">Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).</P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px; LINE-HEIGHT: normal">Yes <FONT
style="FONT-SIZE: 12pt; FONT-FAMILY: Wingdings">o</FONT> &nbsp;&nbsp;No <FONT
style="FONT-SIZE: 12pt; FONT-FAMILY: Wingdings">x</FONT> </P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 5px">Indicate the number of shares
outstanding of each of the issuer &#146;s classes of c ommon s tock, as of the latest
practicable date.</P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=189></TD>
<TD width=138></TD>
<TD width=207></TD></TR>
<TR>
<TD vAlign=top width=189>
<P
style="MARGIN: 0px; TEXT-INDENT: 81px; LINE-HEIGHT: 11.4pt"><U>Class</U></P></TD>
<TD vAlign=top width=138>
<P>&nbsp;</P></TD>
<TD vAlign=top width=207>
<P
style="MARGIN: 0px; TEXT-INDENT: 8px; LINE-HEIGHT: 11.4pt"><U>Outstanding
at November 13, 2008 </U></P></TD></TR>
<TR>
<TD vAlign=bottom width=189>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">Common Stock, $0.01 par
value</P></TD>
<TD vAlign=bottom width=138>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=207>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt"
align=center>2,180,355</P></TD></TR></TABLE>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 12px double"><BR><BR></P>
<P style="MARGIN: 0px" align=justify>1</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="PAGE-BREAK-BEFORE: always; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 12px double"><B>INDEX</B></P>
<P style="MARGIN: 0px"><BR></P><A name=_DV_M24></A>
<P style="MARGIN: 0px" align=center><B>THE LGL GROUP, INC.</B></P>
<P style="MARGIN: 0px" align=center><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=63></TD>
<TD width=502></TD>
<TD width=45></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P style="MARGIN: 0px">PART I.</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">FINANCIAL INFORMATION</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P style="MARGIN: 0px">Item 1.</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">Condensed Consolidated Financial
Statements (Unaudited)</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">Condensed Consolidated Balance
Sheets:</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px">3</P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">&#150;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2008</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">&#150;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 31, 2007</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">Condensed Consolidated
Statements of Operations: </P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px">5</P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">&#150;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Three months ended
September 30, 2008 and 2007</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">&#150;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nine months ended
September 30, 2008 and 2007</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">Condensed Consolidated
Statements of Stockholders&#146; Equity: </P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px">6</P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">&#150;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nine months ended
September 30, 2008</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">Condensed Consolidated
Statements of Cash Flows:</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px">7</P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">&#150;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nine months ended
September 30, 2008 and 2007</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">Notes to Condensed Consolidated
Financial Statements:</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px">8</P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P style="MARGIN: 0px">Item 2.</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">Management&#146;s Discussion and
Analysis of Financial Condition and </P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 50px">Results of Operations</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px">15</P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P style="MARGIN: 0px">Item 3.</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">Quantitative and Qualitative
Disclosure About Market Risk</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px">19</P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P style="MARGIN: 0px">Item 4T.</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">Controls and Procedures</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px">19</P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P style="MARGIN: 0px">PART II.</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">OTHER INFORMATION</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P style="MARGIN: 0px">Item 1.</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">Legal Proceedings</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px">21</P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P style="MARGIN: 0px">Item 1A.</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">Risk Factors</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px">21</P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=502>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=63>
<P style="MARGIN: 0px">Item 6.</P></TD>
<TD vAlign=bottom width=502>
<P style="MARGIN: 0px; TEXT-INDENT: 32px">Exhibits </P></TD>
<TD vAlign=bottom width=45>
<P style="MARGIN: 0px">21</P></TD></TR></TABLE>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P><A name=_DV_M25></A>
<P style="MARGIN: 0px"><BR><BR></P>
<P style="MARGIN: 0px" align=justify>2</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; PAGE-BREAK-BEFORE: always"
align=center><B>PART I &nbsp;</B></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><B>FINANCIAL
INFORMATION</B></P><A name=_DV_M26></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 48px"><B>Item 1 &#151;
</B><FONT style="FONT-FAMILY: Times New Roman Bold"><B><U>Condensed Consolidated
Financial Statements.</U></B></FONT></P><A name=_DV_M27></A>
<P style="MARGIN: 0px" align=center><B><U>THE LGL GROUP, INC. </U></B></P><A
name=_DV_M28></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 6px" align=center><B><U>CONDENSED
CONSOLIDATED BALANCE SHEETS &#151; UNAUDITED</U></B></P><A name=_DV_M29></A>
<P style="MARGIN: 0px" align=center>(In thousands)</P>
<P style="MARGIN: 0px" align=center><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=453></TD>
<TD width=96></TD>
<TD width=90></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">&nbsp;</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt"
align=center>September 30,</P>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid"
align=center>2008</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt"
align=center>December 31,</P>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid"
align=center>2007 (A)</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">ASSETS</P></TD>
<TD vAlign=bottom width=96>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=90>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Current
Assets:</P></TD>
<TD vAlign=bottom width=96>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=90>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 26px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Cash
and cash equivalents</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; MARGIN: 0px; LINE-HEIGHT: 11.4pt">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,604</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; LINE-HEIGHT: 11.4pt">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,233</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 25px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Investments
- - marketable securities</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 45px; LINE-HEIGHT: 11.4pt">21</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 11.4pt">48</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 25px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Accounts
receivable, less allowances of $170 and $415, respectively</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 29px; LINE-HEIGHT: 11.4pt">6,065</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 31px; LINE-HEIGHT: 11.4pt">6,382</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 25px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Inventories</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 29px; LINE-HEIGHT: 11.4pt">5,728</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 31px; LINE-HEIGHT: 11.4pt">5,181</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 25px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Prepaid
expenses and other current assets</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 39px; LINE-HEIGHT: 11.4pt">269</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 41px; LINE-HEIGHT: 11.4pt">381</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; MARGIN-TOP: 0px; MARGIN-BOTTOM: -16px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assets
of Discontinued Operations</P>
<P
style="PADDING-RIGHT: 6px; MARGIN: 0px; TEXT-INDENT: 444px; LINE-HEIGHT: 11.4pt">&nbsp;</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 50px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">--</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 54px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">5</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 48px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Total
Current Assets</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 22px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">17,687</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 21px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">17,230
</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Property,
Plant and Equipment:</P></TD>
<TD vAlign=bottom width=96>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=90>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 26px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Land</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 39px; LINE-HEIGHT: 11.4pt">698</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 41px; LINE-HEIGHT: 11.4pt">698</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 26px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Buildings
and improvements</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 29px; LINE-HEIGHT: 11.4pt">5,043</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 31px; LINE-HEIGHT: 11.4pt">5,020</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 25px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Machinery
and equipment</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 22px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">12,697</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 24px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">12,541</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 26px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Gross
Property, Plant and Equipment</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 22px; LINE-HEIGHT: 11.4pt">18,438</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 24px; LINE-HEIGHT: 11.4pt">18,259</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 26px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Less:
Accumulated Depreciation</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 13px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">(13,862)</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 15px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">(13,196)</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
Property, Plant and Equipment</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 29px; LINE-HEIGHT: 11.4pt">4,576</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 31px; LINE-HEIGHT: 11.4pt">5,063</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 24px; MARGIN: 0px; TEXT-INDENT: -12px; LINE-HEIGHT: 11.4pt">Deferred
Income Taxes</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 39px; LINE-HEIGHT: 11.4pt">111</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 41px; LINE-HEIGHT: 11.4pt">111</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 24px; MARGIN: 0px; TEXT-INDENT: -12px; LINE-HEIGHT: 11.4pt">Other
Assets</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 39px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">415</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 41px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">472</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; MARGIN: 0px; TEXT-INDENT: 18px; LINE-HEIGHT: 11.4pt">Total
Assets</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 3px double">&nbsp;&nbsp;&nbsp;$
&nbsp;22,789</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 3px double">&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;22,876</P></TD></TR></TABLE>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px" align=center><BR><BR></P>
<P style="MARGIN: 0px" align=justify>3</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="PAGE-BREAK-BEFORE: always; MARGIN: 0px" align=center>THE LGL GROUP,
INC. </P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 6px" align=center><B><U>CONDENSED
CONSOLIDATED BALANCE SHEETS &#151; UNAUDITED, continued</U></B></P>
<P style="MARGIN: 0px" align=center>(In thousands, except share and per share
amounts)</P>
<P style="MARGIN: 0px"><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=453></TD>
<TD width=96></TD>
<TD width=90></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">&nbsp;</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt"
align=center>September 30,</P>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid"
align=center>2008</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt"
align=center>December 31,</P>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid"
align=center>2007 (A)</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">LIABILITIES
AND STOCKHOLDERS&#146; EQUITY</P></TD>
<TD vAlign=bottom width=96>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=90>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Current
Liabilities:</P></TD>
<TD vAlign=bottom width=96>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=90>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 26px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Note
payable to bank</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; MARGIN: 0px; LINE-HEIGHT: 11.4pt">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,074</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; LINE-HEIGHT: 11.4pt">&nbsp;&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,035 </P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 25px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Trade
accounts payable</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 29px; LINE-HEIGHT: 11.4pt">2,541</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 31px; LINE-HEIGHT: 11.4pt">2,535</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 25px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Accrued
compensation expense</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 29px; LINE-HEIGHT: 11.4pt">1,877</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 31px; LINE-HEIGHT: 11.4pt">1,481</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 26px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt"
align=center>Other accrued expenses </P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 39px; LINE-HEIGHT: 11.4pt">752</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 41px; LINE-HEIGHT: 11.4pt">771</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 26px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Current
maturities of long-term debt</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 39px; LINE-HEIGHT: 11.4pt">411</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 41px; LINE-HEIGHT: 11.4pt">419</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; MARGIN: 0px; TEXT-INDENT: 18px; LINE-HEIGHT: 11.4pt">Liabilities
of Discontinued Operations</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 39px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">146</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 41px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">231</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 42px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Total
Current Liabilities</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 29px; LINE-HEIGHT: 11.4pt">7,801</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 31px; LINE-HEIGHT: 11.4pt">6,472</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Long-term
debt</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 29px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">3,748</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 31px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">4,035</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 42px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Total
Liabilities</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 23px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">11,549</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 4px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,507</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=96>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=90>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; MARGIN: 0px; LINE-HEIGHT: 11.4pt">Commitments
and Contingencies</P></TD>
<TD vAlign=bottom width=96>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=90>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=96>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=90>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; MARGIN: 0px; LINE-HEIGHT: 11.4pt">Stockholders&#146;
Equity:</P></TD>
<TD vAlign=bottom width=96>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=90>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 26px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Common
stock, $0.01 par value - 10,000,000 shares authorized; 2,188,510 shares
issued; 2,180,355 and 2,167,202 shares outstanding, respectively
&nbsp;</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 51px; LINE-HEIGHT: 11.4pt">22</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 11.4pt">22</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 25px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Additional
paid-in capital</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 28px; LINE-HEIGHT: 11.4pt">20,763</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 24px; LINE-HEIGHT: 11.4pt">20,921</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 25px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Accumulated
deficit</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 26px; LINE-HEIGHT: 11.4pt">(9,258)</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 22px; LINE-HEIGHT: 11.4pt">(8,066)</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 25px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Accumulated
other comprehensive loss</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 36px; LINE-HEIGHT: 11.4pt">(132)</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 32px; LINE-HEIGHT: 11.4pt">(101)</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 25px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Treasury
stock, at cost, 8,155 and 21,308 shares, respectively</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 36px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">(155)</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 32px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">(407)</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 42px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Total
Stockholders&#146; Equity</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 28px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">11,240</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 14px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid">&nbsp;&nbsp;&nbsp;12,369</P></TD></TR>
<TR>
<TD vAlign=bottom width=453>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 42px; MARGIN: 0px; TEXT-INDENT: -6px; LINE-HEIGHT: 11.4pt">Total
Liabilities and Stockholders&#146; Equity</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 3px double">&nbsp;&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;22,789</P></TD>
<TD vAlign=bottom width=90>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 3px double">&nbsp;&nbsp;$
&nbsp;&nbsp;&nbsp;22,876</P></TD><A name=_DV_M35></A></TR></TABLE>
<P
style="MARGIN-TOP: 13px; PADDING-LEFT: 48px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -24px">(A)</P>
<P style="PADDING-LEFT: 48px; MARGIN: 0px">The Condensed Consolidated Balance
Sheet at December 31, 2007 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. <A name=_DV_M36></A>&nbsp;</P>
<P style="PADDING-LEFT: 24px; MARGIN: 0px"><A name=_DV_M37></A>&nbsp;</P>
<P style="MARGIN: 0px" align=center>See accompanying Notes to Condensed
Consolidated Financial Statements.</P><A name=_DV_M38></A>
<P style="MARGIN: 0px"><BR><BR></P>
<P style="MARGIN: 0px" align=justify>4</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="PAGE-BREAK-BEFORE: always; MARGIN: 0px"><BR></P><A name=_DV_M39></A><A
name=_DV_M40></A>
<P style="MARGIN: 0px"><BR></P><A name=_DV_M41></A>
<P style="MARGIN: 0px" align=center>THE LGL GROUP, INC. </P><A name=_DV_M42></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 6px" align=center><B><U>CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS &#151; UNAUDITED</U></B></P><A
name=_DV_M43></A>
<P style="MARGIN: 0px" align=center>(In thousands, except share and per share
amounts)</P>
<P style="MARGIN: 0px"><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=351></TD>
<TD width=78></TD>
<TD width=78></TD>
<TD width=19></TD>
<TD width=76></TD>
<TD width=78></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P style="MARGIN: 0px">&nbsp;</P>
<P style="MARGIN: 0px">&nbsp;</P></TD>
<TD vAlign=bottom width=156 colSpan=2>
<P style="PADDING-BOTTOM: 4px; MARGIN: 0px" align=center>Three Months </P>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center>Ended September 30,</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=154 colSpan=2>
<P style="PADDING-BOTTOM: 4px; MARGIN: 0px" align=center>Nine Months </P>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center>Ended September 30,</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P style="MARGIN: 0px">&nbsp;</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 23px; BORDER-BOTTOM: #000000 1px solid">2008</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 23px; BORDER-BOTTOM: #000000 1px solid">2007</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 23px; BORDER-BOTTOM: #000000 1px solid">2008</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 23px; BORDER-BOTTOM: #000000 1px solid">2007</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=78>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=78>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=76>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=78>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px"><B>REVENUES</B></P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 0px">$
&nbsp;&nbsp;10,248</P></TD>
<TD vAlign=bottom width=78>
<P style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px"
align=right>$ &nbsp;&nbsp;&nbsp;&nbsp;9,612 </P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -3px">$
&nbsp;30,181 </P></TD>
<TD vAlign=bottom width=78>
<P style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px"
align=right>$ &nbsp;&nbsp;&nbsp;29,003 </P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Cost
and expenses:</P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: -6px">Manufacturing
cost of sales</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 23px">7,627</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 27px">7,350</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 13px">22,325</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 21px">22,242</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: -6px">Engineering,
selling and administrative</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 23px">2,714</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 27px">2,545</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 19px">8,799</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 27px">7,807</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: -6px">Impairment
loss on Lynch Systems&#146; assets</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 44px; BORDER-BOTTOM: #000000 1px solid">--</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 48px; BORDER-BOTTOM: #000000 1px solid">--</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 40px; BORDER-BOTTOM: #000000 1px solid">--</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 37px; BORDER-BOTTOM: #000000 1px solid">905</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">OPERATING
LOSS</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 31px; BORDER-BOTTOM: #000000 1px solid">(93)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 28px; BORDER-BOTTOM: #000000 1px solid">(283)</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 20px; BORDER-BOTTOM: #000000 1px solid">(943)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 18px; BORDER-BOTTOM: #000000 1px solid">(1,951)</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Other
income (expense):</P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: -6px">Investment
income</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 44px">--</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 48px">--</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 40px">--</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 27px">1,526</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: -6px">Interest
expense, net</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 31px">(79)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 35px">(79)</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 20px">(208)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 28px">(260)</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: -6px">Gain
on sale of land</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 44px">--</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 48px">--</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 40px">--</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 44px">88</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: -6px">Gain
on sale of equipment</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 33px">255</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 48px">--</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 29px">255</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 48px">--</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: -6px">Other
expense </P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 31px; BORDER-BOTTOM: #000000 1px solid">(58)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 44px; BORDER-BOTTOM: #000000 1px solid">15</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 20px; BORDER-BOTTOM: #000000 1px solid">(131)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 35px; BORDER-BOTTOM: #000000 1px solid">(24)</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P style="MARGIN: 0px">&nbsp;&nbsp;&nbsp;Total Other Income
(Expense)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 33px; BORDER-BOTTOM: #000000 1px solid">118</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 35px; BORDER-BOTTOM: #000000 1px solid">(64)</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 27px; BORDER-BOTTOM: #000000 1px solid">(84)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 27px; BORDER-BOTTOM: #000000 1px solid">1,330</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">INCOME
(LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 40px">25</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 28px">(347)</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 10px">(1,027)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 28px">(621)</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Benefit
(Provision) for income taxes</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 31px; BORDER-BOTTOM: #000000 1px solid">(84)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 35px; BORDER-BOTTOM: #000000 1px solid">(93)</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 20px; BORDER-BOTTOM: #000000 1px solid">(190)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 28px; BORDER-BOTTOM: #000000 1px solid">(134)</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px"><B>LOSS
</B><FONT style="FONT-FAMILY: Times New Roman Bold"><B>FROM CONTINUING
OPERATIONS</B></FONT></P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 31px">(59)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 28px">(440)</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 10px">(1,217)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 28px">(755)</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px"><B>Discontinued
Operations:</B></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 0px">Income
(Loss) from Discontinued Operations</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 40px">30</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 28px">(153)</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 36px">25</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 18px">(1,131)</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 0px">Gain
(Loss) on sale of Lynch Systems</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 44px; BORDER-BOTTOM: #000000 1px solid">--</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 48px; BORDER-BOTTOM: #000000 1px solid">--</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 40px; BORDER-BOTTOM: #000000 1px solid">--</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 28px; BORDER-BOTTOM: #000000 1px solid">(982)</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 6px"><B>Income
(Loss) from discontinued operations</B></P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 40px; BORDER-BOTTOM: #000000 1px solid">30</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 28px; BORDER-BOTTOM: #000000 1px solid">(153)</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 36px; BORDER-BOTTOM: #000000 1px solid">25</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 18px; BORDER-BOTTOM: #000000 1px solid">(2,113)</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P style="PADDING-RIGHT: 6px; MARGIN: 0px"><B>NET LOSS</B></P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 4px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(29)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 3px double"
align=right>$ &nbsp;&nbsp;&nbsp;&nbsp;(593)</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;(1,192)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 3px double"
align=right>$ &nbsp;&nbsp;(2,868)</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=78>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=78>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=76>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=78>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Weighted
average shares outstanding, basic and diluted.</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 0px; BORDER-BOTTOM: #000000 3px double">2,176,555</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 4px; BORDER-BOTTOM: #000000 3px double">2,157,528</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 4px; BORDER-BOTTOM: #000000 3px double">2,172,090</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 4px; BORDER-BOTTOM: #000000 3px double">2,155,654</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=78>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=78>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=76>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=78>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 32px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">BASIC
AND DILUTED LOSS PER SHARE FROM CONTINUING OPERATIONS</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 3px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;(0.03)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 3px double"
align=right>$ &nbsp;&nbsp;&nbsp;(0.20)</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 10px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;(0.56) </P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 3px double"
align=right>$ &nbsp;&nbsp;&nbsp;(.035)</P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">BASIC
AND DILUTED GAIN (LOSS) PER SHARE FROM DISCONTINUED OPERATIONS</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 4px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;0.02</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 3px double"
align=right>$ &nbsp;&nbsp;&nbsp;(0.07)</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 4px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.01</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 3px double"
align=right>$ &nbsp;&nbsp;&nbsp;(0.98) </P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=351>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">BASIC
AND DILUTED NET LOSS PER SHARE</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 5px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 3px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;(0.01)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 3px double"
align=right>$ &nbsp;&nbsp;&nbsp;(0.27)</P></TD>
<TD vAlign=bottom width=19>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 10px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;(0.55)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 3px double"
align=right>$ &nbsp;&nbsp;&nbsp;(1.33) </P></TD></TR></TABLE>
<P style="MARGIN: 0px"><BR></P><A name=_DV_M44></A>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P><A name=_DV_M45></A>
<P style="MARGIN: 0px" align=center><I>See accompanying Notes to Condensed
Consolidated Financial Statements</I></P><A name=_DV_M46></A>
<P style="MARGIN: 0px" align=center><BR><BR></P>
<P style="MARGIN: 0px" align=justify>5</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="PAGE-BREAK-BEFORE: always; MARGIN: 0px" align=center><B><U>THE LGL
GROUP, INC. </U></B></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 6px" align=center><B><U>CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS&#146; EQUITY &#151; UNAUDITED</U></B></P>
<P style="MARGIN: 0px" align=center>(In thousands, except share amounts)</P>
<P style="MARGIN: 0px" align=center><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=185></TD>
<TD width=80></TD>
<TD width=66></TD>
<TD width=72></TD>
<TD width=83></TD>
<TD width=96></TD>
<TD width=67></TD>
<TD width=63></TD>
<TD width=0.867></TD></TR>
<TR>
<TD vAlign=bottom width=185>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=80>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid"
align=center><B>Shares of <BR>Common Stock<BR>Outstanding</B></P></TD>
<TD vAlign=bottom width=66>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid"
align=center><B>Common<BR>Stock</B></P></TD>
<TD vAlign=bottom width=72>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid"
align=center><B>Additional<BR>Paid-In<BR>Capital</B></P></TD>
<TD vAlign=bottom width=83>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid"
align=center><B>Accumulated Deficit</B></P></TD>
<TD vAlign=bottom width=96>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid"
align=center><B>Accumulated Other Comprehensive Loss</B></P></TD>
<TD vAlign=bottom width=67>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid"
align=center><B>Treasury Stock</B></P></TD>
<TD vAlign=bottom width=64 colSpan=2>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid"
align=center><B>Total</B></P></TD></TR>
<TR>
<TD vAlign=bottom width=185>
<P style="FONT-SIZE: 9pt; MARGIN: 0px; LINE-HEIGHT: 11pt"
align=justify>Balance at January 1, 2008</P></TD>
<TD vAlign=bottom width=80>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 9px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid">2,167,202</P></TD>
<TD vAlign=bottom width=66>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22</P></TD>
<TD vAlign=bottom width=72>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid">$
&nbsp;&nbsp;&nbsp;&nbsp;20,921</P></TD>
<TD vAlign=bottom width=83>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8,066)</P></TD>
<TD vAlign=bottom width=96>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(101)</P></TD>
<TD vAlign=bottom width=67>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(407)</P></TD>
<TD vAlign=bottom width=64 colSpan=2>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid">$
&nbsp;&nbsp;12,369</P></TD></TR>
<TR>
<TD vAlign=bottom width=185>
<P style="FONT-SIZE: 9pt; MARGIN: 0px; LINE-HEIGHT: 11pt"
align=justify>Comprehensive loss:</P></TD>
<TD vAlign=bottom width=80>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=66>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=72>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=83>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=96>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=67>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=64 colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=185>
<P
style="PADDING-LEFT: 24px; FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: -12px; LINE-HEIGHT: 11pt"
align=justify>Net loss for period</P></TD>
<TD vAlign=bottom width=80>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 49px; LINE-HEIGHT: 11pt">--</P></TD>
<TD vAlign=bottom width=66>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 39px; LINE-HEIGHT: 11pt">--</P></TD>
<TD vAlign=bottom width=72>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 44px; LINE-HEIGHT: 11pt">--</P></TD>
<TD vAlign=bottom width=83>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 22px; LINE-HEIGHT: 11pt">(1,192)</P></TD>
<TD vAlign=bottom width=96>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 56px; LINE-HEIGHT: 11pt">--</P></TD>
<TD vAlign=bottom width=67>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 38px; LINE-HEIGHT: 11pt">--</P></TD>
<TD vAlign=bottom width=64 colSpan=2>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 10px; LINE-HEIGHT: 11pt">(1,192)</P></TD></TR>
<TR>
<TD vAlign=bottom width=185>
<P
style="PADDING-LEFT: 24px; FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: -12px; LINE-HEIGHT: 11pt"
align=justify>Other comprehensive loss</P></TD>
<TD vAlign=bottom width=80>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 49px; LINE-HEIGHT: 11pt">--</P></TD>
<TD vAlign=bottom width=66>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 39px; LINE-HEIGHT: 11pt">--</P></TD>
<TD vAlign=bottom width=72>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 44px; LINE-HEIGHT: 11pt">--</P></TD>
<TD vAlign=bottom width=83>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 49px; LINE-HEIGHT: 11pt">--</P></TD>
<TD vAlign=bottom width=96>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 44px; LINE-HEIGHT: 11pt">(31)</P></TD>
<TD vAlign=bottom width=67>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 38px; LINE-HEIGHT: 11pt">--</P></TD>
<TD vAlign=bottom width=64 colSpan=2>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 25px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid">(31)</P></TD></TR>
<TR>
<TD vAlign=bottom width=185>
<P
style="PADDING-LEFT: 48px; FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: -12px; LINE-HEIGHT: 11pt"
align=justify>Comprehensive loss</P></TD>
<TD vAlign=bottom width=80>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=66>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=72>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=83>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=96>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=67>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=64 colSpan=2>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 10px; LINE-HEIGHT: 11pt">(1,223)</P></TD></TR>
<TR>
<TD vAlign=bottom width=185>
<P
style="PADDING-LEFT: 24px; FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: -12px; LINE-HEIGHT: 11pt"
align=justify>Stock based compensation</P></TD>
<TD vAlign=bottom width=80>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 49px; LINE-HEIGHT: 11pt">--</P></TD>
<TD vAlign=bottom width=66>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 39px; LINE-HEIGHT: 11pt">--</P></TD>
<TD vAlign=bottom width=72>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 40px; LINE-HEIGHT: 11pt">94</P></TD>
<TD vAlign=bottom width=83>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 49px; LINE-HEIGHT: 11pt">--</P></TD>
<TD vAlign=bottom width=96>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 56px; LINE-HEIGHT: 11pt">--</P></TD>
<TD vAlign=bottom width=67>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 38px; LINE-HEIGHT: 11pt">--</P></TD>
<TD vAlign=bottom width=64 colSpan=2>
<P
style="FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: 33px; LINE-HEIGHT: 11pt">94</P></TD></TR>
<TR>
<TD vAlign=bottom width=185>
<P
style="PADDING-LEFT: 24px; FONT-SIZE: 9pt; MARGIN: 0px; TEXT-INDENT: -12px; LINE-HEIGHT: 11pt"
align=justify>Issuance of treasury shares for vested restricted
stock</P></TD>
<TD vAlign=bottom width=80>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 24px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid">13,153</P></TD>
<TD vAlign=bottom width=66>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 39px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid">--</P></TD>
<TD vAlign=bottom width=72>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 26px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid">(252)</P></TD>
<TD vAlign=bottom width=83>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 49px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid">--</P></TD>
<TD vAlign=bottom width=96>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 56px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid">--</P></TD>
<TD vAlign=bottom width=67>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 28px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid">252</P></TD>
<TD vAlign=bottom width=64 colSpan=2>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 37px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 1px solid">--</P></TD></TR>
<TR>
<TD vAlign=bottom width=185>
<P style="FONT-SIZE: 9pt; MARGIN: 0px; LINE-HEIGHT: 11pt"
align=justify>Balance at September 30, 2008</P></TD>
<TD vAlign=bottom width=80>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 9px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 3px double">2,180,355</P></TD>
<TD vAlign=bottom width=66>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22 </P></TD>
<TD vAlign=bottom width=72>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;20,763</P></TD>
<TD vAlign=bottom width=83>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(9,258)</P></TD>
<TD vAlign=bottom width=96>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(132)</P></TD>
<TD vAlign=bottom width=67>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(155)</P></TD>
<TD vAlign=bottom width=64 colSpan=2>
<P
style="FONT-SIZE: 9pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11pt; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;11,240</P></TD></TR>
<TR>
<TD vAlign=bottom width=185>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=80>
<P style="MARGIN: 0px" align=justify><BR></P></TD>
<TD vAlign=bottom width=66>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=72>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=83>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=96>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=67>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=64 colSpan=2>
<P>&nbsp;</P></TD></TR></TABLE>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><I>See accompanying Notes to Condensed
Consolidated Financial Statements</I> </P>
<P style="MARGIN: 0px" align=center><BR><BR></P>
<P style="MARGIN: 0px" align=justify>6</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="PAGE-BREAK-BEFORE: always; MARGIN: 0px" align=center><BR></P><A
name=_DV_M47></A><A name=_DV_M48></A>
<P style="MARGIN: 0px"><BR></P><A name=_DV_M49></A>
<P style="MARGIN: 0px" align=center><B><U>THE LGL GROUP, INC. </U></B></P><A
name=_DV_M50></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 6px" align=center><B><U>CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS &#151; UNAUDITED</U></B></P><A
name=_DV_M51></A>
<P style="MARGIN: 0px" align=center>(In thousands)</P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=459></TD>
<TD width=84></TD>
<TD width=78></TD></TR>
<TR>
<TD vAlign=top width=459>
<P
style="FONT-SIZE: 8pt; MARGIN: 0px; LINE-HEIGHT: 10pt"><B></B>&nbsp;</P>
<P
style="FONT-SIZE: 8pt; MARGIN: 0px; LINE-HEIGHT: 10pt"><B></B>&nbsp;</P></TD>
<TD vAlign=top width=162 colSpan=2>
<P style="PADDING-BOTTOM: 4px; MARGIN: 0px" align=center><B>Nine Months
Ended</B></P>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>September 30,</B></P></TD></TR>
<TR>
<TD vAlign=top width=459>
<P
style="FONT-SIZE: 8pt; MARGIN: 0px; LINE-HEIGHT: 10pt"><B></B>&nbsp;</P></TD>
<TD vAlign=top width=84>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>2008</B></P></TD>
<TD vAlign=top width=78>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>2007</B></P></TD></TR>
<TR>
<TD vAlign=top width=459>
<P>&nbsp;</P></TD>
<TD vAlign=top width=84>
<P>&nbsp;</P></TD>
<TD vAlign=top width=78>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px"><B>OPERATING
ACTIVITIES</B></P></TD>
<TD vAlign=bottom width=84>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Net
loss</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: -7px">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,192)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">$
&nbsp;(2,868)</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Adjustments
to reconcile net loss to net cash used in operating activities:</P></TD>
<TD vAlign=bottom width=84>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P style="PADDING-RIGHT: 6px; MARGIN: 0px">Impairment on Lynch Systems&#146;
assets</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 49px">--</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 26px">905</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P style="PADDING-RIGHT: 6px; MARGIN: 0px">Loss on sale of Lynch
Systems</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 49px">--</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 26px">982</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P style="PADDING-RIGHT: 6px; MARGIN: 0px">Depreciation</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 38px">771</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 26px">808</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Stock
based compensation</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 2px; MARGIN: 0px; TEXT-INDENT: 51px">94</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 32px">79</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Amortization
of finite-lived intangible assets</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 45px">56</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 32px">44</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Gain
on sale of land</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 49px">--</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 23px">(88)</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Gain
on sale of equipment</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 29px">(255)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 37px">--</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Gain
realized on sale of marketable securities</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 49px">--</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 7px">(1,526)</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Changes
in operating assets and liabilities:</P></TD>
<TD vAlign=bottom width=84>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: -6px">&nbsp;&nbsp;&nbsp;Receivables</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 38px">317</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 26px">679</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 12px; MARGIN: 0px; TEXT-INDENT: -6px">&nbsp;&nbsp;&nbsp;&nbsp;Inventories</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 29px">(547)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 16px">1,048</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 12px; MARGIN: 0px; TEXT-INDENT: -6px">&nbsp;&nbsp;&nbsp;&nbsp;Accounts
payable and accrued liabilities</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 38px">380</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 17px">(785)</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 12px; MARGIN: 0px; TEXT-INDENT: -6px">&nbsp;&nbsp;&nbsp;&nbsp;Other
assets/liabilities</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 38px; BORDER-BOTTOM: #000000 1px solid">112</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 32px; BORDER-BOTTOM: #000000 1px solid">15</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px">Net cash
used in operating activities of continuing operations</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 29px">(264)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 17px">(707)</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">&nbsp;&nbsp;Net
cash (used in) provided by operating activities of discontinued
operations</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 36px; BORDER-BOTTOM: #000000 1px solid">(80)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 26px; BORDER-BOTTOM: #000000 1px solid">517</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px"><B>&nbsp;&nbsp;Net
cash used in operating activities</B></P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 29px; BORDER-BOTTOM: #000000 1px solid">(344)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 17px; BORDER-BOTTOM: #000000 1px solid">(190)</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=84>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px"><B>INVESTING
ACTIVITIES</B></P></TD>
<TD vAlign=bottom width=84>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Capital
expenditures</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 29px">(284)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 17px">(431)</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Restricted
cash</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 49px">--</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 32px">96</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Proceeds
from sale of marketable securities</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 49px">--</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 16px">2,292</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Proceeds
from sale of land</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 49px">--</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 26px">171</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Proceeds
from sale of equipment</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 38px; BORDER-BOTTOM: #000000 1px solid">255</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 37px; BORDER-BOTTOM: #000000 1px solid">--</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Net
cash (used in) provided by investing activities of continuing
operations</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 36px">(29)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 16px">2,128</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Net
cash provided by investing activities of discontinued operations</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 49px; BORDER-BOTTOM: #000000 1px solid"><B>--</B></P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 26px; BORDER-BOTTOM: #000000 1px solid">722</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px"><B>Net
cash (used in) provided by investing activities</B></P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 36px; BORDER-BOTTOM: #000000 1px solid">(29)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 16px; BORDER-BOTTOM: #000000 1px solid">2,850</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=84>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px"><B>FINANCING
ACTIVITIES</B></P></TD>
<TD vAlign=bottom width=84>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Net
borrowings on note payable to bank</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 28px">1,039</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 17px">(487)</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Repayments
of long-term debt</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 29px">(295)</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 17px">(737)</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Proceeds
from long-term debt</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 49px; BORDER-BOTTOM: #000000 1px solid">--</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 26px; BORDER-BOTTOM: #000000 1px solid">443</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Net
cash provided by (used in) financing activities of continuing
operations</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 38px">744</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 17px">(781)</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Net
cash used in financing activities of discontinued operations</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 49px; BORDER-BOTTOM: #000000 1px solid">--</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 17px; BORDER-BOTTOM: #000000 1px solid">(900)</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px"><B>Net
cash provided by (used in) financing activities</B></P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 38px; BORDER-BOTTOM: #000000 1px solid">744</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 7px; BORDER-BOTTOM: #000000 1px solid">(1,681)</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=84>
<P style="MARGIN: 0px"><BR></P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Increase
in cash and cash equivalents</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; MARGIN: 0px; TEXT-INDENT: 38px">371</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 26px">979</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Cash
and cash equivalents at beginning of period</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 28px; BORDER-BOTTOM: #000000 1px solid">5,233</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 16px; BORDER-BOTTOM: #000000 1px solid">4,429</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Cash
and cash equivalents at end of period</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 5px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;5,604</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;5,408</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=84>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=78>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px"><B>Supplemental
Disclosure:</B></P></TD>
<TD vAlign=bottom width=84>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=78>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Cash
paid for interest</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;290</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 0px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;395</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px">Cash
paid for income taxes</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;47</P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: -6px"><B>Non-cash
Financing Transactions:</B></P></TD>
<TD vAlign=bottom width=84>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px"><BR></P></TD></TR>
<TR>
<TD vAlign=bottom width=459>
<P
style="PADDING-RIGHT: 6px; PADDING-LEFT: 6px; MARGIN: 0px; TEXT-INDENT: 11px">Issuance
of treasury shares for vested restricted stock</P></TD>
<TD vAlign=bottom width=84>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 8px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;252</P></TD>
<TD vAlign=bottom width=78>
<P
style="PADDING-RIGHT: 7px; PADDING-LEFT: 6px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;191 </P></TD><A
name=_DV_M52></A></TR></TABLE>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><I>See accompanying Notes to Condensed
Consolidated Financial Statements</I></P><A name=_DV_M55></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 6px" align=center><BR><BR></P>
<P style="MARGIN: 0px" align=justify>7</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 6px; PAGE-BREAK-BEFORE: always"
align=center><B><U>THE LGL GROUP, INC.</U></B></P><A name=_DV_M56></A>
<P style="MARGIN: 0px" align=center><B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS</B></P>
<P style="MARGIN: 0px"><BR></P><A name=_DV_M57></A>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -24px"><B>A.</B></P>
<P style="PADDING-LEFT: 24px; MARGIN: 0px"><B>Subsidiaries of the Registrant
</B></P>
<P style="MARGIN: 0px"><BR></P><A name=_DV_M58></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">As of
September 30, 2008, the subsidiaries of The LGL Group, Inc. (the &#147;Company&#148;) are
as follows: &nbsp;</P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=361></TD>
<TD width=105></TD></TR>
<TR>
<TD vAlign=top width=361>
<P style="MARGIN: 0px"><B></B>&nbsp;</P></TD>
<TD vAlign=top width=105>
<P style="MARGIN: 0px; TEXT-INDENT: 6px"><B><U>Owned By
LGL</U></B></P></TD></TR>
<TR>
<TD vAlign=top width=361>
<P style="MARGIN: 0px">M-tron Industries, Inc.</P></TD>
<TD vAlign=top width=105>
<P style="MARGIN: 0px; TEXT-INDENT: 34px">100.0%</P></TD></TR>
<TR>
<TD vAlign=top width=361>
<P
style="MARGIN: 0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M-tron
Industries, Ltd.</P></TD>
<TD vAlign=top width=105>
<P style="MARGIN: 0px; TEXT-INDENT: 34px">100.0%</P></TD></TR>
<TR>
<TD vAlign=top width=361>
<P
style="MARGIN: 0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Piezo
Technology, Inc.</P></TD>
<TD vAlign=top width=105>
<P style="MARGIN: 0px; TEXT-INDENT: 34px">100.0%</P></TD></TR>
<TR>
<TD vAlign=top width=361>
<P
style="MARGIN-TOP: 0px; MARGIN-BOTTOM: -16px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Piezo
Technology India Private Ltd. </P>
<P
style="MARGIN: 0px; TEXT-INDENT: 351px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P></TD>
<TD vAlign=top width=105>
<P style="MARGIN: 0px; TEXT-INDENT: 41px">99.9%</P></TD></TR>
<TR>
<TD vAlign=top width=361>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: -16px">Lynch Systems, Inc. </P>
<P
style="MARGIN: 0px; TEXT-INDENT: 355px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P></TD>
<TD vAlign=top width=105>
<P
style="MARGIN: 0px; TEXT-INDENT: 23px">&nbsp;&nbsp;&nbsp;100.0%</P></TD></TR></TABLE>
<P style="MARGIN: 0px"><BR></P><A name=_DV_M59></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">The Company
operates through its principal subsidiary, M-tron Industries, Inc. (&#147;Mtron&#148;),
which includes the operations of M-tron Industries, Ltd. and Piezo Technology,
Inc. (&#147;PTI&#148;). The combined operations are referred to herein as &#147;MtronPTI.&#148;
&nbsp;MtronPTI has operations in Orlando, Florida, Yankton, South Dakota and
Noida, India. &nbsp;In addition, MtronPTI has a sales office in Hong Kong.
&nbsp;During 2007, the Company sold the operating assets of Lynch Systems, Inc.
(&#147;Lynch Systems&#148;), a subsidiary of the Company, to an unrelated third party.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">On June 19,
2007, in accordance with the Purchase Agreement dated May 17, 2007, as amended
(the "Purchase Agreement"), by and between Lynch Systems and Olivotto Glass
Technologies S.p.A. ("Olivotto"), Lynch Systems completed the sale of certain of
its assets to Lynch Technologies, LLC (the "Buyer"), the assignee of Olivotto's
rights and obligations under the Purchase Agreement &nbsp;(see Note K).
&nbsp;</P><A name=_DV_M62></A>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -24px"><B>B.</B></P>
<P style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: 13px"><B>Basis of
Presentation </B></P><A name=_DV_M63></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three and nine month periods ended September 30, 2008 are not
necessarily indicative of the results that may be expected for the full year
ending December 31, 2008.</P><A name=_DV_M64></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">The condensed
consolidated balance sheet at December 31, 2007 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 of America for complete financial statements. &nbsp;The
financial results presented for the three and nine month periods ended September
30, 2007 have been reclassified to present the operations of Lynch Systems as
discontinued operations (see Note K).</P><A name=_DV_M65></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company&#146;s Annual Report on Form 10-K for the year ended
December 31, 2007. &nbsp;</P><A name=_DV_M66></A><A name=_DV_M67></A><A
name=_DV_M68></A><A name=_DV_M69></A><A name=_DV_M74></A><A name=_DV_M76></A>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -24px"><B>C.</B></P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: 13px"><B>Investments
</B></P><A name=_DV_M77></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">The following
is a summary of marketable securities (investments) held by the Company:</P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=231></TD>
<TD width=64></TD>
<TD width=84></TD>
<TD width=67></TD></TR>
<TR>
<TD vAlign=bottom width=231>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=64>
<P
style="PADDING-RIGHT: 4px; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid"
align=center><B>Cost</B></P></TD>
<TD vAlign=bottom width=84>
<P style="PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt"
align=center><B>Gross</B></P>
<P style="PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt"
align=center><B>Unrealized</B></P>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid"
align=center><B>&nbsp;(Loss)</B></P></TD>
<TD vAlign=bottom width=67>
<P style="PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt"
align=center><B>Fair</B></P>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid"
align=center><B>Value</B></P></TD></TR>
<TR>
<TD vAlign=bottom width=231>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=216 colSpan=3>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt" align=center>(in
thousands)</P></TD></TR>
<TR>
<TD vAlign=bottom width=231>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">September 30, 2008</P></TD>
<TD vAlign=bottom width=64>
<P style="MARGIN: 0px; TEXT-INDENT: 1px; LINE-HEIGHT: 11.4pt"
align=justify>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;68</P></TD>
<TD vAlign=bottom width=84>
<P style="MARGIN: 0px; TEXT-INDENT: 2px; LINE-HEIGHT: 11.4pt">$
&nbsp;&nbsp;&nbsp;(47)</P></TD>
<TD vAlign=bottom width=67>
<P style="MARGIN: 0px; TEXT-INDENT: 8px; LINE-HEIGHT: 11.4pt">$
&nbsp;&nbsp;&nbsp;&nbsp;21</P></TD></TR>
<TR>
<TD vAlign=bottom width=231>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">December 31, 2007</P></TD>
<TD vAlign=bottom width=64>
<P style="MARGIN: 0px; TEXT-INDENT: 1px; LINE-HEIGHT: 11.4pt">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;68</P></TD>
<TD vAlign=bottom width=84>
<P style="MARGIN: 0px; TEXT-INDENT: 2px; LINE-HEIGHT: 11.4pt">$
&nbsp;&nbsp;&nbsp;(20)</P></TD>
<TD vAlign=bottom width=67>
<P style="MARGIN: 0px; TEXT-INDENT: 8px; LINE-HEIGHT: 11.4pt">$
&nbsp;&nbsp;&nbsp;&nbsp;48</P></TD></TR></TABLE>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR><BR></P>
<P style="MARGIN: 0px" align=justify>8</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="PAGE-BREAK-BEFORE: always; MARGIN: 0px"><BR></P><A name=_DV_M78></A>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -24px"><B>D.</B></P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: 13px"><B>Inventories
</B></P><A name=_DV_M79></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">Inventories
are stated at the lower of cost or market value. &nbsp;At MtronPTI, inventories
are valued using the first-in first-out (&#147;FIFO&#148;) method for 76.5% and 70.5% of
the inventory, as of September 30, 2008 and December 31, 2007, respectively, and
the remaining 23.5% and 29.5% as of September 30, 2008 and December 31, 2007,
respectively, are valued using last-in first-out (&#147;LIFO&#148;). &nbsp;The Company
reduces the value of its inventory to market value when the market value is
believed to be less than the cost of the item.</P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=256></TD>
<TD width=102></TD>
<TD width=96></TD></TR>
<TR>
<TD vAlign=top width=256>
<P
style="FONT-SIZE: 8pt; MARGIN: 0px; LINE-HEIGHT: 10pt"><B></B>&nbsp;</P>
<P
style="FONT-SIZE: 8pt; MARGIN: 0px; LINE-HEIGHT: 10pt"><B></B>&nbsp;</P></TD>
<TD vAlign=top width=102>
<P style="MARGIN: 0px" align=center><B>September 30,</B></P>
<P
style="PADDING-RIGHT: 4px; PADDING-LEFT: 4px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>2008</B></P></TD>
<TD vAlign=top width=96>
<P style="MARGIN: 0px; TEXT-INDENT: 1px"><B>December 31,</B></P>
<P
style="PADDING-RIGHT: 4px; PADDING-LEFT: 4px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>&nbsp;2007 </B></P></TD></TR>
<TR>
<TD vAlign=bottom width=256>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=198 colSpan=2>
<P style="MARGIN: 0px" align=center>(in thousands)</P></TD></TR>
<TR>
<TD vAlign=bottom width=256>
<P style="MARGIN: 0px">Raw materials</P></TD>
<TD vAlign=bottom width=102>
<P
style="PADDING-RIGHT: 4px; PADDING-LEFT: 4px; MARGIN: 0px; TEXT-INDENT: 4px">$
&nbsp;&nbsp;&nbsp;&nbsp;2,992</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 4px; PADDING-LEFT: 4px; MARGIN: 0px; TEXT-INDENT: 9px">$
&nbsp;&nbsp;&nbsp;2,306</P></TD></TR>
<TR>
<TD vAlign=bottom width=256>
<P style="MARGIN: 0px">Work in process</P></TD>
<TD vAlign=bottom width=102>
<P
style="PADDING-RIGHT: 4px; PADDING-LEFT: 4px; MARGIN: 0px; TEXT-INDENT: 27px">1,505</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 4px; PADDING-LEFT: 4px; MARGIN: 0px; TEXT-INDENT: 29px">1,498</P></TD></TR>
<TR>
<TD vAlign=bottom width=256>
<P style="MARGIN: 0px">Finished goods</P></TD>
<TD vAlign=bottom width=102>
<P
style="PADDING-RIGHT: 4px; PADDING-LEFT: 4px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 27px; BORDER-BOTTOM: #000000 1px solid">1,231</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 4px; PADDING-LEFT: 4px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 29px; BORDER-BOTTOM: #000000 1px solid">1,377</P></TD></TR>
<TR>
<TD vAlign=bottom width=256>
<P style="PADDING-LEFT: 14px; MARGIN: 0px">Total Inventories</P></TD>
<TD vAlign=bottom width=102>
<P
style="PADDING-RIGHT: 4px; PADDING-LEFT: 4px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 4px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;5,728</P></TD>
<TD vAlign=bottom width=96>
<P
style="PADDING-RIGHT: 4px; PADDING-LEFT: 4px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 12px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;5,181</P></TD></TR></TABLE>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px; TEXT-INDENT: 24px">Current cost exceeded the LIFO value
of inventory by $209,000 and $266,000 at September 30, 2008 and December 31,
2007, respectively.</P>
<P style="MARGIN: 0px"><BR></P><A name=_DV_M80></A><A name=_DV_M81></A><A
name=_DV_M84></A><A name=_DV_M87></A>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -24px"><B>E.</B></P>
<P style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: 13px"><B>Note
Payable to Banks and Long-Term Debt</B></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=438></TD>
<TD width=97></TD>
<TD width=100></TD></TR>
<TR>
<TD vAlign=bottom width=438>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>September 30, 2008</B></P></TD>
<TD vAlign=bottom width=100>
<P style="PADDING-BOTTOM: 4px; MARGIN: 0px" align=center><B>December 31,
</B></P>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>2007</B></P></TD></TR>
<TR>
<TD vAlign=bottom width=438>
<P style="PADDING-LEFT: 24px; MARGIN: 0px; TEXT-INDENT: -24px"
align=justify><B>Note Payable:</B></P></TD>
<TD vAlign=bottom width=198 colSpan=2>
<P style="MARGIN: 0px" align=center>(in thousands)</P></TD></TR>
<TR>
<TD vAlign=bottom width=438>
<P style="PADDING-LEFT: 24px; MARGIN: 0px; TEXT-INDENT: -24px">MtronPTI
revolving loan (First National Bank of Omaha (&#147;FNBO&#148;)) at 30-day LIBOR
plus 2.1% (4.59% at September 30, 2008), due June 2009 &nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 11px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;2,074</P></TD>
<TD vAlign=bottom width=100>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 8px; BORDER-BOTTOM: #000000 3px double"
align=justify>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,035</P></TD></TR>
<TR>
<TD vAlign=bottom width=438>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=100>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=438>
<P style="PADDING-LEFT: 24px; MARGIN: 0px; TEXT-INDENT: -24px"
align=justify><B>Long-Term Debt:</B></P></TD>
<TD vAlign=bottom width=97>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=100>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=438>
<P style="PADDING-LEFT: 24px; MARGIN: 0px; TEXT-INDENT: -24px">MtronPTI
term loan (RBC Centura Bank (&#147;RBC&#148;)) due October 2010. &nbsp;The note
bears interest at LIBOR Base Rate plus 2.75%. &nbsp;Interest rate swap
converts loan to a fixed rate, at 7.51% at September 30, 2008
&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P style="MARGIN: 0px; TEXT-INDENT: 11px" align=justify>$
&nbsp;&nbsp;&nbsp;&nbsp;2,837</P></TD>
<TD vAlign=bottom width=100>
<P style="MARGIN: 0px; TEXT-INDENT: 8px" align=justify>$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,894</P></TD></TR>
<TR>
<TD vAlign=bottom width=438>
<P style="PADDING-LEFT: 24px; MARGIN: 0px; TEXT-INDENT: -24px">MtronPTI
term loan (FNBO) at 30-day LIBOR plus 2.1%. Interest rate swap converts
loan to a fixed rate, at 5.60% at September 30, 2008, due January 2013
&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P style="MARGIN: 0px; TEXT-INDENT: 35px" align=justify>1,249</P></TD>
<TD vAlign=bottom width=100>
<P style="MARGIN: 0px; TEXT-INDENT: 35px" align=justify>1,430</P></TD></TR>
<TR>
<TD vAlign=bottom width=438>
<P style="PADDING-LEFT: 24px; MARGIN: 0px; TEXT-INDENT: -24px">Rice
University Promissory Note at a fixed interest rate of 4.5%, due August
2009</P></TD>
<TD vAlign=bottom width=97>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 51px; BORDER-BOTTOM: #000000 1px solid"
align=justify>73</P></TD>
<TD vAlign=bottom width=100>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 45px; BORDER-BOTTOM: #000000 1px solid"
align=justify>130</P></TD></TR>
<TR>
<TD vAlign=bottom width=438>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P style="MARGIN: 0px; TEXT-INDENT: 35px" align=justify>4,159</P></TD>
<TD vAlign=bottom width=100>
<P style="MARGIN: 0px; TEXT-INDENT: 35px" align=justify>4,454</P></TD></TR>
<TR>
<TD vAlign=bottom width=438>
<P style="PADDING-LEFT: 24px; MARGIN: 0px; TEXT-INDENT: -24px"
align=justify>Current maturities</P></TD>
<TD vAlign=bottom width=97>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 36px; BORDER-BOTTOM: #000000 1px solid"
align=justify>(411)</P></TD>
<TD vAlign=bottom width=100>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 36px; BORDER-BOTTOM: #000000 1px solid"
align=justify>(419)</P></TD></TR>
<TR>
<TD vAlign=bottom width=438>
<P style="PADDING-LEFT: 24px; MARGIN: 0px; TEXT-INDENT: -24px"
align=justify>Long -Term Debt</P></TD>
<TD vAlign=bottom width=97>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 11px; BORDER-BOTTOM: #000000 3px double"
align=justify>$ &nbsp;&nbsp;&nbsp;&nbsp;3,748</P></TD>
<TD vAlign=bottom width=100>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 11px; BORDER-BOTTOM: #000000 3px double"
align=justify>$ &nbsp;&nbsp;&nbsp;&nbsp;4,035</P></TD></TR></TABLE>
<P style="MARGIN: 0px"><BR></P><A name=_DV_M88></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">On October
14, 2004, MtronPTI, entered into a loan agreement with FNBO (the &#147;FNBO Loan
Agreement&#148;). &nbsp;The FNBO Loan Agreement provides for a short-term credit
facility of up to $5,500,000 (the &#147;FNBO Revolving Loan&#148;). &nbsp;The provisions
of the FNBO Revolving Loan were subsequently amended, most recently on June 30,
2008. &nbsp;The principal balance of the FNBO Revolving Loan currently bears
interest at 30-day LIBOR plus 2.1%, with interest only payments due monthly and
the final payment of principal and interest due on June 30, 2009. &nbsp;At
September 30, 2008, the amount outstanding under the revolving credit loan was
$2,074,000. &nbsp;The Company had $3,426,000 of unused borrowing capacity under
its revolving line of credit at September 30, 2008, compared to $4,465,000 at
December 31, 2007.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">The FNBO Loan
Agreement also provides for a term loan in the original principal amount of
$2,000,000 (the &#147;FNBO Term Loan&#148;). &nbsp;The provisions of the FNBO Term Loan
were subsequently amended, most recently on January 24, 2008. &nbsp;Under such
amendment, the original principal amount of the FNBO Term Loan was approximately
$1,410,000, and the principal balance bears interest at 30-day LIBOR plus 2.1%,
with principal and interest payments due monthly and the final payment of
principal and interest due January 24, 2013.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><BR><BR></P>
<P style="MARGIN: 0px" align=justify>9</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 24px">The
FNBO Loan Agreement contains a variety of affirmative and negative covenants,
including, but not limited to, financial covenants that MtronPTI maintain: (i)
tangible net worth of not less than $7,000,000, (ii) a ratio of current assets
to current liabilities of not less than 1.5 to 1.0; (iii) a ratio of total
liabilities to tangible net worth of not greater than 2.75 to 1.0; and (iv) a
fixed charge ratio of 1.2 to 1.0. &nbsp;At September 30, 2008, the Company was
in compliance with these covenants.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">All
outstanding obligations under the FNBO Loan Agreement are guaranteed by the
Company.</P>
<P
style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px; LINE-HEIGHT: normal">In
connection with the FNBO Term Loan, MtronPTI entered into a separate interest
rate swap agreement with FNBO from which it receives periodic payments at the
LIBOR Base Rate and makes periodic payments at a fixed rate of 5.60% through the
life of the FNBO Term Loan. &nbsp;The Company has designated this swap as a cash
flow hedge in accordance with Financial Accounting <FONT
style="FONT-SIZE: 11pt">Standards Board&#146;s (&#147;FASB&#148;) </FONT>133 &#147;Accounting for
Derivative Instruments and Hedging Activities&#148; (&#147;FASB 133&#148;). &nbsp;The fair
value of the interest rate swap at September 30, 2008 is $1,000 net of any tax
effect, and is included in &#147;swap liability on hedge contracts&#148; on the condensed
consolidated balance sheets. &nbsp;The change in fair value is reflected in
other comprehensive loss, net of any tax effect.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">On September
30, 2005, MtronPTI entered into a loan agreement (the &#147;RBC Loan Agreement&#148;) with
RBC, which provides for a loan in the original principal amount of $3,040,000
(the &#147;RBC Term Loan&#148;). &nbsp;The RBC Term Loan bears interest at LIBOR Base Rate
plus 2.75% and is being repaid in monthly installments based on a 20 year
amortization, with the then remaining principal balance and interest due on the
fifth anniversary of the RBC Loan Agreement. &nbsp;The RBC Loan Agreement
contains a variety of affirmative and negative covenants, including, but not
limited to, financial covenants that MtronPTI maintain: (i) a ratio of total
liabilities to tangible net worth of at least 4.0 to 1.0; (ii) tangible net
worth of at least $4.2 million; and (iii) a fixed charge coverage ratio of not
less than 1.2 to 1.0. &nbsp;At September 30, 2008, the Company was in compliance
with these covenants.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">All
outstanding obligations under the RBC Loan Agreement are collateralized by
security interests in the assets of MtronPTI and guaranteed by the Company.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">In connection
with the RBC Term Loan, MtronPTI entered into a five-year interest rate swap
from which it receives periodic payments at the LIBOR Base Rate and makes
periodic payments at a fixed rate of 7.51% with monthly settlement and rate
reset dates. &nbsp;The Company has designated this swap as a cash flow hedge in
accordance with FASB 133. &nbsp;The fair value of the interest rate swap at
September 30, 2008 is ($85,000) net of any tax effect, and is included in &#147;swap
liability on hedge contracts&#148; on the condensed consolidated balance sheets.
&nbsp;The change in fair value is reflected in other comprehensive loss, net of
any tax effect.</P><A name=_DV_M95></A>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -24px"
align=justify><B>F.</B></P>
<P style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; MARGIN-BOTTOM: 13px"
align=justify><B>Stock Based Compensation </B></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">The Company
utilizes the provisions of Statement of Financial Accounting Standards (&#147;SFAS&#148;)
123R, &#147;Share-Based Payment&#148; (&#147;SFAS 123-R&#148;) to measure the cost of employee
services in exchange for an award of equity instruments based on the grant-date
fair value of the award and to recognize cost over the requisite service period.
&nbsp;Compensation expense is recognized for all share-based payments granted
under SFAS 123-R, and all awards granted under SFAS 123 to employees prior to
the effective date that remain unvested on the effective date. &nbsp;The Company
recognizes compensation expense on fixed awards with pro rata vesting on a
straight-line basis over the service period.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">On March 20,
2007, the Company granted 10,000 restricted shares to an executive officer.
&nbsp;This officer subsequently resigned prior to December 31, 2007 without
vesting in any shares. &nbsp;On December 31, 2007, the Board of Directors
granted restricted shares to eight of its members at 1,471 shares each. &nbsp;On
January 22, 2008, the Board of Directors granted 1,250 restricted shares to one
of its members. All of these shares are to vest ratably over 2008 at the end of
each respective quarter. &nbsp;Total stock compensation related expense for all
outstanding grants for the three-month period ended September 30, 2008 was
$33,000 and for the nine-month period ended September 30, 2008 was $94,000.
&nbsp;</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">The Company
estimates the fair value of stock based compensation on the date of grant using
the Black-Scholes-Merton option-pricing model for stock option grants. &nbsp;The
Black-Scholes-Merton option-pricing model requires subjective assumptions,
including future stock price volatility and expected time to exercise, which
greatly affect the calculated values. &nbsp;There is no expected dividend rate.
&nbsp;Historical Company information was the primary </P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><BR><BR></P>
<P style="MARGIN: 0px" align=justify>10</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; PAGE-BREAK-BEFORE: always">basis
for the expected volatility assumption. &nbsp;Prior years grants were calculated
using historical volatility as the Company believes that the historical
volatility over the life of the option is more indicative of the options
expected volatility in the future. &nbsp;The risk-free interest rate is based on
the U.S. Treasury zero-coupon rates with a remaining term equal to the expected
term of the option. SFAS 123-R also requires forfeitures to be estimated at the
time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. &nbsp;Based on past history of actual
performance, a zero forfeiture rate has been assumed. <A name=_DV_M99></A></P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -24px"><B>G.</B></P>
<P style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: 13px"><B>Loss Per
Share</B></P>
<P style="MARGIN: 0px; TEXT-INDENT: 24px" align=justify>The Company computes
loss per share in accordance with SFAS No. &nbsp;128, &#147;Earnings Per Share.&#148;
&nbsp;Basic loss per share is computed by dividing net loss by the weighted
average number of common shares outstanding during the period. &nbsp;Diluted
earnings per share adjusts basic earnings per share for the effects of stock
options, restricted common stock, and other potentially dilutive financial
instruments, only in the periods in which the effects are dilutive.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">The following
securities have been excluded from the diluted loss per share computation
because the impact of the assumed exercise of stock options and unvested
restricted stock would have been anti-dilutive because the Company has reported
net losses:</P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=292></TD>
<TD width=86></TD>
<TD width=86></TD>
<TD width=86></TD>
<TD width=86></TD></TR>
<TR>
<TD vAlign=bottom width=292>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=173 colSpan=2>
<P style="PADDING-BOTTOM: 4px; MARGIN: 0px" align=center><B>Three Months
Ended </B></P>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>September 30, </B></P></TD>
<TD vAlign=bottom width=173 colSpan=2>
<P style="PADDING-BOTTOM: 4px; MARGIN: 0px" align=center><B>Nine Months
Ended </B></P>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>September 30, </B></P></TD></TR>
<TR>
<TD vAlign=bottom width=292>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=86>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>2008</B></P></TD>
<TD vAlign=bottom width=86>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>2007</B></P></TD>
<TD vAlign=bottom width=86>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>2008</B></P></TD>
<TD vAlign=bottom width=86>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>2007</B></P></TD></TR>
<TR>
<TD vAlign=bottom width=292>
<P style="MARGIN: 0px" align=justify>Options to purchase common
stock</P></TD>
<TD vAlign=bottom width=86>
<P style="MARGIN: 0px; TEXT-INDENT: 15px">200,000</P></TD>
<TD vAlign=bottom width=86>
<P style="MARGIN: 0px; TEXT-INDENT: 15px" align=justify>200,000</P></TD>
<TD vAlign=bottom width=86>
<P style="MARGIN: 0px; TEXT-INDENT: 15px" align=justify>200,000</P></TD>
<TD vAlign=bottom width=86>
<P style="MARGIN: 0px; TEXT-INDENT: 15px" align=justify>200,000</P></TD></TR>
<TR>
<TD vAlign=bottom width=292>
<P style="MARGIN: 0px" align=justify>Unvested restricted stock</P></TD>
<TD vAlign=bottom width=86>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 28px; BORDER-BOTTOM: #000000 1px solid">2,881</P></TD>
<TD vAlign=bottom width=86>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 22px; BORDER-BOTTOM: #000000 1px solid"
align=justify>30,000</P></TD>
<TD vAlign=bottom width=86>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 28px; BORDER-BOTTOM: #000000 1px solid"
align=justify>2,881</P></TD>
<TD vAlign=bottom width=86>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 21px; BORDER-BOTTOM: #000000 1px solid"
align=justify>30,000</P></TD></TR>
<TR>
<TD vAlign=bottom width=292>
<P style="PADDING-LEFT: 11px; MARGIN: 0px" align=justify>Total </P></TD>
<TD vAlign=bottom width=86>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 15px; BORDER-BOTTOM: #000000 3px double"
align=justify>202,881</P></TD>
<TD vAlign=bottom width=86>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 15px; BORDER-BOTTOM: #000000 3px double"
align=justify>230,000</P></TD>
<TD vAlign=bottom width=86>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 15px; BORDER-BOTTOM: #000000 3px double"
align=justify>202,881</P></TD>
<TD vAlign=bottom width=86>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 15px; BORDER-BOTTOM: #000000 3px double"
align=justify>230,000</P></TD></TR></TABLE>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P><A name=_DV_M103></A>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -24px"><B>H.</B></P>
<P style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: 13px"><B>Other
Comprehensive Loss</B></P><A name=_DV_M104></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">Other
comprehensive loss includes the changes in fair value of investments classified
as available for sale and the changes in fair values of derivative instruments
designated as cash flow hedges.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">For the nine
months ended September 30, 2008, total comprehensive loss was ($1,223,000),
comprised of net loss of ($1,192,000) and change in Accumulated Other
Comprehensive Loss of ($31,000), compared to total comprehensive loss of
($4,642,000) in the nine months ended September 30, 2007, which was comprised of
net loss of ($2,868,000) and change in Other Comprehensive Loss of
($1,774,000).</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">The change in
accumulated other comprehensive loss, net of related tax, for the nine month
periods ended September 30, 2008 and 2007, are as follows: </P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=355></TD>
<TD width=93></TD>
<TD width=93></TD></TR>
<TR>
<TD vAlign=bottom width=355>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=186 colSpan=2>
<P style="PADDING-BOTTOM: 4px; MARGIN: 0px" align=center><B>Nine Months
Ended </B></P>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>September 30,</B></P></TD></TR>
<TR>
<TD vAlign=bottom width=355>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=93>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>2008</B></P></TD>
<TD vAlign=bottom width=93>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>2007 </B></P></TD></TR>
<TR>
<TD vAlign=bottom width=355>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=186 colSpan=2>
<P style="MARGIN: 0px" align=center>(in thousands)</P></TD></TR>
<TR>
<TD vAlign=bottom width=355>
<P style="MARGIN: 0px" align=justify>Balance beginning of period </P></TD>
<TD vAlign=bottom width=93>
<P style="MARGIN: 0px; TEXT-INDENT: 2px">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(101) </P></TD>
<TD vAlign=bottom width=93>
<P style="MARGIN: 0px; TEXT-INDENT: -2px">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,790 </P></TD></TR>
<TR>
<TD vAlign=bottom width=355>
<P style="MARGIN: 0px" align=justify>Deferred loss on swap liability on
hedge contracts </P></TD>
<TD vAlign=bottom width=93>
<P style="MARGIN: 0px; TEXT-INDENT: 48px">(4)</P></TD>
<TD vAlign=bottom width=93>
<P style="MARGIN: 0px; TEXT-INDENT: 42px">(18)</P></TD></TR>
<TR>
<TD vAlign=bottom width=355>
<P style="MARGIN: 0px" align=justify>Unrealized loss on available-for-sale
securities</P></TD>
<TD vAlign=bottom width=93>
<P style="MARGIN: 0px; TEXT-INDENT: 42px">(27)</P></TD>
<TD vAlign=bottom width=93>
<P style="MARGIN: 0px; TEXT-INDENT: 35px">(266)</P></TD></TR>
<TR>
<TD vAlign=bottom width=355>
<P style="MARGIN: 0px" align=justify>Reclassification adjustment for gains
included in net income</P></TD>
<TD vAlign=bottom width=93>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 55px; BORDER-BOTTOM: #000000 1px solid">--</P></TD>
<TD vAlign=bottom width=93>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 25px; BORDER-BOTTOM: #000000 1px solid">(1,526)</P></TD></TR>
<TR>
<TD vAlign=bottom width=355>
<P style="PADDING-LEFT: 17px; MARGIN: 0px" align=justify>Balance end of
period </P></TD>
<TD vAlign=bottom width=93>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 5px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(132)</P></TD>
<TD vAlign=bottom width=93>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: -4px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(20)</P></TD></TR></TABLE>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR><BR></P>
<P style="MARGIN: 0px" align=justify>11</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="PAGE-BREAK-BEFORE: always; MARGIN: 0px; TEXT-INDENT: 24px"
align=justify>The components of accumulated other comprehensive loss, net of
related tax at September 30, 2008 and December 31, 2007, are as follows:</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=355></TD>
<TD width=101></TD>
<TD width=99></TD></TR>
<TR>
<TD vAlign=bottom width=355>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=101>
<P style="PADDING-BOTTOM: 4px; MARGIN: 0px" align=center><B>September 30,
</B></P>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>2008</B></P></TD>
<TD vAlign=bottom width=99>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>December 31, 2007</B></P></TD></TR>
<TR>
<TD vAlign=bottom width=355>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=201 colSpan=2>
<P style="MARGIN: 0px" align=center>(in thousands)</P></TD></TR>
<TR>
<TD vAlign=bottom width=355>
<P style="MARGIN: 0px" align=justify>Deferred loss on swap liability on
hedge contracts </P></TD>
<TD vAlign=bottom width=101>
<P style="MARGIN: 0px; TEXT-INDENT: 5px">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(84)</P></TD>
<TD vAlign=bottom width=99>
<P style="MARGIN: 0px; TEXT-INDENT: 5px">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(78)</P></TD></TR>
<TR>
<TD vAlign=bottom width=355>
<P style="MARGIN: 0px" align=justify>Unrealized loss on available-for-sale
securities</P></TD>
<TD vAlign=bottom width=101>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 42px; BORDER-BOTTOM: #000000 1px solid">(48)</P></TD>
<TD vAlign=bottom width=99>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 42px; BORDER-BOTTOM: #000000 1px solid">(23)</P></TD></TR>
<TR>
<TD vAlign=bottom width=355>
<P style="PADDING-LEFT: 17px; MARGIN: 0px" align=justify>Accumulated other
comprehensive loss </P></TD>
<TD vAlign=bottom width=101>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 5px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(132)</P></TD>
<TD vAlign=bottom width=99>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 5px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(101)</P></TD></TR></TABLE>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><BR></P><A name=_DV_M105></A><A
name=_DV_M107></A>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -24px"><B>I.</B></P>
<P style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: 13px"><B>Fair
Value Measurements</B></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">The Company
measures financial assets and liabilities at fair value in accordance with SFAS
No.&nbsp;157, &#147;Fair Value Measurements&#148; (&#147;SFAS 157&#148;).&nbsp; These measurements
involve various valuation techniques and assume that the transactions would
occur between market participants in the most advantageous market for the
Company.&nbsp; The following is a summary of valuation techniques utilized by
the Company for its significant financial assets and liabilities:</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><I>Assets</I></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">To estimate
the market value of its marketable securities, the Company obtains current
market pricing from quoted market sources or uses pricing for similar
securities. Assets measured at fair value on a recurring basis are summarized
below.</P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=158></TD>
<TD width=107></TD>
<TD width=103></TD>
<TD width=107></TD>
<TD width=105></TD></TR>
<TR>
<TD vAlign=bottom width=158>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=107>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center>Quoted Prices in Active Markets for Identical Assets (Level
1)</P></TD>
<TD vAlign=bottom width=103>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center>Significant Other Observable Inputs (Level 2)</P></TD>
<TD vAlign=bottom width=107>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center>Significant Unobservable Inputs (Level 3)</P></TD>
<TD vAlign=bottom width=105>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center>September 30, 2008</P></TD></TR>
<TR>
<TD vAlign=bottom width=158>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=423 colSpan=4>
<P style="MARGIN: 0px" align=center>&nbsp;(in thousands)</P></TD></TR>
<TR>
<TD vAlign=bottom width=158>
<P style="MARGIN: 0px">Marketable securities</P></TD>
<TD vAlign=bottom width=107>
<P style="MARGIN: 0px; TEXT-INDENT: 12px">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21 </P></TD>
<TD vAlign=bottom width=103>
<P style="MARGIN: 0px; TEXT-INDENT: 13px">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;--</P></TD>
<TD vAlign=bottom width=107>
<P style="MARGIN: 0px; TEXT-INDENT: 13px">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;--</P></TD>
<TD vAlign=bottom width=105>
<P style="MARGIN: 0px; TEXT-INDENT: 12px">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21
</P></TD></TR></TABLE>
<P style="MARGIN-TOP: 13px; MARGIN-BOTTOM: 13px"><I>Liabilities</I></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">To estimate
the fair value of the swap liability on hedge contracts as of the measurement
date, the Company obtains inputs other than quoted prices that are observable
for the liability. Liabilities measured at fair value on a recurring basis are
summarized below.</P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=158></TD>
<TD width=107></TD>
<TD width=103></TD>
<TD width=107></TD>
<TD width=105></TD></TR>
<TR>
<TD vAlign=bottom width=158>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=107>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center>Quoted Prices in Active Markets for Identical Assets (Level
1)</P></TD>
<TD vAlign=bottom width=103>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center>Significant Other Observable Inputs (Level 2)</P></TD>
<TD vAlign=bottom width=107>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center>Significant Unobservable Inputs (Level 3)</P></TD>
<TD vAlign=bottom width=105>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center>September 30, 2008</P></TD></TR>
<TR>
<TD vAlign=bottom width=158>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=423 colSpan=4>
<P style="MARGIN: 0px" align=center>&nbsp;(in thousands)</P></TD></TR>
<TR>
<TD vAlign=bottom width=158>
<P style="PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: -13px">Swap
liability on hedge contracts</P></TD>
<TD vAlign=bottom width=107>
<P style="MARGIN: 0px; TEXT-INDENT: 16px">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;--</P></TD>
<TD vAlign=bottom width=103>
<P style="MARGIN: 0px; TEXT-INDENT: 0px">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(84)
</P></TD>
<TD vAlign=bottom width=107>
<P style="MARGIN: 0px; TEXT-INDENT: 13px">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;--</P></TD>
<TD vAlign=bottom width=105>
<P style="MARGIN: 0px; TEXT-INDENT: 16px">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(84)</P></TD></TR></TABLE>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><BR></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><BR><BR></P>
<P style="MARGIN: 0px" align=justify>12</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: -16px; PAGE-BREAK-BEFORE: always; TEXT-INDENT: -24px"><B>J.</B></P>
<P style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: 13px"><B>Foreign
Sales<A name=_DV_M109></A></B></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">For the three
and nine months ended September 30, 2008 and 2007, foreign revenues to specific
countries were as follows:</P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=309></TD>
<TD width=115></TD>
<TD width=115></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=230 colSpan=2>
<P
style="PADDING-RIGHT: 10px; PADDING-LEFT: 13px; PADDING-BOTTOM: 4px; MARGIN: 0px"
align=center><B>Three Months Ended </B></P>
<P
style="PADDING-RIGHT: 10px; PADDING-LEFT: 13px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>September 30,</B></P></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P style="MARGIN: 0px" align=justify><B>Foreign Revenues:</B></P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 13px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>2008</B></P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 10px; PADDING-LEFT: 11px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>2007</B></P></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=230 colSpan=2>
<P style="PADDING-RIGHT: 10px; PADDING-LEFT: 11px; MARGIN: 0px"
align=center>&nbsp;(in thousands)</P></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P style="MARGIN: 0px" align=justify>China </P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: 10px"
align=justify>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,644</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 10px; PADDING-LEFT: 11px; MARGIN: 0px; TEXT-INDENT: 0px">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,075</P></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P style="MARGIN: 0px" align=justify>Malaysia</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: 36px"
align=justify>1,497</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 10px; PADDING-LEFT: 11px; MARGIN: 0px; TEXT-INDENT: 46px">852</P></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P style="MARGIN: 0px" align=justify>Mexico</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: 46px"
align=justify>678</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 10px; PADDING-LEFT: 11px; MARGIN: 0px; TEXT-INDENT: 46px">313</P></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P style="MARGIN: 0px" align=justify>Thailand</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: 46px"
align=justify>508</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 10px; PADDING-LEFT: 11px; MARGIN: 0px; TEXT-INDENT: 46px">453</P></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P style="MARGIN: 0px" align=justify>Canada</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: 46px"
align=justify>181</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 10px; PADDING-LEFT: 11px; MARGIN: 0px; TEXT-INDENT: 46px">690</P></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P style="MARGIN: 0px" align=justify>All other foreign countries</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 13px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 36px; BORDER-BOTTOM: #000000 1px solid"
align=justify>1,266</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 10px; PADDING-LEFT: 11px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 36px; BORDER-BOTTOM: #000000 1px solid">1,408</P></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P style="MARGIN: 0px" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
foreign revenues</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 13px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 6px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,774</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 10px; PADDING-LEFT: 11px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 0px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,791</P></TD></TR></TABLE>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=309></TD>
<TD width=115></TD>
<TD width=115></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=230 colSpan=2>
<P
style="PADDING-RIGHT: 10px; PADDING-LEFT: 13px; PADDING-BOTTOM: 4px; MARGIN: 0px"
align=center><B>Nine Months Ended September 30,</B></P></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P style="MARGIN: 0px" align=justify><B>Foreign Revenues:</B></P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 13px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>2008</B></P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 10px; PADDING-LEFT: 11px; PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=center><B>2007</B></P></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=230 colSpan=2>
<P style="PADDING-RIGHT: 10px; PADDING-LEFT: 11px; MARGIN: 0px"
align=center>&nbsp;(in thousands)</P></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P style="MARGIN: 0px" align=justify>Malaysia </P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: 10px"
align=justify>$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,793</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 10px; PADDING-LEFT: 11px; MARGIN: 0px; TEXT-INDENT: 0px">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,317</P></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P style="MARGIN: 0px" align=justify>China</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: 36px"
align=justify>4,208</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 10px; PADDING-LEFT: 11px; MARGIN: 0px; TEXT-INDENT: 36px">2,938</P></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P style="MARGIN: 0px" align=justify>Thailand</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: 36px"
align=justify>1,556</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 10px; PADDING-LEFT: 11px; MARGIN: 0px; TEXT-INDENT: 36px">1,808</P></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P style="MARGIN: 0px" align=justify>Mexico</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: 36px"
align=justify>1,519</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 10px; PADDING-LEFT: 11px; MARGIN: 0px; TEXT-INDENT: 36px">1,659</P></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P style="MARGIN: 0px" align=justify>Canada</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 13px; MARGIN: 0px; TEXT-INDENT: 36px"
align=justify>1,013</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 10px; MARGIN: 0px; TEXT-INDENT: 48px">1,751</P></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P style="MARGIN: 0px" align=justify>All other foreign countries</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 13px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 36px; BORDER-BOTTOM: #000000 1px solid"
align=justify>3,794</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 10px; PADDING-LEFT: 11px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 36px; BORDER-BOTTOM: #000000 1px solid">3,727</P></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P style="MARGIN: 0px" align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
foreign revenues</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 8px; PADDING-LEFT: 13px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 0px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16,883</P></TD>
<TD vAlign=bottom width=115>
<P
style="PADDING-RIGHT: 10px; PADDING-LEFT: 11px; PADDING-BOTTOM: 4px; MARGIN: 0px; TEXT-INDENT: 0px; BORDER-BOTTOM: #000000 3px double">$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,200</P></TD></TR></TABLE>
<P style="MARGIN: 0px" align=justify><BR></P><A name=_DV_M110></A>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -24px"><B>K.</B></P>
<P style="PADDING-LEFT: 24px; MARGIN: 0px"><B>Discontinued Operations</B></P>
<P style="MARGIN: 0px"><BR></P><A name=_DV_M112></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">In June 2007,
the Company finalized its sale of certain assets and liabilities of Lynch
Systems to a third party. &nbsp;The assets sold under the Purchase Agreement, as
amended, included certain accounts receivable, inventory, machinery and
equipment. The Buyer also assumed certain liabilities of Lynch Systems,
including accounts payable, customer deposits and accrued warranties. The assets
retained by Lynch systems include the land, buildings and some equipment. The
Company intends to sell the land, buildings and remaining equipment in separate
transactions. </P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">As a result
of the sale of Lynch Systems, certain reclassifications of assets, liabilities,
revenues, costs, and expenses have been made to the prior period financial
statements to reflect the operations of Lynch Systems as discontinued
operations. &nbsp;Specifically, we have reclassified the results of operations
of Lynch Systems for all periods presented to &#147;Loss from Discontinued
Operations&#148; within the Condensed Consolidated Statements of Operations. &nbsp;In
addition, the remaining assets and liabilities of the business divested in 2007
have been reclassified to &#147;Assets of Discontinued Operations&#148; and &#147;Liabilities
of Discontinued Operations&#148; and the assets of the divested business held for
separate sale continue to be classified as held and used in accordance with SFAS
No. 144, &#147;Accounting for the Impairment or Disposal of Long-Lived Assets,&#148;<I>
</I>and are included within &#147;Land and Buildings and Improvements.&#148; &nbsp;</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">There were no
revenues from discontinued operations for the three months ended September 30,
2008 and 2007, respectively. &nbsp;Income (loss) from discontinued operations
was $30,000 and ($153,000) for the three months ended September 30, 2008 and
2007, respectively.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><BR><BR></P>
<P style="MARGIN: 0px" align=justify>13</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 24px">Revenues
from discontinued operations were $0 and $2,534,000 for the nine months ended
September 30, 2008 and 2007, respectively. &nbsp;Income (loss) from discontinued
operations was $25,000 and ($1,131,000) for the nine months ended September 30,
2008 and 2007, respectively.</P><A name=_DV_M113></A>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -24px"><B>L.</B></P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: 13px"><B>Commitments
and Contingencies </B></P><A name=_DV_M114></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">In the normal
course of business, the Company and its subsidiaries may become defendants in
certain product liability, worker claims and other litigation. &nbsp;The Company
and its subsidiaries have no litigation pending at this time.</P><A
name=_DV_M115></A>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -24px"><B>M.</B></P>
<P style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: 13px"><B>Income
Taxes</B></P><A name=_DV_M116></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 14px; TEXT-INDENT: 24px">The Company
files consolidated federal income tax returns, which includes all U.S.
subsidiaries. &nbsp;The Company has a total net operating loss (&#147;NOL&#148;)
carry-forward of $5,378,000 as of December 31, 2007. &nbsp;This NOL expires
through 2027 if not utilized prior to that date. &nbsp;The Company has research
and development credit carry-forwards of approximately $743,000 at December 31,
2007 that can be used to reduce future income tax liabilities and expire
principally between 2020 and 2027. &nbsp;In addition, the Company has foreign
tax credit carry-forwards of approximately $230,000 at December 31, 2007 that
are available to reduce future U.S. income tax liabilities subject to certain
limitations. &nbsp;These foreign tax credit carry-forwards expire at various
times through 2017.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">The Company
provided $84,000 and $93,000 for foreign income taxes and $0 and $0 for state
taxes in the three month period ended September 30, 2008 and 2007, respectively.
&nbsp;The Company provided $190,000 and $134,000 for foreign income taxes and $0
and $0 for state taxes in the nine month period ended September 30, 2008 and
2007, respectively. &nbsp;</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">Due to the
uncertainty surrounding the realization of the favorable U.S. tax attributes in
future tax returns, we continue to record a full valuation allowance against our
otherwise recognizable U.S. net deferred tax assets as of September 30, 2008 and
December 31, 2007, except for the Company&#146;s $111,000 in AMT deferred tax assets
which do not expire.<A name=_DV_M117></A><A name=_DV_M118></A></P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -24px"
align=justify><B>N.</B></P>
<P style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: 13px"
align=justify><B>Related Party Transactions</B></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 24px">At September
30, 2008, the Company had $5,604,000 of cash and cash equivalents. &nbsp;Of this
amount, $1,114,000 is invested in United States Treasury money market funds for
which affiliates of the Company serve as investment managers to the respective
funds, compared with $1,095,000 of $5,233,000 at December 31, 2007. &nbsp;</P><A
name=_DV_M119></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><BR><BR></P>
<P style="MARGIN: 0px" align=justify>14</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="PAGE-BREAK-BEFORE: always; MARGIN: 0px; TEXT-INDENT: 24px"><B>Item 2.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations.</B></P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><B>Forward Looking
Statements</B></P>
<P style="MARGIN: 0px">Information included or incorporated by reference in this
Quarterly Report on Form 10-Q may contain forward-looking statements. This
information may involve known and unknown risks, uncertainties and other factors
that may cause our actual results, performance or achievements to be materially
different than the future results, performance or achievements expressed or
implied by any forward-looking statements. &nbsp;Forward-looking statements,
which involve assumptions and describe our future plans, strategies and
expectations, are generally identifiable by use of the words &#147;may,&#148; &#147;should,&#148;
&#147;expect,&#148; &#147;anticipate,&#148; &#147;estimate,&#148; &#147;believe,&#148; &#147;intend&#148; or &#147;project&#148; or the
negative of these words or other variations on these words or comparable
terminology.</P>
<P style="MARGIN: 0px"><BR></P><A name=_DV_M120></A>
<P style="MARGIN: 0px"><B>Results of Operations</B></P><A name=_DV_M121></A>
<P style="MARGIN: 0px"><B><I>Three months ended September 30, 2008 compared to
three months ended September 30, 2007</I></B></P>
<P style="MARGIN: 0px"><BR></P><A name=_DV_M122></A>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 17px; MARGIN-BOTTOM: 13px; TEXT-INDENT: -17px"><B>Consolidated
Revenues and Gross Margin </B></P><A name=_DV_M123></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">Consolidated revenues from
continuing operations increased by $636,000, or 6.6%, to $10,248,000 for the
third quarter 2008 from $9,612,000 for the comparable period in 2007. &nbsp;The
increase is due primarily to an increase in foreign sales of $983,000 over the
comparable period in 2007 offset by a decrease in domestic sales of $347,000.
&nbsp;This growth in foreign sales is driven by the Company&#146;s customers&#146;
continuing migration of manufacturing into low labor cost regions.
&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P><A
name=_DV_M124></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">Consolidated gross margin from
continuing operations as a percentage of revenues for the third quarter 2008
increased to 25.6% from 23.5% for the comparable period in 2007 reflecting the
Company&#146;s continuing efforts to improve upon its manufacturing and supply chain
efficiency. &nbsp;&nbsp;&nbsp;&nbsp;</P><A name=_DV_M125></A>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 17px; MARGIN-BOTTOM: 13px; TEXT-INDENT: -17px"><B>Operating
Loss</B></P><A name=_DV_M126></A><A name=OLE_LINK1></A><A name=OLE_LINK2></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">Operating loss from continuing
operations of $93,000 for the third quarter 2008 is an improvement of $190,000
from the $283,000 operating loss for the comparable period in 2007. &nbsp;The
$190,000 improvement was primarily driven by an improvement in gross margin of
2.1% in the third quarter of 2008 as a percentage of sales in comparison to the
same period in 2007 reflecting the Company&#146;s continuing efforts to improve upon
its manufacturing and supply chain efficiency. &nbsp;The improvement in gross
margin was offset by an increase in engineering, selling and administrative
expenses of $169,000 in the third quarter of 2008 compared to the same period in
2007, which was primarily driven by an increase in engineering head count.
&nbsp;&nbsp;&nbsp;&nbsp;</P><A name=_DV_M127></A>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 17px; MARGIN-BOTTOM: 13px; TEXT-INDENT: -17px"><B>Other
Income (Expenses)</B></P><A name=_DV_M128></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">Net interest expense for the
third quarter 2008 was $79,000, compared with $79,000 for the comparable period
in 2007. &nbsp;In the third quarter of 2008, the Company recognized $58,000 in
other expense, compared with other income of $15,000 for the comparable period
in 2007, offset by the gain on the sale of equipment not related to the
Company&#146;s frequency control and electronic filter businesses of $255,000 in the
third quarter of 2008.</P><A name=_DV_M129></A>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 17px; MARGIN-BOTTOM: 13px; TEXT-INDENT: -17px"><B>Income
Taxes </B></P><A name=_DV_M130></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">The Company files consolidated
federal income tax returns, which includes all subsidiaries. &nbsp;The income
tax provision for the three-month period ended September 30, 2008 included
foreign taxes. &nbsp;The provision gives effect to our estimated tax liability
at the end of the year. </P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">Due to the uncertainty
surrounding the realization of the favorable U.S. tax attributes in future tax
returns, we continue to record a full valuation allowance against our otherwise
recognizable U.S. net deferred tax assets as of September 30, 2008 and December
31, 2007, except for the Company&#146;s $111,000 in AMT deferred tax assets which do
not expire.</P><A name=_DV_M131></A><A name=_DV_M134></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><BR><BR></P>
<P style="MARGIN: 0px" align=justify>15</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 17px; MARGIN-BOTTOM: 13px; PAGE-BREAK-BEFORE: always; TEXT-INDENT: -17px"><B>Results
of Discontinued Operations</B></P><A name=_DV_M135></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">As a result of the sale of Lynch
Systems in the second quarter of 2007, we have reclassified the results of
operations of Lynch Systems for all periods presented to &#147;Discontinued
Operations&#148; within the Condensed Consolidated Statements of Operations, in
accordance with accounting principles generally accepted in the United States of
America. </P><A name=_DV_M136></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">For the quarter ended September
30, 2008, the revenues from discontinued operations were $0 and income from
discontinued operations was $30,000 compared with revenues of $0 and loss from
discontinued operations of $153,000 for the third quarter of 2007. </P><A
name=_DV_M137></A>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 17px; MARGIN-BOTTOM: 13px; TEXT-INDENT: -17px"><B>Net
Loss</B></P><A name=_DV_M138></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">Net loss for the third quarter
2008 was $29,000 compared to net loss of $593,000 for the comparable period in
2007. The third quarter 2008 loss was comprised of a $59,000 loss from
continuing operations and $30,000 income from discontinued operations compared
with a $440,000 loss from continuing operations and $153,000 loss from
discontinued operations for the third quarter of 2007. The decrease in net loss
is due to improved gross margins as a percentage of revenue of 2.1% and a
reduction in the loss from discontinued operations of income of $30,000 in the
third quarter of 2008 compared to a loss of $153,000 third quarter of 2007. In
addition, the Company recognized a gain on the sale of equipment of $255,000 in
the third quarter of 2008 compared to $0 in the same period in 2007.</P>
<P style="MARGIN: 0px"><B><I>Nine months ended September 30, 2008 compared to
nine months ended September 30, 2007</I></B></P>
<P style="MARGIN: 0px"><BR></P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 17px; MARGIN-BOTTOM: 13px; TEXT-INDENT: -17px"><B>Consolidated
Revenues and Gross Margin </B></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">Consolidated revenues from
continuing operations for the nine-month period ending September 30, 2008
increased by $1,178,000, or 4.1%, to $30,181,000 from $29,003,000 for the
comparable period in 2007. &nbsp;The increase is due primarily to an increase in
foreign sales of $2,683,000 over the comparable period in 2007 offset by a
decrease in domestic sales of $1,505,000. &nbsp;This growth in foreign sales is
driven by the Company&#146;s customers&#146; continuing migration of manufacturing into
low labor cost regions.
&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">Consolidated gross margin from
continuing operations as a percentage of revenues for the nine-month period
ending September 30, 2008 increased to 26.0% from 23.3% for the comparable
period in 2007. &nbsp;The improvement in gross margin reflects the Company&#146;s
continuing efforts to improve upon its manufacturing and supply chain
efficiency. &nbsp;&nbsp;</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 17px; MARGIN-BOTTOM: 13px; TEXT-INDENT: -17px"><B>Operating
Loss</B></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">Operating loss from continuing
operations of $943,000 for the nine-month period ending September 30, 2008 is an
improvement of $1,008,000 from the $1,951,000 operating loss for the comparable
period in 2007. &nbsp;The $1,008,000 improvement was caused by a margin
percentage improvement of 2.7%, resulting in additional gross margin of $783,000
on a same sales level reflecting the Company&#146;s continuing efforts to improve
upon its manufacturing inefficiencies experienced in 2007, offset by an increase
in professional fees primarily due to the Company&#146;s restatement of its financial
statements for the first two quarters of 2007, fiscal 2006 and prior years and
its continuing compliance requirements under Sarbanes-Oxley. &nbsp;In addition,
in 2007 the Company recognized an impairment loss on Lynch Systems&#146; assets of
$905,000. &nbsp;&nbsp;&nbsp;&nbsp;</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><BR><BR></P>
<P style="MARGIN: 0px" align=justify>16</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 17px; MARGIN-BOTTOM: 13px; PAGE-BREAK-BEFORE: always; TEXT-INDENT: -17px"><B>Other
Income (Expenses)</B></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">Investment income from
continuing operations decreased $1,526,000 to $0 for the nine-month period ended
September 30, 2008. &nbsp;This was due to the sale of substantially all of the
marketable securities that were held for sale during the first quarter 2007.
&nbsp;Net interest expense for the nine-month period ended September 30, 2008
was $208,000, compared with $260,000 for the comparable period in 2007 due to
the overall reduction in Company debt in 2008 in relation to the comparable
period in 2007, as well as a reduction in the variable interest rate on
MtronPTI&#146;s revolving loan. &nbsp;In addition, the Company recognized a gain on
the sale of equipment not related to the Company&#146;s frequency control and
electronic filter businesses of $255,000 in 2008 compared to a gain on the sale
of land of $88,000 during the comparable period in 2007. &nbsp;</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 17px; MARGIN-BOTTOM: 13px; TEXT-INDENT: -17px"><B>Income
Taxes </B></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">The Company files consolidated
federal income tax returns, which includes all subsidiaries. &nbsp;The income
tax provision for the nine-month period ended September 30, 2008 included
foreign taxes. &nbsp;The provision gives effect to our estimated tax liability
at the end of the year. </P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">Due to the uncertainty
surrounding the realization of the favorable U.S. tax attributes in future tax
returns, we continue to record a full valuation allowance against our otherwise
recognizable U.S. net deferred tax assets as of September 30, 2008 and December
31, 2007, except for the Company&#146;s $111,000 in AMT deferred tax assets which do
not expire.</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 17px; MARGIN-BOTTOM: 13px; TEXT-INDENT: -17px"><B>Results
of Discontinued Operations</B></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">As a result of the sale of Lynch
Systems in the second quarter of 2007, we have reclassified the results of
operations of Lynch Systems for all periods presented to &#147;Discontinued
Operations&#148; within the Condensed Consolidated Statements of Operations, in
accordance with accounting principles generally accepted in the United States of
America. </P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">For the nine-month period ended
September 30, 2008, the revenues from discontinued operations were $0 and income
from discontinued operations was $25,000 compared with revenues of $2,534,000
and loss from discontinued operations of $2,113,000 including a loss on the sale
of Lynch Systems of $982,000 for the comparable period in 2007. </P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 17px; MARGIN-BOTTOM: 13px; TEXT-INDENT: -17px"><B>Net
Loss</B></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">Net loss for the nine-month
period ended September 30, 2008 was $1,192,000 compared to a net loss of
$2,868,000 for the comparable period in 2007. The nine-month period ended
September 30, 2008 loss was comprised of a $1,217,000 loss from continuing
operations and $25,000 gain from discontinued operations compared with a
$755,000 loss from continuing operations and $2,113,000 loss from discontinued
operations for the comparable period in 2007. The decrease in net loss from 2007
to 2008 is due to the Company incurring an impairment loss on Lynch Systems&#146;
assets of $905,000 and total net loss from discontinued operations of
$2,113,000, offset by investment income of $1,526,000 for the nine-month period
ended September 30, 2007, compared to an impairment loss of $0, net income from
discontinued operations of $25,000 and investment income of $0 for the
comparable period in 2008. </P><A name=_DV_M139></A><A name=_DV_M148></A><A
name=_DV_M159></A><A name=_DV_M161></A>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 17px; MARGIN-BOTTOM: 13px; TEXT-INDENT: -17px"><B>Liquidity
and Capital Resources </B></P><A name=_DV_M162></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">The Company&#146;s cash, cash
equivalents and investments in marketable securities at September 30, 2008 was
$5,625,000 as compared to $5,281,000 at December 31, 2007. &nbsp;MtronPTI had
unused borrowing capacity of $3,426,000 under MtronPTI&#146;s revolving line of
credit at September 30, 2008, as compared to $4,465,000 at December 31, 2007.
&nbsp;At September 30, 2008, MtronPTI had $2,074,000 outstanding in its
revolving loan, compared with $1,035,000 at December 31, 2007.</P><A
name=_DV_M163></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">At September 30, 2008, the
Company&#146;s net working capital was $10,032,000 as compared to $10,984,000 at
December 31, 2007 after taking into account the reclassification of Lynch
Systems assets into &#147;Assets or Liabilities of Discontinued Operations.&#148; &nbsp;At
September 30, 2008, the Company had current assets of $17,595,000 and current
</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><BR><BR></P>
<P style="MARGIN: 0px" align=justify>17</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; PAGE-BREAK-BEFORE: always">liabilities
of $7,563,000. &nbsp;&nbsp;After taking into account the reclassification of
Lynch Systems assets into &#147;Assets or Liabilities of Discontinued Operations,&#148; at
December 31, 2007, the Company had current assets of $17,225,000 and current
liabilities of $6,241,000. &nbsp;The ratio of current assets to current
liabilities was 2.33 to 1.00 at September 30, 2008, compared to 2.76 to 1.00 at
December 31, 2007. &nbsp;&nbsp;</P><A name=_DV_M164></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">Cash used in operating
activities from continuing operations was $264,000 for the nine months ended
September 30, 2008, compared to cash used in operating activities from
continuing operations of $707,000 for the nine months ended September 30, 2007.
&nbsp;The decrease in cash used in operating activities is due to cash used in
the nine months ended September 30, 2007 to pay down accounts payable and
accrued liabilities of $785,000 compared to an increase of $288,000 for the nine
months ended September 30, 2008. &nbsp;This was offset by usage of $547,000
during the nine months ended September 30, 2008 that increased inventory
balances compared to a decrease in inventory and cash creation of $1,048,000
during the comparable period in 2007.</P><A name=_DV_M165></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">Cash used in investing
activities from continuing operations was $29,000 for the nine months ended
September 30, 2008, versus cash provided by of $2,128,000 for the nine months
ended September 30, 2007. &nbsp;The cash from investing activities came
primarily from the sale of securities in March 2007. &nbsp;The proceeds of that
sale were $2,292,000. </P><A name=_DV_M166></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">Cash provided by financing
activities from continuing operations was $744,000 for the nine months ended
September 30, 2008, compared with cash used in financing activities of $781,000
for the nine months ended September 30, 2007. &nbsp;The increase in cash
provided by financing activities is due primarily to an increase in net
borrowings on the Company&#146;s note payable offset by a decrease in scheduled
repayments of its long-term debt.</P><A name=_DV_M167></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">At September 30, 2008, total
liabilities of $11,457,000 was $950,000 more than the total liabilities at
December 31, 2007 of $10,507,000. The debt increased due to the increase in
MtronPTI&#146;s borrowing on its revolving loan, which was partially offset by a
decrease in term loans outstanding due to scheduled repayments. &nbsp;At
September 30, 2008, the Company had $411,000 in current maturities of long-term
debt compared with $419,000 at December 31, 2007. &nbsp;The increase in
consolidated debt was offset by an increase in cash and cash equivalents of
$371,000.</P><A name=_DV_M168></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">The Company believes that
existing cash and cash equivalents, cash generated from operations and available
borrowings on its revolver, will be sufficient to meet its ongoing working
capital and capital expenditure requirements for the foreseeable future.
&nbsp;&nbsp;</P><A name=_DV_M169></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">On October 14, 2004, MtronPTI,
entered into the FNBO Loan Agreement. &nbsp;The FNBO Loan Agreement provides for
a short-term credit facility of up to $5,500,000, the FNBO Revolving Loan.
&nbsp;The provisions of the FNBO Revolving Loan were subsequently amended, most
recently on June 30, 2008. &nbsp;The principal balance of the FNBO Revolving
Loan currently bears interest at 30-day LIBOR plus 2.1%, with interest only
payments due monthly and the final payment of principal and interest due on June
30, 2009. &nbsp;At September 30, 2008, the amount outstanding under the
revolving credit loan was $2,074,000. &nbsp;The Company had $3,426,000 of unused
borrowing capacity under its revolving line of credit at September 30, 2008,
compared to $4,465,000 at December 31, 2007.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">The FNBO Loan Agreement also
provides for a term loan in the original principal amount of $2,000,000, the
FNBO Term Loan. &nbsp;The provisions of the FNBO Term Loan were subsequently
amended, most recently on January 24, 2008. &nbsp;Under such amendment, the
original principal amount of the FNBO Term Loan is approximately $1,410,000, and
the principal balance bears interest at 30-day LIBOR plus 2.1%, with principal
and interest payments due monthly and the final payment of principal and
interest due January 24, 2013.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">The FNBO Loan Agreement contains
a variety of affirmative and negative covenants, including, but not limited to,
financial covenants that MtronPTI maintain: (i) tangible net worth of not less
than $7,000,000, (ii) a ratio of current assets to current liabilities of not
less than 1.5 to 1.0; (iii) a ratio of total liabilities to tangible net worth
of not greater than 2.75 to 1.0; and (iv) a fixed charge ratio of 1.2 to 1.0.
&nbsp;At September 30, 2008, the Company was in compliance with these
covenants.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">All outstanding obligations
under the FNBO Loan Agreement are guaranteed by the Company.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">In connection with the FNBO Term
Loan, MtronPTI entered into a separate interest rate swap agreement with FNBO
from which it receives periodic payments at the LIBOR Base Rate and makes
periodic payments at a fixed rate of 5.60% through the life of the FNBO Term
Loan. &nbsp;The Company has designated this swap as a cash flow </P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><BR><BR></P>
<P style="MARGIN: 0px" align=justify>18</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; PAGE-BREAK-BEFORE: always">hedge
in accordance with FASB 133 &#147;Accounting for Derivative Instruments and Hedging
Activities&#148;. &nbsp;The fair value of the interest rate swap at September 30,
2008 is $1,000 net of any tax effect, and is included in &#147;swap liability on
hedge contracts&#148; on the condensed consolidated balance sheets. &nbsp;The change
in fair value is reflected in other comprehensive loss, net of any tax
effect.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">On September 30, 2005, MtronPTI
entered into the RBC Loan Agreement, which provides for a loan in the original
principal amount of $3,040,000, the RBC Term Loan. &nbsp;The RBC Term Loan bears
interest at LIBOR Base Rate plus 2.75% and is being repaid in monthly
installments based on a 20 year amortization, with the then remaining principal
balance and interest due on the fifth anniversary of the RBC Loan Agreement.
&nbsp;The RBC Loan Agreement contains a variety of affirmative and negative
covenants, including, but not limited to, financial covenants that MtronPTI
maintain: (i) a ratio of total liabilities to tangible net worth of at least 4.0
to 1.0; (ii) tangible net worth of at least $4.2 million; and (iii) a fixed
charge coverage ratio of not less than 1.2 to 1.0. &nbsp;At September 30, 2008,
the Company was in compliance with these covenants.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">All outstanding obligations
under the RBC Loan Agreement are collateralized by security interests in the
assets of MtronPTI and guaranteed by the Company.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">In connection with the RBC Term
Loan, MtronPTI entered into a five-year interest rate swap from which it
receives periodic payments at the LIBOR Base Rate and makes periodic payments at
a fixed rate of 7.51% with monthly settlement and rate reset dates. &nbsp;The
Company has designated this swap as a cash flow hedge in accordance with FASB
133 &#147;Accounting for Derivative Instruments and Hedging Activities&#148;. &nbsp;The
fair value of the interest rate swap at September 30, 2008 is ($85,000) net of
any tax effect, and is included in &#147;swap liability on hedge contracts&#148; on the
condensed consolidated balance sheets. &nbsp;The change in fair value is
reflected in other comprehensive loss, net of any tax effect.</P><A
name=_DV_M175></A><A name=_DV_M176></A><A name=_DV_M177></A><A
name=_DV_M182></A><A name=_DV_M183></A>
<P style="MARGIN: 0px"><B>Off-Balance Sheet Arrangements</B> </P>
<P style="MARGIN: 0px"><BR></P><A name=_DV_M184></A>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 13px; LINE-HEIGHT: normal">The
Company does not have any off-balance sheet arrangements.<A name=_DV_M185></A><A
name=_DV_M186></A><FONT style="FONT-SIZE: 10pt"> </FONT></P><A
name=_DV_M187></A><A name=_DV_M188></A><A name=_DV_M189></A><A
name=_DV_M190></A><A name=_DV_M191></A><A name=_DV_M192></A><A
name=_DV_M193></A><A name=_DV_M194></A><A name=_DV_M195></A><A
name=_DV_M196></A>
<P style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: -16px">&nbsp;<A
name=_DV_M197></A><B>Item 3. &nbsp;</B></P>
<P style="PADDING-LEFT: 24px; MARGIN: 0px; TEXT-INDENT: 72px"><B>Quantitative
and Qualitative Disclosures About Market Risk.</B> </P><A name=_DV_M198></A>
<P style="MARGIN-TOP: 13px; MARGIN-BOTTOM: 13px">Not applicable.</P><A
name=_DV_M200></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: -16px; TEXT-INDENT: 30px"><B>Item 4T.
&nbsp;</B></P>
<P style="MARGIN: 0px; TEXT-INDENT: 96px"><B>Controls and Procedures.</B> </P>
<P style="MARGIN: 0px"><BR></P><A name=_DV_M201></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><I>Evaluation of our Disclosure
Controls and Procedures</I></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">Under the supervision and with
the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, we evaluated the effectiveness of the design and
operation of our disclosure controls and procedures (as defined under Exchange
Act Rule 13a-15(e)) as of September 30, 2008. Based on this evaluation,
management has concluded that as of September 30, 2008, such disclosure controls
and procedures were not effective.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><I>Changes in Internal Control
Over Financial Reporting</I></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">The Company&#146;s management is
responsible for establishing and maintaining adequate internal control over
financial reporting. &nbsp;Under the supervision and with the participation of
management, including our Chief Executive Officer and Chief Financial Officer,
management assessed the effectiveness of internal control over financial
reporting as of December 31, 2007 based on the guidance for smaller companies in
using the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) <I>Internal Controls &#150; Integrated Framework </I>as it relates to the
effectiveness of internal control over financial reporting. &nbsp;Based on that
assessment, management had concluded that the Company&#146;s internal controls over
financial reporting were not effective as of December 31, 2007 to provide
reasonable assurance regarding the reliability of its financial reporting and
the preparation of its financial statements for external purposes in accordance
with accounting principles generally accepted in the United States of America.
As a result of its assessment of our internal control over financial reporting,
management identified material weaknesses in the following areas: entity-level
controls, enterprise-wide risk oversight, financial statement close and
reporting process, inventory controls and information technology company-level
controls.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><BR><BR></P>
<P style="MARGIN: 0px" align=justify>19</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px; PAGE-BREAK-BEFORE: always">There
were no significant changes in our internal control over financial reporting
that occurred during the most recent fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><I>Remediation Efforts to
Address Material Weaknesses in Internal Control over Financial Reporting
</I></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">Throughout the process to report
on the operations for the three months ended September 30, 2008, no material
changes in our internal control over financial reporting were made regarding the
implementation of a remediation plan to address the material weaknesses
identified as of December 31, 2007. &nbsp;We have continued to implement
controls and procedures that have addressed and corrected the previously
reported control deficiency related to material weakness in internal control
over financial reporting with respect to inventory controls. &nbsp;The primary
changes made by the Company to remedy the identified material weakness were
improvements in the documentation of implemented controls and procedures and
their respective reviews and approvals. &nbsp;&nbsp;In addition, management
continuously identifies and communicates in a timely manner to the responsible
personnel across the Company changes to its compliance program and actively
follows up on its appropriate implementation. </P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">Management has continued to
identify a material weakness in the area of information technology company-level
controls.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">We will continue to implement
process changes to address the material weaknesses previously noted regarding
the internal controls over financial reporting for fiscal 2007. We are currently
undergoing a comprehensive effort to remedy the control deficiencies identified.
This effort, under the direction of the Company&#146;s senior management includes the
documentation, testing and review of our internal controls. During the course of
these activities, we may identify other potential improvements to our internal
controls over financial reporting that we will evaluate for possible future
implementation. We expect to continue such documentation, testing and review and
may identify other control deficiencies, possibly including additional material
weaknesses, and other potential improvements to our internal controls in the
future. </P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><I>Evaluation of Internal
Control Over Financial Reporting</I></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">Based on management&#146;s continuing
assessment of the Company&#146;s internal control over financial reporting,
management has concluded that the Company&#146;s internal control over financial
reporting was not effective as of September 30, 2008 to provide reasonable
assurance regarding the reliability of its financial reporting and the
preparation of its financial statements for external purposes in accordance with
United States generally accepted accounting principles.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><BR></P><A name=_DV_M207></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 14px" align=center><BR><BR></P>
<P style="MARGIN: 0px" align=justify>20</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 14px; PAGE-BREAK-BEFORE: always; LINE-HEIGHT: 13pt"
align=center><B>PART II</B></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 13pt"><B>OTHER
INFORMATION</B></P><A name=_DV_M208></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: -16px; TEXT-INDENT: 24px"><B>Item 1.
&nbsp;</B></P>
<P style="MARGIN: 0px; TEXT-INDENT: 96px"><B>Legal Proceedings.</B></P>
<P style="MARGIN: 0px"><BR></P><A name=_DV_M209></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">In the normal course of
business, the Company and its subsidiaries may become defendants in certain
product liability, worker claims and other litigation. &nbsp;There is no
litigation pending currently.</P>
<P style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: -16px"><B>Item
1A.</B></P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; MARGIN-BOTTOM: 13px; TEXT-INDENT: 72px"><B>Risk
Factors.</B></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px"><B><I>We found material
weaknesses in our internal control over financial reporting and concluded that
our disclosure controls and procedures and our internal control over financial
reporting were not effective as of December 31, 2007 and September 30,
2008.</I></B></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">As disclosed in Part II, Item
9A(T), &#147;Controls and Procedures,&#148; of our Annual Report on Form 10-K for the year
ended December 31, 2007, and updated herein in Part I, Item 4T, &#147;Controls and
Procedures,&#148; of our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2008, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures and our internal control
over financial reporting were not effective as of December 31, 2007 and not
effective as of September 30, 2008. &nbsp;Our failure to successfully implement
our plans to remediate the material weaknesses discovered could cause us to fail
to meet our reporting obligations, to produce timely and reliable financial
information, and to effectively prevent fraud. &nbsp;Additionally, such failures
could cause investors to lose confidence in our reported financial information,
which could have a negative impact on our financial condition and stock
price.</P><A name=_DV_M210></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: -16px; TEXT-INDENT: 24px"><B>Item 6.
&nbsp;&nbsp;&nbsp;</B></P>
<P style="MARGIN: 0px; TEXT-INDENT: 96px"><B>Exhibits.</B></P>
<P style="MARGIN: 0px" align=justify><BR></P><A name=_DV_M211></A>
<P style="MARGIN: 0px"><B>EXHIBIT INDEX</B></P>
<P style="MARGIN: 0px"><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=53></TD>
<TD width=567></TD></TR>
<TR>
<TD vAlign=bottom width=53>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid"
align=center>Exhibit No.</P></TD>
<TD vAlign=bottom width=567>
<P style="PADDING-BOTTOM: 4px; MARGIN: 0px" align=center><BR></P>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 11.4pt; BORDER-BOTTOM: #000000 1px solid"
align=center>Description</P></TD></TR>
<TR>
<TD vAlign=bottom width=53>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=567>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=53>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">31(a)*</P></TD>
<TD vAlign=bottom width=567>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">Certification by Principal
Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.</P></TD></TR>
<TR>
<TD vAlign=bottom width=53>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">31(b)*</P></TD>
<TD vAlign=bottom width=567>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">Certification by Principal
Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.</P></TD></TR>
<TR>
<TD vAlign=bottom width=53>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">32(a)*</P></TD>
<TD vAlign=bottom width=567>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">Certification by Principal
Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.</P></TD></TR>
<TR>
<TD vAlign=bottom width=53>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">32(b)*</P></TD>
<TD vAlign=bottom width=567>
<P style="MARGIN: 0px; LINE-HEIGHT: 11.4pt">Certification by Principal
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.</P></TD></TR></TABLE>
<P style="MARGIN: 0px" align=justify><BR></P><A name=_DV_M212></A>
<P style="MARGIN: 0px">* filed herewith</P><A name=_DV_M213></A>
<P style="MARGIN: 0px">&nbsp;</P><A name=_DV_M214></A>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px">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, the Company will furnish
to each of its stockholders a copy of any such exhibit. Requests should be
addressed to the Office of the Secretary, The LGL Group, Inc., 2525 Shader Rd.,
Orlando, Florida 32804.</P><A name=_DV_M215></A>
<P style="MARGIN: 0px" align=center><BR><BR></P>
<P style="MARGIN: 0px" align=justify>21</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="PAGE-BREAK-BEFORE: always; MARGIN: 0px"
align=center><U>SIGNATURES</U></P>
<P style="MARGIN: 0px"><BR></P><A name=_DV_M216></A>
<P style="MARGIN: 0px">Pursuant to the requirements of the Securities<A
name=_DV_M217></A> Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.</P>
<P style="MARGIN: 0px"><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=212></TD>
<TD width=106></TD>
<TD width=40></TD>
<TD width=278></TD></TR>
<TR>
<TD vAlign=bottom width=212>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=106>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=319 colSpan=2>
<P style="MARGIN: 0px; TEXT-INDENT: 7px" align=justify>THE LGL GROUP,
INC.</P></TD></TR>
<TR>
<TD vAlign=bottom width=212>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=106>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=319 colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=212>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=106>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=319 colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=212>
<P style="MARGIN: 0px" align=justify>Date:
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;November
13, 2008</P></TD>
<TD vAlign=bottom width=106>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=40>
<P style="MARGIN: 0px" align=justify>BY:</P></TD>
<TD vAlign=bottom width=278>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=justify>/s/ Robert Zylstra</P></TD></TR>
<TR>
<TD vAlign=bottom width=212>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=106>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=40>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=278>
<P style="MARGIN: 0px" align=justify>Robert Zylstra</P></TD></TR>
<TR>
<TD vAlign=bottom width=212>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=106>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=40>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=278>
<P style="MARGIN: 0px" align=justify>President and Chief Executive
Officer</P>
<P style="MARGIN: 0px" align=justify>(Principal Executive Officer)
</P></TD></TR>
<TR>
<TD vAlign=bottom width=212>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=106>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=40>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=278>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=212>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=106>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=40>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=278>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=212>
<P style="MARGIN: 0px" align=justify>Date:
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;November
13, 2008</P></TD>
<TD vAlign=bottom width=106>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=40>
<P style="MARGIN: 0px" align=justify>BY:</P></TD>
<TD vAlign=bottom width=278>
<P
style="PADDING-BOTTOM: 4px; MARGIN: 0px; BORDER-BOTTOM: #000000 1px solid"
align=justify>/s/ Harold D. Castle</P></TD></TR>
<TR>
<TD vAlign=bottom width=212>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=106>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=40>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=278>
<P style="MARGIN: 0px" align=justify>Harold D. Castle</P></TD></TR>
<TR>
<TD vAlign=bottom width=212>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=106>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=40>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=278>
<P style="MARGIN: 0px" align=justify>Chief Financial Officer</P>
<P style="MARGIN: 0px" align=justify>(Principal Financial Officer)
</P></TD></TR></TABLE>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P><A name=_DV_M218></A>
<P style="MARGIN: 0px; FONT-FAMILY: Courier New"
align=right>&nbsp;</P></DIV></BODY>
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<DOCUMENT>
<TYPE>EX-1
<SEQUENCE>2
<FILENAME>exhibit32b.htm
<DESCRIPTION>EX1
<TEXT>
<!doctype html public "-//IETF//DTD HTML//EN">
<HTML>
<HEAD>
<TITLE>EXHIBIT 32(b)</TITLE>
<META NAME="author" CONTENT="Neal Renuart">
<META NAME="date" CONTENT="11/06/2008">
</HEAD>
<BODY style="line-height:12pt; font-family:Times New Roman; font-size:10pt; color:#000000">
<DIV style="width:576px"><P style="line-height:11pt; margin:0px; font-size:9pt" align=right>EXHIBIT 32(b)</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin:0px; font-size:9pt" align=center>CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER</P>
<P style="line-height:11pt; margin:0px; font-size:9pt" align=center>PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin:0px; text-indent:61.067px; font-size:9pt">In connection with the quarterly report of The LGL Group, Inc., (the &#147;Company&#148;) on Form 10-Q for the quarterly period ended September 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the &#147;Report&#148;), I, Harold D. Castle, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:48px; text-indent:-24px; font-size:9pt">1.</P>
<P style="line-height:11pt; margin:0px; padding-left:48px; font-size:9pt">The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:48px; text-indent:-24px; font-size:9pt">2.</P>
<P style="line-height:11pt; margin:0px; padding-left:48px; font-size:9pt">The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.</P>
<P style="margin:0px"><BR></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=319.2></TD><TD width=18.467></TD><TD width=60></TD><TD width=240.733></TD></TR>
<TR><TD valign=top width=319.2><P style="line-height:11pt; margin:0px; font-size:9pt">November 13, 2008</P>
</TD><TD valign=top width=18.467><P>&nbsp;</P></TD><TD style="border-bottom:1px solid #000000" valign=top width=300.733 colspan=2><P style="line-height:11pt; margin:0px; font-size:9pt">/s/ Harold D. Castle</P>
</TD></TR>
<TR><TD valign=top width=319.2><P>&nbsp;</P></TD><TD valign=top width=18.467><P>&nbsp;</P></TD><TD valign=top width=60><P style="line-height:11pt; margin:0px; font-size:9pt">Name:</P>
</TD><TD valign=top width=240.733><P style="line-height:11pt; margin:0px; font-size:9pt">Harold D. Castle</P>
</TD></TR>
<TR><TD valign=top width=319.2><P>&nbsp;</P></TD><TD valign=top width=18.467><P>&nbsp;</P></TD><TD valign=top width=60><P style="line-height:11pt; margin:0px; font-size:9pt">Title:</P>
</TD><TD valign=top width=240.733><P style="line-height:11pt; margin:0px; font-size:9pt">Chief Financial Officer</P>
<P style="line-height:11pt; margin:0px; font-size:9pt">(Principal Financial Officer)</P>
</TD></TR>
</TABLE>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR>
<BR></P>
</DIV></BODY>
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<DOCUMENT>
<TYPE>EX-2
<SEQUENCE>3
<FILENAME>exhibit31a.htm
<DESCRIPTION>EX2
<TEXT>
<!doctype html public "-//IETF//DTD HTML//EN">
<HTML>
<HEAD>
<TITLE>EXHIBIT 31(a)</TITLE>
<META NAME="author" CONTENT="Neal Renuart">
<META NAME="date" CONTENT="11/06/2008">
</HEAD>
<BODY style="line-height:12pt; font-family:Times New Roman; font-size:10pt; color:#000000">
<DIV style="width:576px"><P style="line-height:11pt; margin:0px; font-size:9pt" align=right>EXHIBIT 31(a)</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin:0px; font-size:9pt" align=center>CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER </P>
<P style="line-height:11pt; margin:0px; font-size:9pt" align=center>PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002</P>
<P style="margin:0px" align=center><BR></P>
<P style="line-height:11pt; margin:0px; font-size:9pt">I, Robert Zylstra, certify that:</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:34px; text-indent:-24px; font-size:9pt">1.</P>
<P style="line-height:11pt; margin:0px; padding-left:34px; font-size:9pt">I have reviewed this quarterly report on Form 10-Q of The LGL Group, Inc. for the quarterly period ended September 30, 2008;</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:34px; text-indent:-24px; font-size:9pt">2.</P>
<P style="line-height:11pt; margin:0px; padding-left:34px; font-size:9pt">Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:34px; text-indent:-24px; font-size:9pt">3.</P>
<P style="line-height:11pt; margin:0px; padding-left:34px; font-size:9pt">Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:34px; text-indent:-24px; font-size:9pt">4.</P>
<P style="line-height:11pt; margin:0px; padding-left:34px; font-size:9pt">The registrant&#146;s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:82px; text-indent:-24px; font-size:9pt">(a)</P>
<P style="line-height:11pt; margin:0px; padding-left:82px; font-size:9pt">Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:82px; text-indent:-24px; font-size:9pt">(b)</P>
<P style="line-height:11pt; margin:0px; padding-left:82px; font-size:9pt">Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:82px; text-indent:-24px; font-size:9pt">(c)</P>
<P style="line-height:11pt; margin:0px; padding-left:82px; font-size:9pt">Evaluated the effectiveness of the registrant&#146;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</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:82px; text-indent:-24px; font-size:9pt">(d)</P>
<P style="line-height:11pt; margin:0px; padding-left:82px; text-indent:-4px; font-size:9pt">&nbsp;Disclosed in this report any change in the registrant&#146;s internal control over financial reporting that occurred during the registrant&#146;s most recent fiscal quarter (the registrant&#146;s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant&#146;s internal control over financial reporting; and</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:34px; text-indent:-24px; font-size:9pt">5.</P>
<P style="line-height:11pt; margin:0px; padding-left:34px; font-size:9pt">The registrant&#146;s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit committee of the registrant&#146;s board of directors (or persons performing the equivalent functions):</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:82px; text-indent:-24px; font-size:9pt">(a)</P>
<P style="line-height:11pt; margin:0px; padding-left:82px; font-size:9pt">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&#146;s ability to record, process, summarize and report financial information; and</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:82px; text-indent:-24px; font-size:9pt">(b)</P>
<P style="line-height:11pt; margin:0px; padding-left:82px; font-size:9pt">Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant&#146;s internal control over financial reporting.</P>
<P style="margin:0px"><BR></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=319.2></TD><TD width=18.467></TD><TD width=60></TD><TD width=240.733></TD></TR>
<TR><TD valign=top width=319.2><P style="line-height:11pt; margin:0px; font-size:9pt">November 13, 2008</P>
</TD><TD valign=top width=18.467><P>&nbsp;</P></TD><TD style="border-bottom:1px solid #000000" valign=top width=300.733 colspan=2><P style="line-height:11pt; margin:0px; font-size:9pt">/s/ Robert Zylstra</P>
</TD></TR>
<TR><TD valign=top width=319.2><P>&nbsp;</P></TD><TD valign=top width=18.467><P>&nbsp;</P></TD><TD valign=top width=60><P style="line-height:11pt; margin:0px; font-size:9pt">Name:</P>
</TD><TD valign=top width=240.733><P style="line-height:11pt; margin:0px; font-size:9pt">Robert Zylstra</P>
</TD></TR>
<TR><TD valign=top width=319.2><P>&nbsp;</P></TD><TD valign=top width=18.467><P>&nbsp;</P></TD><TD valign=top width=60><P style="line-height:11pt; margin:0px; font-size:9pt">Title:</P>
</TD><TD valign=top width=240.733><P style="line-height:11pt; margin:0px; font-size:9pt">President and Chief Executive Officer</P>
<P style="line-height:11pt; margin:0px; font-size:9pt">(Principal Executive Officer)</P>
</TD></TR>
</TABLE>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR>
<BR></P>
</DIV></BODY>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3
<SEQUENCE>4
<FILENAME>exhibit31b.htm
<DESCRIPTION>EX3
<TEXT>
<!doctype html public "-//IETF//DTD HTML//EN">
<HTML>
<HEAD>
<TITLE>EXHIBIT 31(b)</TITLE>
<META NAME="author" CONTENT="Neal Renuart">
<META NAME="date" CONTENT="11/06/2008">
</HEAD>
<BODY style="line-height:12pt; font-family:Times New Roman; font-size:10pt; color:#000000">
<DIV style="width:576px"><P style="line-height:11pt; margin:0px; font-size:9pt" align=right>EXHIBIT 31(b)</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin:0px; font-size:9pt" align=center>CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER </P>
<P style="line-height:11pt; margin:0px; font-size:9pt" align=center>PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002</P>
<P style="margin:0px" align=center><BR></P>
<P style="line-height:11pt; margin:0px; font-size:9pt">I, Harold D. Castle, certify that:</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:34px; text-indent:-24px; font-size:9pt">1.</P>
<P style="line-height:11pt; margin:0px; padding-left:34px; font-size:9pt">I have reviewed this quarterly report on Form 10-Q of The LGL Group, Inc. for the quarterly period ended September 30, 2008;</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:34px; text-indent:-24px; font-size:9pt">2.</P>
<P style="line-height:11pt; margin:0px; padding-left:34px; font-size:9pt">Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:34px; text-indent:-24px; font-size:9pt">3.</P>
<P style="line-height:11pt; margin:0px; padding-left:34px; font-size:9pt">Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:34px; text-indent:-24px; font-size:9pt">4.</P>
<P style="line-height:11pt; margin:0px; padding-left:34px; font-size:9pt">The registrant&#146;s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:82px; text-indent:-24px; font-size:9pt">(a)</P>
<P style="line-height:11pt; margin:0px; padding-left:82px; font-size:9pt">Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:82px; text-indent:-24px; font-size:9pt">(b)</P>
<P style="line-height:11pt; margin:0px; padding-left:82px; font-size:9pt">Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:82px; text-indent:-24px; font-size:9pt">(c)</P>
<P style="line-height:11pt; margin:0px; padding-left:82px; font-size:9pt">Evaluated the effectiveness of the registrant&#146;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</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:82px; text-indent:-24px; font-size:9pt">(d)</P>
<P style="line-height:11pt; margin:0px; padding-left:82px; text-indent:-4px; font-size:9pt">&nbsp;Disclosed in this report any change in the registrant&#146;s internal control over financial reporting that occurred during the registrant&#146;s most recent fiscal quarter (the registrant&#146;s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant&#146;s internal control over financial reporting; and</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:34px; text-indent:-24px; font-size:9pt">5.</P>
<P style="line-height:11pt; margin:0px; padding-left:34px; font-size:9pt">The registrant&#146;s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit committee of the registrant&#146;s board of directors (or persons performing the equivalent functions):</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:82px; text-indent:-24px; font-size:9pt">(a)</P>
<P style="line-height:11pt; margin:0px; padding-left:82px; font-size:9pt">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&#146;s ability to record, process, summarize and report financial information; and</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:82px; text-indent:-24px; font-size:9pt">(b)</P>
<P style="line-height:11pt; margin:0px; padding-left:82px; font-size:9pt">Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant&#146;s internal control over financial reporting.</P>
<P style="margin:0px"><BR></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=319.2></TD><TD width=18.467></TD><TD width=60></TD><TD width=240.733></TD></TR>
<TR><TD valign=top width=319.2><P style="line-height:11pt; margin:0px; font-size:9pt">November 13, 2008</P>
</TD><TD valign=top width=18.467><P>&nbsp;</P></TD><TD style="border-bottom:1px solid #000000" valign=top width=300.733 colspan=2><P style="line-height:11pt; margin:0px; font-size:9pt">/s/ Harold D. Castle</P>
</TD></TR>
<TR><TD valign=top width=319.2><P>&nbsp;</P></TD><TD valign=top width=18.467><P>&nbsp;</P></TD><TD valign=top width=60><P style="line-height:11pt; margin:0px; font-size:9pt">Name:</P>
</TD><TD valign=top width=240.733><P style="line-height:11pt; margin:0px; font-size:9pt">Harold D. Castle</P>
</TD></TR>
<TR><TD valign=top width=319.2><P>&nbsp;</P></TD><TD valign=top width=18.467><P>&nbsp;</P></TD><TD valign=top width=60><P style="line-height:11pt; margin:0px; font-size:9pt">Title:</P>
</TD><TD valign=top width=240.733><P style="line-height:11pt; margin:0px; font-size:9pt">Chief Financial Officer</P>
<P style="line-height:11pt; margin:0px; font-size:9pt">(Principal Financial Officer)</P>
</TD></TR>
</TABLE>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR>
<BR></P>
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<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>5
<FILENAME>exhibit32a.htm
<DESCRIPTION>EX4
<TEXT>
<!doctype html public "-//IETF//DTD HTML//EN">
<HTML>
<HEAD>
<TITLE>EXHIBIT 32(a)</TITLE>
<META NAME="author" CONTENT="Neal Renuart">
<META NAME="date" CONTENT="11/06/2008">
</HEAD>
<BODY style="line-height:12pt; font-family:Times New Roman; font-size:10pt; color:#000000">
<DIV style="width:576px"><P style="line-height:11pt; margin:0px; font-size:9pt" align=right>EXHIBIT 32(a)</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin:0px; font-size:9pt" align=center>CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER</P>
<P style="line-height:11pt; margin:0px; font-size:9pt" align=center>PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</P>
<P style="margin:0px"><BR></P>
<P style="line-height:11pt; margin:0px; text-indent:61.067px; font-size:9pt">In connection with the quarterly report of The LGL Group, Inc., (the &#147;Company&#148;) on Form 10-Q for the quarterly period ended September 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the &#147;Report&#148;), I, Robert Zylstra, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:48px; text-indent:-24px; font-size:9pt">1.</P>
<P style="line-height:11pt; margin:0px; padding-left:48px; font-size:9pt">The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and</P>
<P style="margin:0px" align=justify><BR></P>
<P style="line-height:11pt; margin-top:0px; margin-bottom:-14.667px; padding-left:48px; text-indent:-24px; font-size:9pt">2.</P>
<P style="line-height:11pt; margin:0px; padding-left:48px; font-size:9pt">The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.</P>
<P style="margin:0px"><BR></P>
<TABLE style="font-size:10pt" cellspacing=0><TR height=0 style="font-size:0"><TD width=319.2></TD><TD width=18.467></TD><TD width=60></TD><TD width=240.733></TD></TR>
<TR><TD valign=top width=319.2><P style="line-height:11pt; margin:0px; font-size:9pt">November 13, 2008</P>
</TD><TD valign=top width=18.467><P>&nbsp;</P></TD><TD style="border-bottom:1px solid #000000" valign=top width=300.733 colspan=2><P style="line-height:11pt; margin:0px; font-size:9pt">/s/ Robert Zylstra</P>
</TD></TR>
<TR><TD valign=top width=319.2><P>&nbsp;</P></TD><TD valign=top width=18.467><P>&nbsp;</P></TD><TD valign=top width=60><P style="line-height:11pt; margin:0px; font-size:9pt">Name:</P>
</TD><TD valign=top width=240.733><P style="line-height:11pt; margin:0px; font-size:9pt">Robert Zylstra</P>
</TD></TR>
<TR><TD valign=top width=319.2><P>&nbsp;</P></TD><TD valign=top width=18.467><P>&nbsp;</P></TD><TD valign=top width=60><P style="line-height:11pt; margin:0px; font-size:9pt">Title:</P>
</TD><TD valign=top width=240.733><P style="line-height:11pt; margin:0px; font-size:9pt">President and Chief Executive Officer</P>
<P style="line-height:11pt; margin:0px; font-size:9pt">(Principal Executive Officer)</P>
</TD></TR>
</TABLE>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR>
<BR></P>
</DIV></BODY>
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</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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