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-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TSVQvJCf6Sgcd7QBSSO1CN4SOgvVU21INv8r9jrg50Y5nUwsdecCXWcUbzxeijwC ZOExqLlkINORPnVI367YJg== 0000921895-08-001927.txt : 20080630 0000921895-08-001927.hdr.sgml : 20080630 20080627180624 ACCESSION NUMBER: 0000921895-08-001927 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20070930 FILED AS OF DATE: 20080630 DATE AS OF CHANGE: 20080627 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/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-00106 FILM NUMBER: 08923729 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 10-Q/A 1 form10qa03725_09302007.htm sec document

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File No. 1-106
THE LGL GROUP, INC.
- --------------------------------------------------------------------------------

(Exact name of Registrant as Specified in Its Charter)

Delaware 38-1799862
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

2525 Shader Road, Orlando, FL 32804
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)

(407) 298-2000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)

- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year If Changed Since Last Report)

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.

Yes [x] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and smaller
reporting company" in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer [ ] Accelerated filer [ ]

Non-accelerated filer [ ] Smaller reporting company [x]
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

Yes [ ] No [x]

Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practical date.

Class Outstanding At November 12 ,2007
- ----------------------------- --------------------------------
Common Stock, $0.01 par value 2,164,702

INDEX

THE LGL GROUP, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets:................................3

- September 30, 2007

- December 31, 2006

Condensed Consolidated Statements of Operations:......................4

- Three months ended September 30, 2007 and 2006

- Nine months ended September 30, 2007 and 2006

Condensed Consolidated Statements of Cash Flows:......................5

- Nine months ended September 30, 2007 and 2006

Notes to Condensed Consolidated Financial Statements:.................6

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................12

Item 3. Quantitative and Qualitative Disclosures About Market Risk...........18

Item 4T. Controls and Procedures..............................................18

PART II. OTHER INFORMATION

Item 1. Legal Proceedings....................................................19

Item 5. Other Information....................................................19

Item 6. Exhibits ............................................................20

EXPLANATORY NOTE

The LGL Group, Inc. (the "Company") is filing this amendment (this "Amendment")
to its Quarterly Report on Form 10-Q for the quarterly period ended September
30, 2007 (the "Original Filing") in order to include under Part II, Item 5 of
this Amendment certain information required to be disclosed in a report on Form
8-K during the period covered by the Original Filing, but not included in the
Original Filing, and to make associated updates elsewhere. The information
disclosed under Part II, Item 5 of this Amendment has been properly reflected in
the Company's periodic filings made following the Original Filing, including the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2007
and Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2008.

The financial statements and related notes contained in this Amendment have been
restated on a basis consistent with the restated financial statements included
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2007. For detailed information about the restatement and its impact, please
see Note 2, "Restatement of Consolidated Financial Statements" in the
consolidated financial statements to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2007.

Generally, no attempt has been made in this Amendment to modify or update other
disclosures presented in the Original Filing except as required to reflect the
abovementioned matters. This Amendment does not reflect events occurring after
the Original Filing or modify or update those disclosures. Accordingly, this
Amendment should be read in conjunction with the Company's filings made with the
Securities and Exchange Commission subsequent to the date of the Original
Filing.

PART 1 -- FINANCIAL INFORMATION -
ITEM 1. -- CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THE LGL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS -- UNAUDITED
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

September 30, December 31,
2007 2006 (A)
(Restated) (Restated)
-----------------------------
ASSETS
Current Assets
Cash and cash equivalents ............................................... $ 5,408 $ 4,429
Restricted cash ......................................................... 0 96
Investments - marketable securities (Note E) ............................ 54 2,610
Accounts receivable, less allowances of $360 and $132, respectively ..... 5,793 6,472
Due From Olivotto (Note A) .............................................. 253 --
Inventories (Note F) .................................................... 5,057 6,105
Prepaid expenses and other current assets ............................... 287 265
Assets from Discontinued Operations .................................... 4 3,788
-------- --------
Total Current Assets ................................................ $ 16,856 $ 23,765
-------- --------
Property, Plant and Equipment
Land .................................................................... 698 855
Buildings and improvements .............................................. 5,020 5,770
Machinery and equipment ................................................. 12,441 12,010
-------- --------
Gross Property, Plant and Equipment ..................................... 18,159 18,635
Less: Accumulated Depreciation .......................................... (12,896) (12,034)
-------- --------
Net Property, Plant and Equipment ....................................... 5,263 6,601
Deferred Income Taxes ................................................... 112 111
Other Assets ............................................................ 406 508
-------- --------
Total Assets ......................................................... $ 22,637 $ 30,985
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable to bank (Note H) .......................................... $ 869 $ 1,356
Trade accounts payable .................................................. 2,549 2,515
Accrued compensation expense ............................................ 1,136 1,943
Accrued income taxes .................................................... 85 --
Accrued professional fees ............................................... 314 385
Other accrued expenses .................................................. 588 613
Current maturities of Long-Term Debt (Note H) ........................... 801 2,027
Liabilities from Discontinued Operations ................................ 127 2,311
-------- --------
Total Current Liabilities ........................................... 6,469 11,150
Long-term debt (Note H) ..................................................... 4,032 3,100
-------- --------
Total Liabilities ................................................... $ 10,501 $ 14,250
-------- --------
Shareholders' Equity
Common stock, $0.01 par value - 10,000,000 shares authorized;
2,188,510 shares issued; 2,164,702 shares outstanding................ 22 22
Additional paid-in capital .............................................. 21,160 21,081
Accumulated deficit ..................................................... (8,379) (5,512)
Accumulated other comprehensive income (loss) (Note J) .................. (21) 1,790
Treasury stock, at cost, 23,808 shares .................................. (646) (646)
-------- --------
Total Shareholders' Equity .......................................... 12,136 16,735
-------- --------
Total Liabilities and Shareholders' Equity .......................... $ 22,637 $ 30,985
======== ========

(A) The Condensed Consolidated Balance Sheet at December 31, 2006 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.

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

PART I -- FINANCIAL INFORMATION

ITEM 1 -- CONDENSED FINANCIAL STATEMENTS

THE LGL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006* 2007 2006*
(Restated) (Restated) (Restated) (Restated)
----------- ----------- ----------- -----------
REVENUES ............................................... $ 9,612 $ 11,042 $ 29,003 $ 31,364
Cost and expenses:
Manufacturing cost of sales .......................... 7,350 8,014 22,242 21,847
Selling and administrative ........................... 2,564 2,682 7,826 7,588
Impairment loss on Lynch Systems' assets ............. -- -- 905 --
----------- ----------- ----------- -----------
OPERATING PROFIT (LOSS) ................................ (302) 346 (1,970) 1,929
----------- ----------- ----------- -----------
Other income (expense):
Investment income .................................... -- 720 1,526 1,231
Interest expense ..................................... (79) (127) (260) (414)
Gain on sale of land ................................. -- -- 88 --
Other income (expense) ............................... 15 (40) (24) (25)
----------- ----------- ----------- -----------
Total Other income (expense) ........................ (64) 553 1,330 792
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES ...................... (366) 899 (640) 2,721
(Provision) Benefit for income taxes ................... (93) 250 (134) (161)
----------- ----------- ----------- -----------
INCOME/(LOSS) FROM CONTINUING OPERATIONS ............... (459) 1,149 (774) 2,560
----------- ----------- ----------- -----------

Loss from Discontinued Operations ..................... (153) (277) (1,131) (786)
Loss on Sale of Lynch Systems ......................... -- -- (982) --
----------- ----------- ----------- -----------
Total Loss on Discontinued Operations ................. (153) (277) (2,113) (786)
----------- ----------- ----------- -----------

NET INCOME(LOSS) ...................................... $ (612) $ 872 $ (2,887) $ 1,774
----------- ----------- ----------- -----------

Weighted average shares outstanding .................... 2,157,528 2,154,702 2,155,654 2,154,702
----------- ----------- ----------- -----------

BASIC AND DILUTED INCOME/(LOSS) PER
COMMON SHARE FROM CONTINUING
OPERATIONS ........................................... $ (0.21) $ 0.53 $ (0.36) $ 1.18
=========== =========== =========== ===========

BASIC AND DILUTED INCOME/(LOSS) PER
COMMON SHARE FROM DISCONTINUED
OPERATIONS ........................................... $ (0.07) $ (0.13) $ (0.98) $ (0.36)
=========== =========== =========== ===========

BASIC AND DILUTED NET INCOME/(LOSS) PER
COMMON SHARE ......................................... $ (0.28) $ 0.40 $ (1.34) $ 0.82
=========== =========== =========== ===========

* Reclassified to reflect the sale of Lynch Systems, Inc. on June 19, 2007.

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PART I -- FINANCIAL INFORMATION

ITEM 1 -- CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE LGL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -- UNAUDITED
(IN THOUSANDS)

Nine Months Ended
September 30,
------------------
2007 2006
(Restated) (Restated)
--------- ---------
OPERATING ACTIVITIES
Net income (loss) ......................................................................... $(2,887) $ 1,774
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Impairment loss on Lynch Systems' assets .................................................. 905 --
Loss on sale of discontinued operations ................................................... 982 --
Depreciation .............................................................................. 825 715
Amortization of restricted stock .......................................................... 79 --
Provision for doubtful accounts receivable ................................................ 228 92
Amortization of finite-lived intangible assets ............................................ 44 122
Gain realized on sale of marketable securities ............................................ (1,526) (1,171)
Gain on sale of land ...................................................................... (88) --
Changes in operating assets and liabilities:
Receivables ............................................................................. 451 (678)
Inventories ............................................................................. 1,048 (1,438)
Accounts payable and accrued liabilities ................................................ (1,035) 63
Commitments and contingencies ........................................................... -- (859)
Other assets/liabilities ................................................................ 19 (113)
------- -------
Cash used in operating activities of continuing operations ................................ (955) (1,493)
Cash provided by (used in) operating activities of discontinued operations ................ 769 (181)
------- -------
Net cash used in operating activities ..................................................... (186) (1,674)
------- -------

INVESTING ACTIVITIES
Capital expenditures ...................................................................... (431) (496)
Restricted cash ........................................................................... 96 --
Proceeds from sale of marketable securities ............................................... 2,292 2,113
Proceeds from sale of discontinued assets and liabilities ................................. 722 --
Proceeds from sale of land ................................................................ 171 --
Net repayment of margin liability on marketable securities ................................ -- (330)
------- -------
Net cash provided by investing activities ................................................. 2,850 1,287
------- -------

FINANCING ACTIVITIES
Repayment of debt of discontinued operations .............................................. (900) --
Net borrowings (repayments) of notes payable to bank ...................................... (487) (585)
Repayment of long-term debt ............................................................... (737) (566)
Borrowings under long term debt ........................................................... 443 --
Other ..................................................................................... (4) 15
------- -------
Net cash used in financing activities ..................................................... (1,685) (1,136)
------- -------

Increase (decrease) in cash and cash equivalents .......................................... 979 (1,523)
Cash and cash equivalents at beginning of period .......................................... 4,429 5,512
------- -------
Cash and cash equivalents at end of period ................................................ $ 5,408 $ 3,989
======= =======
Supplemental Disclosure
Cash paid for interest .................................................................... $ 395 $ 420
======= =======
Cash paid for income taxes ................................................................ $ 47 $ 98
======= =======

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A. SUBSIDIARIES OF THE REGISTRANT

As of September 30, 2007, the Subsidiaries of the Registrant are as
follows:

Owned By LGL
------------
Lynch Systems, Inc.......................... 100.0%
M-tron Industries, Inc...................... 100.0%
M-tron Industries, Ltd.................... 100.0%
Piezo Technology, Inc..................... 100.0%
Piezo Technology India Private Ltd..... 99.9%

On June 19, 2007, in accordance with the Purchase Agreement dated May 17,
2007 and Second Amendment to the Purchase Agreement, dated May 31, 2007, (the
"Purchase Agreement") by and between Lynch Systems Inc. ("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.

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. After deduction of the amount of the
liabilities assumed, $601,074, from the value of the assets sold, $1,455,000,
and taking into account the Buyer's partial funding of the severance obligation,
$118,000, Lynch Systems was due a net cash payment in the amount of $972,000. Of
such amount, $722,000 was paid upon closing and the $250,000 balance, which was
escrowed was paid on October 3rd in accordance with the Escrow Agreement. The
assets retained by Lynch Systems include the land and building used in its
operations with a book value of $1,502,000 and accounts receivable with net book
value of $ 0. All of the accounts receivable for which specific reserves have
not been established have been collected as of September 30, 2007. The Company
intends to sell the land and building in a separate transaction following the
expiration of the six-month lease of the premises to the Buyer.

At September 30, 2007, the LGL Group, Inc. (the "Company") operates
through its principal subsidiary, M-tron Industries, Inc. which includes the
operations of M-tron Industries, Ltd. ("Mtron") and Piezo Technology, Inc.
("PTI"). The combined operations of Mtron and PTI are referred to herein as
"MtronPTI."

B. BASIS OF PRESENTATION

As reported and disclosed within the Company's Form 10-K for the fiscal
year ended December 31, 2007, the Company restated its financial statements for
the first two quarters of 2007, fiscal 2006 as well as years prior to 2006. The
effect of the restatement for the three months ended September 30, 2007 was to
recognize a $19,000 reduction to selling and administrative expenses related to
a reduction in depreciation expense. The effect of the restatement for the three
months ended September 30, 2006 was to recognize a $31,000 in other expense
related to foreign currency remeasurement losses.

The effect of the restatement for the nine months ended September 30, 2007
was to recognize an impairment loss on Lynch Systems' assets of $905,000, a
$2,000 reduction to manufacturing cost of sales related to a reduction in
depreciation expense and a $19,000 reduction to selling and administrative
expenses related to a reduction in depreciation expense. The effect of the
restatement for the nine months ended September 30, 2006 was to recognize a
$4,000 reduction to manufacturing cost of sales related to a reduction in
depreciation expense and $2,000 in income related to foreign currency
remeasurement gains. For detailed information about the restatement and its
impact, please see Note 2, "Restatement of Consolidated Financial Statements" in
the consolidated financial statements to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2007.

The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America 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 generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and nine month period ended September 30, 2007 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2007.

The condensed balance sheet at December 31, 2006 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements and has been reclassified to present the
operations of Lynch Systems as discontinued operations.

For further information, refer to the consolidated financial statements
and footnotes thereto included in the Registrant Company and Subsidiaries Annual
Report on Form 10-K/A for the year ended December 31, 2006.

C. DISCONTINUED OPERATIONS

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 conform to the 2007 financial statement
presentation. Specifically, we have reclassified the results of operations of
Lynch Systems for all periods presented to DISCONTINUED OPERATIONS within the
Statement of Operations. In addition, the remaining assets and liabilities of
the business divested and the assets of the divested business held for separate
sale in 2007 have been reclassified to ASSETS OF DISCONTINUED OPERATIONS and
LIABILITIES OF DISCONTINUED OPERATIONS.

D. ADOPTION OF ACCOUNTING PRONOUNCEMENTS

In July 2006, the FASB issued Financial Accounting Standards
Interpretation No. 48, ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES -- AN
INTERPRETATION OF FASB STATEMENT NO. 109 (the "Interpretation," or "FIN 48"),
which clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. The Interpretation prescribes a recognition and
measurement method for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. The Interpretation
also provides guidance on recognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. The Interpretation is
effective for fiscal years beginning after December 15, 2006. We have adopted
the provisions of FIN 48 effective January 1, 2007 accordingly. In accordance
with FIN 48, the Company will recognize any interest and penalties related to
unrecognized tax benefits in income tax expense.

Based on a review of our tax provisions, the Company did not record a
liability for unrecognized tax benefits as a result of adopting FIN 48 on
January 1, 2007. Further, there has been no change during the nine months ended
September 30, 2007. Accordingly, we have not accrued any interest and penalties
through the period ending September 30, 2007.

The Company files income tax returns in the U.S. federal, various state
and Hong Kong jurisdictions. The Company is generally no longer subject to
income tax examinations by U.S. federal, state and Hong Kong tax authorities for
years before 2001.

In September 2006, the FASB issued SFAS No. 157 "FAIR VALUE MEASUREMENTS"
("SFAS 157"). This statement replaces multiple existing definitions of fair
value with a single definition, establishes a consistent framework for measuring
fair value, and expands financial statement disclosures regarding fair value
measurements. This statement applies only to fair value measurements that are
already required or permitted by other accounting standards and does not require
any new fair value measurements. SFAS 157 is effective for fiscal years
beginning subsequent to November 15, 2007. The Company will adopt this Statement
in the first quarter of 2008, and is currently evaluating the impact on its
financial position and results of operations.

In February 2007, the FASB issued SFAS No. 159, The FAIR VALUE OPTION FOR
FINANCIAL ASSETS AND FINANCIAL LIABILITIES-INCLUDING AN AMENDMENT OF FASB
STATEMENT NO. 115 ("SFAS No. 159"). SFAS No. 159 permits entities to irrevocably
choose to measure many financial instruments and certain other items at fair
value. SFAS No. 159 is effective for fiscal years beginning after November 15,
2007. For any eligible items that exist at the effective date for which an
entity chooses to elect the fair value option, the effect of the first
measurement to fair value shall be reported as a cumulative-effect adjustment to
the opening balance of retained earnings. The Company is in the process of
evaluating the impact that this pronouncement may have on its results of
operations and financial condition.

E. INVESTMENTS

The following is a summary of marketable equity securities held by the
Company (IN THOUSANDS):

Gross Gross Estimated
Unrealized Unrealized Fair
Equity Securities Cost Gains Losses Value
- --------------------------------- ------ ---------- ---------- ---------
September 30, 2007 .............. $ 68 $ 1 (15) $ 54
December 31, 2006 ............... $ 833 $1,789 (12) $2,610

F. INVENTORIES

Inventories are stated at the lower of cost or market value. At September 30,
2007, inventories were valued by two methods: last-in, first-out ("LIFO") and
first-in, first-out ("FIFO"). At September 30, 2007 LIFO inventory comprised 30%
and FIFO 70% of the total inventory, at December 31, 2006, LIFO inventory
comprised 31% and FIFO 69% of the total inventory.

September 30, December 31,
2007 2006
-----------------------------
(in thousands)
Raw materials .............................. $2,402 $2,575
Work in process ............................ 1,202 1,693
Finished goods ............................. 1,453 1,837
------ ------
Total Inventories ........................ $5,057 $6,105
====== ======

Current costs exceed LIFO value of inventories by $377,000 and $334,000 at
September 30, 2007 and December 31, 2006, respectively.

G. ASSETS MARKETED FOR SALE

In accordance with the Purchase Agreement between Lynch Systems and
Olivotto, Lynch Systems sold certain assets to the Buyer. The assets retained by
Lynch Systems include the land and building used in its operations (All accounts
receivable at the closing date which were not fully reserved for were
subsequently collected). The Company intends to sell the land and building in a
separate transaction following the expiration of the six-month lease of the
premises to the Buyer. As such, the Company is continuing to classify the land
and building and its accumulated depreciation, within their respective line
items in the condensed consolidated balance sheet. The Company also recorded an
impairment charge on these retained assets of $905,000 in June 2007.

H. REVOLVING LOANS AND LONG-TERM NOTES/DEBT

September 30, December 31,
2007 2006
------- -------
REVOLVING LOANS: (in thousands)
MtronPTI revolving loan (First National Bank of Omaha) at the 30 day LIBOR rate
plus 2.1% (7.92% at September 30, 2007), due June 30, 2008 $ 869 $ 1,356
======= =======

LONG-TERM LOANS AND DEBT:
MtronPTI term loan (RBC Centura Bank) due October 2010. The note bears interest
at LIBOR Base Rate plus 2.75%. Interest rate swap converted the
loan to a fixed rate, (7.51% at September 30, 2007). $ 2,912 $ 2,964
MtronPTI term loan (First National Bank of Omaha) at the 30 day LIBOR rate
plus 2.1% (7.92% at September 30, 2007), due August 31, 2010 1,473 1,287
MtronPTI commercial variable rate bank term loan, (First National Bank of
Omaha) repaid May 2007 -- 239
South Dakota Board of Economic Development loan at a fixed rate of 3%, due
December 2007 240 250
Yankton Areawide Business Council loan at a fixed rate of 5.5%, due
November 2007 58 65
Rice University Promissory Note at a fixed rate of 4.5%, due August 2009 150 203
Smythe Estate Promissory Note, repaid February 2007 -- 119
------- -------
Totals 4,833 5,127
Less: Current maturities (801) (2,027)
------- -------
Long-term Debt $ 4,032 $ 3,100
======= =======

On September 30, 2005, MtronPTI entered into a Loan Agreement with RBC
Centura Bank ("RBC"). The RBC Term Loan Agreement provided for a loan in the
amount of $3,040,000 (the "RBC Term Loan"), the proceeds of which were used to
pay off the $3,000,000 bridge loan with First National Bank of Omaha which had
been due October 2005. The RBC Term Loan bears interest at LIBOR Base Rate plus
2.75% and is to be repaid in monthly installments based on a twenty year
amortization, with the then remaining principal balance to be paid on the fifth
anniversary of the RBC Term Loan. The balance of this loan at September 30, 2007
is $2,912,000. The RBC Term Loan is collateralized by a mortgage on PTI's
premises.

In connection with this RBC Term Loan, MtronPTI entered into a five-year
interest rate swap from which it will receive periodic payments at the LIBOR
Base Rate and make periodic payments at a fixed rate of 7.51% with monthly
settlement and rate reset dates. The Company has designated this swap as a cash
flow hedge in accordance with FASB 133 "Accounting for Derivative Instruments
and Hedging Activities". The fair value of the interest rate swap at September
30, 2007 is ($6,000), ($4,000) net of tax, compared with $22,000, $14,000 net of
tax, at December 31, 2006. It is included in "other assets" on the balance
sheet. The aggregate fair value is recorded in accumulated other comprehensive
income/(loss), net of tax.

All outstanding obligations under the RBC Term Loan Agreement are
collateralized by security interests in the assets of MtronPTI. The Loan
Agreement contains a variety of affirmative and negative covenants of types
customary in an asset-based lending facility. The Loan Agreement also contains
financial covenants relating to maintenance of levels of minimal tangible net
worth and working capital, and current, leverage and fixed charge ratios,
restricting the amount of capital expenditures. At September 30, 2007, MtronPTI
was not in compliance with the fixed charge covenant on this loan and a waiver
letter has been received from RBC.

On October 14, 2004, MtronPTI, entered into a Loan Agreement with First
National Bank of Omaha for a term loan in the amount of $2,000,000 (the "Term
Loan"). The Term Loan bore interest at the greater of prime rate plus 50 basis
points, or 4.5%, and was repaid in monthly installments of $37,514, with the
then remaining principal balance plus accrued interest to be paid on the third
anniversary of the Loan Agreement, October 2007. This loan was renegotiated on
September 7, 2007. The principal balance was increased by $443,000 to $1,500,000
and the variable interest rate is the 30 day LIBOR rate plus 2.1% (7.92% at
September 30, 2007). The balance of this loan at September 30, 2007, is
$1,473,000 At September 30, 2007, MtronPTI was not in compliance with the fixed
charge covenant on this loan and a waiver letter has been received from First
National Bank of Omaha.

The Smythe Estate Promissory Note was repaid in the first quarter of 2007.

The debt decreased at MtronPTI due to a reduction in the outstanding
revolving debt and the scheduled repayments and retirements of long term debt.
The current portion of long term debt decreased due to the September 7, 2007
renegotiation of the term loan with First National Bank of Omaha. Notes payable
and long-term debt outstanding at September, 30, 2007 included $3,360,000 of
fixed rate debt at an average interest rate of 7.0% (after considering the
effect of the interest rate swap) and variable rate debt of $2,342, 000 at an
average rate of 7.92%. Long-term notes and debt outstanding at December 31,
2006, included $3,601,000 of fixed rate debt at an average interest rate of
6.91% after considering the effect of the interest rate swap) and variable rate
debt of $2,882,000 at an average rate of 8.45%.

I. EARNINGS (LOSS) PER SHARE AND STOCKHOLDERS' EQUITY

STOCK BASED COMPENSATION

The Company accounts for stock based compensation in accordance with the
provisions of Statement of Financial Accounting Standards 123R, "Share-Based
Payment" ("SFAS 123R"). SFAS 123R requires all share based payments issued to be
recognized in the statement of operations based on their fair values, net of
estimated forfeitures. Compensation expense related to stock based compensation
is recognized over the requisite service period, which is generally the vesting
period.

On September 5, 2006, the Company issued 20,000 shares of restricted stock
to two senior executives and on March 20, 2007, the Company issued 10,000 shares
of restricted stock to its new Chief Financial Officer. Fifty percent of these
shares will become vested after one year and the remainder, quarterly during
year two. These are being accounted for under SFAS 123R. Total stock
compensation expense recognized by the Company for these shares for the quarter
ended September 30, 2007 was $30,000 and for the nine months ended September 30,
2007, was $79,000. The remaining unrecognized compensation expense of $75,600
associated with the September 2006 grant will be recognized ratably over the
next 11 months and the remaining $56,800 associated with the March 20, 2007
grant will be recognized ratably over the next 17 2/3 months.

EARNINGS (LOSS) PER SHARE

The Company computes earnings (loss) per share in accordance with SFAS No.
128, "EARNINGS PER SHARE". Basic earnings (loss) per share is computed by
dividing net income (loss) by the weighted average number of common shares
outstanding during the period. 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.

The following securities have been excluded from the diluted earnings per
share computation because the impact of the assumed exercise of stock options
would have been anti-dilutive as the strike price of the options were at least
$13.17 and the stock was trading at $10.20 per share on Friday, September 28,
2007. At September 30, 2007, there were 200,000 options outstanding to purchase
common stock. At September 30, 2006 there were 295,000 options outstanding. The
reduction in outstanding options was due to the expiration of 75,000 options 90
days following the December 2006 separation of the former CEO and the expiration
of 20,000 options following the October 2006 separation of the former VP of
Finance. The Company has no other dilutive securities.

J. ACCUMULATED OTHER COMPREHENSIVE INCOME

For the nine months ended September 30, 2007, total comprehensive loss was
$4,697,000, comprised of net loss of $2,887,000 and change in Accumulated Other
Comprehensive Income of $1,810,000, compared to total comprehensive income of
$2,543,000 in the nine months ended September 30, 2006, which was comprised of
net income of $1,774,000 and change in Other Comprehensive Income of $769,000.

Nine Months Ended
September 30
2007 2006
(Restated) (Restated)
--------- ---------
Net income (loss) as reported............................. $(2,887) $ 1,774
Deferred gain on hedge contract........................... (18) 14
Unrealized gain (loss) on available for sale securities.. (266) 752
Reclassification adjustment for gains included in income.. (1,526) 3
------- -------
Total comprehensive income/(loss)......................... $(4,697) $ 2,543
======= =======

K. SIGNIFICANT FOREIGN SALES

For the three and nine months ended September 30, 2007 and September 30,
2006, significant foreign revenues to specific countries were as follows:

------------------ -----------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
2007 2006 2007 2006
FOREIGN REVENUES -------- ------- ------- -------
China $ 1,778 $ 1,075 $ 4,640 $ 3,225
Canada 741 967 1,802 3,111
Thailand 474 490 1,829 1,674
Mexico 349 523 1,695 1,167
Malaysia 1,562 582 3,532 1,280
All other foreign countries 1,517 1,783 3,836 5,414
------- ------- ------- -------
Total foreign revenues $ 6,421 $ 5,420 $17,334 $15,871
======= ======= ======= =======

L. DISCONTINUED OPERATIONS

For the quarter ended September 30, 2007, the net loss from discontinued
operations was $153,000 compared with a net loss of $277,000 from the
discontinued operations of Lynch Systems for the third quarter of 2006. For the
nine month period ended September 30, 2007, the revenues from discontinued
operations were $2,534,000 and the loss from discontinued operations was
$1,131,000 compared with revenues of $6,911,000 and $786,000 loss from
discontinued operations for the same period in 2006. The 2007 losses do not
include tax benefits because the company can not assume future profits to use
these benefits according to current accounting standards.

M. COMMITMENTS AND CONTINGENCIES

In the normal course of business, subsidiaries of the Company may become
defendants in certain product liability, worker claims and other litigation in
which the amounts being sought may exceed insurance coverage levels. The Company
has no pending litigation at this time.

N. INCOME TAXES

The Company files consolidated federal income tax returns, which includes
all U.S. subsidiaries. The Company has a $2,836,000 net operating loss ("NOL")
carry-forward as of December 31, 2006. This NOL expires through 2026 if not
utilized prior to that date. The company provided $134,000 for foreign income
taxes and $0 for state taxes in the nine month period, an effective tax rate of
48 percent. This increase in the effective tax rate is due to the increase in
profits of the Hong Kong operations.

O. GUARANTEES

At September 30, 2007, the Company guarantees (unsecured) the RBC Century
bank loan of MtronPTI. There were no other financial, performance, indirect
guarantees or indemnification agreements at September 30, 2007.

P. RELATED PARTY TRANSACTIONS

At September 30, 2007, the Company had $5,408,000 of cash and cash
equivalents. Of this amount, $1,083,000 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 $2,040,000 of $4,429,000 at
December 31, 2006.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2006

CONSOLIDATED REVENUES AND GROSS MARGIN

Consolidated revenues decreased by $1,430,000, or 13%, to $9,612,000 for the
third quarter 2007 from $11,042,000 for the comparable period in 2006. The
decrease is due to business declines at three of the Company's largest customers
in the telecom and military/avionics markets. The decreases were due to a
combination of reduced business levels and selling price reductions. The Company
also discontinued sales to its second largest distributor due to the
distributor's bankruptcy. The distributor has emerged from bankruptcy, but the
Company has been unable to reach a suitable agreement to resume business with
this distributor.

Consolidated gross margin as a percentage of revenues for the third quarter
decreased to 23.5% from 27.4% for the comparable period in 2006. The reduction
in gross margin reflects selling price reductions, increases in material costs
and the continuing yield losses and rework costs at MtronPTI's Orlando facility.
These problems were compounded in the current quarter by lowered revenue so the
operations overhead also increased as a percentage of revenue.

OPERATING PROFIT (LOSS)

The operating loss of $302,000 for the third quarter 2007 is a reduction of
$648,000 from $346,000 operating profit for the comparable period in 2006. This
decline was caused by a $766,000 (25%) reduction in gross margin caused
primarily by lower sales volume and higher material and yield loss costs in
Orlando. Selling and administrative expenses in the third quarter were reduced
by $118,000 from $2,682,000 in 2006 to $2,564,000 in 2007. This was due
primarily to reductions in commissions, incentives and bonus accruals. Corporate
expenses increased $18,000 to $422,000 for the third quarter 2007 from $404,000
for the comparable period in 2006.

OTHER INCOME (EXPENSES)

Investment income decreased $720,000 to $0 for the third quarter 2007. This was
due to the first quarter sale of substantially all of the marketable securities
which were held for sale. Interest expense for the third quarter 2007 was
$79,000, compared with $127,000 in the comparable period in 2006 due to higher
cash balances at the corporate level as a result of the liquidation of the
security portfolio at the end of the first quarter of 2007.

Other income (expense) increased by $55,000 to income of $15,000 for the third
quarter 2007 compared to a loss of $40,000 for 2006. The change was primarily
driven by an improvement in the U.S. Dollar to Indian Rupee exchange rate used
as part of the Company's consolidation process.

INCOME TAXES

The Company files consolidated federal income tax returns, which includes all
subsidiaries. The income tax provision for the three month period ended
September 30, 2007 provides for tax expenses in Hong Kong. Due to the quarterly
operating losses, none of the other jurisdictions in which the Company transacts
business require a quarterly tax provision. The provision gives effect to our
estimated tax liability at the end of the year.

RESULTS OF DISCONTINUED OPERATIONS

As a result of the sale of Lynch Systems, we have reclassified the results of
operations of Lynch Systems for all periods presented to DISCONTINUED OPERATIONS
within the Statement of Operations, in accordance with accounting principles
generally accepted in the United States.

For the quarter ended September 30, 2007, the revenues from discontinued
operations were $0 and the net loss from discontinued operations was $153,000
compared with revenues of $1,996,000 and net loss from the discontinued
operations of $277,000 for the same quarter of 2006.

NET LOSS

Net loss for the third quarter 2007 was $612,000 compared to net income of
$872,000 in the comparable period in 2006. The third quarter 2007 loss was
comprised of a $459,000 loss from continuing operations, and a $153,000 loss
from discontinued operations.

RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 2006

CONSOLIDATED REVENUES AND GROSS MARGIN

Consolidated revenues for the nine month period ending September 30, 2007
decreased by $2,361,000, or 7.5% to $29,003,000 from $31,364,000 for the
comparable period in 2006. The decrease is due to business declines at three of
the company's largest customers in the telecom and military/avionics markets.
The decreases were due to a combination of reduced business levels and selling
price reductions. The company also discontinued sales to its second largest
distributor due to the distributor's bankruptcy. The distributor has emerged
from bankruptcy, but the Company has been unable to reach a suitable agreement
to resume business with this distributor.

The consolidated gross margin as a percentage of revenues for the nine month
period ending September 30, 2007 decreased to 23.3% from 30.3% for the
comparable period in 2006. The reduction in gross margin reflects selling price
reductions, increases in material costs and the continuing yield losses and
rework costs at MtronPTI's Orlando facility. These problems were compounded by
lowered revenue so the operations overhead also increased as a percentage of
revenue.

OPERATING PROFIT (LOSS)

The operating loss of $1,970,000 is a reduction of $3,899,000 from the operating
profit of $1,929,000 for the comparable nine month period ended September 30,
2006. The margin loss was primarily due to lower selling prices and higher
material and rework costs in Orlando combined with the reduction in revenue.
Corporate expenses increased $306,000 to $1,356,000 for the nine month period
ending September 30, 2007, from $1,050,000 in the comparable period in 2006. The
increase was due primarily to increases in legal fees, professional fees and in
total director fees. The closure of the Greenwich office and the consolidation
of the corporate office into the Orlando facility will result in a reduction of
ongoing Corporate expenses. These increases in Corporate expenses were partially
offset by a $149,000 reduction in selling and administrative expenses at
MtronPTI, which was primarily due to reductions in accrued insurance expenses,
commissions, incentives and bonus accruals. In addition, the Company recorded an
impairment loss on Lynch Systems' assets of $905,000 in 2007 and $0 in 2006.

OTHER INCOME (EXPENSE)

Investment income increased $295,000 to $1,526,000 for the nine month period
ended September 30, 2007 from $1,231,000 in the comparable period in 2006 due to
realized gain on sales of marketable securities. Interest expense decreased to
$260,000 for the nine month period ended September 30, 2007 from $414,000 for
the comparable period in 2006 due to a decrease in the average level of debt and
higher cash balances at the corporate level due to the liquidation of the
security portfolio at the end of the first quarter of 2007. In the second
quarter of 2007, MtronPTI sold a small strip of land which had a book value of
$83,000, for $171,000, resulting in a gain of $88,000 on the sale.

INCOME TAXES

The Company files consolidated federal income tax returns, which includes all
subsidiaries. The income tax provision for the nine month period ended September
30, 2007 included federal, state and foreign taxes. The company provided
$134,000 for foreign income taxes and $0 for state taxes in the nine month
period, an effective tax rate of 48 percent. This increase in the effective tax
rate is due to the increase in profits of the Hong Kong operations.

LOSS ON SALE OF LYNCH SYSTEMS

The loss on the sale of Lynch Systems was $982,000. These losses arose because
the company disposed of elements of inventory at less than book value, incurred
approximately $181,000 of severance costs above the amount contributed by the
buyer, and incurred approximately $200,000 in legal and professional fees
associated with the sale. No tax benefit was accrued on these losses.

As a consequence of the disposal, the Company operates in a single line of
business, no longer distracted by attempting to turn around a problematic, loss
ridden business in a declining glassware market beset by higher fuel and steel
costs and intense competition.

RESULTS OF DISCONTINUED OPERATIONS

For the nine month period ended September 30, 2007, the revenues from
discontinued operations were $2,534,000 and the loss from discontinued
operations was $1,131,000 compared with revenues of $6,911,000 and $786,000 loss
from discontinued operations for the same period in 2006. The additional losses
from discontinued operations are primarily due to commissions, vacation pay and
consulting contracts. There will be only minimal monthly charges which will be
offset by rental income during the balance of 2007.

The losses do not include tax benefits because the company can not assume future
profits to use these benefits.

NET INCOME/LOSS

Net loss for the nine months ended September 30, 2007 was $2,887,000
compared with net income for the nine months ended September 30, 2006, of
$1,774,000. This loss is comprised of a loss from continuing operations of
$774,000, loss from discontinued operations of $1,131,000, and a loss on sale of
Lynch Systems of $982,000.

BACKLOG/ NEW ORDERS

MtronPTI's backlog at September 30, 2007 was $10.5 million, a $2.4 million
increase over the backlog at December 31, 2006 of $8.1 million and a $1.6
million increase from the backlog of $8.9 million at September 30, 2006.

FINANCIAL CONDITION

The Company's cash, cash equivalents and investments in marketable
securities at September 30, 2007 was $5,462,000 as compared to $7,039,000 at
December 31, 2006. MtronPTI had unused borrowing capacity of $4,631,000 under
MtronPTI's revolving lines of credit at September 30, 2007, as compared to
$4,144,000 at December 31, 2006. At September 30, 2007, MtronPTI had $869,000 in
revolving loans, compared with $1,356,000 at December 31, 2006.

At September 30, 2007, the Company's net working capital was $10,387,000
as compared to $12,615,000 at December 31, 2006 after taking into account the
reclassification of Lynch Systems assets into "Held for Sale" and "Assets or
Liabilities from Discontinued Operations." At September 30, 2007, the Company
had current assets of $16,856,000 and current liabilities of $6,469,000. After
taking into account the reclassification of Lynch Systems assets into "Held for
Sale" and "Assets or Liabilities from Discontinued Operations, at December 31,
2006, the Company had current assets of $23,765,000 and current liabilities of
$11,150,000. The ratio of current assets to current liabilities was 2.61 to 1.00
at September 30, 2007, compared to 2.13 to 1.00 at December 31, 2006.

Cash used in operating activities was $186,000 for the nine months ended
September 30, 2007, compared to cash used in operating activities of $1,674,000
for the nine months ended September 30, 2006. This was due primarily to a
reduction in accounts receivable and inventories which was partially offset by a
decrease in accounts payable and accrued liabilities. Cash used in continuing
operations was $955,000, which was due to operating losses and excludes gains on
the sale of securities.

Cash provided by investing activities was $2,850,000 for the nine months
ended September 30, 2007, versus $1,287,000 for the nine months ended September
30, 2006. The cash from investing activities came primarily from the sale of
securities in March 2007. The proceeds of that sale were $2,292,000. In
addition, the sale of a discontinued operation in June 2007 resulted in $722,000
of cash proceeds. The sale of the discontinued operation produced an additional
$253,000 of cash in October of 2007 due to the collection of all funds held in
escrow plus interest.

Cash used in financing activities was $1,685,000 for the nine months ended
September 30, 2007, compared with $1,136,000 for the nine months ended September
30, 2006. The use of cash was primarily due to retiring $900,000 of Lynch
Systems debt and other scheduled MtronPTI debt reductions.

At September 30, 2007, total debt of $5,702,000 was $781,000 less than the
total debt at December 31, 2006 of $6,483,000. The debt decreased due to a
reduction in the outstanding revolving debt and the scheduled repayments and
retirements of long term debt. At September 30, 2007, the Company had $801,000
in current maturities of long-term debt compared with $2,027,000 at December 31,
2006. The reduction in current maturities was due to the renegotiation of the
term debt with First National Bank of Omaha. The prior agreement included a
balloon payment which was due in October 2007.

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.

MtronPTI maintains its own short-term line of credit facilities. In
general, the credit facilities are collateralized by property, plant and
equipment, inventory, receivables and contain certain covenants restricting
distributions to the Company. At September 30, 2007, Mtron's short-term credit
facility with First National Bank of Omaha ("FNBO") is $5,500,000, under which
there is a revolving credit loan of $869,000 compared with $1,356,000 at
December 31, 2006. The Revolving Loan bears variable interest at the 30 day
LIBOR rate plus 2.1% (7.92% at September 30, 2007) and is due on June 30, 2008.

On October 14, 2004, MtronPTI, entered into a Loan Agreement with First
National Bank of Omaha for a term loan in the amount of $2,000,000 (the "Term
Loan"). The Term Loan bore interest at the greater of prime rate plus 50 basis
points, or 4.5%, and was repaid in monthly installments of $37,514, with the
then remaining principal balance plus accrued interest to be paid on the third
anniversary of the Loan Agreement, October 2007. This loan was renegotiated on
September 7, 2007. The principal balance was increased by $443,000 to $1,500,000
and the variable interest rate is the 30 day LIBOR rate plus 2.1% (7.92% at
September 30, 2007). The balance of this loan at September 30, 2007 is
$1,473,000 and is due on August 30, 2010. At September 30, 2007, MtronPTI was
not in compliance with the fixed charge covenant on this loan and a waiver
letter has been received from First National Bank of Omaha.

The Smythe Estate Promissory Note was repaid in the first quarter of 2007.

The debt decreased at MtronPTI due to a reduction in the outstanding
revolving debt and the scheduled repayments and retirements of long term debt.
The current portion of long term debt decreased due to the September 7, 2007
renegotiation of the term loan with First National Bank of Omaha. Notes payable
and long-term debt outstanding at September 30, 2007 included $3,360,000 of
fixed rate debt at an average interest rate of 7.0% (after considering the
effect of the interest rate swap) and variable rate debt of $2,342,000 at an
average rate of 7.92%. Long-term notes and debt outstanding at December 31,
2006, included $3,601,000 of fixed rate debt at an average interest rate of
6.91% after considering the effect of the interest rate swap) and variable rate
debt of $2,882,000 at an average rate of 8.45%.

ADOPTION OF ACCOUNTING PRONOUNCEMENTS

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet arrangements.

RELATED PARTY TRANSACTIONS

RISK FACTORS

The Company sells to industries that are subject to cyclical economic
changes. Any downturns in the economic environment would have a financial impact
on the Company and may cause the reported financial information herein not to be
indicative of future operating results, financial condition or cash flows.

Future activities and operating results may be adversely affected by a
delay in the recovery of demand for components used by telecommunications
infrastructure manufacturers, disruption of foreign economies and the inability
to renew or obtain new financing for expiring loans.

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and trade
accounts receivable.

The Company maintains cash and cash equivalents and short-term investments
with various financial institutions. These financial institutions are located
throughout the country and the Company's policy is designed to limit exposure to
any one institution. The Company performs periodic evaluations of the relative
credit standing of those financial institutions that are considered in the
Company's investment strategy. Other than certain accounts receivable, the
Company does not require collateral on these financial instruments. In relation
to export sales, the Company requires Letters of Credit supporting a significant
portion of the sales price prior to production to limit exposure to credit risk.
The Company maintains an allowance for doubtful accounts at a level that
management believes is sufficient to cover potential credit losses.

For a complete list of risk factors, see the Company's Annual Report on
Form 10-K for the year ended December 31, 2006.

FORWARD LOOKING INFORMATION

Included in this Management Discussion and Analysis of Financial Condition
and Results of Operations are certain forward looking financial and other
information, including without limitation matters relating to "Risks". It should
be recognized that such information are projections, estimates or forecasts
based on various assumptions, including without limitation, meeting its
assumptions regarding expected operating performance and other matters
specifically set forth, as well as the expected performance of the economy as it
impacts the Company's businesses, government and regulatory actions and
approvals, and tax consequences, and the risk factors and cautionary statements
set forth in reports filed by the Company with the Securities and Exchange
Commission. As a result, such information is subject to uncertainties, risks and
inaccuracies, which could be material.

The Registrant makes available, free of charge, its Annual Report on Form
10-K, Quarterly Reports on Form 10-Q, and current reports, if any, on Form 8-K.

The Registrant also makes this information available on its website, whose
internet address is WWW.LGLGROUP.COM.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is exposed to market risk relating to changes in the general
level of U.S. interest rates, which affect the amount of interest earned on the
Company's cash/cash equivalents and restricted cash, $5,408,000 at September 30,
2007. Additionally, the Company's earnings and cash flows are affected by
changes in interest rates as the Company makes variable interest rate payments
on its debt. To minimize its interest rate risk, on September 30, 2005, in
connection with its $3,040,000 five-year, LIBOR plus 2.75% RBC Term Loan,
MtronPTI entered into a five-year interest rate swap (the notional amount equals
the loan amount) from which it will receive payments at the LIBOR Base Rate and
make payments at a fixed rate of 7.51%. This is comprised of the fixed pay rate
of the swap of 6.59% plus the .92% differential between the variable rate of the
loan, LIBOR plus 2.75%, and the prime rate. Management does not foresee any
significant changes in the strategies used to manage interest rate risk in the
future, although the strategies may be reevaluated as market conditions dictate.

ITEM 4T. CONTROLS AND PROCEDURES.

(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Company's Principal
Executive Officer and Principal Financial Officer have evaluated the
effectiveness of the Company's disclosure controls and procedures as of
September 30, 2007. Based on such evaluation, such officers have
concluded that, as of September 30, 2007, (i) the Company's disclosure
controls and procedures were not effective in ensuring that information
required to be disclosed by the Company in the reports that it files and
submits under the Securities Exchange Act of 1934 is accumulated and
communicated to the Company's management, including its principal
executive and principal financial officers, or persons performing similar

functions, as appropriate to allow timely decisions regarding required
disclosure, (ii) the lack of integration in the Company's accounting
systems, which necessitates numerous conversions of data throughout the
month end closing process, combined with the inconsistencies in the chart
of accounts and the turnover of accounting personnel, allowed an
overstatement of accounts receivable and other comprehensive income and
(iii) the Company's financial statement closing process did not identify
all business activity that needed to be recorded as part of the closing
process. In connection with this evaluation, management has determined
that a presentation error had occurred in LGL Group's financial
statements previously filed for December 31, 2006 and the quarters ended
March 31, 2007, September 30, 2006, June 30, 2006, and March 31, 2006.
The impact in 2007 was $39,000 in expense and a balance sheet
reclassification of $205,000 in other comprehensive income offset by a
$244,000 adjustment to accounts receivable.

The December 31, 2006 comparative balance sheet was reclassified in this
document to reduce other comprehensive income and accumulated deficit by
$172,000 reflecting the cumulative effect of deferred translation gains
since the Indian subsidiary was acquired in October 2004. The
reclassification was the result of considering the Indian Rupee instead
of the U.S. dollar as the functional currency and deferring the foreign
currency translation gains in other comprehensive income which should
have been credited to operations. The deferred gain was $83,000 in 2006,
$75,000 in 2005, and $14,000 in 2004. The improvement to earnings per
share would have been $0.04 in 2006, $0.05 in 2005 and $0.01 in 2004. The
adjustment did not change shareholders' equity as of December 31, 2006.

(b) CHANGES IN INTERNAL CONTROLS. The Company has begun evaluating
remediation steps to enhance its internal control over financial
reporting and reduce control deficiencies. Required changes will include
integration of all accounting and record maintenance, enhancements to
accounting software, formal documentation of accounting policies and
procedures, and the creation of centralized, on-site document control and
maintenance. Additionally, the Company plans to hire personnel with the
appropriate qualifications to effect these changes.

Except as noted above, during the quarter ended September 30, 2007, there
were no changes which have materially effected or are reasonable likely
to materially effect our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

In the normal course of business, the Company and its subsidiaries may
become defendants in certain product liability, worker claims and other
litigation. There is no litigation pending currently.

ITEM 5. OTHER INFORMATION.

On June 30, 2007, Mtron and PTI entered into a Fourth Amendment to Loan
Agreement (the "Fourth Amendment"), by and among Mtron, PTI and FNBO, and
acknowledged and guaranteed by the Company, to amend that certain loan
agreement, dated October 14, 2004, by and among such parties (the "FNBO Loan
Agreement"). The Fourth Amendment amends the short-term credit facility under
the FNBO Loan Agreement in order to extend the term of the revolving credit
facility to June 30, 2008. In addition, certain other changes were made to the
definitions and financial covenants.

On August 1, 2007, Mtron and PTI executed a promissory note by and among
Mtron, PTI and FNBO, amending and restating the terms of the revolving credit
facility under the FNBO Loan Agreement in order to change the interest rate to
30-day LIBOR plus 2.1%.

Additionally, on August 1, 2007, Mtron and PTI executed a promissory note
by and among Mtron, PTI and FNBO, amending and restating the terms of the term
loan under the FNBO Loan Agreement in order to change the principal amount to
$1,500,000, change the interest rate to 30-day LIBOR plus 2.1%, and extend the
term to August 30, 2010.

ITEM 6. EXHIBITS.

Exhibits filed herewith:

10.1* Fourth Amendment to the Loan Agreement, dated June 30, 2007, by and
among M-tron Industries, Inc., Piezo Technology, Inc. and First
National Bank of Omaha

10.2* Promissory Note (revolving credit facility), dated August 1, 2007,
by and among M-tron Industries, Inc., Piezo Technology, Inc. and
First National Bank of Omaha

10.3* Promissory Note (term loan), dated August 1, 2007, by and among
M-tron Industries, Inc., Piezo Technology, Inc. and First National
Bank of Omaha

31(a)* Certification by Principal Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.

31(b)* Certification by Principal Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.

32(a)* Certification by Principal Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.

32(b)* Certification by Principal Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.

* filed herewith

The Exhibits listed above have been filed separately with the Securities
and Exchange Commission in conjunction with this amended Quarterly Report on
Form 10-Q/A or have been incorporated by reference into this amended Quarterly
Report on Form 10-Q/A. Upon request, The LGL Group, Inc. will furnish to each of
its shareholders a copy of any such Exhibit. Requests should be addressed to the
Office of the Secretary, The LGL Group, Inc., 2525 Shader Road, Orlando, FL
32804.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the SecuritiesExchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.

THE LGL GROUP, INC.

June 26, 2008 By: /s/ Robert Zylstra
-----------------------------------
Robert Zylstra
PRESIDENT AND CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)

June 26, 2008 By: /s/ Harold D. Castle
-----------------------------------
Harold D. Castle
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER AND
PRINCIPAL ACCOUNTING OFFICER)

EX-10.1 2 ex101to10qa03725_09302007.htm sec document



                                                                    Exhibit 10.1


                       FOURTH AMENDMENT TO LOAN AGREEMENT

          THIS Amendment to Loan Agreement made this 30th day of June,  2007, by
and between M-TRON  INDUSTRIES,  INC., a Delaware  corporation  ("M-TRON"),  and
PIEZO TECHNOLOGY,  INC., a Florida corporation (collectively,  the "Borrowers"),
and FIRST NATIONAL BANK OF OMAHA (the "Bank"),  a national  banking  association
established at Omaha, Nebraska.

          WHEREAS,  M-TRON has  existing  term loans with the Bank  evidenced by
term note number  855891-1  with a due date of October 14, 2007,  pursuant to an
existing  additional  loan agreement  with the Bank,  which shall remain in full
force in accordance with its terms; and

          WHEREAS, M-TRON has an existing revolving line of credit with the Bank
evidenced by  revolving  note number  855893-1  with a due date of June 30, 2008
pursuant to an existing  additional loan agreement with the Bank, which shall be
paid in full from the proceeds of the Revolving Note; and

          WHEREAS,  the Bank is willing to provide such credit facilities to the
Borrowers upon the terms and conditions herein set forth.

          WHEREAS,  BANK and BORROWER  executed a written Loan  Agreement  dated
October 14, 2004 which was subsequently  amended May 31, 2005, June 30, 2006 and
October  3, 2006 (the Loan  Agreement  together  with all  amendments  is herein
called the "AGREEMENT"); and

          WHEREAS, the parties hereto desire to amend the AGREEMENT.

          Now,  therefore,  in consideration of the AGREEMENT,  and their mutual
promises made herein, BANK and BORROWERS agree as follows:

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

          2. Article I Section 1.01 Defined Terms  "Borrowing  Base"  subsection
          (b) of the AGREEMENT is hereby amended to read, effective immediately:
                   The term  "Tangible  Net  Worth" of the  AGREEMENT  is hereby
          amended to read, effective immediately:
                              "Tangible Net Worth" means total assets less total
          liabilities (but excluding  Subordinated  Debt existing on the Closing
          Date, in an amount of not less than $4,200,000).

          3. Article I Section 1.01.  Defined Terms  "Revolving Loan Termination
          Date"  (a) of the  AGREEMENT  is  hereby  amended  to read,  effective
          immediately:

               (a) June 30,  2008,




          4. Article II Section  2.12,  Repayment  of  Revolving  Note is hereby
          amended to read, effective immediately:

                   2.12 The Revolving  Note shall be due and payable on June 30,
                   2008. Interest only shall be payable monthly on the Revolving
                   Note. All outstanding principal and interest shall be due and
                   payable on June 30, 2008.

          5.  BORROWER  certifies  by  its  execution  hereof  that  all  of the
          representations  and warranties set forth in the AGREEMENT are true as
          of this date, and that no EVENT OF DEFAULT under the AGREEMENT, and no
          event  which,  with the  giving of notice or  passage of time or both,
          would  become such an EVENT OF DEFAULT,  has  occurred as of execution
          hereof, except as disclosed to BANK. All other terms and conditions of
          the  AGREEMENT not affected or amended by this  AGREEMENT,  are hereby
          ratified and confirmed.

          8. GUARANTOR acknowledges and consents to the foregoing amendment, and
          agrees  and  confirms  that  his  separate   guarantee  of  BORROWER's
          obligations  to BANK  are,  and  continue  to be,  valid  and  binding
          obligations of GUARANTOR.

          9. Except as herein amended,  the AGREEMENT continues to be the valid,
          binding obligation of BORROWER.

          IN WITNESS  WHEREOF,  the parties  have caused  this  Agreement  to be
executed by their respective officers thereunto duly authorized,  as of the date
first above written.

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

By:  /s/ David Rein                                 By:  /s/ Justin Mahoney
     -----------------------                             -----------------------

Its:  VP                                            Its:  Justin Mahoney
     -----------------------                             -----------------------


PIEZO TECHNOLOGY, INC.

By:  /s/ David Rein
     -----------------------

Its:  VP
     -----------------------




ACKNOWLEDGED BY GUARANTOR:

LYNCH CORPORATION

By:  /s/ Steve Pegg
     -----------------------
Its: Chief Financial Officer
     -----------------------

EX-10.2 3 ex102to10qa03725_09302007.htm sec document

Exhibit 10.2

FIRST NATIONAL BANK

- -------------------------- ------------------------ ----------------------- ------------------------ ------------------------
LOAN NUMBER LOAN NAME ACCT. NUMBER NOTE DATE INITIALS
8558931/ Replacement M-Tron Industries, Inc. 08/01/07 MKM
NOTE AMOUNT INDEX (W/MARGIN) RATE MATURITY DATE LOAN PURPOSE
$5,500,000.00 30-Day LIBOR plus 7.428% 06/30/08 Commercial
2.100%
Creditor Use Only
- -------------------------- ------------------------ ----------------------- ------------------------ ------------------------

PROMISSORY NOTE
(Commercial - Revolving Draw)
- ------------------------------------------------------------------------------------------------------------------------

DATE AND PARTIES. The date of this Promissory Note (Note) is August 1, 2007. The parties and their addresses are:

LENDER:
FIRST NATIONAL BANK OF OMAHA
Stop Code 1031
1620 Dodge St
Omaha, Nebraska 68197
Telephone: (402) 633-3617

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

PIEZO TECHNOLOGY, INC.
a Florida Corporation
100 Douglas Avenue
Yankton, South Dakota 57078

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

A. PRONOUNS. The pronouns "I," "me," and "my" refer to each Borrower signing this Note, individually and together.
"You" and "Your" refer to the Lender.

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

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

D. LOAN DOCUMENTS. Loan Documents refer to all the documents executed as a part of or in connection with the Loan.

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

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

2. PROMISE TO PAY. For value received, I promise to pay you or your order, at your address, or at such other location as
you may designate, amounts advanced from time to time under the terms of this Note up to the maximum outstanding principal
balance of $5,500,000.00 (Principal), plus interest from the date of disbursement, on the unpaid outstanding Principal
balance until this Note is paid in full and you have no further obligations to make advances to me under the Loan.

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

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

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

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

(1) I make a request in person.

(2) I make a request by phone.

(3) I make a request by mail.

(4) I write a check or share draft.

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

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

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

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

(4) CREDIT LIMIT. I understand that you will not ordinarily grant a request for an advance that would cause the
unpaid principal of my Loan to be greater than the Principal limit. You may, at your option, grant such a
request without obligating yourselves to do so in the future. I will pay any over advances in addition to
my regularly scheduled payments. I will repay any over advance by repaying you in full within 10 days after
the overdraft occurs.

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

4. INTEREST. Interest will accrue on the unpaid Principal balance of this Note at the rate of 7.428 percent (Interest
Rate) until August 2, 2007, after which time it may change as described in the Variable Rate subsection.

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

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

C. ACCRUAL. Interest accrues using an Actual/360 days counting method.

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

(1) INDEX. Beginning with the first Change Date, the Interest Rate will be based on the following index: 30-day
LIBOR based on the British Banker's Association average of interbank offered rates for dollar deposits in
the London market based on quotations at sixteen major banks.

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

(2) CHANGE DATE. Each date on which the Interest Rate may change is called a Change Date. The Interest Rate may
change August 2, 2007 and daily thereafter.

(3) CALCULATION OF CHANGE. On each Change Date you will calculate the Interest Rate, which will be the Current
Index plus 2.100 percent. The result of this calculation will be rounded to the nearest .001 percent.
Subject to any limitations, this will be the Interest Rate until the next Change Date. The new Interest
Rate will become effective on each Change Date. The Interest Rate and other charges on this Note will never
exceed the highest rate or charge allowed by law for this Note.

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

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

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

5. PAYMENT. I agree to pay all accrued interest on the balance outstanding from time to time in regular payments beginning
August 30, 2007, then on the same day of each month thereafter. Any payment scheduled for a date falling beyond the last day
of the month, will be due on this last day. A final payment of the entire, unpaid outstanding balance of Principal and
interest will be due June 30, 2008.

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

Interest payments will be applied first to any I owe other than late charges, then to accrued, but unpaid interest, then to
late charges. Principal payments will be applied first to the outstanding Principal balance, then to any late charges. If you
and I agree to a different application of payments, we will describe our agreement on this Note. The actual amount of my
final payment will depend on my payment record.

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

7. LOAN PURPOSE. The purpose of this Loan is to change the interest rate.

8. ADDITIONAL TERMS. A. AUTOMATIC TRANSFER AUTHORIZATION:

I authorize you to charge my Account No. for all payments due on this Loan as set forth in the PAYMENT section of this Note.
You may continue to charge the Account until the Loan is paid or until I provide you with notice of cancellation.

I understand and agree that if a payment due date falls on a non-business day, the payment amount will be debited from the
Account and credited to the Loan as a loan payment on the next day you are open for regular business.

I further understand and agree that if the Account does not have a sufficient balance on a day that a payment is to be
debited from the Account and credited to the Loan, you may, at your option, suspend further efforts to debit the Account and
look to me for the payment and all subsequent payments until such time as all payments under the Loan are, current. In no
event will availability of any credit line that I may have with you be used in determining whether the Account has a
sufficient balance.

At your option and sole discretion, you may resume charging the Account without further instruction from me once all payments
are current. In the event that you do not resume charging to the Account, you will notify me in writing that this
authorization has been cancelled. Such cancellation of this authorization does not excuse me from making timely payment under
the terms of the Loan.

In any event, you, at your option, may cancel this authorization at any time.

B. IMPORTANT NOTICE: To help the government fight the funding of terrorism and money laundering activities, the USA
PATRIOT Act requires all banks to obtain and verify the identity, of each person, or business that opens an
account. When I open an account you will ask me for information that will allow you to properly identify me and
you will verify that information. If you cannot properly verify identity within 30 calendar days, you reserve the
right to deem all of the balance and accrued interest due and payable immediately.

9. SECURITY. The Loan is secured by the following, previously executed, security instruments or agreements: Loan Agreement
dated 10/14/04 and any amendments thereof; Security Agreement dated 10/14/04 covering Business Assets.

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

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

B. INSOLVENCY OR BANKRUPTCY. The death, dissolution or insolvency of, appointment of a receiver by or on behalf of,
application of any debtor relief law, the assignment for the benefit of creditors by or on behalf of, the
voluntary, or involuntary termination of existence by, or the commencement of any proceeding under any present or
future federal or state insolvency, bankruptcy; reorganization, composition or debtor relief law by or against me
or any co-signer, endorser, surety or guarantor of this Note or any other obligations I have with you.

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

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

E. OTHER DOCUMENTS. A default occurs under the terms of any other Loan Document.

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

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

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

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

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

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

L. PROPERTY VALUE. You determine in good faith that the value of the Property has declined or is impaired.

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

N. INSECURITY. You determine in good faith that a material adverse change has occurred in my financial condition
from the conditions set forth in my most recent financial statement before the date of this Note or that the
prospect for payment or performance of the Loan is impaired for any reason.

11. DUE ON SALE OR ENCUMBRANCE. You may, at your option, declare the entire balance of this Note to be due and payable upon
the creation of, or contract for, the creation of, any lien, encumbrance, transfer or sale of all or any part of the
Property. This right is subject to the restrictions imposed by federal law (12 C.F.R. 591), as applicable.

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

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

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

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

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

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

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

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

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

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

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

B. SOURCES. You may use any and all remedies you have under state or federal law or in any Loan Document.

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

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

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

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

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

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

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

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

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

14. COLLECTION EXPENSES AND ATTORNEYS' FEES. On or after Default, to the extent permitted by law, I agree to pay all
expenses of collection, enforcement or protection of your rights and remedies under this Note or any other Loan Document.
Expenses include, but are not limited to, attorneys' fees, court costs and other legal expenses. These expenses are due and
payable immediately. If not paid immediately, these expenses will bear interest from the date of payment until paid in full
at the highest interest rate in effect as provided for in the terms of this Note. All fees and expenses will be secured by

the Property I have granted to you, if any. In addition, to the extent permitted by the United States Bankruptcy Code, I
agree to pay the reasonable attorneys' fees incurred by you to protect your rights and interests in connection with any
bankruptcy proceedings initiated by or against me.

15. COMMISSIONS. I understand and agree that you (or your affiliate) will earn commissions or fees on any insurance
products, and may earn such fees on other services that I buy through you or your affiliate.

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

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

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

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

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

18. JOINT AND INDIVIDUAL LIABILITY AND SUCCESSORS. My obligation to pay the Loan is independent of the obligation of any
other person who has also agreed to pay it. You may sue me alone, or anyone else who is obligated on the Loan, or any number
of us together, to collect the Loan. Extending the Loan or new obligations under the Loan, will not affect my duty under the
Loan and I will still be obligated to pay the Loan. This Note shall inure to the benefit of and be enforceable by you and
your successors and assigns and shall be binding upon and enforceable against me and my personal representatives, successors,
heirs and assigns.

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

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

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

22. CREDIT INFORMATION. I agree to supply you with whatever information you reasonably feel you need to decide whether to
continue this Loan. You will make requests for this information without undue frequency, and will give me reasonable time in
which to supply the information.

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

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

BORROWER:

M-Tron Industries, Inc.

By /s/ David Rein
-----------------------------
Authorized Signer

Piezo Technology, Inc.

By /s/ David Rein
-----------------------------
Authorized Signer

- ----------------------------------------------------------------------------------------------------------------------------

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

BORROWER:

M-Tron Industries, Inc.

By /s/ David Rein
-----------------------------
Authorized Signer

Piezo Technology, Inc.

By /s/ David Rein
-----------------------------
Authorized Signer

LENDER:

First National Bank of Omaha

By /s/ Mark R. McMillan
-----------------------------
Mark R. McMillan, Vice President

EX-10.3 4 ex103to10qa03725_09302007.htm sec document

Exhibit 10.3

FIRST NATIONAL BANK

- ---------------------------------------------------------------------------------------------------------------------
LOAN NUMBER LOAN NAME ACCT. NUMBER NOTE DATE INITIALS
8558911/ Renewal + M-Tron Industries, Inc. 08/01/07 MKM
NOTE AMOUNT INDEX (W/MARGIN) RATE MATURITY DATE LOAN PURPOSE
$1,500,000.00 30-Day LIBOR plus 7.428% 08/30/10 Commercial
2.100%
Creditor Use Only
- ---------------------------------------------------------------------------------------------------------------------

PROMISSORY NOTE
(Commercial - Single Advance)
- ---------------------------------------------------------------------------------------------------------------------

DATE AND PARTIES. The date of this Promissory Note (Note) is August 1, 2007. The
parties and their addresses are:

LENDER:
FIRST NATIONAL BANK OF OMAHA
Stop Code 1031
1620 Dodge St
Omaha, Nebraska 68197
Telephone: (402) 633-3617

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

PIEZO TECHNOLOGY, INC.
a Florida Corporation
100 Douglas Avenue
Yankton, South Dakota 57078

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

A. PRONOUNS. The pronouns "I," "me," and "my" refer to each Borrower
signing this Note, individually and together. "You" and "Your" refer
to the Lender.

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

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

D. LOAN DOCUMENTS. Loan Documents refer to all the documents executed
as a part of or in connection with the Loan.

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

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

2. PROMISE TO PAY. For value received, I promise to pay you or your order, at
your address, or at such other location as you may designate, the principal sum
of $1,500,000.00 (PRINCIPAL) plus interest from August 1, 2007 on the unpaid
Principal balance until this Note matures or this obligation is accelerated.

3. INTEREST. Interest will accrue on the unpaid Principal balance of this Note
at the rate of 7.428 percent (Interest Rate) until August 2, 2007, after which
time it may change as described in the Variable Rate subsection.

A. INTEREST AFTER DEFAULT. If you declare a default under the terms of
the Loan, including for failure to pay in full at maturity, you may
increase the Interest Rate otherwise payable as described in this
section. In such event, interest will accrue on the unpaid Principal
balance of this Note at a rate equal to the rate in effect prior to
default, plus 6.000 percent, until paid in full.

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

C. ACCRUAL. Interest accrues using an Actual/360 days counting method.

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

(1) Index. Beginning with the first Change Date, the Interest
Rate will be based on the following index: 30-day LIBOR based
on the British Banker's Association average of interbank
offered rates for dollar deposits in the London market based
on quotations at sixteen major banks.

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

(2) Change Date. Each date on which the Interest Rate may
change is called a Change Date. The Interest Rate may change
August 2, 2007 and daily thereafter.

(3) Calculation Of Change. On each Change Date you will
calculate the Interest Rate, which will be the Current Index
plus 2.100 percent. The result of this calculation will be
rounded to the nearest .001 percent. Subject to any
limitations, this will be the Interest Rate until the next
Change Date. The new Interest Rate will become effective on
each Change Date. The Interest Rate and other charges on this
Note will never exceed the highest rate or charge allowed by
law for this Note.

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

4. PAYMENT. I agree to pay this Note in 37 payments. This Note is amortized over
60 payments. A payment of $30,076.15 will be due August 30, 2007, and on the
30th day of each month thereafter. A final payment of the entire unpaid balance
of Principal and interest will be due August 30, 2010. Any changes in the
Interest Rate will affect the amount of this payment.

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

If the amount of a scheduled payment does not equal or exceed interest accrued
during the payment period the unpaid portion will be added to, and will be
payable with, the next scheduled payment.

Each payment I make on this Note will be applied first to interest that is due
then to principal that is due, and finally to any charges that I owe other than
principal and interest. If you and I agree to a different application of
payments, we will describe our agreement on this Note. You may change how
payments are applied in your sole discretion without notice to me. The actual
amount of my final payment will depend on my payment record.

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

6. LOAN PURPOSE. The purpose of this Loan is to increase loan amount to cover
machinery and equipment purchased over the last 2 years.

7. ADDITIONAL TERMS. A. AUTOMATIC TRANSFER AUTHORIZATION:

I authorize you to charge my Account No. for all payments due on this Loan as
set forth in the PAYMENT section of this Note. You may continue to charge the
Account until the Loan is paid or until I provide you with notice of
cancellation.

I understand and agree that if a payment due date falls on a non-business day,
the payment amount will be debited from the Account and credited to the Loan as
a loan payment on the next day you are open for regular business.

I further understand and agree that if the Account does not have a sufficient
balance on a day that a payment is to be debited from the Account and credited
to the Loan, you may, at your option, suspend further efforts to debit the
Account and look to me for the payment and all subsequent payments until such
time as all payments under the Loan are current. In no event will availability
of any credit line that I may have with you be used in determining whether the
Account has a sufficient balance.

At your option and sole discretion, you may resume charging the Account without
further instruction from me once all payments are current. In the event that you
do not resume charging to the Account, you will notify me in writing that this
authorization has been cancelled. Such cancellation of this authorization does
not excuse me from making timely payment under the terms of the Loan.

In any event, you, at your option, may cancel this authorization at any time.

B. IMPORTANT NOTICE: To help the government fight the funding of terrorism and
money laundering activities, the USA PATRIOT Act requires all banks to obtain
and verify the identity of each person or business that opens an account. When I
open an account you will ask me for information that will allow you to properly
identify me and you will verify that information. If you cannot properly verify
identity within 30 calendar days, you reserve the right to deem all of the
balance and accrued interest due and payable immediately.

8. SECURITY. The Loan is secured by the following, previously executed, security
instruments or agreements: Loan Agreement dated 10/14/04 and all amendments;
Security Agreement dated 10/14/04 covering Business Assets.

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

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

B. INSOLVENCY OR BANKRUPTCY. The death, dissolution or insolvency of,
appointment of a receiver by or on behalf of, application of any
debtor relief law, the assignment for the benefit of creditors by or
on behalf of, the voluntary or involuntary termination of existence
by, or the commencement of any proceeding under any present or future
federal or state insolvency, bankruptcy, reorganization, composition
or debtor relief law by or against me or any co-signer, endorser,
surety or guarantor of this Note or any other obligations I have with
you.

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

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

E. OTHER DOCUMENTS. A default occurs under the terms of any other Loan
Document.

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

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

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

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

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

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

L. PROPERTY VALUE. You determine in good faith that the value of the
Property has declined or is impaired.

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

N. INSECURITY. You determine in good faith that a material adverse
change has occurred in my financial condition from the conditions set
forth in my most recent financial statement before the date of this
Note or that the prospect for payment or performance of the Loan is
impaired for any reason.

10. DUE ON SALE OR ENCUMBRANCE. You may, at your option, declare the entire
balance of this Note to be due and payable upon the creation of, or contract for
the creation of, any lien, encumbrance, transfer or sale of all or any part of
the Property. This right is subject to the restrictions imposed by federal law
(12 C.F.R. 591), as applicable.

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

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

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

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

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

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

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

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

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

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

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

B. SOURCES. You may use any and all remedies you have under state or
federal law or in any Loan Document.

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

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

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

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

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

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

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

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

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

14. COMMISSIONS. I understand and agree that you (or your affiliate) will earn
commissions or fees on any insurance products, and may earn such fees on other
services that I buy through you or your affiliate.

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

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

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

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

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

17. JOINT AND INDIVIDUAL LIABILITY AND SUCCESSORS. My obligation to pay the Loan
is independent of the obligation of any other person who has also agreed to pay
it. You may sue me alone, or anyone else who is obligated on the Loan, or any
number of us together, to collect the Loan. Extending the Loan or new
obligations under the Loan, will not affect my duty under the Loan and I will
still be obligated to pay the Loan. This Note shall inure to the benefit of and
be enforceable by you and your successors and assigns and shall be binding upon
and enforceable against me and my personal representatives, successors, heirs
and assigns.

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

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

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

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

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

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

BORROWER:

M-Tron Industries, Inc.

By: /s/ David Rein
-----------------
Authorized Signer

Piezo Technology, Inc.

By: /s/ David Rein
-----------------
Authorized Signer

- --------------------------------------------------------------------------------

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

BORROWER:

M-Tron Industries, Inc.

By: /s/ David Rein
--------------------------------
Authorized Signer

Piezo Technology, Inc.

By: /s/ David Rein
--------------------------------
Authorized Signer
LENDER:

First National Bank of Omaha

By: /s/ Mark K. McMillan
--------------------------------
Mark K. McMillan, Vice President

EX-31.1 5 ex311to10qa03725_09302007.htm sec document


                                                                    Exhibit 31.1


                CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
            PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

      I, Robert Zylstra, certify that:

      1.    I have reviewed this amended quarterly report on Form 10-Q/A of The
            LGL Group, Inc.;

      2.    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;

      3.    Based on my knowledge, the financial statements, and other financial
            information included in this report, fairly present in all material
            respects the financial condition, results of operations and cash
            flows of the registrant as of, and for, the periods presented in
            this report;

      4.    The registrant's other certifying officer and I are responsible for
            establishing and maintaining disclosure controls and procedures (as
            defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
            registrant and have:

            (a)   Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

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

            (c)   Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

      5.    The registrant's other certifying officer and I have disclosed,
            based on our most recent evaluation of internal control over
            financial reporting, to the registrant's auditors and the audit
            committee of the registrant's board of directors (or persons
            performing the equivalent functions):

            (a)   All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

            (b)   Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.


Date: June 26, 2008                     By: /s/ Robert Zylstra
                                            ------------------------------------
                                            Name:  Robert Zylstra
                                            Title: President and Chief Executive
                                                   Officer
                                                   (Principal Executive Officer)

EX-31.2 6 ex312to10qa03725_09302007.htm sec document


                                                                    Exhibit 31.2


                CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
            PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

      I, Harold D. Castle, certify that:

      1.    I have reviewed this amended quarterly report on Form 10-Q/A of The
            LGL Group, Inc.;

      2.    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;

      3.    Based on my knowledge, the financial statements, and other financial
            information included in this report, fairly present in all material
            respects the financial condition, results of operations and cash
            flows of the registrant as of, and for, the periods presented in
            this report;

      4.    The registrant's other certifying officer and I are responsible for
            establishing and maintaining disclosure controls and procedures (as
            defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
            registrant and have:

            (a)   Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

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

            (c)   Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

      5.    The registrant's other certifying officer and I have disclosed,
            based on our most recent evaluation of internal control over
            financial reporting, to the registrant's auditors and the audit
            committee of the registrant's board of directors (or persons
            performing the equivalent functions):

            (a)   All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

            (b)   Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.


Date: June 26, 2008                     By: /s/ Harold D. Castle
                                            ------------------------------------
                                            Name:  Harold D. Castle
                                            Title: Chief Financial Officer
                                                   (Principal Financial Officer)

EX-32.1 7 ex321to10qa03725_09302007.htm sec document


                                                                    Exhibit 32.1


                CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
            PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the amended quarterly report of The LGL Group, Inc.,
(the "Company") on Form 10-Q/A for the quarterly period ended September 30, 2007
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), 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:

      1.    The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

      2.    The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.


Date: June 26, 2008                     By: /s/ Robert Zylstra
                                            ------------------------------------
                                            Name:  Robert Zylstra
                                            Title: President and Chief Executive
                                                   Officer
                                                   (Principal Executive Officer)

EX-32.2 8 ex322to10qa03725_09302007.htm sec document


                                                                    Exhibit 32.2


                CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
            PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the amended quarterly report of The LGL Group, Inc.,
(the "Company") on Form 10-Q/A for the quarterly period ended September 30, 2007
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), 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:

      1.    The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

      2.    The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.


Date: June 26, 2008                     By: /s/ Harold D. Castle
                                            ------------------------------------
                                            Name:  Harold D. Castle
                                            Title: Chief Financial Officer
                                                   (Principal Financial Officer)

-----END PRIVACY-ENHANCED MESSAGE-----