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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

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.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

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

This document consists of 22 pages

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See Notes to Consolidated Financial Statements

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In the opinion of management of Chyron Corporation (the "Company"), the accompanying unaudited consolidated interim financial statements reflect all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of the Company as of June 30, 2003 and the consolidated results of its operations and its cash flows for the periods ended June 30, 2003 and 2002. The results of operations for such interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. In addition, management is required to make estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgment and available information. Also, during interim periods, certain costs and expenses are allocated among periods based on an estimate of time expired, benefit received, or other activity associated with the periods. Accordingly, actual results could differ from those estimates. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002. The December 31, 2002 figures included herein were derived from such audited consolidated financial statements. Certain reclassifications have been made to the 2002 financial statements to conform to the 2003 method of presentation.

We provide signal distribution, automation and graphics products to the broadcast industry for use in analog and digital television. Currently, our customers are facing capital budget constraints because of a slowdown in the U.S. and European economies, and there are few signs of growth in our traditional markets. In addition, we have sustained losses from operations in each of the six years ended December 31, 2002. In 2002 our selling, general & administrative ("SG&A") and research and development ("R&D") expenses were $11.5 million lower than in 2001 as a result of two restructuring plans implemented in 2001 to reduce staff and curtail certain operating and discretionary expenses. In 2003, increased cost consciousness and further reductions in discretionary spending have resulted in net $0.9 million lower operating expenses in the first six months of 2003 as compared to the same period in 2002.

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We continue to approach 2003 with caution, adopting a modest outlook for growth, and sizing the business accordingly. We do not currently intend to effect another restructuring as we did in 2001 unless a leveling off of 2003 sales to 2002 levels, or a downturn in sales, necessitates it. We have configured our business with a level of costs that allows flexibility to further reduce costs if economic conditions deteriorate. We believe we have sized our businesses to a level that will not significantly reduce our cash resources while continuing to invest in our new products. We operate in a rapidly changing environment and must remain responsive to changes as they occur. In the event that revenues are significantly below 2003 forecasted revenues we believe we have the ability to (i) further reduce or delay discretionary expenditures, including capital purchases, and further reduce headcount, according to our contingency plan and (ii) refinance or sell (outright sale or sale-leaseback) our Pr o-Bel division headquarters building in the U.K., so that we will have sufficient cash resources through December 31, 2003. However, there can be no assurance that we will be able to adjust our costs or refinance or sell our U.K. building in sufficient time to respond to revenue shortfalls or obtain waivers and/or amendments to our covenants from our U.S. bank should defaults occur.

In preparing our contingency plan for a lower level of 2003 sales than we are currently forecasting, we have re-examined our cost structure, and prepared a contingent restructuring plan that recommends, in the event it is necessary, to reduce spending in staffing, travel, trade shows, advertising, professional fees and equipment, among other items. This plan would affect both the Graphics and the Signal Distribution and Automation divisions of our business. However, there can be no assurance we would be able to execute the plans in adequate time to provide an immediate or short-term benefit and if implemented, could have an adverse effect on our ability to conduct business.

Our borrowing facility with our U.S. bank requires that for 2003 we achieve certain quarterly financial covenants with respect to our U.S. operations: a designated minimum EBITDA; maintain in a pledged account at our U.S. bank a minimum cash balance of $1 million at all times; achieve a set fixed charge ratio, and upon repayment on December 31, 2003 of the senior subordinated convertible notes plus accrued interest, maintain a minimum undrawn availability of $0.25 million at all times under our revolving line of credit. While we met the financial covenants for all quarters of 2002 and the first two quarters of 2003, our operating results in the past have caused us to violate the financial covenants in place at the time for which we either obtained waivers or amended our bank agreements. We cannot be certain we will achieve these covenants for the remainder of 2003, although we believe that unless quarterly EBITDA for the U.S. business falls short of plan by more than 15% in any future q uarter, we will likely achieve the covenants. There is no assurance we will not be in violation of bank covenants in the future because of fluctuations or deterioration in our operating results. At that point there is no assurance we will be able to obtain waivers or amend our bank agreements. If not, we would be in violation of our financial covenants and the bank would have the right to demand full payment of all amounts owed them. We would then be required to settle the outstanding obligation. At June 30, 2003, we owed the U.S. bank $1.9 million, consisting of $1.5 million under our revolving credit line and $0.4 million under our outstanding term loan. Based on our agreed repayment schedule with the U.S. bank, we are currently repaying the term loan at $150,000 per month until paid in full in September 2003.

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If we were to be in violation of our financial covenants and the bank demanded full payment, our expectation is that we would not have the financial resources to meet the bank obligation in one single payment. We would, therefore, expect to agree to a payment plan to pay off the outstanding bank debt over a specific period of time. We cannot provide any assurance that the bank would accept any plan. Furthermore, we cannot provide any assurance that the sources of capital to pay off the bank would materialize in a timely manner and to the extent we had planned for.

In specific terms, the contemplated sources of capital to meet our bank obligation are listed below:

• Make additional reductions in staff and discretionary expenses as per our contingent restructuring plan to save $0.4 million in cash outlays assuming implementation in September 2003. Such savings would be reduced by approximately $0.15 million for each month of delay. A further restructuring may not be possible without impairing the business.

• Refinance the mortgage on our Pro-Bel office building in Reading, U.K. Refinance of the existing mortgage could generate proceeds of up to $1 million. However, there can be no assurance we will be able to refinance the mortgage on our building and if we do, that we will be able to generate the desired proceeds.
• If we do not refinance our mortgage on our Pro-Bel office building in Reading, U.K., as described above, we would consider the sale or sale-leaseback of such building. Net of and assuming no refinance of the existing mortgage, a sale or sale-leaseback could generate proceeds of between $2.0 million to $2.6 million. However, there can be no assurance we will be able to sell or arrange a sale-leaseback of our building for these amounts.
• Cash on the balance sheet. There may be no cash on the balance sheet at the time of covenant violation.
• Third party financial support. Sufficient additional financial support from third parties, which may include directors and principal shareholders, may not materialize as it has in the past.

While our 2003 plan, if executed, envisions that we will have sufficient cash to meet our plan obligations and operate the business beyond December 31, 2003, there can be no assurances we will be able to achieve our plan.

We are currently exploring opportunities with third parties regarding potential benefits that might result from a sale of part of our business. These discussions are preliminary and there can be no assurance or determination of the outcome of such discussions.

During the first quarter of 2003 we evaluated our investment in equity securities of vizrt Ltd. (symbol VIZ - traded on the Prime Standard segment of the Frankfurt Stock Exchange). Due to trading values that were below our cost for a period of time, we determined that the decline in market value was other than temporary and wrote this security down to its then fair value. Accordingly, an impairment loss of $0.2 million, which is included in other expense, was charged to earnings.

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In 2000, we purchased a 20% interest in Video Technics, Inc., which develops software for the Chyron Aprisa Clip/Stillstore systems. The investment is accounted for under the equity method of accounting.

The excess of the aggregate purchase price over the fair market value of net assets acquired, of approximately $1.1 million, has been ascribed to an exclusive sales and marketing agreement and is being amortized over three years pursuant to Statement of Financial Accounting Standards No. 142 "Goodwill and Intangible Assets." Amortization of this intangible approximated $0.09 million in the three months ended June 30, 2003 and 2002 and $0.18 million in the six months ended June 30, 2003 and 2002. As of June 30, 2003 and December 31, 2002 the gross asset balance was $1.1 million and the accumulated amortization was $1.0 million and $0.8 million, respectively. Amortization for the year ended December 31, 2003 will be $0.25 million.

Inventory, net is comprised of the following (in thousands):

We account for our stock compensation plans in accordance with the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and its related interpretations, which requires that compensation cost be recognized on the date of grant for stock options issued based on the difference, if any, between the fair market value of our stock and the exercise price. Under this intrinsic value method prescribed under APB 25 there was no compensation expense recognized for the three or six months ended June 30, 2003 and 2002. We have adopted the disclosure requirements of SFAS 123, "Accounting for Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure" which allows entities to continue to apply the provisions of APB 25 for transactions with employees and provides pro-forma earnings disclosures for employee stock grants as if the fair value ba sed method of accounting in SFAS No. 123 had been applied to these stock grants. The following table illustrates the effect on net loss and net loss per common share if the fair value method had been applied (in thousands except per share amounts):

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Chyron's businesses are organized, managed and internally reported as two segments. The segments, which are based on differences in products and technologies, are Graphics and Signal Distribution and Automation. The accounting policies of the segments are the same as those described in the "Summary of Significant Accounting Policies" included in our Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2002. We are an integrated organization characterized by interdivisional cooperation, cost allocations and inventory transfers. Therefore, management does not represent that these segments, if operated independently, would report the financial information shown below.

	Three Months		Six Months
	Ended June 30,		Ended June 30,
	(In thousands)		(In thousands)
	2003	2002	2003	2002
Net sales
Graphics	$4,991	$5,879	$10,290	$10,696
Signal Distribution & Automation	5,014	4,418	10,619	9,669
Operating income (loss)
Graphics	287	(37)	887	(29)
Signal Distribution & Automation	(414)	(738)	(103)	(877)
Depreciation and amortization
Graphics	163	358	336	717
Signal Distribution & Automation	294	302	586	593
Geographic sales
United States	5,823	5,072	12,120	10,381
United Kingdom	1,743	2,033	4,489	5,339
Other	2,439	3,192	4,300	4,645

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In November 2002, the Emerging Issues Task Force (or EITF) of the Financial Accounting Standards Board (or FASB) issued EITF 00-21, "Revenue Arrangements with Multiple Deliverables," which addresses certain aspects of the accounting for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. Under EITF 00-21, revenue arrangements with multiple deliverables should be divided into separate units of accounting if the deliverables meet certain criteria, including whether the fair value of the delivered items can be determined and whether there is evidence of fair value of the undelivered items. In addition, the consideration should be allocated among the separate units of accounting based on their fair values, and the applicable revenue recognition criteria should be considered separately for each of the separate units of accounting. EITF 00-21 is effective for revenue arrangements we enter into after June 30, 2003. We are cu rrently evaluating the impact of EITF 00-21 on revenue arrangements we enter into in the future.

In December 2002, the FASB issued FIN 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." This interpretation expands the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. As of January 1, 2003, we have adopted the provisions of FIN 45, which did not have a material impact on the Company's Consolidated Financial Statements.

In January 2003, the FASB issued FIN 46, "Consolidation of Variable Interest Entities - an interpretation of ARB No. 51," which addresses consolidation of variable interest entities. FIN 46 expands the criteria for consideration in determining whether a variable interest entity should be consolidated by a business entity, and requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. This interpretation applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. It applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. The adoption of FIN 46 will not have a material impact on the Company's Consoli dated Financial Statements.

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From time to time, including in this Quarterly Report on Form 10-Q, we may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, changes in the industry, new products, research and development activities and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for such forward-looking statements. In order to comply with the terms of the safe harbor, we note that a variety of factors could cause our actual results to differ from the anticipated results or other expectations expressed in our forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of our business include, without limitation, the following: product concentration in a mature market, dependence on the emerging digital market and the industry's transition to DTV and HDTV, consumer acceptance of DTV and HDTV, resistance within the broadcast or cable industry to implement DTV and HDTV technology, use and improvement of the Internet, new technologies that could render certain Chyron products to be obsolete, a highly competitive environment, competitors with significantly greater financial resources, new product introductions by competitors, seasonality, fluctuations in quarterly operating results, ability to maintain adequate levels of working capital, viability of the OTC Bulletin Board as a trading platform, expansion into new markets, and our ability to successfully implement our strategic alliance strategy. Additional factors affecting future results, and which are described in more detail in our Annual Report on Form 10-K for the year ended December 31, 2002, include:

• We cannot assure you that we will reach profitability because we have a history of losses.
• Our future operating results are likely to fluctuate and therefore may fail to meet expectations, which could cause our stock price to decline.
• If we fail to successfully develop, introduce and sell new products, we may be unable to compete effectively in the future.
• If we are unable to keep up with rapid change in our industry, our business will not grow.
• We expend substantial resources in developing and selling our products, and we may be unable to generate significant revenue as a result of these efforts.
• Our customers may cancel or change their product plans after we have expended substantial time and resources in the design of their products.
• If the digital video market does not grow, we will be unable to increase our revenues.
• We will be unable to compete effectively if we fail to anticipate product opportunities based upon emerging technologies and standards and fail to develop products that incorporate these technologies and standards.
• We may not successfully develop strategic relationships that may be important to our business.
• We operate in a highly competitive environment and industry and we may lack resources needed to capture increased market share.
• We may encounter periods of industry-wide surface mount components shortage, resulting in pricing pressure and a risk that we could be unable to fulfill our customers' requirements.
• We depend upon one supplier for the software license of our Aprisa product.
• We depend on a limited number of suppliers of surface mount components.

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• If we fail to adequately forecast demand for our products, we may incur product shortages or excess product.
• Problems in manufacturing our products, especially our new products, may increase the costs of our manufacturing process.
• We may be unable to grow our business if the markets in which we sell our products do not grow.
• Our business will suffer if our systems fail or become unavailable.
• In order to become profitable, we will need to offset the general pattern of declines and fluctuations in the prices of our products.
• We depend upon third party dealers to market and sell our products and they may discontinue sale of our products, fail to give our products priority or be unable to successfully market, sell and support our products.
• Problems associated with international business operations could subject us to risks from financial, operational and political situations, and affect our ability to manufacture and sell our products.
• We may be unable to accurately predict quarterly results which could adversely affect the trading price of our stock.
• We may be unable to successfully grow our business if we fail to compete effectively with others to attract and retain key personnel.
• We may not be able to protect our proprietary technology and may be sued for infringing on the rights of others.
• Our future operating results may fluctuate or deteriorate and we would be in violation of restrictive bank covenants.
• We may not be able to successfully implement our contingency plan upon a decline in revenues.
• We are uncertain of our ability to obtain additional financing or refinance existing obligations for our future needs, and liquidity issues have and may continue to increase our cost of capital.
• The TV broadcast industry has historically expected substantial marketing expenses.
• We sell hardware and software service agreements to our customers that may become onerous because of product problems or the age of our products.
• Our warranties on products may prove insufficient and could cause us unexpected costs.
• If a new law or regulation is created pertaining to the telecommunications and television industries it could cause our customers to suffer and impede our ability to increase profits.
• Our principal stockholders have significant voting power and may vote for actions that may not be in the best interests of our stockholders.
• We have not issued dividends on our common stock for over thirteen years and do not anticipate doing so in the foreseeable future.
• The price of our common stock may be volatile.
• An increase in the number of shares of our common stock outstanding could reduce the price of our common stock.
• We have various mechanisms in place to discourage takeover attempts, which may reduce or eliminate your ability to sell your shares for a premium in a change of control transaction.

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• It may be difficult to sell your shares and the value of your investment may be reduced because our common stock has experienced low trading volumes on the OTC Bulletin Board and currently lacks public market research analyst coverage.

This discussion should be read in conjunction with the Consolidated Financial Statements including the Notes thereto.

Revenues for the quarter ended June 30, 2003 were $10.0 million, a decrease of $0.3 million, or 3% from the $10.3 million reported for the second quarter of 2002. Revenues for the six months ended June 30, 2003 were $20.9 million, an increase of $0.5 million or 3% from the $20.4 million reported for the first six months of 2002.

Second quarter 2003 revenues from the Graphics division were $5.0 million as compared to $5.9 million for the second quarter of 2002, which represented a decrease of 15%. Revenues for the six month periods from the Graphics division were $10.3 million in 2003 as compared to $10.7 million in 2002. Second quarter revenues in the Graphics division were impacted primarily by an increase of $0.9 million in U.S. sales of Duet products, offset by a decline of $1.4 million in international sales of Duet products. The increase in the U.S. market resulted from a greater level of customer confidence and acceptance, in addition to a wider product range. The Duet product was initially launched with only a sophisticated high-end unit, but now we also provide for a range of low cost packages running on PC based platforms to fully integrated systems. In the second quarter of 2002, we had received two large European orders that did not recur in 2003.

Second quarter 2003 revenues from the Signal, Distribution and Automation division were $5.0 million as compared to $4.4 million for the second quarter of 2002, which represented an increase of 14%. Revenues for the six month periods from the Signal, Distribution and Automation division were $10.6 million in 2003 as compared to $9.7 million in 2002, a 9% increase. This increase resulted primarily from international sales of hardware equipment.

Gross margins for the second quarter of 2003 increased to 54% from 51% in the comparable quarter in 2002. Gross margins for the six month periods in 2003 and 2002, were 56% and 53% respectively. Gross margins in the Graphics division have improved to 54% in the second quarter of 2003 as compared to 48% in the second quarter of 2002 as a result of strict containment of overhead costs and lower material costs resulting from the ability to leverage off the numerous products within the range. Gross margins in the Signal Distribution and Automation division of approximately 54% were lower than 56% realized in the comparable quarter in 2002 due primarily to product mix, most notably due to one large software order that was recognized in the second quarter of 2002.

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Selling, general and administrative (SG&A) expenses decreased by $0.6 million, to $4.4 million in the quarter ended June 30, 2003 compared to $5 million in the second quarter of 2002. SG&A expenses decreased by $1 million, to $8.6 million in the first six months of 2003 compared to $9.6 million for the first six months of 2002. The major components of the decrease in the second quarter amounts are reductions in sales and marketing expenses (primarily travel, commissions and marketing salaries) of $0.2 million, facility costs of $0.1 million, $0.2 million in administrative costs and the balance attributable to reductions in costs of employee benefits and other miscellaneous expenses. These same components comprised the decrease in the comparable six month periods.

Research and development (R&D) costs in the second quarter of 2003 of $1.1 million increased slightly by $0.1 million compared to the quarter ended June 30, 2002. R&D costs increased by $0.2 million, to $2.2 million in the first six months of 2003, compared to $2.0 million for the first six months of 2002. The increases are primarily due to several recent additions to headcount. This level of expenditure is consistent with our budgeted spending plans for 2003 and we believe is at a level that will not significantly drain our cash resources and will enable us to continue to invest in our next generation products.

Overall interest expense of $0.5 million in the three months ended June 30, 2003 was relatively consistent with expense levels in 2002. Reductions in interest expense result from lower interest rates, as well as lower average outstanding balances on our U.S. and U.K. credit facilities, in 2003 than 2002. This was offset by increased interest expense attributable to our senior notes and debentures since we are not settling that liability in cash, but rather accruing interest through the issuance of additional principal obligations. Interest income in each period is nominal as cash on hand is used primarily for operations and not invested in any long-term arrangements.

The components of other (income) expense, net are as follows (in thousands):

	Three Months		Six Months
	Ended June 30,		Ended June 30,
	2003	2002	2003	2002
Foreign exchange transaction gain	$(264)	$(321)	$(190)	$(218)
Impairment of marketable security			211
Other	(2)	(4)	(2)	17
	$(266)	$(325)	$    19	$(201)

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During the six months ended June 30, 2003, net cash of $1.7 million was provided by operations as compared to $0.4 million in the six months of 2002. The generation of cash from operations results primarily from the net loss of $0.3 million, offset by non-cash expenses totaling $1.9 million and net changes in operating assets and liabilities of $0.1 million. In the first six months of 2002, the net loss of $1.8 million, when adjusted for non-cash items totaling $2.2 million, resulted in positive cash flow of $0.4 million. During the six months ended June 30, 2002 the net change in operating assets and liabilities was minimal.

At June 30, 2003, we had cash on hand, including restricted cash, of $2.6 million and working capital of $3.9 million. Due to the requirement of our U.S. bank to maintain a minimum cash balance of $1 million, such amount has been classified as restricted cash. The unutilized availability under the U.S. revolving line of credit was $1 million and under the U.K. overdraft facility was $0.5 million (collectively the "revolving lines of credit") at June 30, 2003.

We provide signal distribution and graphics products to the broadcast industry for use in analog and digital television. Currently, our customers are facing capital budget constraints because of a slowdown in the U.S. and European economies, and there are few signs of growth in our traditional markets. In addition, we have sustained losses from operations in each of the six years ended December 31, 2002. In 2002 our selling, general & administrative ("SG&A") and research and development ("R&D") expenses were $11.5 million lower than in 2001 as a result of two restructuring plans implemented in 2001 to reduce staff and curtail certain operating and discretionary expenses. In 2003, increased cost consciousness and further reductions in discretionary spending have resulted in net $0.9 million lower operating expenses in the first six months of 2003 as compared to the same period in 2002.

We continue to approach 2003 with caution, adopting a modest outlook for growth, and sizing the business accordingly. We do not currently intend to effect another restructuring as we did in 2001 unless a leveling off of 2003 sales to 2002 levels, or a downturn in sales, necessitates it. We have configured our business with a level of costs that allows flexibility to further reduce costs if economic conditions deteriorate. We believe we have sized our businesses to a level that will not significantly reduce our cash resources while continuing to invest in our new products. We operate in a rapidly changing environment and must remain responsive to changes as they occur. In the event that revenues are significantly below 2003 forecasted revenues we believe we have the ability to (i) further reduce or delay discretionary expenditures, including capital purchases, and further reduce headcount, according to our contingency plan and (ii) refinance or sell (outright sale or sale-leaseback) our P ro-Bel division headquarters building in the U.K., so that we will have sufficient cash resources through December 31, 2003. However, there can be no assurance that we will be able to adjust our costs or refinance or sell our U.K. building in sufficient time to respond to revenue shortfalls or obtain waivers and/or amendments to our covenants from our U.S. bank should defaults occur.

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In preparing our contingency plan for a lower level of 2003 sales than we are currently forecasting, we have re-examined our cost structure, and prepared a contingent restructuring plan that recommends, in the event it is necessary, to reduce spending in staffing, travel, trade shows, advertising, professional fees and equipment, among other items. This plan would affect both the Graphics and the Signal Distribution and Automation divisions of our business. However, there can be no assurance we would be able to execute the plans in adequate time to provide a significant immediate or short-term benefit and if implemented, could have an adverse effect on our ability to conduct business.

Our borrowing facility with our U.S. bank requires that for 2003 we achieve certain quarterly financial covenants with respect to our U.S. operations: a designated minimum EBITDA; maintain in a pledged account at our U.S. bank a minimum cash balance of $1 million at all times; achieve a set fixed charge ratio, and upon repayment on December 31, 2003 of the senior subordinated convertible notes plus accrued interest, maintain a minimum undrawn availability of $0.25 million at all times under our revolving line of credit. While we met the financial covenants for all quarters of 2002 and the first two quarters of 2003, our operating results in the past have caused us to violate the financial covenants in place at the time for which we either obtained waivers or amended our bank agreements. We cannot be certain we will achieve our covenants for the remainder of 2003, although we believe that unless quarterly EBITDA for the U.S. business falls short of plan by more than 15% in any future qua rter, we will likely achieve the covenants. There is no assurance we will not be in violation of bank covenants in the future because of fluctuations or deterioration in our operating results. At that point there is no assurance we will be able to obtain waivers or amend our bank agreements. If not, we would be in violation of our financial covenants and the bank would have the right to demand full payment of all amounts owed them. We would then be required to settle the outstanding obligation. At June 30, 2003, we owed the U.S. bank $1.9 million, consisting of $1.5 million under our revolving credit line and $0.4 million under our outstanding term loan. Based on our agreed repayment schedule with the U.S. bank, we are currently repaying the term loan at $150,000 per month until paid in full in September 2003.

If we were to be in violation of our financial covenants, and the bank demanded full payment, our expectation is that we would not have the financial resources to meet the bank obligation in a single payment. We would, therefore, expect to agree to a payment plan to pay off the outstanding bank debt over a specific period of time. We cannot provide any assurance that the bank would accept any plan. Furthermore, we cannot provide any assurance that the sources of capital to pay off the bank would materialize in a timely manner and to the extent we had planned for.

In specific terms, the contemplated sources of capital to meet our bank obligation are listed below:

• Make additional reductions in staff and discretionary expenses as per our contingent restructuring plan to save $0.4 million in cash outlays assuming implementation in September 2003. Such savings would be reduced by approximately $0.15 million for each month of delay. A further restructuring may not be possible without impairing the business.

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• Refinance the mortgage on our Pro-Bel office building in Reading, U.K. Refinance of the existing mortgage could generate proceeds of up to $1 million. However, there can be no assurance we will be able to refinance the mortgage on our building and if we do, that we will be able to generate the desired proceeds.
• If we do not refinance our mortgage on our Pro-Bel office building in Reading, U.K., as described above, we would consider the sale or sale-leaseback of such building. Net of and assuming no refinance of the existing mortgage, a sale or sale-leaseback could generate proceeds of between $2.0 million to $2.6 million. However, there can be no assurance we will be able to sell or arrange a sale-leaseback of our building for these amounts.
• Cash on the balance sheet. There may be no cash on the balance sheet at the time of covenant violation.
• Third party financial support. Sufficient additional financial support from third parties, which may include directors and principal shareholders, may not materialize as it has in the past.

While our 2003 plan, if executed, envisions that we will have sufficient cash to meet our 2003 debt obligations and operate the business beyond December 31, 2003, there can be no assurances we will be able to achieve our plan.

We are currently exploring opportunities with third parties regarding potential benefits that might result from a sale of part of our business. These discussions are preliminary and there can be no assurance or determination of the outcome of such discussions.

In November 2002, the Emerging Issues Task Force (or EITF) of the Financial Accounting Standards Board (or FASB) issued EITF 00-21, "Revenue Arrangements with Multiple Deliverables," which addresses certain aspects of the accounting for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. Under EITF 00-21, revenue arrangements with multiple deliverables should be divided into separate units of accounting if the deliverables meet certain criteria, including whether the fair value of the delivered items can be determined and whether there is evidence of fair value of the undelivered items. In addition, the consideration should be allocated among the separate units of accounting based on their fair values, and the applicable revenue recognition criteria should be considered separately for each of the separate units of accounting. EITF 00-21 is effective for revenue arrangements we enter into after June 30, 2003. We are cu rrently evaluating the impact of EITF 00-21 on revenue arrangements we enter into in the future.

In December 2002, the FASB issued FIN 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." This interpretation expands the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. As of January 1, 2003, we have adopted the provisions of

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 FIN 45 which did not have a material impact on the Company's Consolidated Financial Statements.

In January 2003, the FASB issued FIN 46, "Consolidation of Variable Interest Entities - an interpretation of ARB No. 51," which addresses consolidation of variable interest entities. FIN 46 expands the criteria for consideration in determining whether a variable interest entity should be consolidated by a business entity, and requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. This interpretation applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. It applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. The adoption of FIN 46 will not have a material impact on the Company's Consoli dated Financial Statements.

We are exposed to foreign currency and exchange risk in the normal course of business related to investments in our foreign subsidiaries and sales to foreign customers. For the three months ended June 30, 2003 and 2002, sales to foreign customers were 42% and 51% of total sales, respectively. For the six months ended June 30, 2003 and 2002, sales to foreign customers were 42% and 49%, respectively. Substantially all sales generated outside of the U.S. are denominated in British Pounds Sterling, Euros and U.S. Dollars.

The net impact of foreign exchange transactions was a gain of $0.3 million in each of the quarters ended June 30 in 2003 and 2002. The net impact of foreign exchange transactions in each of the six months ended June 30 in 2003 and 2002 was a gain of $0.2 million. We record translation gain or loss as a separate component of other comprehensive income or loss.

Additionally, we are exposed to interest rate risk with respect to certain of our short-term and long-term debt that carries a variable interest rate. Rates that affect the variable interest on this debt include the Prime Rate and LIBOR. We have evaluated the foreign currency exchange risk and interest rate risk and believe that our exposure to these risks are not material to our near-term financial position, earnings, or cash flows.

As of June 30, 2003, an evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, the Company's management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2003. There have been no significant changes in the Company's internal control over financial reporting during the most recent quarter that have

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materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

The Company from time to time is involved in routine legal matters incidental to its business. In the opinion of management, the ultimate resolution of such matters will not have a material adverse effect on the Company's financial position, results of operations or liquidity.

At the Annual Meeting of Shareholders held on May 22, 2003, voting was held for one proposal - the election of seven (7) directors to hold office until the next Annual Meeting. The results of that voting were as follows:

	In Favor	Against
Proposal:
Donald P. Greenberg	26,659,371	305,997
Roger Henderson	26,711,291	254,078
Christopher R. Kelly	26,711,401	253,967
Wesley W. Lang, Jr.	26,711,496	253,872
Joan Y. McCabe	26,711,475	253,894
Eugene M. Weber	26,711,496	253,872
Michael I. Wellesley-Wesley	26,710,462	254,906

(a) Exhibits:

Exhibit No.		Description of Exhibit
31.1		Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K:

A Form 8-K was filed on May 15, 2003 pertaining to results at March 31, 2003.

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Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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