TECHDYNE INC - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Year Ended December 31, 2002

Commission File Number: 0-14659

TECHDYNE, INC.
(Exact name of Registrant as specified in its charter)

FLORIDA 59-1709103
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

2230 W. 77TH STREET
HIALEAH, FLORIDA 33016
(Address of principal executive offices,
including zip code)

(305) 556-9210
(Registrant's telephone number,
including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.01 par value

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 the
filing requirements for at least the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The aggregate market value of the voting stock held by non-affiliates
of the registrant computed by reference to the closing price per share on March
25, 2003, was approximately $1,653,402.

As of March 25, 2003, the Company had issued and outstanding 6,556,990
shares of its common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our Information Statement for the 2003 Annual Meeting of
Stockholders are incorporated by reference in Part III.

Table of Contents
-----------------

PART I

ITEM 1. BUSINESS

INTRODUCTION

We are a contract manufacturer of electronic and electro-mechanical
products. Our products are manufactured to customer specifications and designed
for original equipment manufacturers (OEMs) and distributors in the data
processing, telecommunications, instrumentation and food preparation equipment
industries. Our principal custom-designed products include complex printed
circuit boards (PCBs), conventional and molded cables, wire harnesses and
electro-mechanical assemblies. In addition, we provide OEMs with value-added,
turnkey contract manufacturing services and total systems assembly and
integration. We also deliver manufacturing and test engineering services and
materials management, with flexible and service-oriented manufacturing and
assembly services for our customers' high-tech and rapidly changing products.

We were incorporated in Florida in 1976, acquired by Medicore, Inc.,
our former parent, in 1982, and became a public company in 1985. Effective June
27, 2001, control of our company was acquired by Simclar International Limited
(Simclar International), which then transferred its 71.3% ownership of our
company to its parent, Simclar Group Limited (Simclar) both of which are private
United Kingdom companies. See "Recent Developments." Simclar International is
engaged in the same electronic and electro-mechanical subcontract manufacturing
industry as is our company. Simclar International is a larger company than ours,
with sales for fiscal 2002 of approximately $44 million.

Our executive offices are located at 2230 West 77th Street, Hialeah,
Florida 33016. Our telephone number is (305) 556-9210. Our common stock is
traded on the Nasdaq Small Cap Market (Ticker:TCDN).

ELECTRONIC MANUFACTURING INDUSTRY

Until 2001, our industry exhibited significant year to year growth, due
both to the growth in the overall electronics industry, and the steadily
increasing number of OEMs deciding to outsource all or a significant portion of
the production of their products. As a result of the general global recession
beginning in 2001 and continuing through the present, and its magnified effect
in the computer and telecommunications equipment segments, this recent pattern
of growth in our industry was interrupted, and both the Company and the industry
as a whole experienced a decline in sales starting 2001 and continuing through
the present. We are aggressively seeking new business opportunities with
existing and new customers, but there is no assurance we will be successful in
generating additional sales, particularly in this recessionary segment of the
economy.

We believe that the fundamental factors contributing to the growth of
our industry in past years will lead to a resumption of the pattern of growth
late in this year. These factors include increased capital requirements for OEMs
to acquire modern, highly automated manufacturing equipment, their continuing
effort to reduce inventory costs and the relative cost advantages of contract
manufacturers. Using outsourcing for their production of electronic assemblies
also enables OEMs to focus on product development, reduce working capital
requirements, and improve inventory management and marketability. We believe
OEMs will continue to rely on contract manufacturers not only for partial
component assemblies but complete turnkey manufacturing of entire finished
products. We also believe

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that OEMs will look more to contract manufacturers to provide a broader scope of
value-added services, including manufacturing, engineering and test services.

We assist our customers from initial design and engineering through
materials procurement, to manufacturing of the complete product and testing.
Involving contract manufacturers earlier in the manufacturing process through
"concurrent engineering" allows OEMs to realize greater efficiencies and gives
contract manufacturers greater impact in product design, component selection,
production methods and the preparation of assembly drawings and test schematics.
This process also gives the customer the ability to draw upon our manufacturing
expertise at the outset and minimize manufacturing bottlenecks.

Another factor which will continue to lead OEMs to utilize contract
manufacturers is reduced time-to-market. Due to the intense competition in the
electronics industry, OEMs are faced with increasingly shorter product
life-cycles which pressure them to reduce time constraints in bringing a product
to market. This reduction can be accomplished by using a contract manufacturer's
established manufacturing expertise with its sophisticated, technically advanced
and automated manufacturing processes. We believe that this, coupled with the
elements discussed above, such as reduced production costs through economies of
scale in materials procurement, improved inventory management, access to our
manufacturing technology, engineering, testing and related expertise, will
motivate OEMs to work with electronic contract manufacturers such as us.

BUSINESS STRATEGY

We believe that the cost reductions and restructuring of our operations
that we made in response to the continued economic downturn has put us in a
better position to compete once the economy and our industry recovers. We also
believe that our alliance with Simclar will allow us to expand our customer
base, broaden our product lines and provide greater efficiencies in equipment,
supplies, labor and manufacturing processes, both domestically and
internationally.

In response to industry trends, particularly in view of constantly
changing and improving technology and, therefore, shorter product life cycles,
we focus on product development and marketing in order to become a competitive
provider of electronic contract manufacturing services for OEM customers. We
continue to seek to develop strong, long-term alliances with major-growth OEMs
of complex, market leading products. We believe that creating and maintaining
long-term relationships with customers requires providing high quality,
cost-effective manufacturing services marked by a high degree of customer
responsiveness and flexibility. Therefore, our strategy is to focus on leading
manufacturers of advanced electronic products that generally require
custom-designed, more complex interconnect products and short lead-time
manufacturing services. In 2003, we will also continue to target large contract
manufacturers as potential customers.

We strive to build on our integrated manufacturing capabilities, final
system assemblies and testing. In addition to PCBs, our custom cable assembly
capabilities provide us with further opportunities to leverage our vertical
integration and to provide greater value added services and be more competitive.
In addition, vertical integration provides us with greater control over quality,
delivery and cost.

To further satisfy customer needs, we develop long-term customer
relationships by using our state-of-the-art technology to provide timely and
quick-turnaround manufacturing and comprehensive support for materials purchases
and inventory control. Through our use of electronic data interchange technology
(EDI), the customer is able to convey its inventory and product needs on a
weekly basis based on a rolling quantity forecast. More emphasis is placed on
value-added turnkey business for the

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manufacture of complete finished assemblies. This is accomplished with extended
technology, continuous improvement of our processes, and our early involvement
in the design process using our computer-aided design system.

We believe that we can develop closer and more economically beneficial
relationships with our customers through our geographically diverse
manufacturing and assembly operations, presently located in Florida, Texas,
Massachusetts, and Ohio. Our diverse locations have multiple advantages by
helping satisfy costs, timely deliveries and local market requirements of our
customers. We will continue to pursue expansion in different markets to better
serve existing customers and to obtain additional new customers. In alliance
with Simclar, we anticipate experiencing growth and ability to increase our
global presence and competitive position.

PRODUCTS AND SERVICES

We manufacture approximately 850 products, including complete turnkey
finished products, sub-assemblies, molded and non-molded cable assemblies, wire
harnesses, PCBs, injection molded and electronic assembly products, for over 100
OEM customers.

Printed Circuit Boards

PCB assemblies are electronic assemblies consisting of a basic printed
circuit laminate with electronic components including diodes, resistors,
capacitors and transistors, inserted and wave soldered. PCBs may be used either
internally within the customer's products or in peripheral devices. The PCBs
produced by the company include pin-through-hole assemblies, low and medium
volume surface mount technology assemblies, and mixed technology PCBs, which
include multilayer PCBs.

In pin-through-hole assembly production, electronic components with
pins or leads are inserted through pre-drilled holes in a PCB and the pins are
soldered to the electrical surface of a PCB. In surface mount technology
production, electronic components are attached and soldered directly onto the
surface of a circuit board rather than inserted through holes. Surface mount
technology components are smaller so they can be spaced more closely together
and, unlike pin-through-hole components, surface mount technology components can
be placed on both sides of a PCB. This allows for product miniaturization, while
enhancing the electronic properties of the circuit. Surface mount technology
manufacturing requires substantial capital investment in expensive, automated
production equipment, which requires high usage. We are utilizing computerized
testing systems in order to verify that all components have been installed
properly and meet certain functional standards, that the electrical circuits
have been properly completed, and that the PCB assembly will perform its
intended functions.

In 1997, we acquired Lytton Incorporated (Lytton), whose Ohio
operations, with six automated lines, are more focused on PCB manufacturing,
primarily for the food preparation equipment industry. This expansion resulted
in PCB manufacturing yielding approximately 69% and 60% of our sales revenues in
2002 and 2001 respectively.

Cable and Harness Assemblies

A cable is an assembly of electrical conductors insulated from each
other, twisted around a central core and jacketed. Cables may be molded or
non-molded.

Techdyne offers a wide range of custom manufactured cable and harness
assemblies for molded and mechanical applications. These assemblies include
multiconductor, ribbon, co-axial cable, and

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discrete wire harness assemblies. We use advanced manufacturing processes,
in-line inspection and computerized automated test equipment.

We maintain a large assortment of standard tooling for D-Subminiature,
DIN connectors and phono connectors. D-Subminiatures are connectors which are
over-molded with the imprint of the customer's name and part number. DIN
connectors are circular connectors consisting of two to four pairs of wires used
for computer keyboards.

Flat ribbon cable or ribbon cable assemblies are cables with wires
(conductors) on the same plane with connectors at each end. Flat ribbon cables
are used in computer assemblies and instrumentation.

Discrete cable assemblies are wires with contacts and connectors.
Harnesses are prefabricated wiring with insulation and terminals ready to be
attached to connectors. Our cable sales comprised approximately 29% and 34% of
total sales revenue for 2002 and 2001, respectively.

Contract Manufacturing

Contract manufacturing involves the manufacture of complete finished
assemblies with all sheet metal, power supplies, fans, PCBs as well as complete
sub-assemblies for integration into an OEM's finished products, such as speaker
and lock-key assemblies and diode assemblies that consist of wire, connectors
and diodes that are over-molded, packaged and bar coded for distribution. These
products can be totally designed and manufactured by the company through our
computer-aided design system, engineering and supply procurement. We develop
manufacturing processes and tooling, and test sequences for new products of our
customers. We provide design and engineering services in the early stages of
product development, thereby assuring mechanical and electrical considerations
are integrated with a total system. Alternatively, the customer may provide
specifications and we will assist in the design and engineering or manufacture
to the customer's specifications.

Reworking and Refurbishing

Customers provide the company with materials and sub-assemblies
acquired from other sources, which the customer has determined require modified
design or engineering changes. We redesign, rework, refurbish and repair these
materials and sub-assemblies.

Contract manufacturing, reworking and refurbishing together amounted to
approximately 10% of sales for each of 2002 and 2001. We believe that PCB sales
and contract manufacturing will provide us with substantial increases in
revenues over the next few years. Our affiliation with Simclar gives us access
to a larger customer base and the ability to handle large customers both in the
USA and Europe.

MANUFACTURING

We manufacture components and products that are custom designed and
developed to fit specific customer requirements and specifications. Such service
includes computer integrated manufacturing and engineering services,
quick-turnaround manufacturing and prototype development, materials procurement,
inventory management, developing customer oriented manufacturing processes,
tooling and test sequences for new products from product designs received from
our customers or developed by Techdyne from customer requirements. Our
industrial, electrical and mechanical engineers work closely with our customers'
engineering departments from inception through design, prototypes, production
and packaging. We evaluate customer designs and if appropriate, recommend design
changes to improve the

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quality of the finished product, reduce manufacturing costs or other
necessary design modifications. Upon completion of engineering, we produce
prototype or preproduction samples. Materials procurement includes planning,
purchasing and warehousing electronic components and materials used in the
assemblies and finished products. Our engineering staff reviews and structures
the bill of materials for purchase, coordinates manufacturing instructions and
operations, and reviews inspection criteria with the quality assurance
department. The engineering staff also determines any special capital equipment
requirements, tooling and dies, which must be acquired.

We attempt to develop a "partnership" relationship with many of our
customers by providing a responsive, flexible, total manufacturing service. We
have "supplier partnerships" with certain customers pursuant to which we must
satisfy in-house manufacturing requirements of the customer that are based on
the customer's need on a weekly basis based on a rolling quarterly forecast.

Our PCB assembly operations are geared toward advanced surface mount
technology. Our Lytton subsidiary provides the PCB production through
state-of-the-art manufacturing equipment and processes and a highly trained and
experienced engineering and manufacturing workforce. We also offer a wide range
of custom manufactured cables and harnesses for molded and mechanical
applications. We use advanced manufacturing processes, in-line inspection and
testing to focus on process efficiencies and quality. The cable and harness
assembly process is accomplished with automated and semi-automated preparation
and insertion equipment and manual assembly techniques.

Finished turnkey assemblies include the entire manufacturing process
from design and engineering to purchasing raw materials, manufacturing and
assembly of the component parts, testing, packaging and delivery of the finished
product to the customer. By contracting assembly production, OEMs are able to
keep pace with continuous and complex technological changes and improvements by
making rapid modifications to their products without costly retooling and
without any extensive capital investments for new or altered equipment.

At three of our facilities we maintain modern state-of-the-art
equipment for crimping, stripping, terminating, soldering, sonic welding and
sonic cleaning which permits us to produce conventional and complex molded
cables. We also maintain a large assortment of standard tooling. New
manufacturing jobs may require new tooling and dies, but most presses and
related equipment are standard.

SUPPLIES AND MATERIALS MANAGEMENT

Materials used in our operations consist of metals, electronic
components such as cable, wire, resistors, capacitors, diodes, PCBs and plastic
resins.

The company procures components from a select group of vendors which
meet our standards for timely delivery, high quality and cost effectiveness. In
order to control inventory investment and avoid material obsolescence,
components are generally ordered when we have a purchase order or commitment
from our customer for the completed assembly. We use Enterprise Resource
Planning (ERP) management technologies and manage our material pipelines and
vendor base to allow our customers to increase or decrease volume requirements
within established frameworks. We have Visual Manufacturing and Symix
computerized software systems providing us with material requirements planning,
purchasing, and sales and marketing functions. See "Business Strategy" above and
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations."

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We have improved our overall efficiency of manufacturing, particularly
in the area of inventory management, including purchasing, which is geared more
closely to current needs resulting in reduced obsolescence problems. Except for
a worldwide shortage of key electronic components in 2000 that adversely
impacted our sales and earnings, we have not otherwise experienced any
significant disruptions from shortages of materials or delivery delays from
suppliers and we believe that our present sources and the availability of our
required materials are adequate. See Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

QUALITY AND PROCESS CONTROL

Our Florida, Texas, and Massachusetts facilities received from
Underwriter's Laboratories, an independent quality assurance organization, the
ISO 9002 quality assurance designation, which is the international standard of
quality with respect to all systems of operations, including, among others,
purchasing, engineering, manufacturing, sales, inventory control and quality.
Lytton holds its ISO 9002 quality designation from Eagle Registrations, Inc.
These quality assurance designations are only provided to those manufacturers
which exhibit stringent quality and process control assurances after extensive
evaluation and auditing by these independent quality assurance organizations.
Quality control is essential to the company's operations since customers demand
strict compliance with design and product specifications, and high quality
production is a primary competitive standard vital to our services.

Product components, assemblies and sub-assemblies manufactured by the
company are thoroughly inspected visually and electronically to assure all
components are made to strict specifications and are functional and safe. Strict
process controls relating to the entire manufacturing process are part of our
standard operating procedure.

Over the years our product and manufacturing quality have received
excellent ratings. Total quality, timely delivery and customer satisfaction is
our philosophy. High levels of quality in every area of our operations are
essential. Quality standards are established for each operation, performance
tracked against those standards, and identifying workflow and implementing
necessary changes to deliver higher quality levels. We maintain regular contact
with our customers to assure adequate information exchange and other activities
necessary to assure customer satisfaction and to support our high level of
quality and on-time delivery. Any adverse change in our quality and process
controls could adversely affect our relationships with customers and ultimately
our revenues and profitability.

CUSTOMERS

We serve a wide range of businesses, from emerging growth companies to
multinational OEMs, involved in a variety of markets including computer
networking systems, computer workstations, telecommunications, mass data storage
systems, instrumentation and food preparation equipment industries. A
significant portion of our revenues are distributed over the following industry
segments:

Year Ended December 31,
--------------------------------------
2002 2001 2000
---- ---- ----
Food preparation equipment 37% 23% 22%
Data processing 23% 13% 15%
Telecommunications 9% 9% 22%
Military and government 8% --% --%
Instrumentation 4% 19% 19%

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We seek to serve a sufficiently large number of customers to avoid
dependence on any one customer or industry. Nevertheless, historically a
substantial percentage of our net sales have been to multiple locations of a
small number of customers. Significant reductions or delays in sales to any of
those major customers would have a material adverse effect on our results of
operations. In the past, certain of our customers have terminated their
manufacturing relationship with us, or otherwise significantly reduced their
product orders. We cannot assure you that any of our major customers will not
terminate or otherwise significantly reduce or delay manufacturing orders, any
of which such terminations or changes in manufacturing orders could have a
material adverse effect on our results of operations.

We depend upon the continued growth, viability and financial stability
of our customers, who in turn substantially depend on the growth of the personal
computer, computer peripherals, communications, instrumentation, data processing
and food preparation equipment industries. Most of these industries have been
characterized by rapid technological change, short product life cycles, pricing
and margin pressures. In addition, many of our customers in these industries are
affected by general economic conditions. The factors affecting these industries
in general, and/or our customers in particular, could have a material adverse
effect on our results of operations. In addition, we generate significant
accounts receivable in connection with providing manufacturing services to our
customers. If one or more of our customers were to become insolvent or otherwise
were unable to pay us for manufacturing services we have provided, our operating
results and financial condition would be adversely affected. In 2002, 58% of our
sales were made to numerous locations of five major customers. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

The table below sets forth the respective portion of sales for the
applicable period attributable to customers and related suppliers who accounted
for more than 10% of the company's sales in any respective period.

Percentage of Sales
-------------------

2002 2001 2000
---- ---- ----
ITW Food Equipment Group 36% 26% 19%
Trilithic * * 12%
Alcatel * * 12%

* Less than 10% for that year

MARKETING AND SALES

We are pursuing expansion and diversification of our customer base. We
are seeking to develop long term relationships by working closely with
customers, starting with the initial product design and development stage, and
continuing throughout the manufacturing and distribution process. Our principal
sources of new business are the expansion in the volume and scope of services
provided to existing customers, referrals from customers and suppliers, direct
sales through our sales managers and executive staff, and through independent
sales representatives. Domestic operations generate sales through five regional
sales managers covering the Northeast, Southeast, West and Southwest regions of
the United States. There are 11 in-house sales/marketing personnel in the United
States. In addition to sales through sales representatives and in-house sales
personnel, sales are also generated through our website at http://www.tcdn.com
and through catalogues, brochures and trade shows.

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The independent manufacturer sales representatives, primarily marketing
electronic and similar high-technology products, are retained under exclusive
sales representative agreements for specific territories and are paid on a
commission basis. Unless otherwise approved by Techdyne, the sales
representatives cannot represent any other person engaged in the business of
manufacturing services similar to those of the company, nor represent any person
who may be in competition with us. The agreements further prohibit the sales
representative from disclosing trade secrets or calling on our customers for a
period of six months to one year from termination of their agreement.

Substantially all of our sales and reorders are affected through
competitive bidding. Most sales are accomplished through purchase orders with
specific quantity, price and delivery terms. Some productions, such as our
supplier partnerships, are accomplished under open purchase orders with
components released against customer request.

BACKLOG

At December 31, 2002 and 2001, our backlog of orders amounted to
approximately $4,786,000 and $8,314,000, respectively. The decrease in backlog
reflects customers' demands for shorter lead-times and less order coverage.
Based on past experience and relationships with our customers and knowledge of
our manufacturing capabilities, we believe that most of our backlog orders are
firm and should be filled within six months. Most of the purchase orders within
which the company performs do not provide for cancellation. Over the last
several years cancellations have been minimal and management does not believe
that any significant amount of the backlog orders will be cancelled. However,
based upon relationships with our customers, we occasionally allow cancellations
and frequently the rescheduling of deliveries. The variations in the size and
delivery schedules of purchase orders received by the company may result in
substantial fluctuations in backlog from period to period. Since orders and
commitments may be rescheduled or cancelled, and customers' lead times may vary,
backlog does not necessarily reflect the timing or amount of future sales.

PATENTS AND TRADEMARKS

We do not have nor do we rely on patents or trademarks to establish or
protect our market position. Rather, we depend on design, engineering and
manufacturing, cost containment, quality, and marketing skills to establish or
maintain market position.

COMPETITION

Techdyne is a part of highly competitive electronic manufacturing
services industry. We face competition from divisions of large electronics and
high-technology firms, as well as numerous smaller specialized companies.
Certain competitors have broader geographic coverage and competitive price
advantage based on their less expensive offshore operations, particularly in the
Far East. Many of our competitors are larger and more geographically diverse and
have greater financial, manufacturing and marketing resources than we have. Our
main competitors in the PCB area include Vickers Electronics Systems,
Diversified Systems, Inc., Epic Technologies, Inc, and others. We have numerous
competitors in the cable and harness assembly market, including Volex
Interconnect Systems, Inc., Foxconn, ACT Manufacturing, Inc. (in bankruptcy) and
Escod Industries (parent company in bankruptcy).

We believe that we are favorably positioned with regard to primary
competitive factors - price, quality of production, manufacturing capability,
prompt customer service, timely delivery, engineering expertise, and technical
support. We also believe that our affiliation with Simclar enhances our
competitive position internationally. However, recent consolidation trends in
the electronic

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manufacturing services industry are resulting in changes in the competitive
landscape. Increased competition could result in lower priced components and
lower profit margins, or loss of customers, which could have a material adverse
effect on our business, financial condition and result of operations. Compared
to manufacturers who have greater direct buying power with component suppliers
or who have lower cost structure, we may be operating at a cost disadvantage.

Due to the number and variety of competitors, reliable data reflective
to our competitive position in the electronic components and assembly industry
is difficult to develop and is not known.

GOVERNMENTAL REGULATION

Our operations are subject to certain federal, state and local
regulatory requirements relating to environmental waste management and health
and safety matters. We believe that we comply with applicable regulations
pertaining to health, safety and the use, storage and disposal of materials that
are considered hazardous waste under applicable law. To date our costs for
compliance and governmental permits and authorizations have not been material.
However, additional or modified requirements that may require substantial
additional expenditures may be imposed in the future.

EMPLOYEES

We presently have 284 employees located in our four USA facilities.
Twenty-nine of our employees are employed as part time or temporary help. Of our
employees, approximately 228 are engaged in manufacturing, quality assurance,
related operations and support activities, 25 are in material handling and
procurement, 11 are in sales and marketing, 7 are in engineering, and 13 are in
administrative, accounting and support activities.

We have no unions and we believe that our relationship with our
employees is good.

RECENT DEVELOPMENTS

On June 27, 2001, our shareholders approved an agreement under which
Simclar International, a private United Kingdom company acquired 4,674,620
shares of our common stock (71.3% of our shares) from our former parent,
Medicore, Inc. Simclar International immediately transferred its controlling
interest in our company to its parent, Simclar Group Limited, also a private
United Kingdom company owned by Samuel Russell and his wife, Christina Margaret
Janet Russell, each a director of Simclar International and our company. Mr.
Russell is also Chief Executive Officer of our company.

Simclar acquired the controlling interest in our company from Medicore,
Inc. for $10,000,000 plus earn-out payments of 3% of our net sales for the next
three years, with a minimum aggregate earn-out of $2,500,000 and a maximum
aggregate earn-out of $5,000,000. It was also agreed that Simclar use its best
efforts to refinance our long-term debt, which Simclar did, enabling us to repay
our outstanding indebtedness of approximately $193,000 to Medicore on October
29, 2001. Simclar and Medicore made a variety of customary representations and
covenants, one noteworthy one being Simclar's covenant not to finance the
purchase of control with any pre-arranged sale of our assets, provided Simclar
would be permitted to close or dispose of our facilities or assets for valid
corporate purposes. Simclar also agreed to register the shares of common stock
underlying certain options held by management (see "Risk Factors").

In April 2001, as a result of continuing operating losses, we
determined to discontinue our manufacturing operations in Scotland through our
subsidiary, Techdyne (Europe) Limited. We incurred a

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cost of approximately $225,000 for closing our Scottish manufacturing
operations, primarily from post-employment benefits to terminated employees. In
May 2001, Techdyne (Europe) entered into a management agreement with Simclar,
under which Simclar manufactures products for that subsidiary, and assists it in
management coordination. Simclar receives a service charge for the cost of such
services based on the actual costs incurred by Simclar. To date, we have paid
Simclar $1,508,000 under that management agreement.

With the cessation of the manufacturing operations, the company made
the land, building and equipment available for sale during the third quarter of
2001. On February 28, 2002, the company agreed to transfer to Simclar at net
book value the operating assets of Techdyne (Europe) except for the land and
building. Included in property and equipment at December 31, 2002, is the
Scottish land and building, which are considered assets held for sale, at an
estimated fair value of $653,000 based upon market information obtained from an
unrelated third party.

Upon Simclar's acquisition of control of our company, management also
changed. Of the original executive officers, only Barry Pardon, President and a
director, continues in his original position. Joseph Verga, formerly Senior Vice
President and director, no longer holds those positions, but he continues as a
member of our management. Thomas K. Langbein, Chairman of the Board and Chief
Executive Officer of our company and of our former parent, Medicore, of which he
is also President, and directors Peter D. Fischbein, Anthony C. D'Amore and
Edward Diamond resigned upon completion of the sale of control. Messrs.
Fischbein and D'Amore are directors of Medicore. Lytton Crossley resigned as a
director of the company during 2002. Additions to our management upon the change
in control are: (1) Samuel Russell, chairman of Simclar and 90% owner of
Simclar, who is Chairman of the Board and Chief Executive Officer of our
company; (2) Christina Margaret Janet Russell, the wife of Samuel Russell and a
Director of Simclar and 10% owner of Simclar, who is a director of our company,
and (3) three new directors, Thomas Foggo, senior partner of Skene Edwards,
W.S., legal counsel to Simclar, John Ian Durie, Finance Director of Simclar and
formerly a partner of Deloitte & Touche, and Kenneth Greenhalgh, a management
consultant to Simclar. Our by-laws were amended to increase the board of
directors to nine members effective upon completion of the sale of control.
James A. Clark, President of Scherer Industrial Group, was appointed a director
of the company in September 2002. There remain two vacancies on the board.

RISK FACTORS

This Report contains forward-looking statements that involve risks and
uncertainties. The company's actual results may differ significantly from the
prospects discussed in the forward-looking statements. Factors that could cause
or contribute to such differences include, but are not limited to, those listed
below.

The loss of a major customer would adversely affect us

A substantial percentage, approximately 58% of our sales for the year
ended December 31, 2002, has been to five customers, the loss of any of which
would adversely affect us. A substantial portion of our sales (36%) is with one
major customer, Illinois Tool Works (formerly PMI Foods Equipment Group)
("ITW"). There are no long-term contracts with any customer. Substantially all
of our sales and reorders are subject to competitive bids. Sales are dependent
on the success of our customers, some of which operate in businesses associated
with rapid technological change, vigorous competition, short product life
cycles, and pricing and margin pressures. Additionally, certain of the
industries served by us are subject to economic cycles and have in the past
experienced, and are likely in the future to

- 10 -

experience, recessionary periods. Developments adverse to our major customers or
their products could have an adverse effect on us. A variety of conditions, both
specific to each individual customer and generally affecting each customer's
industry, may cause customers to cancel, reduce or delay purchase orders and
commitments without penalty, except for payment for services rendered, materials
purchased and, in certain circumstances, charges associated with such
cancellation, reduction or delay.

In addition, we generate large accounts receivable in connection with
our providing of electronic contract manufacturing. If one or more of our
customers experiences financial difficulty and is unable to pay for the services
provided by us, our operating results and financial condition would be adversely
affected. Recent examples are two customers who sought reorganization under
Chapter 11 of the Bankruptcy Act since August 2001. Both customers owed us a
total of $160,000 at the time of their filings, which may be uncollectible. We
expect to continue to depend on sales to a limited number of major customers.

Secured loans - existence of liens on all of our assets

All of our assets, except for Techdyne (Europe), have been pledged as
collateral for two bank loans. On October 24, 2001, we refinanced our existing
bank loans of $10,400,000, of which approximately $7,256,000 was outstanding at
the time of refinancing, with a one-year $3,000,000 line of credit and a
$7,000,000 seven-year term loan. The refinancing was completed with the Bank of
Scotland. The refinancing was at an interest rate at the LIBOR rate plus 1.5%
for a one, three or six month period, at our option. We recently extended the
term of the line of credit until July 19, 2003 on the same terms as the original
loan, and elected an initial 30- day interest period at an interest rate of
2.93%. The term loan specifies quarterly payments of $250,000 due on the
twenty-fourth day of January, April, July and October of each year plus
interest. We and our subsidiary, Lytton, guaranteed the new financing.

Our credit facilities impose operational and financial restrictions on us

Our credit facilities with the Bank of Scotland, which include a
Facility Letter, a Working Capital Facility Letter, a Security Agreement, a
Pledge Agreement, and a Guaranty, in addition to subjecting all our assets as
security for the bank financing, include substantial covenants that impose
significant restrictions on us, including, among others, requirements that:

o the facilities take priority over all our other obligations;
o we must maintain sufficient and appropriate insurance for our
business and assets;
o we must maintain all necessary licenses and authorizations for the
conduct of our business;
o we indemnify the bank against all costs and expenses incurred by it
which arise as a result of any actual or threatened (i) breach of
environmental laws; (ii) release or exposure to a dangerous
substance at or from our premises; or (iii) claim for an alleged
breach of environmental law or remedial action or liability under
such environmental law which could have an adverse material effect;
o if environmental harm has occurred to our property securing the
credit facility, we have to ensure we were not responsible for the
harm, and we have to be aware of the person responsible and its
financial condition; and
o a variety of pension and benefit plans and ERISA issues, including,
among others, requiring us to notify the bank of (i) material
adverse changes in the financial condition of any such plan; (ii)
increase in benefits; (iii) establishment of any new plan; (iv)
grounds for termination of any plan; and (v) our affiliation with
or acquisition of any new ERISA

- 11 -

affiliate that has an obligation to contribute to a plan that has
an accumulated funding deficiency.

In addition, our credit facilities require us to maintain:

o consolidated adjusted net worth greater than $10,000,000 for the
period January 2003 through June 2003; $10,500,000 for the period
July 2003 to September 2003 and $11,000,000 thereafter;
o a ratio of consolidated assets to consolidated net borrowing not
less than 1.75 to 1;
o a ratio of consolidated trade receivables to consolidated net
borrowing of not less than .75 to 1; and
o a ratio of consolidated net income before interest, income taxes
and management fees to total consolidated interest costs of not
less than 2 to 1.

Finally, without the prior written consent of the Bank of Scotland, our
credit facilities prohibit us from:

o granting or permitting a security agreement against our
consolidated assets except for permitted security agreements;
o declaring or paying any dividends or making any other payments on
our capital stock;
o consolidating or merging with any other entity or acquiring or
purchasing any equity interest in any other entity, or assuming any
obligations of any other entity, except for notes and receivables
acquired in the ordinary course of business;
o incurring, assuming, guaranteeing, or remaining liable with respect
to any indebtedness, except for certain existing indebtedness
disclosed in our financial statements;
o undertaking any capital expenditures in excess of $1,000,000 in any
one fiscal year;
o effecting any changes in ownership of our company or Lytton, our
100%-owned subsidiary;
o making any material change in any of our business objectives,
purposes, operation or taxes; and
o incurring any material adverse event in business conditions as
defined by the bank.

Our ability to comply with these provisions may be affected by changes
in our business condition or results of our operations, or other events beyond
our control. The breach of any of these covenants would result in a default
under our debt. At December 31, 2002, we were in violation of the covenant
requiring a ratio of consolidated trade receivables to consolidated net
borrowings of .75 to 1. Although the Bank of Scotland has waived this default,
there can be no assurance that defaults in these or other covenants will not
occur in the future, nor can there be any assurance that our lender will waive
future covenants violations. A default in the covenants would permit our lender
to accelerate the maturity of our credit facilities and to sell the assets
securing them, which would cause the company to cease operations and seek
bankruptcy protection.

Our indebtedness requires us to dedicate a substantial portion of our
cash flow from operations to payments on our debt, which could reduce amounts
for working capital and other general corporate purposes. The restrictions in
our credit facility could also limit our flexibility in reacting to changes in
our business and increases our vulnerability to general adverse economic and
industry conditions.

- 12 -

We operate in a highly competitive industry and our business may be harmed by
competitive pressures

Manufacture and assembly of electro-mechanical and electronic
components is a highly competitive industry characterized by a diversity and
sophistication of products and components. We compete with major electronics
firms that have substantially greater financial and technical resources and
personnel than we do. We also face competition from many smaller, more
specialized companies. We believe the primary competitive factors are pricing,
quality of production, prompt customer service, timely delivery, engineering
expertise, and technical assistance to customers. Among this mix of competitive
standards, we believe we are competitive with respect to delivery time, quality,
price and customer service. Price sensitivity becomes a paramount competitive
issue in recessionary periods, as we are now experiencing, and we may be at a
competitive disadvantage with manufacturers with a lower cost structure,
particularly off-shore manufacturers with lower labor and related production
costs. To compete effectively, we must also provide technologically advanced
manufacturing services, and respond flexibly and rapidly to customers' design
and schedule changes. Our inability to do so could have adverse effects on us.
Customers in our industry are price-sensitive and, particularly in the recent
economic downturn, there is substantial pressure from customers to reduce our
prices. Our ability to remain competitive depends on our ability to meet these
customer and competitive price pressures while protecting our profit margins. We
have been engaged in and will have to continue cost reductions in overhead,
manufacturing processes, and equipment retooling, while maintaining product
flow, inventory control, and just-in-time shipping to our customers. If we are
unable to accomplish these factors, we will not be competitive, and our business
and operating results will be adversely impacted.

Our revenues are contingent on the health of the industries we serve

We rely on the continued growth and financial stability of our
customers who operate in the following industry segments:

o food preparation equipment;
o data processing;
o telecommunications;
o instrumentation; and
o military and government.

These industry segments, to a varying extent, are subject to dynamic
changes in technology, competition, short product life cycles, and economic
recessionary periods. When our customers are adversely affected by these
factors, we may be similarly affected.

Manufacture of electronic and electro-mechanical products, particularly designed
for OEMs and manufactured to custom specifications, is cyclical, and demand for
our products may decline

Our business depends substantially on both the volume of electronic and
electro-mechanical production by OEMs in the data processing,
telecommunications, instrumentation and food preparation industries, and new
specifications and designs for these OEMs. These industries have been cyclical
over the years, and have experienced oversupply as well as significantly reduced
demand, as we are currently experiencing. Declining demand for our products and
services may continue into the immediate future. The result of the economic
downturn has resulted in lower capacity utilization of our manufacturing
operations and a shift in product mix toward lower margin assemblies. OEMs may
not increase production or may shift to new customer specifications and designs,
in which case demand for our products and services may continue to slow. These
changes in economic conditions and demand have resulted and may continue to
result in customer rescheduling of orders and shipments, which affects our
results of operations. Any continuation in the downturn in OEM products is
anticipated to have an adverse effect on our business, financial condition, and
operating results. Moreover, our need to invest

- 13 -

in engineering, marketing, and customer services and support capabilities will
limit our ability to reduce expenses, as we have been attempting to do, in
response to such downturns.

We do not have long-term contracts with customers, and cancellations, reductions
or delays in orders affect our profitability

We do not typically obtain firm long-term contracts from our customers.
Instead, we work closely with our customers to develop forecasts for upcoming
orders, which are not binding, in order to properly schedule inventory and
manufacturing. Our customers may alter or cancel their orders or demand delays
in production for a number of reasons beyond our control, which may include:

o market demand for products;
o change in inventory control and procedures;
o acquisitions of or consolidations among competing customers;
o electronic design and technological advancements; and
o recessionary economic environment.

Any one of these factors may significantly change the total volume of
sales and affect our operating results, as has been the case with the
recessionary environment and reduced demand for our customers' products and in
turn, our products and services. In addition, since much of our costs and
operating expenses are relatively fixed, a reduction in customer demand would
adversely affect our gross margins and operating income. Although we are always
seeking new business and customers, we cannot be assured that we will be able to
replace deferred, reduced or cancelled orders.

Shortages of components specified by our customers would delay shipments and
adversely affect our profitability

Substantially all of our sales are derived from electro-mechanical and
subcontract electronic manufacturing in which we purchase components specified
by our customers. In 2000, supply shortages curtailed production of certain
assemblies using a particular component. Industry-wide shortages of electronic
components, particularly components for PCB assemblies, have occurred. We did
not experience any substantial supply shortages in 2001 or 2002. Should our
industry experience a rapid recovery shortages of components mostly likely will
occur, and we may be forced to delay shipments, which could have an adverse
effect on our profit margins and customer relations. Because of the continued
increase in demand for surface mount components, we anticipate component
shortages and longer lead times for certain components to occur from time to
time. Also, we typically bear the risk of component price increases that occur,
which accordingly could adversely affect our gross profit margins. At times, we
are forced to purchase components beyond customer demand on items which are in
short supply. To the extent there is less customer demand or cancellations, we
will have increased obsolescence. Due to the current difficult economic
environment, there may be cut-backs and/or shut-downs of semi-conductor
foundries, which could reinitiate component shortages.

Technological developments, satisfying customer designs and production
requirements, quality and process controls are factors impacting our operations

Our existing and future operations are and will be influenced by
several factors, including technological developments, our ability to
efficiently meet the design and production requirements of our customers, our
ability to control costs, our ability to evaluate new orders to target
satisfactory profit margins, and our capacity to develop and manage the
introduction of new products. We also may not be

- 14 -

able to adequately identify new product trends or opportunities, or respond
effectively to new technological changes. Quality control is also essential to
our operations, since customers demand strict compliance with design and product
specifications. Any deviation from our quality and process controls would
adversely affect our relationship with customers, and ultimately our revenues
and profitability.

Our operating results are subject to annual and quarterly fluctuation which
could negatively impact our stock prices

There are a number of factors, beyond our control, that may affect our
annual and quarterly results. These factors include:

o the volume and timing of customer orders;
o changes in labor and operating prices;
o fluctuations in material cost and availability;
o changes in domestic and international economies;
o timing of our expenditures in anticipation of future orders;
o increase in price competition, and competitive pressures on
delivery time and product reliability;
o changes in demand for customer products;
o the efficiency and effectiveness of our automated manufacturing
processes;
o market acceptance of new products introduced by our customers; and
o uneven seasonal demands by our customers.

Any one or combination of these factors can cause an adverse effect on our
future annual and quarterly financial results. Fluctuations in our operating
results could materially and adversely affect the market price of our common
stock, which has been declining over the last several years.

Environmental laws may expose us to financial liability and restrictions on
operations

We are subject to a variety of federal, state and local laws and
regulations relating to environmental, waste management, and health and safety
concerns, including the handling, storage, discharge and disposal of hazardous
materials used in or derived from our manufacturing processes. Proper waste
disposal is a major consideration for printed circuit board manufacturers, which
is a substantial part of our business, since metals and chemicals are used in
our manufacturing process. Environmental controls are also essential in our
other areas of electronic assembly. If we fail to comply with such environmental
laws and regulations, then we could incur liabilities and fines and our
operations could be suspended. This could also trigger indemnification of our
lender under our credit facilities, as well as being deemed a default under such
credit facilities. See "Our credit facilities impose operational and financial
restrictions on us" above. Such laws and regulations could also restrict our
ability to modify or expand our facilities, could require us to acquire costly
equipment, or could impose other significant capital expenditures. In addition,
our operations may give rise to claims of property contamination or human
exposure to hazardous chemicals or conditions. Although we have not incurred any
environmental problems in our operations, there can be no assurance that
violations of environmental laws will not occur in the future due to failure to
obtain permits, human error, equipment failure, or other causes. Furthermore,
environmental laws may become more stringent and impose greater compliance costs
and increase risks and penalties for violations.

- 15 -

Simclar controls over 72% of our common stock and the affairs of our company

Simclar acquired 71.3% of our common stock in June 2001, and controls
the affairs of our company. In September 2001 Simclar announced its intention to
acquire an additional 200,000 shares of our common stock. To date, Simclar has
purchased 70,500 shares of our common stock in the open market, giving Simclar a
72.4% ownership of our company. Our common stock does not provide for cumulative
voting, and therefore, the remaining shareholders other than Simclar will be
unable to elect any directors or have any significant impact in controlling the
business or affairs of the company. The concentration of ownership with Simclar
may also have the effect of delaying, deterring or preventing a change in
control of our company, and would make transactions relating to our operations
more difficult or impossible without the support of Simclar.

The price of our shares is volatile

The market price of our common stock has substantially fluctuated in
the past, which resulted in its delisting from the Nasdaq National Market in
1992. In 1995, we completed a public offering of our common stock, which then
was listed with the Nasdaq SmallCap Market and Boston Stock Exchange. On
November 6, 1996, the common stock was relisted for trading on the Nasdaq
National Market and delisted from the Boston Stock Exchange. On February 18,
2000, our common stock transferred to the Nasdaq SmallCap Market, since the
market value of the public float was not equal to or greater than the minimum
required for listing. The market price of our common stock has been as high as
$8.13 in the first quarter of 1997 to as low as $.52 in the fourth quarter of
2002. Our common stock has limited trading volume, and it closed at $1.11 on
March 25, 2003.

There are a variety of factors which contribute to the volatility of
our common stock. These factors include domestic and international economic
conditions, stock market volatility, our reported financial results,
fluctuations in annual and quarterly operating results, and general conditions
in the contract manufacturing and technology sectors. Announcements concerning
our company and competitors, our operating results, and any significant amount
of shares eligible for future sale may also have an impact on the market price
of our common stock. As a result of these factors, the volatility of our common
stock prices may continue in the future.

Substantial market overhang from outstanding options and shares held by the
certain shareholders and our parent may adversely affect the market price of our
common stock

Certain persons, including officers of our company, own options to
purchase shares of our common stock that are exercisable at a price of $2.00 per
share for an aggregate of 60,000 shares. Our parent, Simclar, owns 4,745,120
shares of our common stock, or 72.4% of our outstanding shares. Under the
agreement in which it purchased the controlling interest in our company, Simclar
agreed to acquire the shares as "restricted securities" under the Securities Act
of 1933 (the "Securities Act"), and not with a view to their distribution.
However, restricted shares may be sold under Rule 144 of the Securities Act one
year from their acquisition or June 26, 2002, and Simclar, at any time, could
register as many of its 4,745,120 shares of common stock as it desires, which
could be well in excess of any limited amounts it could sell under Rule 144
without registration. Rule 144 entitles each person having owned restricted
securities for a period of one year, to sell without registering the securities,
every three months, an amount of shares which does not exceed the greater of 1%
of the outstanding common stock or, since the common stock is trading on Nasdaq,
the average weekly volume of trading as reported by Nasdaq during the four
calendar weeks prior to the sale. Accordingly, the sale of the 401,867 shares by
officers and directors of our company and our former parent, Medicore, and the
potential sale of shares by Simclar,

- 16 -

whether under Rule 144 or through a registration statement, may have an adverse
affect on the market price of our common stock, and may hamper our ability to
manage subsequent equity or debt financing, or otherwise affect the terms and
timing of such financing. Simclar has indicated to the company that it does not
presently have any intentions to sell any of its shares of the company.

We have not declared dividends, and our credit facilities prohibit us from
paying dividends

Under Florida corporate law, holders of our common stock are entitled
to receive dividends from legally available funds, when and if declared by our
board of directors. We have not paid any cash dividends, and our board of
directors does not intend to declare dividends in the foreseeable future. Our
future earnings, if any, will be used to finance our capital requirements, repay
bank borrowings and fund our operations. Our credit facilities prohibit us from
paying any dividends or making any other payments on our capital stock without
the written consent of the lender. There can be no assurance that the lender
will provide such consent.

Possible delisting of our stock

Our common stock trades on the Nasdaq SmallCap Market. There are
certain criteria for continued listing on the Nasdaq SmallCap Market, known as
maintenance listing requirements. Failure to satisfy any one of these
maintenance listing requirements could result in our securities being delisted
from the Nasdaq SmallCap Market. These criteria include two active market
makers, maintenance of $2,500,000 of stockholders' equity (or alternatively,
$35,000,000 in market capitalization or $500,000 in net income from operations
in the latest fiscal year or 2 of the last 3 fiscal years), a minimum bid price
for our common stock of $1.00, and at least 500,000 publicly held shares with a
market value of at least $1,000,000, among others. Usually, if a deficiency
occurs for a period of 30 consecutive business days (10 consecutive business
days for failure to satisfy the minimum market capitalization requirement), the
particular company is notified by Nasdaq and has 90 days (30 days in the case of
market capitalization) to achieve compliance. Nasdaq has proposed adjustments to
its SmallCap Market bid price grace period from 90 days to 180 days. Following
this grace period, issuers that demonstrated compliance with the core initial
listing standards of the SmallCap Market, which is either net income of $750,000
(determined from the most recently completed fiscal year or two of the most
recently completed fiscal year), stockholder; equity of $5,000,000, or market
capitalization of $50,000,000, will be afforded an additional 180 day grace
period within which to regain compliance. If the company is unable to
demonstrate compliance, the security is subject to delisting. The security might
be able to trade on the Nasdaq Over-The-Counter Bulletin Board, a less
transparent trading market which may not provide the same visibility for the
company or liquidity for its securities, as does the Nasdaq SmallCap Market. As
a consequence, an investor may find it more difficult to dispose of or obtain
prompt quotations as to the price of our securities, and may be exposed to a
risk of decline in the market price of our common stock.

The Nasdaq SmallCap Market requires that the Company maintain a minimum
market value of public float of $1,000,000 for continued listing on the Nasdaq
SmallCap Market. The publicly trading shares, exclusive of any affiliate
ownership, which is the float for our common stock, is approximately 1,615,000
shares, and as the closing price of our shares on March 25, 2003 was $1.11, we
satisfy that maintenance requirement.

However, our common stock has traded as low as $.52 in the fourth
quarter of 2002, and has limited trading volume. There is the risk of being
delisted from the Nasdaq SmallCap Market should our common stock fail to
maintain a minimum bid price of $1.00 per share for 30 consecutive days. Such
occurrence would generate a notice from Nasdaq that we have a 90-day period to
reflect that our common

- 17 -

stock traded at $1.00 or more for at least 10 consecutive trading days.
Continued satisfaction of certain of the Nasdaq SmallCap listing maintenance
requirements is beyond our control. There is no assurance that the company will
continue to satisfy the minimum listing maintenance criteria, which, without a
timely cure, could cause our securities to be delisted from the Nasdaq SmallCap
Market.

ITEM 2. PROPERTIES

The following chart summarizes the properties leased by the company.

(1) The landlord is our former parent, Medicore. The lease is as favorable
as may be obtained from unaffiliated third parties.
(2) 3,000 square feet of this location is sub-leased to Team Source.
(3) The landlord is the former President and Director of Lytton and a
former Director of the company. See Item 13, "Certain Relationships and
Related Transactions." The company has a right of first refusal and an
option to purchase these premises. This lease is guaranteed by
Techdyne.

Techdyne (Europe) owns an approximately 31,000 square foot facility in
Livingston, Scotland, which is listed as assets for sale. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

The company maintains state-of-the-art manufacturing, quality control,
testing and packaging equipment at all of its facilities in Florida, Ohio,
Massachusetts, and Texas.

We believe that our equipment and facilities are adequate for our
current operations.

We are subject to a variety of environmental regulations relating to
our manufacturing processes and facilities. See "Government Regulation" and
"Risk Factors" under Item 1, "Business."

- 18 -

ITEM 3. LEGAL PROCEEDINGS

The company is a party in a pending proceeding entitled Lemelson
Medical Education & Research Foundation, Limited Partnership v. Esco Electronics
Corporation, et al., initiated in August 2000, pending in the United States
District Court for the District of Arizona. Lemelson brought a suit against 91
named defendants, including our company, for infringement of a variety of
patents owned by Lemelson, primarily relating to Lemelson's machine vision and
bar code scanning patents. Each of the defendants is involved, as is the
company, in the manufacture of electronic or semiconductor products. Lemelson
simultaneously filed similar lawsuits in the same court against approximately
another 350 defendants in different categories of electronic manufacturing. The
matter has been referred to patent counsel, who filed jointly with the majority
of the other named defendants, a motion to stay any further proceedings pending
the resolution of a motion for summary judgment addressing the issue of the
equitable defense of "prosecution laches" in an unrelated action entitled
Lemelson v. Symbol Technologies, Inc. The equitable defense of prosecution
laches is based on the assertion that Lemelson filed initial patent applications
with USPTO in the 1950s and continued the patent prosecution through the 1990s
continually amending his applications to include products and methods that have
become prevalent in the market. In February 2002, the Federal Court of Appeals
in the Symbol Technologies case found that prosecution laches is a viable
defense to patent infringement claims. This determination is very favorable and
could minimize or totally negate Lemelson's claim.

We assemble custom products to the specifications of our customers, and
we rely on our customers' patents, designs, know-how and other intellectual
property. At this stage in the litigation, we are evaluating the Lemelson
litigation and our potential exposure, but are unable to project the merits of
Lemelson's claims, whether the litigation might result in material damages, or
whether, if necessary, we could obtain a license from Lemelson. Should we be
required to obtain such a license from Lemelson, there can be no assurance that
a license could be obtained on acceptable terms. Any litigation of this type may
result in substantial costs and diversion of our resources.

The company is also a defendant in an action brought in January 2003 by
Nexans, Inc., claiming damages of approximately $123,000, plus reasonable
attorneys' fees, as a result of a claimed breach by the company of an agreement
to purchase cable from Nexans. The dispute arises out of the cancellation by the
company of certain purchase orders for cable. The company has filed an answer to
the complaint disputing Nexans' claims, and asserting what it believes to be
valid defenses. At this early stage of the litigation, the company is unable to
predict whether and in what amount the litigation will result in any liability
to Nexans.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted during the fourth quarter of our fiscal year to
a vote of security holders through the solicitation of proxies or otherwise.

- 19 -

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The table below reflects the high and low closing sales prices for our
common stock, which trades under the symbol "TCDN" as reported by the Nasdaq
SmallCap Market. The prices shown represent quotations between dealers, without
adjustment for retail markups, markdowns or commissions and may not represent
actual transactions.

2001
----
High Low
---- ---
1st Quarter $ 1.50 $ 0.88
2nd Quarter $ 1.50 $ 0.81
3rd Quarter $ 1.34 $ 0.77
4th Quarter $ 1.10 $ 0.81

2002
----
High Low
---- ---
1st Quarter $1.15 $ .95
2nd Quarter $1.40 $1.00
3rd Quarter $1.77 $ .76
4th Quarter $1.50 $ .52

At March 25, 2003, the closing sales price of our common stock was
$1.11.

At March 25, 2003, we had 69 shareholders of record and, based upon
data obtained from our transfer agent, we have approximately 552 beneficial
owners of our common stock.

We have not paid, nor do we have any present plans to pay cash
dividends on our common stock in the immediate future. In addition, our credit
facilities with the Bank of Scotland prohibit us from declaring or paying
dividends on our common stock without the Bank of Scotland's written consent.
See Item 7, "Management's Discussion and Analysis of Financial Conditions and
Results of Operations - Liquidity and Capital Resources."

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction
with the consolidated financial statements, related notes and other financial
information included herein.

- 20 -

CONSOLIDATED STATEMENTS OF OPERATIONS DATA
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Consolidated Balance Sheet Data
(in thousands)

- --------------------
(1) Includes advances from Medicore for years prior to 2000.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

Our operations have continued to depend upon a relatively small number
of customers for a significant percentage of our net revenue. Significant
reductions in sales to any of our large customers would have a material adverse
effect on our results of operations. The level and timing of orders placed by a
customer vary due to the customer's attempts to balance its inventory, design
modifications, changes in a customer's manufacturing strategy, acquisitions of
or consolidations among customers, and variation in demand for a customer's
products due to, among other things, product life cycles, competitive conditions
and general economic conditions. Termination of manufacturing relationships or
changes, reductions or delays in orders could have an adverse effect on our
results of operations and financial condition, as has occurred in the past. Our
results also depend to a substantial extent on the success of our OEM customers
in marketing their products. We continue to seek to diversify our customer base
to reduce our reliance on our few major customers. See "Business Strategy" and
"Customers" under Item 1, "Business."

The industry segments we serve, and the electronics industry as a
whole, are subject to rapid technological change and product obsolescence.
Discontinuance or modification of products containing components manufactured by
the company could adversely affect our results of operations. The electronics
industry is also subject to economic cycles and has in the past experienced, and
is likely in the future to experience, recessionary periods. A prolonged
worldwide recession in the electronics industry,

- 21 -

as we have experienced throughout 2001 and 2002, could have a material adverse
effect on our business, financial condition and results of operations. Our 2002
operating results were adversely impacted by the severe instabilities
experienced during the last 18 months in the telecommunication industry as well
as a general downturn in the U.S. economy over the preceding year. We typically
do not obtain long-term volume purchase contracts from our customers, but rather
we work with our customers to anticipate future volumes of orders. Based upon
such anticipated future orders, we will make commitments regarding the level of
business we want and can accomplish the timing of production schedules and the
levels of and utilization of facilities and personnel. Occasionally, we purchase
raw materials without a customer order or commitment. Customers may cancel,
delay or reduce orders, usually without penalty, for a variety of reasons,
whether relating to the customer or the industry in general, which orders are
already made or anticipated. Any significant cancellations, reductions or order
delays could adversely affect our results of operations.

We use Electronic Data Interchange (EDI) with both our customers and
our suppliers in our efforts to continuously develop accurate forecasts of
customer volume requirements, as well as sharing our future requirements with
our suppliers. We depend on the timely availability of many components.
Component shortages could result in manufacturing and shipping delays or
increased component prices, which could have a material adverse effect on our
results of operations. It is important for us to efficiently manage inventory,
proper timing of expenditures and allocations of physical and personnel
resources in anticipation of future sales, the evaluation of economic conditions
in the electronics industry and the mix of products, whether PCBs, wire
harnesses, cables, or turnkey products, for manufacture. See "Electronic
Manufacturing Industry" and "Supplies and Materials Management" under Item 1,
"Business" and "Results of Operations" below.

We must continuously develop improved manufacturing procedures to
accommodate our customers' needs for increasingly complex products. To continue
to grow and be a successful competitor, we must be able to maintain and enhance
our technological capabilities, develop and market manufacturing services which
meet changing customer needs and successfully anticipate or respond to
technological changes in manufacturing processes on a cost-effective and timely
basis. Although we believe that our operations utilize the assembly and testing
technologies and equipment currently required by our customers, there can be no
assurance that our process development efforts will be successful or that the
emergence of new technologies, industry standards or customer requirements will
not render our technology, equipment or processes obsolete or noncompetitive. In
addition, to the extent that we determine that new assembly and testing
technologies and equipment are required to remain competitive, the acquisition
and implementation of such technologies and equipment are likely to require
significant capital investment.

During periods of recession in the electronics industry, as we have
experienced in 2001 and 2002, our competitive advantages in the areas of
quick-turnaround manufacturing and responsive customer service may be of reduced
importance to electronic OEMs, who may become more price sensitive.

Our results of operations are also affected by other factors, including
price competition, the level and timing of customer orders, fluctuations in
material costs (due to availability), the overhead efficiencies achieved by
management in managing the costs of our operations, our experience in
manufacturing a particular product, the timing of expenditures in anticipation
of increased orders, selling, and general and administrative expenses.
Accordingly, gross margins and operating income margins have generally improved
during periods of high volume and high capacity utilization. We generally have
idle capacity and reduced operating margins during periods of lower-volume
production.

- 22 -

RESULTS OF OPERATIONS

The following is a discussion of the key factors that have affected our
business over the last three years. This discussion should be read in
conjunction with our consolidated financial statements and the related footnotes
included herein.

2002 COMPARED TO 2001

Consolidated revenues decreased approximately $3,287,000 (9%) for the
year ended December 31, 2002, compared to the preceding year. There was a
decrease in domestic sales of $1,081,000 (3%), and a decrease in European sales
of $2,053,000 (90%) compared to the preceding year. The European sales decline
in 2002 compared to 2001 was due to the cessation of operations in Europe on
February 28, 2002, (see Note 13 to our consolidated financial statements). The
domestic sales decline was primarily because of a continuation of the 2001
decrease in our shipments to our customers in the telecommunications industry
during the first half of 2002. Domestic sales increased by approximately
$3,911,000 (27%) during the second half of 2002, compared to the second half of
2001. Interest and other income decreased by approximately $187,000 compared to
the preceding year. This decrease reflects the recognition of a $161,000
deferred gain on sale of a buildings to Medicore in 2001 and reduction of
approximately $22,000 in interest income from stock option notes receivable (see
Note 4 to our consolidated financial statements).

Approximately 58% of our consolidated sales for 2002 were made to five
customers. Illinois Tool Works ("ITW") (36%) is the only customer that accounts
for more than 10% of our total sales. The loss of or substantial reduction of
sales to any major customer would have an adverse effect on our operations if
such sales were not replaced. See Item 1, "Business-Customers."

Cost of goods sold as a percentage of sales amounted to 86% for the
year ended December 31, 2002, and 94% for the preceding year. We experienced
favorable operating cost reductions of approximately $2,601,000 as a result of
closing the Techdyne (Europe) manufacturing facility in May 2001 as compared to
our 2001 operating costs. The reorganization of three manufacturing facilities
during the second half of 2001 provided reduced operating costs of approximately
$1,126,000 for the year ended December 31, 2002. Lower component costs during
the second half of 2002 added additional savings to the improvement of our
operating results for 2002 as compared to 2001.

Selling, general and administrative expenses, although decreasing by
approximately $1,043,000 (7%) for the year ended December 31, 2002, compared to
the preceding year, amounted to approximately 9% of sales for 2002 and 11% of
sales for 2001. The decrease in 2002 was due primarily to the reduction in the
costs of support personnel and marketing personnel implemented during the third
and fourth quarters of 2001, and to the closing of the Techdyne (Europe)
manufacturing facilities in May 2001. The company recorded a one time charge of
$304,000 in 2001 related to the forgiveness of stock option notes and related
accrued interest (see Item 1, Recent Developments) as well as bonuses for
certain officers and directors, all as a result of the sale of the company to
Simclar in June 2001.

Interest expense decreased approximately $302,000 for the year ended
December 31, 2002, compared to the preceding year reflecting the decreased
borrowings due to the company's profitable operations and to the reductions in
inventories, along with declining interest rates during the year. The LIBOR
three month interest rate was 1.35% and 1.88% at December 31, 2002 and 2001,
respectively.

- 23 -

2001 COMPARED TO 2000

Consolidated revenues decreased approximately $15,724,000 (30%) for the
year ended December 31, 2001, compared to the preceding year. There was a
decrease in domestic sales of $13,303,000 (28%), and a decrease in European
sales of $2,584,000 (53%) compared to the preceding year. The sales decrease was
due primarily to a 61% decrease in our shipments to our customers in the
telecommunications industry and to a lesser degree the general overall business
decline in 2001 compared to 2000. Interest and other income increased by
approximately $163,000 compared to the preceding year. This increase reflects
the recognition of $161,000 deferred gain on sale of buildings to Medicore (see
Note 4).

Significant reductions in sales of Techdyne (Europe) during recent
years have resulted in continuing losses. Net losses for this subsidiary
amounted to $909,000 for the year ended December 31, 2001, and $328,000 for the
preceding year. As a result of continuing operating losses, in April 2001 we
decided to discontinue the manufacturing operations of Techdyne (Europe). We
incurred a cost of approximately $225,000 for closing our Scottish manufacturing
operations, primarily from post employment benefits associated with 79
employees. In May 2001, Techdyne (Europe) entered into a management agreement
with Simclar whereby Simclar undertook to manufacture products for Techdyne
(Europe) and assist in management coordination. Subsequently on February 28,
2002, the company entered into an agreement with Simclar to transfer, at net
book value, all operating assets and all liabilities of Techdyne (Europe), with
the exception of the land and building. The company plans to liquidate its
European subsidiary when the land and building are sold. The company believes
that the liquidation of this subsidiary will not require any additional
write-downs.

Approximately 57% of our consolidated sales for 2001 were made to five
customers. Illinois Tool Works ("ITW") (26%) is the only customer that accounts
for more than 10% of our total sales. The loss of or substantially reduced sales
to any major customer would have an adverse effect on our operations if such
sales were not replaced. See Item 1, "Business-Customers."

Cost of goods sold as a percentage of sales amounted to 94% for the
year ended December 31, 2001, and 88% for the preceding year. We experienced
decreases in utilization of our manufacturing facilities during 2001, which had
a negative effect on our profit margins. Higher component costs during the first
quarter of 2001 also had a negative effect on our profit margins. As the
economic business cycle deteriorated in 2001, our product mix negatively
affected our profit margin in the second half of the year.

Selling, general and administrative expenses, although decreasing by
approximately $821,000 (17%) for the year ended December 31, 2001, compared to
the preceding year, amounted to approximately 11% of sales for 2001 and 9% of
sales for 2000. The decrease in 2001 was due primarily to the reduction in the
costs of support personnel and marketing personnel, which amount to
approximately $501,000. The company also recorded a charge of $304,000 in 2001
related to the forgiveness of stock option notes receivable and related accrued
interest as well as bonuses for certain officers and directors, all as a result
of the sale of the Company to Simclar in June 2001.

Interest expense decreased approximately $248,000 for the year ended
December 31, 2001, compared to the preceding year reflecting the decreased
borrowings due to the reduction in trade receivables and inventories, along with
declining interest rates during the year. The prime rate was 4.75% and 9.5% at
December 31, 2001 and 2000, respectively.

- 24 -

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents balances at December 31, 2002 were
approximately $1,537,000 compared to approximately $1,021,000 at December 31,
2001. Net cash provided by operating activities was approximately $2,986,000 in
2002 compared to approximately $1,604,000 in 2001. The increase in cash provided
from operating activities in 2002 as compared to 2001 was due primarily to the
reorganization of three manufacturing facilities during the second half of 2001
and the closing of the Techdyne (Europe) manufacturing facility. Inventory
reductions and accrued income taxes payable expenses increases for 2002
contributed to the increase in cash provided from operations.

At December 31, 2002, our average days sales outstanding was 48 days as
compared to 44 days at December 31, 2001. The increase of our average days sales
outstanding is primarily the result of a 24% increase in sales for the fourth
quarter of 2002, compared to the fourth quarter of 2001. Average inventory
turnover was 3.9 and 4.2 times for the years ended December 31, 2002 and 2001,
respectively. The decrease in inventory turnover is primarily due to the
continued slowdown in sales to our cable and wiring customers during 2002 as
compared to 2001.

Cash flows used in investing activities increased approximately $30,000
in 2002 to $304,000 as compared to approximately $274,000 in 2001. The increase
in investing activities was primarily due to leasehold improvements of
approximately $33,000 required due to the relocation of our Massachusetts
facilities from Milford to Attleboro in April of 2002. The company has a capital
expenditure budget of $625,000 for 2003. Cash flow used in financing activities
was approximately $2,169,000 in 2002 as compared to cash flow used in 2001 of
approximately $811,000. The cash flow was used to reduce the company's long-term
loan from the Bank of Scotland and to fund a short term loan to Simclar.

On October 24, 2001, the company entered into two credit facilities
with Bank of Scotland in Edinburgh, Scotland for an aggregate borrowing of
$10,000,000. This financing replaced the lines of credit and three commercial
loans with The Provident Bank of Ohio, for Techdyne and Lytton. The financing
included a $3,000,000 line of credit, expiring July 19, 2003, with an interest
rate at LIBOR rate plus 1.5% for a one, three or six month period, at the
company's election. The company elected the one-month interest period at 2.94%
as of December 31, 2002. This line of credit had an outstanding balance of
$1,500,000 at December 31, 2002. The financing also included a seven-year term
loan of $7,000,000 at the same interest rate as the line of credit. The term
loan is priced at the LIBOR interest rate plus 1.5% for a one, three or six
month period, at the company's election. The company elected the three-month
interest period at 3.36% until January 24, 2003, after this date the rate is
2.85% until April 24, 2003. The term loan requires quarterly payments of
$250,000 in January, April, July and October of each year, plus interest. The
term loan had an outstanding balance of approximately $6,000,000 at December 31,
2002. The company, based on discussions with Bank of Scotland, believes the
$3,000,000 line of credit will be renewed through July 19, 2004. Should such
renewal not occur, the company would have the adverse effect of repaying the
line of credit and would seek alternative financing.

All of the assets of Techdyne and Lytton collateralize the credit
facilities. The credit facilities require affirmative and negative covenants.
Certain of the affirmative covenants require maintenance of a consolidated
adjusted net worth greater than $10,000,000 after December 31, 2002; $10,500,000
after June 30, 2003 and $11,000,000 after September 30, 2003; ratio of
consolidated current assets to consolidated net borrowing not less than 1.75 to
1; a ratio of consolidated trade receivables to consolidated net borrowings not
less than .75 to 1; and a ratio of consolidated net income before interest and
income taxes to total consolidated interest costs not less than 2 to 1. Some of
the negative covenants,

- 25 -

among others include (1) granting or permitting a security agreement against the
consolidated assets of the companies other than permitted security agreements,
(2) declaring or paying any dividends or making any other payments on our
capital stock, (3) consolidating or merging with any other entity or acquiring
or purchasing any equity interest in any other entity, or assuming any
obligations of any other entity, except for notes and receivables acquired in
the ordinary course of business, (4) incurring, assuming, guarantying, or
remaining liable with respect to any indebtedness, except for certain existing
indebtedness disclosed in our financial statements, or (5) undertaking any
capital expenditure in excess of $1,000,000 in any one fiscal year. The
agreements also preclude changes in ownership in the companies, any material
change in any of our business objectives, purposes, operations and tax residence
or any other circumstances or events which will have a material adverse effect
as defined by the agreements.

Our ability to comply with these provisions may be affected by changes
in our business condition or results of our operations, or other events beyond
our control. The breach of any of these covenants would result in a default
under our debt. At December 31, 2002, we were in violation of the covenant
requiring a ratio of consolidated trade receivables to consolidated net
borrowings of .75 to 1.0. Although the Bank of Scotland has waived this default,
there can be no assurance that defaults in these or other covenants will not
occur in the future, nor can there be any assurance that our lender will waive
future covenant violations. Management believes the company will be in
compliance with its covenants in 2003. A default in the covenants would permit
our lender to accelerate the maturity of our credit facilities and to sell the
assets securing them, which would cause the company to cease operations and seek
bankruptcy protection.

On October 11, 2001, Techdyne (Europe) entered into a credit facility
with Bank of Scotland for an amount of (pound)275,000 ($399,025). This facility
comprises an eight-year term loan repayable in quarterly payments of
(pound)8,594 ($12,470) in January, April, July and October of each year, with an
interest rate of Bank of Scotland base rate plus 1.5% (effectively 5.4% at
December 31, 2002). This term loan had an outstanding balance of (pound)240,624
($347,692) at December 31, 2002. The proceeds from the credit facility were used
to repay the 15-year mortgage loan of $371,000 as of September 30, 2001.

We have no off-balance sheet financing arrangements with related or
unrelated parties and no unconsolidated subsidiaries. In the normal course of
business, we enter into various contractual and other commercial commitments
that impact or can impact the liquidity of our operations. The following table
outlines our commitments at December 31, 2002:

- 26 -

EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In April 2002, the FASB issued Statement of Financial Accounting
Standards No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment
of FASB Statement No. 13, and Technical Corrections" ("SFAS No. 145"). Among
other items, SFAS No. 145 updates and clarifies existing accounting
pronouncements related to reporting gains and losses from the extinguishment of
debt and certain lease modifications that have economic effects similar to
sale-leaseback transactions. The provisions of SFAS No. 145 are generally
effective for fiscal years beginning after May 15, 2002, with earlier adoption
of certain provisions encouraged. The company does not expect the adoption of
SFAS No. 145 to have a material impact on its financial position or results of
operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" SFAS No. 146 nullifies Emerging
Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Costs to
Exit an Activity (Including Certain Costs Incurred in a Restructuring)". SFAS
No. 146 requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. Under EITF Issue 94-3, a
liability for an exit cost as defined in EITF Issue 94-3 was recognized at the
date of an entity's commitment to an exit plan. The provisions of SFAS No. 146
are effective for exit or disposal activities that are initiated after December
31, 2002, with earlier application encouraged. Under SFAS No. 146, an entity may
not restate its previously issued financial statements and the new statement
grandfathers the accounting for liabilities that an entity had previously
recorded under EITF Issue 94-3. The company does not expect the adoption of SFAS
No. 146 to have a material impact on its financial position or results of
operations.

In November 2002, the FASB issued Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN No. 45 requires that a
guarantor must recognize, at the inception of a guarantee, a liability for the
fair value of the obligation that it has undertaken in issuing a guarantee. FIN
No. 45 also addresses the disclosure requirements that a guarantor must include
in its financial statements for guarantees issued. The disclosure requirements
in this interpretation are effective for financial statements ending after
December 15, 2002. The initial recognition and measurement provisions of this
interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002. The company does not expect the adoption of
FIN 45 to have a material impact on its financial position or results of
operations.

- 27 -

In December 2002, the FASB issued SFAS, No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure". SFAS No. 148 amends SFAS
Statement No. 123, "Accounting for Stock-Based Compensation", to provide
alternative methods of transition for a voluntary change to the fair value
method of accounting for stock-based employee compensation. In addition, SFAS
No. 148 amends the prior disclosure guidance and requires prominent disclosures
in both annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used on
reported results. The provisions of SFAS No. 148 are generally effective for
fiscal years ending after December 15, 2002. The company is currently evaluating
the new pronouncement and has not yet determined what effect, if any, the
adoption of SFAS No. 148 will have on its financial position and results of
operations.

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities" (an interpretation of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements"), which becomes effective for the company in
June 2003. FIN No. 46 provides consolidation guidance for certain variable
interest entities ("VIE") in which equity investors of the VIE do not have the
characteristics of a controlling interest or do not have sufficient equity at
risk for the VIE to finance its activities independently. FIN No. 46 requires
each enterprise involved with a special purpose entity to determine whether it
provides financial support to the special purpose entity through a variable
interest. Variable interests may arise from financial instruments, service
contracts, minority ownership interests or other arrangements. If an entity
holds a majority of the variable interests, or a significant variable interest
that is considerably more than any other party's variable interest, that entity
would be the primary beneficiary and would be required to include the assets,
liabilities and results of operations of the special purpose entity in its
consolidated financial statements. The company does not expect the adoption of
FIN 46 to have a material impact on its financial position or results of
operations.

CRITICAL ACCOUNTING POLICIES

We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements.

USE OF ESTIMATES--The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make judgments and estimates. On an on-going basis, we
evaluate our estimates, the most significant of which include establishing
allowances for doubtful accounts, allowances for inventory obsolescence, a
valuation allowance for our deferred tax assets and determining the
recoverability of our long-lived assets. The basis for our estimates are
historical experience and various assumptions that are believed to be reasonable
under the circumstances, given the available information at the time of the
estimate, the results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily available from
other sources. As described in Note 1 to the consolidated financial statements,
actual results may differ from the amounts estimated and recorded in such
financial statements.

ALLOWANCE FOR DOUBTFUL ACCOUNTS--We maintain an allowance for doubtful
accounts for estimated losses resulting from the inability of our customers to
make required payments. Based on historical information, we believe that our
allowance is adequate. However, changes in general economic, business and market
conditions could affect the ability of our customers to make their required
payments; therefore, the allowance for doubtful accounts is reviewed monthly and
changes to the allowance are updated as new information is received.

- 28 -

ALLOWANCE FOR INVENTORY OBSOLESCENCE--We maintain an allowance for
inventory obsolescence for losses resulting from inventory items becoming
unusable in our manufacturing operations due to loss of a specific customer or a
customer's product changes or discontinuations. Based on historical and
projected sales information and our concentration of customers, we believe that
our allowance is adequate. However, changes in general economic, business and
market conditions could cause our customers to cancel, reduce or reschedule
orders. These changes could affect our inventory turn over; therefore, the
allowance for inventory obsolescence is reviewed monthly and changes to the
allowance are updated as new information is received.

INCOME TAXES--Deferred income taxes at the end of each period are
determined by applying enacted tax rates applicable to future periods in which
the taxes are expected to be paid or recovered to differences between the
financial accounting and tax basis of assets and liabilities.

LONG-LIVED ASSETS--We state our property and equipment at acquisition
cost and compute depreciation by the straight-line method over estimated useful
lives of the assets. Long-lived assets are reviewed annually for impairment or
whenever events or changes in circumstances indicate the carrying amount of the
asset may not be recoverable in accordance with SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets".

REVENUE RECOGNITION--Revenue is recognized upon delivery of a product
based upon a customer's order where the selling price is fixed and our ability
to collect is reasonably assured.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Report includes certain forward-looking statements with respect to
our company and its business that involve risks and uncertainties. These
statements are influenced by our financial position, business strategy, budgets,
projected costs and the plans and objectives of management for future
operations. They use words such as anticipate, believe, plan, estimate, expect,
intend, project and other similar expressions. Although we believe our
expectations reflected in these forward-looking statements are based on
reasonable assumptions, we cannot assure you that our expectations will prove
correct. Actual results and developments may differ materially from those
conveyed in the forward-looking statements. For these statements, we claim the
protections for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.

Important factors include changes in general economic, business and
market conditions, as well as changes in such conditions that may affect
industries or the markets in which we operate, including, in particular, the
impact of our nation's current war on terrorism could cause actual results to
differ materially from the expectations reflected in the forward-looking
statements made in this Form Report. Further, information on other factors that
could affect the financial results of Techdyne, Inc. is included in Techdyne's
other filings with the Securities and Exchange Commission. These documents are
available free of charge at the Commission's website at http://www.sec.gov
and/or from Techdyne, Inc. The forward-looking statements speak only as of the
date on which they are made, and we undertake no obligation to update any
forward-looking statement to reflect events or circumstances after the date of
this Report.

- 29 -

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The company is exposed to market risks from changes in interest rates
and foreign currency exchange rates.

Sensitivity of results of operations to interest rate risks on our
investments is managed by conservatively investing liquid funds in short-term
government securities and interest-bearing accounts at financial institutions in
which we had approximately $31,000 invested at December 31, 2002.

Interest rate risks on debt are managed by negotiation of appropriate
rates on new financing obligations based on current market rates. There is an
interest rate risk associated with our variable rate debt agreements which
totaled approximately $6,348,000 at December 31, 2002.

We have exposure to both rising and falling interest rates. A 1/2%
decrease in rates on our year-end investments would have an insignificant impact
on our results of operations. A 1% increase in rates on our year-end variable
rate debt would result in a negative impact of approximately $63,000 on our
operations.

Our exposure to market risks from foreign currency exchange rates is
minimal due to the closing of Techdyne (Europe) in May 2001 and our transfer of
all Techdyne (Europe) operating assets to Simclar in February 2002.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements of the company, and the related notes,
together with the reports of PricewaterhouseCoopers LLP dated March 27, 2003,
and Wiss & Company, LLP dated March 9, 2001, are set forth at pages F-2 through
F-23 attached hereto.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Effective September 19, 2001, the board of directors of the company,
upon the recommendation of the audit committee, dismissed Wiss & Company, LLP as
our independent accountants, and engaged new independent accountants,
PricewaterhouseCoopers, LLP, for the company's annual audit for our 2001 fiscal
year. This matter was previously reported by the company on the Current Report
on Form 8-K dated September 19, 2001, filed with the Securities and Exchange
Commission on September 25, 2001.

During the two fiscal years ended December 31, 1999 and 2000 and the
subsequent interim period to the date of September 19, 2001, there were no
disagreements with Wiss & Company, LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope of procedure, nor
any "reportable events" as defined in Item 304(a)(1)(v) of Regulation S-K of the
Securities and Exchange Commission. Additionally, the reports of Wiss & Company,
LLP on the Company's financial statements for those same periods contained no
adverse opinion or a disclaimer of opinion, nor was it qualified or modified as
to uncertainty, audit scope or accounting principles.

- 30 -

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item is included under the caption,
"INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS" in our Information
Statement relating to our 2003 annual meeting of shareholders to be held on June
6, 2003, and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is included under the caption,
"EXECUTIVE COMPENSATION" in our Information Statement relating to our 2003
annual meeting of shareholders to be held on June 6, 2003, and is incorporated
herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information required by this item is included under the caption,
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" and "EQUITY
COMPENSATION PLAN INFORMATION" in our Information Statement relating to our 2003
annual meeting of shareholders to be held on June 6, 2003, and is incorporated
herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is included under the caption,
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" in our Information Statement
relating to our 2003 annual meeting of shareholders to be held on June 6, 2003,
and is incorporated herein by reference.

ITEM 14. CONTROLS AND PROCEDURES

As of a date within 90 days of the date of this report, the Company's
Chief Executive Officer and Chief Financial Officer evaluated the effectiveness
of the design and operation of the Company's disclosure controls and procedures.
Based upon this evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the disclosure controls and procedures are effective in
ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the Securities and Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported within the time period
specified by the Securities and Exchange Commission's rules and forms.

Additionally, there were no significant changes in the Company's
internal controls that could significantly affect the Company's disclosure
controls and procedures subsequent to the date of their evaluation, nor were
there any significant deficiencies or material weaknesses in the Company's
internal controls. As a result, no corrective actions were required or
undertaken.

- 31 -

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT.

(1) The following financial statements are filed as part
of this Annual Report on Form 10-K:

Independent Auditors' Report.

Consolidated Balance Sheets as of December 31, 2002 and 2001.

Consolidated Statements of Operations for the Years Ended
December 31, 2002, 2001 and 2000.

Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 2002, 2001 and 2000.

Consolidated Statements of Cash Flows for the Years Ended
December 31, 2002, 2001 and 2000.

Notes to the Consolidated Financial Statements.

(2) The following financial statement schedule is included in
this Annual Report on Form 10-K and should be read in conjunction with the
Consolidated Financial Statements contained in this Report:

Schedule II - Valuation and Qualifying Accounts

Schedules not listed above are omitted because of the absence of conditions
under which they are required or because the required information is included in
the financial statements or notes thereto.

(3) Exhibits:

EXHIBIT EXHIBIT DESCRIPTION
NUMBER -------------------
- ------

3(i) Articles of Incorporation (incorporated by reference to the
Company's Registration Statement on Form SB-2 dated July 26,
1995, as amended August 21, 1995 and September 1, 1995,
Registration No. 33-94998-A ("Form SB-2"), Part II, Item 27,
3(a)).

3(ii) By-Laws (incorporated by reference to the Company's Form SB-2,
Part II, Item 27, 3(b)), as amended June 27, 2001 (incorporated
by reference to the Company's Form S-3 Registration dated January
23, 2002, Registration No. 333-81270, Part II, Item 16, 99(i)).

4(i) Form of Common Stock Certificate (incorporated by reference to
the Company's Form SB-2, Part II, Item 27, 4(a)).

- 32 -

4(ii) Form of 1997 Stock Option Plan (incorporated by reference to the
Company's Current Report on Form 8-K dated June 11, 1997 ("June
11, 1997 Form 8-K"), Item 7(c)(4)(i)).

4(iii) Form of 1997 Incentive Stock Option (incorporated by reference to
the Company's June 11, 1997 Form 8-K, Item 7(c)(4)(ii)).

4(iv) Form of 1997 Non-Qualified Stock Option (incorporated by
reference to the Company's June 11, 1997 Form 8-K, Item
7(c)(4)(iii)).

10(i) Lease Agreement between the Company and Medicore, Inc. dated
August 29, 2000 (incorporated by reference to Medicore Inc.'s
Current Report on Form 8-K dated September 1, 2000).

10(ii) Form of Exclusive Sales Representative Agreement (incorporated by
reference to Medicore, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1994, Part IV, Item 14 (a) 3 (10)(lxiv)).

10(iii) Employment Agreement between the Company and Barry Pardon dated
September 27, 2000 (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December 31, 2000,
Part IV, Item 14(a), 10(iii)).

10(iv) Promissory Note to Medicore, Inc. dated April 10, 1995
(incorporated by reference to the Company's Form SB-2, Part II,
Item 27, 10 (a)(a)).

10(v) Lease Agreement between the Company and Route 495 Commerce Park
Limited Partnership dated March 25, 1997 (incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the
first quarter of 1997, Item 6(a), Part II(10)).

10(vi) Lease Agreement between the Company and PruCrow Industrial
Properties, L.P. dated April 30, 1997 (incorporated by reference
to the Company's Current Report on Form 8-K dated June 4, 1997
("June 1997 Form 8-K"), Item 7(c)(10)(i)).

10(vii) Lease Agreement between the Company and EGP Houston Partners Ltd.
dated April 29, 1997 (incorporated by reference to the Company's
June 1997 Form 8-K, Item 7(c)(10)(ii)).

10(viii) Form of Stock Option to The Investor Relations Group, Inc.
(incorporated by reference to the Company's Current Report on
Form 8-K dated May 28, 1998, Item 7(c)(10)(i)).

- 33 -

10(ix) Sublease between the Company and United Consulting Group dated
August 23, 1999 (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December 31, 1999;
Part IV, Item 14(a)(10)(xiv)).

10(x) Amended Consent to Sublease between the Company, United
Consulting Group, Inc., and United Computing Group, Inc.
(incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 2000, Part IV, Item 14(a),
10(xxv)).

10(xi) Management Agreement between Techdyne (Europe) Limited and
Simclar International Limited dated May 3, 2001 (incorporated by
reference to the Company's Amended Quarterly Report on Form 10-Q
for the first quarter of 2001, Item 6(a)(99)(i)).

10(xii) Facility Letter, dated October 2, 2001, for the Company's
financing with the Bank of Scotland (incorporated by reference to
the Company's Quarterly Report on Form 10-Q for the third quarter
of 2001, Item 6(a)10(a)).

10(xiii) Working Capital Facility Letter, dated October 21, 2001, for the
Company's Financing with the Bank of Scotland (incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the
third quarter of 2001, Item 6(a)10(b)).

10(xiv) Service Agreement between the Company and Simclar International
Holdings Limited, effective July 11, 2001 (incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the
third quarter of 2001, Item 6(a)10(c)).

10(xv) Minute of Agreement between Techdyne (Europe) Limited and Simclar
International Limited, effective February 28, 2002 (incorporated
by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, Exhibit 10(xv))

16(i) Letter from Wiss & Company, LLP, dated September 28, 2001,
addressed to the Securities and Exchange Commission (incorporated
by reference to the Company's Current Report on Form 8-K/A dated
September 19, 2001, Item 7, 16(a)).

21 Subsidiaries of the registrant (incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001, Exhibit 21)).

23.1 * Consent of PricewaterhouseCoopers LLP.

23.2 * Consent of Wiss & Company LLP.

24 * Powers of Attorney

99.1 * Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350.

99.2 * Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350.

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

* Filed with this Report.

- 34 -

(B) REPORTS ON FORM 8-K.

None.

(C) EXHIBITS.

The exhibits to this report follow the Signature Page.

(D) FINANCIAL STATEMENT SCHEDULES.

The financial statement schedule follows the exhibits to this
report.

- 35 -

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

TECHDYNE, INC.

Date: March 31, 2003 By: /s/ Barry J. Pardon
---------------------------------------
Barry J. Pardon, President and Director

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

- 36 -

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Barry J. Pardon, certify that:

1. I have reviewed this annual report on Form 10-K of Techdyne, Inc.;

2. Based on my knowledge, this annual 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
annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures 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 annual
report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: March 31, 2003 /s/ Barry J. Pardon
-----------------------------------------
Barry J. Pardon
President and Principal Executive Officer

- 37 -

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David L. Watts, certify that:

1. I have reviewed this annual report on Form 10-K of Techdyne, Inc.;

2. Based on my knowledge, this annual 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
annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures 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 annual
report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: March 31, 2003 /s/ David L. Watts
-------------------------------------
David L. Watts
Chief Financial Officer and Secretary

- 38 -

TECHDYNE, INC. AND SUBSIDIARIES

FORM 10-K--ITEM 15(a)(1), (2) AND (3)

LIST OF FINANCIAL STATEMENTS

The following consolidated financial statements of Techdyne, Inc. and
subsidiaries are included in Item 8:

The following financial statement schedule of Techdyne, Inc. and subsidiaries is
included in Item 15(a)(2):

Schedule II - Valuation and qualifying accounts.

All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.

F-1

TECHDYNE, INC. AND SUBSIDIARIES

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders
Techdyne, Inc. and Subsidiaries

In our opinion, the consolidated financial statements listed in the index
appearing under Item 15(a)(1) on page F-1 present fairly, in all material
respects, the financial position of Techdyne, Inc. and its subsidiaries at
December 31, 2002 and 2001, and the results of their operations and their cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion,
the financial statement schedule listed in the index appearing under Item
15(a)(2) on page F-1 presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements. These financial statements are the responsibility of the
company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

As discussed in Note 1, effective January 1, 2002, the company adopted the
provisions of Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets."

/s/ PRICEWATERHOUSECOOPERS LLP

March 27, 2003
Dayton, Ohio

F-2

TECHDYNE, INC. AND SUBSIDIARIES

Shareholders and Board of Directors
Techdyne, Inc.

We have audited the accompanying consolidated statements of income,
stockholders' equity and cash flows of Techdyne, Inc. and subsidiaries as of
December 31, 2000, and the related consolidated for each of the year ended
December 31, 2000. Our audit also included the financial statement schedule
listed in the Index at Item 14(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of their operations
and their cash flows of Techdyne, Inc. and subsidiaries for the year ended
December 31, 2000 in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

/s/ WISS & COMPANY LLP

March 9, 2001
Livingston, New Jersey

F-3

TECHDYNE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See notes to consolidated financial statements.

F-4

TECHDYNE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See notes to consolidated financial statements.

F-5

TECHDYNE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

See notes to consolidated financial statements.

F-6

TECHDYNE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDES' EQUITY

See notes to consolidated financial statements.

F-7

TECHDYNE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

See notes to consolidated financial statements.

F-8

TECHDYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION

The consolidated financial statements include the accounts of Techdyne,
Inc. ("Techdyne") and its subsidiaries, including Lytton Incorporated
("Lytton"), Techdyne (Europe) Limited ("Techdyne (Europe)"), and Techdyne
(Livingston) Limited which is a subsidiary of Techdyne (Europe), collectively
referred to as the "company." All material intercompany accounts and
transactions have been eliminated in consolidation. The company is a 72.4% owned
subsidiary of Simclar Group Limited ("Simclar"), which purchased an initial
71.3% interest of the company from its former parent, Medicore, Inc.
("Medicore"), on June 27, 2001. See Notes 6, 7 and 12.

BUSINESS

The company operates in one business segment, the manufacture of
electronic and electro-mechanical products primarily manufactured to customer
specifications in the data processing, telecommunication, instrumentation and
food preparation equipment industries.

CASH AND CASH EQUIVALENTS

The company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents. The
carrying amounts reported in the balance sheets for cash and cash equivalents
approximate their fair values. The credit risk associated with cash and cash
equivalents is considered low due to the high quality of the financial
institutions in which the assets are invested.

INVENTORIES

Inventories, which consist primarily of raw materials used in the
production of electronic components, are valued at the lower of cost (first-in,
first-out and/or weighted average cost method) or market value. The cost of
finished goods and work in process consists of direct materials, direct labor
and an appropriate portion of fixed and variable-manufacturing overhead.

PROPERTY AND EQUIPMENT

Property and equipment is stated on the basis of cost. Depreciation is
computed by the straight-line method over the estimated useful lives of the
assets, which are generally 25 years for buildings and improvements; 3 to 10
years for machinery, computer and office equipment; 3 to 10 years for tools and
dies; and 5 to 15 years for leasehold improvements based on the shorter of the
lease term or estimated useful life of the property. Replacements and
betterments that extend the lives of assets are capitalized. Maintenance and
repairs are expensed as incurred. Upon the sale or retirement of assets, the
related cost and accumulated depreciation are removed and any gain or loss is
recognized.

LONG-LIVED ASSET IMPAIRMENT

In accordance with Statement of Financial Accounting Standards (SFAS)
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
long-lived assets to be held and used are reviewed for impairment whenever
events or circumstances indicate that the carrying amount may not be
recoverable. When required, impairment losses on assets to be held and used are
recognized based on the fair value of the asset. The fair value of these assets
is determined based upon estimates of future cash flows, market value of similar
assets, if available, or independent appraisals, if required. In analyzing the
fair value and recoverability using future cash flows, we make projections based
on a number of assumptions and estimates of growth rates, future economic

F-9

TECHDYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED

conditions, assignment of discount rates and estimates of terminal values. An
impairment loss is recognized if the carrying amount of the long-lived asset is
not recoverable from its undiscounted cash flows. The measurement of impairment
loss is the difference between the carrying amount and fair value of the asset.
Long-lived assets to be disposed of and/or held for sale are reported at the
lower of carrying amount or fair value less cost to sell. We determine the fair
value of these assets in the same manner as described for assets held and used.
See Note 13.

DEFERRED EXPENSES

Deferred expenses, except for deferred loan costs, are amortized on the
straight-line method, over their estimated benefit period ranging to 60 months.
Deferred loan costs are amortized over the lives of the respective loans.
Accumulated amortization amounted to $11,304 and $9,699 at December 31, 2002 and
2001, respectively.

GOODWILL

The company adopted SFAS No.142, "Goodwill and Other Intangible
Assets," effective January 1, 2002. Under SFAS No. 142, goodwill and certain
other intangible assets are no longer amortized but are tested annually for
impairment. In connection with the adoption of SFAS No. 142, the company
completed the first step of the transitional goodwill impairment, which requires
the company to compare the fair value of its reporting unit to the carrying
value of the net assets of the reporting unit as of January 1, 2002. Based on
this analysis, the company has concluded that no impairment existed at the time
of adoption, and, accordingly, the company has not recognized any transitional
impairment loss.

Year Ended December 31,
2002 2001 2000
------------------------------------
Reported net income (loss) $ 1,390,109 $ (2,805,554) $ 565,027
Goodwill amortization, net of income taxes -- 146,640 142,209
----------- ------------ ---------
Adjusted net Income (loss) $ 1,309,109 $ (2,658,914) $ 707,236
=========== ============ =========

INCOME TAXES

Deferred income taxes at the end of each period are determined by
applying enacted tax rates applicable to future periods in which the taxes are
expected to be paid or recovered to differences between the financial accounting
and tax basis of assets and liabilities.

STOCK-BASED COMPENSATION

The company follows Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options. FASB Statement No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123), as amended by SFAS No,
148, permits a company to elect to follow the accounting provisions of APB 25
rather than the alternative fair value accounting provided under SFAS 123 but
requires pro forma net income and earnings per share disclosures as well as
various other disclosures not required under APB 25 for companies following APB
25.

Pro forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if the company had accounted
for its employee stock options under the fair value method of that Statement.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for the options issued during 2000 and 1999, respectively: risk-free
interest rate of 5.88% and 5.20%, respectively; no dividend yield; volatility
factor of the expected market price of the company's common stock of .85 and
..67, respectively; and an expected life of the options of 3 years and 1.8 years,
respectively.

F-10

TECHDYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED

The Black-Scholes options valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective input assumptions including the expected stock price
volatility. Because the company's employee stock options have characteristics
significantly different than those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee's stock options.

For purposes of pro forma disclosures, the estimated fair value of
options is amortized to expense over the options' vesting period. The company's
pro forma information for options issued is as follows:

Year Ended December 31,
----------------------------------------
2002 2001 2000
----------------------------------------
Pro forma net income (loss) $ 1,390,109 $ (2,085,554) $ 557,000
=========== ============ =========

Pro forma earnings per share:
Basic $ 0.21 $ (0.43) $ 0.09
=========== ============ =========

Diluted $ 0.21 $ (0.43) $ 0.09
=========== ============ =========

EARNINGS PER SHARE

Diluted earnings (losses) per share gives effect to potential common shares that
were dilutive and outstanding during the period, such as stock options and
warrants using the treasury stock method and average market price, The company
has various stock options; however, only those options which were dilutive
during the periods being reported on have been included in the earnings per
share computations.

Following is a reconciliation of amounts used in the basic and diluted
computations:

F-11

TECHDYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED

Estimated Fair Value of Financial Instruments

The carrying value of cash, accounts receivable and debt in the
accompanying financial statements approximate their fair value because of the
short-term maturity of these instruments, or in the case of debt, because such
instruments bear variable interest rates which approximate market.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.

Revenue Recognition

Revenue is recognized upon delivery of a product based upon a
customer's order where the selling price is fixed and the ability to collect is
reasonably assured.

Shipping Costs

Shipping costs related to the transportation of products sold to
customers are charged to cost of goods sold.

Foreign Operations

The financial statements of the foreign subsidiary have been translated
into U.S. dollars in accordance with SFAS Statement No. 52. All balance sheet
accounts have been translated using the current exchange rates at the balance
sheet date. Income statement accounts have been translated using the average
exchange rate for the period. The translation adjustments resulting from the
change in exchange rates from period to period have been reported separately as
a component of accumulated other comprehensive income included in stockholders'
equity. Foreign currency transaction gains and losses, which are not material,
are included in the results of operations. These gains and losses result from
exchange rate changes between the time transactions are recorded and settled,
and for unsettled transactions, exchange rate changes between the time the
transactions are recorded and the balance sheet date.

Comprehensive Income

The company follows SFAS No. 130, "Reporting Comprehensive Income"
which contains rules for the reporting of comprehensive income and its
components. Comprehensive income consists of net income and foreign currency
translation adjustments and is presented in the Consolidated Statement of
Stockholders' Equity.

New Pronouncements

In April 2002, the FASB issued Statement of Financial Accounting
Standards No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment
of FASB Statement No. 13, and Technical Corrections" ("SFAS No. 145"). Among
other items, SFAS No. 145 updates and clarifies existing accounting
pronouncements related to reporting gains and losses from the extinguishment of
debt and certain lease modifications that have economic effects similar to
sale-leaseback transactions. The provisions of SFAS No. 145 are generally
effective for fiscal years beginning after May 15, 2002, with earlier adoption
of certain provisions encouraged. The company does

F-12

TECHDYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED

not expect the adoption of SFAS No. 145 to have a material impact on its
financial position or results of operations.

In June 2002, the FASB issued SFAS, No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". SFAS No. 146 nullifies Emerging
Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Costs to
Exit an Activity (Including Certain Costs Incurred in a Restructuring)". SFAS
No. 146 requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. Under EITF Issue 94-3, a
liability for an exit cost as defined in EITF Issue 94-3 was recognized at the
date of an entity's commitment to an exit plan. The provisions of SFAS No. 146
are effective for exit or disposal activities that are initiated after December
31, 2002, with earlier application encouraged. Under SFAS No. 146, an entity may
not restate its previously issued financial statements and the new statement
grandfathers the accounting for liabilities that an entity had previously
recorded under EITF Issue 94-3. The company does not expect the adoption of SFAS
No. 146 to have a material impact on its financial position or results of
operations.

In November 2002, the FASB issued Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN No. 45 requires that a
guarantor must recognize, at the inception of a guarantee, a liability for the
fair value of the obligation that it has undertaken in issuing a guarantee. FIN
No. 45 also addresses the disclosure requirements that a guarantor must include
in its financial statements for guarantees issued. The disclosure requirements
in this interpretation are effective for financial statements ending after
December 15, 2002. The initial recognition and measurement provisions of this
interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002. The company does not expect the adoption of
FIN 45 to have a material impact on its financial position or results of
operations.

In December 2002, the FASB issued SFAS, No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure". SFAS No. 148 amends SFAS
Statement No. 123, "Accounting for Stock-Based Compensation", to provide
alternative methods of transition for a voluntary change to the fair value
method of accounting for stock-based employee compensation. In addition, SFAS
No. 148 amends the prior disclosure guidance and requires prominent disclosures
in both annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used on
reported results. The provisions of SFAS No. 148 are generally effective for
fiscal years ending after December 15, 2002. The company is currently evaluating
the new pronouncement and has not yet determined what effect, if any, the
adoption of SFAS No. 148 will have on its financial position and results of
operations.

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities" (an interpretation of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements"), which becomes effective for the company in
June 2003. FIN No. 46 provides consolidation guidance for certain variable
interest entities ("VIE") in which equity investors of the VIE do not have the
characteristics of a controlling interest or do not have sufficient equity at
risk for the VIE to finance its activities independently. FIN No. 46 requires
each enterprise involved with a special purpose entity to determine whether it
provides financial support to the special purpose entity through a variable
interest. Variable interests may arise from financial instruments, service
contracts, minority ownership interests or other arrangements. If an entity
holds a majority of the variable interests, or a significant variable interest
that is considerably more than any other party's variable interest, that entity
would be the primary beneficiary and would be required to include the assets,
liabilities and results of operations of the special purpose entity in its
consolidated financial statements. The company does not expect the adoption of
FIN 46 to have a material impact on its financial position or results of
operations.

F-13

TECHDYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2--INVENTORIES

Inventories are comprised of the following:

December 31, December 31,
2002 2001
-------------------------------
Finished goods $ 703,754 $ 584,397
Work in process 1,359,595 1,216,328
Raw materials and supplies 5,368,033 6,440,955
--------------------------------
$ 7,431,382 $ 8,241,680
================================

NOTE 3--ACCRUED EXPENSES

Accrued expenses are comprised of the following:

December 31, December 31,
2002 2001
-------------------------------
Accrued Compensation $ 413,821 $ 319,682
Income Taxes 519,619 --
Other 475,533 531,876
-------------------------------
$ 1,408,973 $ 851,558
===============================

NOTE 4--LONG-TERM DEBT

On October 24, 2001, the company entered into two credit facilities
with Bank of Scotland in Edinburgh, Scotland for an aggregate borrowing of
$10,000,000. This financing replaced the lines of credit and three commercial
loans with The Provident Bank of Ohio for Techdyne and Lytton. The financing
included a $3,000,000 line of credit, expiring July 19, 2003, with an interest
rate at LIBOR rate plus 1.5% for a one, three or six month period, at the
company's election. The company elected the three-month interest period at 3.36%
until January 24, 2003, after this date the rate is 2.85% until April 24, 2003.
This line of credit had an outstanding balance of $1,500,000 at December 31,
2002. The financing also included a seven-year term loan of $7,000,000 at the
same interest rate as the line of credit. The term loan specifies quarterly
payments of $250,000 due in January, April, July and October of each year, plus
interest. The term loan had an outstanding balance of $6,000,000 at December 31,
2002.

The credit facilities are collateralized by all the assets of the
company, excluding Techdyne (Europe), and require affirmative and negative
covenants be maintained by the company. Certain of the affirmative covenants
require maintenance of a consolidated adjusted net worth greater than
$10,000,000 after December 31, 2002, $10,500,000 after June 30, 2003 and
$11,000,000 after September 30, 2003; a ratio of consolidated current assets to
consolidated net borrowing not less than 1.75 to 1; a ratio of consolidated
trade receivables to consolidated net borrowings not less than .75 to 1; and a
ratio of consolidated net income before interest and income taxes to total
consolidated interest costs not less than 2 to 1. Some of the negative
covenants, among others, include (1) granting or permitting a security agreement
against the consolidated assets of the companies other than permitted security
agreements, (2) declaring or paying any dividends or making any other payments
on the company's capital stock, (3) consolidating or merging with any other
entity or acquiring or purchasing any equity interest in any other entity, or
assuming any obligations of any other entity, except for notes and receivables
acquired in the ordinary course of business, (4) incurring, assuming,
guarantying, or remaining liable with respect to any

F-14

TECHDYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4--LONG-TERM DEBT--CONTINUED

indebtedness, except for certain existing indebtedness disclosed in these
financial statements, or (5) undertaking any capital expenditure in excess of
$1,000,000 in any one fiscal year. The agreements also preclude changes in
ownership in the companies, any material change in any of our business
objectives, purposes, operations and tax residence or any other circumstances or
events which will have a material adverse effect as defined by the agreements.
At December 31, 2002, the company was not in compliance with respect to the
terms of the credit facilities as a result of not meeting the ratio between
consolidated trade receivables to consolidated net borrowings of not less than
..75 to 1. In March 2003, the company obtained a waiver of the non-compliance.

On October 11, 2001, Techdyne (Europe) entered into a credit facility
with Bank of Scotland for an amount of (pound)275,000 ($399,025). This facility
comprises an eight-year term loan repayable in quarterly payments of
(pound)8,594 ($13,788) due in January, April, July and October of each year,
with an interest rate of Bank of Scotland base rate plus 1.5% (effectively 5.4%
at December 31, 2002). This term loan had an outstanding balance of $347,692 at
December 31, 2002. The proceeds from the credit facility were used to repay the
15-year mortgage loan of $371,000 as of September 30, 2001.

The base rate was 4.25% and 4.75% as of December 31, 2002 and 2001,
respectively.

Scheduled maturities of long-term debt outstanding at December 31, 2002
are approximately: 2003---$1,073,000; 2004---$1,068,000; 2005---$1,060,000;
2006---$1,060,000; 2007---$1,056,000; thereafter---$1,071,000. Interest payments
on all of the above debt amounted to approximately $294,000, $600,000 and
$784,000 in 2002, 2001 and 2000, respectively.

NOTE 5--INCOME TAXES

Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. For financial
reporting purposes a valuation allowance of $587, 000 at December 31, 2001 was
recognized to offset the deferred tax assets.

F-15

TECHDYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5--INCOME TAXES--CONTINUED

Significant components of the company's deferred tax liabilities and assets are
as follows:

December 31,
---------------------------
2002 2001
---------------------------
Deferred tax liabilities:
Depreciation and amortization $ 310,800 $ 403,000
---------------------------
Total deferred tax liabilities 310,800 403,000
===========================
Deferred tax assets:
Inventory obsolescence 435,500 374,000
Cost capitalized in ending inventory 114,100 120,000
Accrued expenses 64,300 50,000
Other 95,500 78,000
Net operating loss carryforwards -- 368,000
---------------------------
Total deferred tax assets 709,400 990,000
Valuation allowance for deferred tax assets -- (587,000)
---------------------------
Net deferred tax assets 709,400 403,000
---------------------------
Net deferred tax asset $ 398,600 $ --
===========================

A valuation allowance was provided to offset the deferred tax asset recorded at
December 31, 2001 as management believed that it was more likely than not, based
on the weight of the available evidence, this portion of the deferred tax asset
would not be realized. In 2002, the company generated taxable income in excess
of the net operating loss carryforwards and accordingly, reversed the valuation
allowance. At December 31, 2002, management believes it is more likely than not,
based on the weight of available evidence, the deferred tax assets will be
realized.

For financial reporting purposes, income (loss) before income taxes includes the
following components:

Year Ended December 31,
----------------------------------------
2002 2001 2000
-----------------------------------------
United States income (loss) $ 1,538,928 $ (1,651,423) $ 983,848
Foreign loss (25,432) (908,634) (328,278)
-----------------------------------------
$ 1,513,496 $ (2,560,057) $ 655,570
=========================================

Significant components of the provision (benefit) for income taxes are as
follows:

Year Ended December 31,
--------------------------------------
2002 2001 2000
--------------------------------------
Current:
Federal $ 398,600 $ -- $ 20,000
State 123,387 -- 60,600
--------- --------- --------
521,987 -- 80,600
--------- --------- --------
Deferred
Federal (347,500) 214,023 (18,489)
State (51,100) 31,474 28,432
--------- --------- --------
(398,600) 245,497 9,943
--------- --------- --------
$ 123,387 $ 245,497 $ 90,543
========= ========= ========

F-16

TECHDYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5--INCOME TAXES--CONTINUED

Techdyne (Europe) files separate income tax returns in the United Kingdom.

The reconciliation of income tax attributable to income before income
taxes computed at the U.S. federal statutory rates to income tax expense
(benefit) is:

Undistributed earnings of the company's foreign subsidiary amounted to
approximately $456,000 and $481,000 at December 31, 2002 and 2001, respectively.
Those earnings are considered to be indefinitely reinvested and, accordingly, no
provision for U.S. federal and state income taxes has been provided thereon.
Upon distribution of those earnings in the form of dividends or otherwise, the
company would be subject to both U.S. income taxes (subject to an adjustment for
foreign tax credits) and withholding taxes payable to the various foreign
countries. Determination of the amount of unrecognized deferred U.S. income tax
liability is not practicable because of the complexities associated with its
hypothetical calculation; however, foreign tax credits may be available to
reduce some portion of the U.S. liability. Withholding taxes of approximately
$23,000 and $24,000 would be payable upon remittance of all previously
unremitted earnings at December 31, 2002 and 2001, respectively.

Income tax payments were approximately $28,000, $130,000 and $368,000
in 2002, 2001 and 2000, respectively

NOTE 6--TRANSACTIONS WITH SIMCLAR AND MEDICORE

The company's parent, Simclar, provides certain financial and
administrative services to the company under a service agreement. The amount of
expenses covered under the service agreement totaled $336,000 and $154,000 in
2002 and 2001, respectively. Subsequent to Medicore's sale of its majority
ownership interest to Simclar on June 27, 2001, Medicore continued to provide
certain financial and administrative services to the company under a service
agreement through July 15, 2001, the effective date of cancellation of the
agreement. The amount of expenses allocated by former parent Medicore under the
service agreement totaled $195,000 and $360,000 in 2001 and 2000, respectively.

On March 27, 1990, the company sold real property to Medicore. The gain
on the sale of approximately $161,000, which was deferred due to the
relationship of the parties, was recognized in 2001, in accordance with the
provisions of SFAS No. 66, "Accounting for Sales of Real Estate" as a result of
Medicore's sale of its interest in the company to Simclar. The premises are
leased from Medicore under a 10-year net operating lease expiring August 31,
2010, at an annual rental of $120,000 plus applicable taxes.

F-17

TECHDYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6--TRANSACTIONS WITH SIMCLAR AND MEDICORE--CONTINUED

In May 2001, Techdyne (Europe) entered into a management agreement with
Simclar pursuant to which Simclar will manufacture products for Techdyne
(Europe) and assist in management coordination. These expenses were
approximately $241,000 and $1,103,000 in 2002 and 2001, respectively. This
agreement was terminated on February 28, 2002 (See Note 13). The company has a
net receivable due from its parent, Simclar, of approximately $1,945,000 at
December 31, 2002 and a net payable due to Simclar, of approximately $563,000 at
December 31, 2001. The company manufactured certain products for the parent,
Simclar, during 2001. Sales of the products were $190,000 in 2001.

NOTE 7--RELATED PARTY TRANSACTIONS

For the years ended December 31, 2001 and 2000, respectively, the
company paid premiums of approximately $434,000 and $588,000, for insurance
through a former director and stockholder, and the relative of a former director
and stockholder.

For the years ended December 31, 2001and 2000, respectively, legal fees
of $44,000 and $52,000 were paid to an officer of the former parent, Medicore,
who acted as general counsel for the company prior to its acquisition by
Simclar.

Subcontract manufacturing is performed for the company by a company
whose President and shareholder is a former director of the company. Subcontract
manufacturing purchases from this company amounted to approximately $1,486,000,
$1,503,000 and $2,302,000 in 2002, 2001 and 2000, respectively.

The company leases one of its operating facilities from an entity which
is owned by Lytton's former owner and former President. The operating lease,
which expires July 31, 2007, requires annual lease payments of approximately
$241,000 adjusted each year based on the Consumer Price Index, and contains
renewal option for a period of five years at the then fair market rental value.

NOTE 8--COMMITMENTS AND CONTINGENCIES

Commitments

The company leases several facilities which expire at various dates
through 2010 with renewal options for a period of five years at the then fair
market rental value. The company's aggregate lease commitments at December 31,
2002, are approximately: 2003--$451,000, 2004---$431,000, 2005---$417,000,
2006---$418,000 and 2007---$325,000. Total rent expense was approximately
$556,000, $669,000 and $818,000 for the years ended December 31, 2002, 2001 and
2000, respectively.

The company sponsors a 401(k) Profit Sharing Plan covering
substantially all of its employees, excluding Techdyne (Europe). The
discretionary profit sharing and matching expense amounted to approximately
$57,000, $64,000 and $80,000 for the years ended December 31, 2002, 2001 and
2000, respectively.

The company is involved in various legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
liability, if any, resulting from these matters will not have a material effect
on the company's financial position.

F-18

TECHDYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9--STOCK OPTIONS

On February 27, 1995 the company granted non-qualified stock options,
to directors of Techdyne and its subsidiary for 142,500 shares exercisable at
$1.75 per share for five years. In April 1995, the company granted a
non-qualified stock option for 10,000 shares which vested immediately, to its
general counsel at the same price and terms as the directors' options. On
February 25, 2000, 145,000 of these options were exercised. The company received
cash payment of the par value and the balance in three-year promissory notes
totaling $207,825 presented in the stockholders' equity section of the balance
sheet, with interest at 6.19%. The notes, which are due in February 2003, were
not repaid and, as a result, the related interest receivable was written off in
2002. The related shares will be cancelled in 2003.

In June 1997, the company adopted a stock option plan for up to 500,000
options, and pursuant to this plan the board granted 375,000 options exercisable
for five years through June 22, 2002 at $3.25 per share, with 320,000 of these
options outstanding at December 31, 2001. On June 30, 1999, the company granted
52,000 options exercisable for three years through September 29, 2002 at $4.00
per share with 10,000 options outstanding at December 31, 2001. On August 25,
1999, the company granted 16,000 options exercisable for three years through
August 24, 2002 at $4.00 per share with 13,000 options outstanding at December
31, 2001. On December 15, 1999 the company granted 19,000 options exercisable
for three years through December 14, 2002 at $4.00 per share with 8,000 options
outstanding at December 31, 2001. On May 24, 2000, the company granted 3,000
options exercisable for three years through May 23, 2003 at $4.00 per share, the
options terminated when the employee terminated his employment with the company.
On October16, 2000, the company granted 90,000 three year stock options
exercisable at $2.00 per share through October 15, 2002, with one-third of the
options vesting immediately, one-third vesting on October 16, 2001 and one-third
vesting on October 16, 2002, but based on the change in control of the company,
all options vested on June 27, 2001, and 30,000 options were redeemed for
$4,200.

The company entered into a consulting agreement on July 1, 1999 for
financial advisory services which ended on September 15, 2000. As compensation,
the consultant received non-qualified stock options to purchase 100,000 shares
of the company's common stock exercisable at $3.50 per share that expired on
September 15, 2000. These options were valued at $40,000 resulting in
approximately $23,000 expense during 2000.

F-19

TECHDYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9--STOCK OPTIONS--CONTINUED

A summary of the company's stock option activity, for the years ended
December 31, follows:

The remaining average contractual life at December 31, 2002 is ten
months for the October 2000 options. All other options expired without being
exercised.

In June 2001, in connection with the sale to Simclar, the company
forgave stock option notes and related accrued interest totaling $207,825 from
certain current and former officers and directors of the company. See Note 1.

NOTE 10--QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following summarizes certain quarterly operating data:

F-20

TECHDYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10--QUARTERLY FINANCIAL INFORMATION (UNAUDITED)--CONTINUED

Since the computation of earnings per share is made independently for
each quarter using the treasury stock method, the total of four quarters
earnings do not necessarily equal earnings per share for the year.

In 2001, the company recognized $529,000 in the second quarter; $77,000
in the third quarter and $28,000 in the fourth quarter for non-recurring costs
related to stock option note write-off and bonus compensation and to the
shutdown of the Techdyne (Europe) manufacturing operations.

The company recorded an adjustment to the valuation allowance relating
to its deferred tax assets of approximately $(587,000) during fourth quarter of
2002; $521,000 during the fourth quarter of 2001; $66,000 during the third
quarter of 2001; $303,000 during the fourth quarter of 2000.

NOTE 11--GEOGRAPHIC AREA DATA AND MAJOR CUSTOMERS

Summarized financial information for the company's one reportable segment is
shown in the following table.

Year Ended December 31,
----------------------------------------------
Geographic Area Sales 2002 2001 2000
- --------------------- ----------------------------------------------
United States $ 33,458,570 $ 34,539,558 $ 47,843,141
Europe(1) 233,012 2,285,716 4,869,678
----------------------------------------------
$ 33,691,582 $ 36,825,274 $ 52,712,819
==============================================

(1) Techdyne (Europe) sales are primarily to customers in the United Kingdom.

GEOGRAPHIC AREA PROPERTY,
PLANT AND EQUIPMENT (NET) 2002 2001 2000
- -------------------------- ----------------------------------------------
United States $ 2,361,984 $ 2,999,125 $ 3,918,081
Europe 653,521 917,765 1,073,388
----------------------------------------------
$ 3,015,505 $ 3,916,890 $ 4,991,469
==============================================

Sales to major customers are as follows:

F-21

TECHDYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10--QUARTERLY FINANCIAL INFORMATION (UNAUDITED)--CONTINUED

Year Ended December 31,
--------------------------------------------
2002 2001 2000
--------------------------------------------
Major Customers
ITW $ 12,078,000 $ 9,705,000 $ 10,196,000
Alcatel (1) -- -- 6,179,000
Trilithic (1) -- -- 6,177,000

(1) Less than 10% of sales for 2002 and 2001

A majority of the company's sales are to certain significant customers. The loss
of or substantially reduced sales to any of these customers would have an
adverse effect on the company's operations if such sales were not replaced.

NOTE 12--SALE OF INTEREST

On April 6, 2001, the company's former parent, Medicore, Inc., entered
into an Agreement for Sale and Purchase of Shares with Simclar Group Limited
("Simclar"), a private United Kingdom company, and the company, pursuant to
which Medicore agreed to sell its 71.3% interest in the company's common stock
to Simclar. The sale was subject to Medicore shareholder approval, which was
obtained on June 27, 2001, on which date the sale closed.

NOTE 13 - CESSATION OF SCOTLAND MANUFACTURING OPERATIONS

As a result of continuing operating losses, in April 2001 the company
decided to discontinue the manufacturing operations of its European subsidiary,
Techdyne (Europe). In May 2001, Techdyne (Europe) entered into a management
agreement with Simclar pursuant to which Simclar will manufacture products for
Techdyne (Europe) and assist in management coordination. The company initially
incurred a cost of approximately $225,000, primarily for severance benefits
associated with 79 employees who were terminated during the second quarter of
2001 a result of this decision. During the remainder of 2001, Techdyne (Europe)
continued operations with approximately two employees (one as of December 31,
2001).

With the cessation of the manufacturing operations, the company made
the land and building available for sale during the third quarter of 2001. In
connection with this process, the company recorded an adjustment of $77,000
based upon market information obtained from an unrelated third party during the
third quarter of 2001 to adjust the land and building to its estimated fair
value. During the fourth quarter, the company recorded an additional $28,000.
Included in property and equipment at December 31, 2002 are assets held for
sale, net of accumulated depreciation, in Scotland totaling approximately
$654,000.

As of February 28, 2002 all remaining net assets and the remaining
employee, except the building and land, were transferred to Simclar at net book
value on that date. These net assets consisted principally of cash, receivables,
payables and equipment. The management agreement with Simclar was also
cancelled.

F-22

TECHDYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

(1) Uncollectible accounts written off, net of recoveries
(2) Net write-offs against inventory reserves

F-23