M TRON INDUSTRIES INC, S-1, 2000-10-27

M TRON INDUSTRIES INC
S-1, 2000-10-27

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER , 2000

REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
M-TRON INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------------

<TABLE>
<S> <C> <C>
DELAWARE 3679 46-0457994
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

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

100 S. DOUGLAS STREET
P.O. BOX 630
YANKTON, SOUTH DAKOTA 57078
(800) 762-8800
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
------------------------------

ROBERT R. ZYLSTRA
PRESIDENT AND CHIEF EXECUTIVE OFFICER
M-TRON INDUSTRIES, INC.
100 S. DOUGLAS STREET
P.O. BOX 630
YANKTON, SOUTH DAKOTA 57078
(800) 762-8800
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
------------------------------

COPIES TO:
HAROLD B. FINN III, ESQ.
CHARLES J. DOWNEY III, ESQ.
FINN DIXON & HERLING LLP
ONE LANDMARK SQUARE
STAMFORD, CT 06901-2689
(203) 325-5000
(203) 348-5777 FAX
--------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis, pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
--------

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering: / /
--------

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
--------

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
--------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
--------------------------

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE REGISTERED BE REGISTERED OFFERING PRICE PER UNIT AGGREGATE OFFERING PRICE
<S> <C> <C> <C>
Rights to purchase shares of Class A Common Stock 1,006,790 --(1) --
Class A Common Stock 1,006,790(3) $5.00 $5,033,950

<CAPTION>
TITLE OF EACH CLASS OF AMOUNT OF
SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
Rights to purchase shares of Class A Common Stock $0(2)
Class A Common Stock $1,329
</TABLE>

(1) M-tron Industries, Inc. is granting, at no cost, transferable subscription
rights to subscribe for and purchase shares of Class A common stock of
M-tron Industries, Inc.
(2) Pursuant to Rule 457(g) under the Securities Act of 1933, as amended, no
separate registration fee is required for the rights since they are being
registered in the same registration statement as the common stock of M-tron
Industries, Inc. underlying the rights.
(3) Represents shares of Class A common stock of M-tron Industries, Inc.
issuable upon exercise of the rights being registered.
------------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVENESS UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL
THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PRELIMINARY PROSPECTUS
IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER , 2000

PROSPECTUS

SUBSCRIPTION RIGHTS TO PURCHASE
M-TRON
CLASS A COMMON STOCK

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

We are distributing, at no cost, transferable rights to purchase our
Class A common stock to Lynch Corporation, our parent company, which, in turn,
is distributing the rights to persons who own shares of common stock of Lynch
Corporation on the record date of 2000. We will issue up to
1,006,790 shares of our Class A common stock in the offering. You will receive
one right for every 1.5 shares of Lynch Corporation common stock you hold. You
may purchase one share of our Class A common stock for each right you are issued
for the price of $5.00 per share. You will not have the right to purchase any
fractional shares. You will be able to exercise your rights only during a
limited period. If you do not exercise your rights before 5:00 p.m., Eastern
Standard Time, on , 2000, your rights will expire. We may decide to
extend the rights offering, in our discretion, for up to calendar days. If you
timely exercise all of your subscription rights, you will be entitled to
exercise over-subscription privileges to purchase additional shares of our
Class A common stock at the same subscription price. No public market currently
exists for our common stock. We intend to apply to qualify our Class A common
stock on the American Stock Exchange, however, there can be no assurance that we
will sell enough shares in this offering to satisfy the listing requirements of
that exchange.

We have outstanding two classes of common stock. The holders of our Class A
common stock are entitled to one vote for each share, and the holders of our
Class B common stock are entitled to five votes for each share. The rights of
the holders of our common stock are substantially the same in all other
respects.

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

INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE .

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

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- ----------
<S> <C> <C>
Subscription Price.......................................... $5.00 $5,033,950
Proceeds, after estimated expenses, to us................... $ $
</TABLE>

The Securities and Exchange Commission and state securities regulators have
not approved or disapproved of these securities or determined if this prospectus
is truthful or complete. It is illegal for any person to tell you otherwise.

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

The date of this prospectus is , 2000
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary.......................................... 3
Risk Factors................................................ 7
Forward-Looking Statements.................................. 16
The Offering................................................ 16
Our Separation from Lynch................................... 25
Use of Proceeds............................................. 27
Dividend Policy............................................. 27
Capitalization.............................................. 28
Dilution.................................................... 29
Selected Combined Financial Information..................... 30
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 31
Our Business................................................ 39
Management.................................................. 48
Principal Stockholders...................................... 54
Certain Transactions........................................ 55
Arrangements Between Us and Lynch........................... 55
Description of Capital Stock................................ 58
Shares Eligible for Future Sale............................. 60
Federal Income Tax Consequences............................. 61
Legal Matters............................................... 62
Experts..................................................... 63
Additional Information...................................... 63
Index to Combined Financial Statements and Financial
Statement Schedule........................................ F-1
</TABLE>

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

You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of our Class A common stock only in jurisdictions where offers and
sales are permitted. The information contained in this prospectus is accurate
only as of the date of this prospectus, regardless of the time of delivery of
this prospectus or of any sale of our Class A common stock.

We are the successor to a South Dakota corporation that transferred all of
its assets and liabilities to us, other than its investment in another
corporation that is engaged in a different line of business than ours, in
connection with a reorganization of certain subsidiaries and affiliates of our
parent, Lynch Corporation. All references to "we," "us," "our," or "the Company"
in this prospectus mean M-tron Industries, Inc. or, as appropriate, our
predecessor. All references to "Lynch" in this prospectus refer to Lynch
Corporation and its subsidiaries and affiliates unless the context otherwise
requires. We use the following trademark in this prospectus: M-tron. All other
trademarks, servicemarks or tradenames referred to in this prospectus are the
property of their respective owners.

2
<PAGE>
PROSPECTUS SUMMARY

YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION, FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS
PROSPECTUS. EXCEPT AS OTHERWISE INDICATED, THE INFORMATION IN THE PROSPECTUS
ASSUMES THAT ANY OUTSTANDING OPTIONS TO PURCHASE SHARES OF COMMON STOCK HAVE NOT
BEEN EXERCISED.

OUR COMPANY

Our products are quartz based frequency control devices, including packaged
quartz crystals and oscillator modules incorporating those crystals. Our
frequency control devices produce an electrical signal that is used either as a
carrier signal for the transmission of information, as a timing signal for
digital circuits or as a reference frequency for devices that transmit and
receive information. Our products produce an electrical signal that is accurate,
stable, has low phase noise and has low phase jitter, thus enabling
communications infrastructure equipment manufacturers and communications service
providers to meet the increasing demands of their customers.

The communications infrastructure equipment industry is in the midst of a
rapid expansion that is attributable to, among other things: an increased use of
mobile and fixed wireless communications, growth in demand for high speed
Internet access, and worldwide deregulation and privatization.

We believe that we are well positioned for continued and increased success
in the evolving communications infrastructure equipment industry because of our:

- focus on serving the communications infrastructure industry;

- design and engineering resources;

- integrated manufacturing capabilities;

- reputation for providing high quality, reliable products; and

- extensive customer service and technical support resources.

Our objective is to build on the strength of our core expertise in quartz
crystal and oscillator technologies to become the supplier of choice to
customers serving the needs of the communications infrastructure industry. To
achieve this goal, our strategy includes the following key elements:

- leverage our reputation as a value added, dependable supplier of high
quality, highly reliable frequency control devices;

- capitalize on changes to our sales process to increase our penetration at
existing customers and to acquire new customers;

- increase our design and engineering capabilities and create higher value
solutions for our customers' design engineers;

- increase our manufacturing capacity to take advantage of communications
infrastructure industry growth;

- pursue strategic acquisitions and mergers; and

- expand our product line to include a broader range of frequency control
devices.

3
<PAGE>
We sell our products to communications original equipment manufacturers,
contract manufacturers and distributors. Original equipment manufacturers who
use our products include: ADC Telecommunications; Cirrus Logic Incorporated;
Cisco Systems Incorporated; Telefonaktiebolaget LM Ericsson; Lucent
Technologies; Marconi Incorporated; Newbridge Networks Corporation, a subsidiary
of Alcatel; Nortel Networks Corporation and Paradyne Corporation. Our contract
manufacturer customers include: Celestica Incorporated; Flextronics
International Limited; Jabil Circuit Incorporated; SCI Systems Incorporated and
Solectron Corporation. Our distributor customers include: All American
Semiconductor Incorporated; Arrow Electronics Incorporated; Avnet Incorporated
and Pioneer Standard Electronics Incorporated.

In addition, we sell crystals and oscillators which are used outside the
communications infrastructure industry. We expect this portion of our business
to decline over time as we increase our emphasis on the growing communications
infrastructure market.

We are a Delaware Corporation. Our principal executive offices are located
at 100 South Douglas Street, Yankton, South Dakota 57078 and our telephone
number is (800) 762-8800. Our World Wide Web site is www.mtron.com. The
information in the Web site is not incorporated into, and is not intended to be
a part of, this prospectus.

OUR RELATIONSHIP WITH LYNCH

We are currently an indirect wholly-owned subsidiary of Lynch. After the
completion of this offering, and assuming that all subscription rights are
exercised, Lynch will own 100% of the outstanding shares of our Class B common
stock representing 97% of the voting power of our capital stock.

Lynch has advised us that it may consider various alternatives with respect
to its ownership of our Class B common stock, including a possible distribution
of such Class B common stock to its own stockholders. In this connection, in
order to preserve Lynch's ability to make such a distribution on a tax-free
basis, which requires, among other things, that Lynch own stock having 80% of
the voting power of all of our capital stock, while at the same time preserving
our ability to issue additional shares of Class A common stock without
precluding the making of such a distribution on a tax-free basis, the Class B
common stock has five votes per share. Lynch is not obligated to distribute any
of its shares of our common stock to the holders of Lynch's common stock and it
is not prohibited from selling such shares to a third party.

Any shares of Class B common stock that are distributed by Lynch to the
holders of its common stock will convert into an equal number of shares of
Class A common stock, which has one vote per share, five years after the date of
such distribution unless Lynch, in its sole discretion, accelerates the date of
such conversion. Any shares of Class B common stock that are transferred by
Lynch to an unaffiliated person or entity will convert into an equal number of
shares of Class A common stock having one vote per share immediately upon the
transfer of such shares to such entity or person which is not controlled by or
is not under common control with Lynch.

As described in more detail under "Our Separation From Lynch," we are the
successor to a South Dakota corporation that transferred all of its assets and
liabilities to us, other than its investment in another corporation that is
engaged in a different line of business than ours, in connection with a
reorganization of certain subsidiaries and affiliates of Lynch. The agreements
regarding our separation from Lynch are described more fully in the sections
entitled "Our Separation From Lynch" and "Arrangements Between Us and Lynch"
included elsewhere in this prospectus. See "Risk Factors-Risks Related To Our
Relationship With Lynch."

4
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Description of the rights offering..... We are distributing the rights in this offering to Lynch
which, in turn, is distributing the rights to Lynch
stockholders. Each holder of shares of Lynch common stock
on the record date of , 2000 will receive one
right for every 1.5 shares of Lynch common stock owned on
that date.

Description of rights.................. The holders of rights have a basic subscription privilege
which entitles the holder to purchase one share of our
Class A common stock for each right held, as well as an
over-subscription privilege to purchase additional shares
of our Class A common stock that are not purchased by
other stockholders. You are entitled to exercise your
over-subscription privilege only if you exercise your
basic subscription privilege in full. We are offering up
to 1,006,790 shares. We will not issue fractional shares.

Subscription price..................... The subscription price for our Class A common stock is
$5.00 per share.

Exercise period........................ The rights will only be exercisable, in whole or in part,
from the period beginning on , 2000 and ending on
, 2000, at 5:00 p.m., Eastern Standard Time,
unless extended by us in our sole discretion. In no event
will we extend the exercise period beyond 5:00 p.m.,
Eastern Standard Time, , 2000. Once rights are
exercised, you may not revoke the exercise or request a
refund of monies paid.

How rights will be evidenced........... Each rights holder will receive a subscription certificate
representing such holder's rights.

Transferability of rights.............. The rights are transferable, but we do not anticipate that
a formal trading market will develop or that they will be
listed for trading on any exchange.

Common stock outstanding after the 1,006,790 shares of Class A common stock, assuming that
offering............................. all subscription rights are exercised, and 6,500,000
shares of Class B common stock.

Voting rights of common stock.......... One vote per share of Class A common stock; five votes per
share of Class B common stock. After the offering, and
assuming that all subscription rights are exercised, the
outstanding Class B common stock that is owned by Lynch
will constitute 97% of the voting power of our capital
stock.

Use of proceeds........................ For payment of a demand promissory note in the principal
amount of $1,500,000 that we distributed to Lynch as a
dividend shortly before this offering as well as general
corporate purposes, including capital expenditures,
satisfaction of other existing indebtedness, increasing
working capital, research and development and potential
acquisitions of complementary products, technologies or
businesses. See "Use of Proceeds."
</TABLE>

Unless we specifically state otherwise, the information in this prospectus
assumes that all subscription rights are exercised. The information that is set
forth above excludes options under our 2000 Stock Option Plan to purchase
shares of Class A common stock which we have granted effective upon the
closing of the sale of our Class A common stock pursuant to this offering.

5
<PAGE>
SUMMARY COMBINED FINANCIAL DATA
(IN THOUSANDS)

In the table below, we provide you with our summary combined financial data.
We have prepared this information using our financial statements for the five
years ended December 31, 1999 and the six-month periods ended June 30, 1999 and
2000. The combined financial statements for the five years ended December 31,
1999 have been audited. The combined financial statements for the six-month
periods ended June 30, 1999 and 2000 have not been audited. The data should be
read in conjunction with the financial statements, related notes and other
combined financial information included herein.

The as adjusted information reflects the application of the net proceeds
from the sale of 1,006,790 shares of our Class A common stock, based upon an
exercise price for the subscription rights of $5.00 per share, after deducting
the estimated offering expenses. There can be no assurance that any shares of
our Class A Common Stock will be sold pursuant to this offering.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- --------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF INCOME DATA:
Net sales......................... $20,118 $18,433 $22,828 $22,798 $26,467 $12,371 $18,484
Gross profit...................... 5,452 5,189 5,966 5,982 7,129 3,398 5,592
Operating income.................. 1,477 1,213 1,610 1,428 1,783 792 1,808
Net income........................ 847 677 1,006 817 1,058 480 1,171
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 2000
----------------------
ACTUAL AS ADJUSTED
-------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED BALANCE SHEET DATA:
Cash.............................. $ 158 $ 36 $ 81 $ 3 $ 125 $ 2 $
Working capital................... 1,013 1,275 1,875 2,469 3,361 2,894
Total assets...................... 7,375 6,389 8,858 8,898 10,940 13,535
Demand note due to parent(1)...... 0 0 0 0 0 1,500
Due to parent..................... 0 0 0 0 118 118
Long-term notes payable to related
parties, less current portion... 342 95 0 0 199 99
Net asset(1)...................... 2,495 3,172 3,927 4,745 5,387 5,058
</TABLE>

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

(1) Includes our obligation to pay Lynch $1.5 million with respect to a dividend
which we declared shortly prior to this offering. Such dividend was paid in
the form of a demand promissory note in the principal amount of
$1.5 million. The effect of this dividend has been reflected retroactively
in the combined financial statements as of and for the six months ended
June 30, 2000.

6
<PAGE>
RISK FACTORS

YOU SHOULD CONSIDER CAREFULLY THE RISKS DESCRIBED BELOW BEFORE YOU DECIDE TO
BUY OUR CLASS A COMMON STOCK. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE
NOT THE ONLY ONES FACING US. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR
BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS WOULD LIKELY SUFFER. IN
THAT CASE THE TRADING PRICE OF OUR CLASS A COMMON STOCK COULD FALL, AND YOU MAY
LOSE ALL OR PART OF THE MONEY THAT YOU HAVE PAID TO BUY OUR CLASS A COMMON
STOCK.

RISKS RELATED TO OUR BUSINESS

FREQUENCY CONTROL DEVICES ACCOUNT FOR NEARLY ALL OF OUR SALES; CONSEQUENTLY,
CONTINUED MARKET ACCEPTANCE OF OUR PACKAGED QUARTZ CRYSTALS AND OSCILLATOR
MODULES IS CRITICAL TO OUR SUCCESS.

Virtually all of our 1999 net sales came from sales of our frequency control
devices, which consist of packaged quartz crystals and oscillator modules. We
expect that this product line will continue to account for substantially all of
our net sales for the foreseeable future. Continued market acceptance of this
product line is critical to our success. Any decline in demand for this product
line or failure to achieve continued market acceptance of our packaged quartz
crystals and oscillator modules or of any new versions of our frequency control
devices may harm our business.

IF WE ARE UNABLE TO DEVELOP OR ACQUIRE SUCCESSFUL NEW PRODUCTS AND TECHNOLOGIES
IN A TIMELY MANNER, OUR ABILITY TO GROW OUR BUSINESS MAY BE HARMED.

Frequency control devices are subject to technological changes, particularly
in devices that control higher frequencies. We believe that our future success
will depend in part upon our ability to continue to enhance our existing product
line and to develop or acquire successful new products in a timely manner. In
particular, we need to enhance our ability to produce products that operate at
higher frequencies and have longer product lives than our current products. We
cannot assure you that our product development or acquisition efforts will be
successful or that we will be able to respond effectively to technological
change. If we are unsuccessful, our business may be negatively impacted.

IF WE ARE UNABLE TO INCREASE OUR MANUFACTURING CAPACITY, WE MAY BE UNABLE TO
GROW OUR BUSINESS.

We are currently producing our products at or near full capacity. Our
ability to increase our manufacturing capacity is dependent upon our ability to
obtain equipment, hire additional employees, reduce manufacturing cycle times
and increase our utilization of our contract manufacturers. If we are unable to
successfully increase our manufacturing capacity, including that of our contract
manufacturers, we may be unable to grow our business.

WE RELY UPON TWO CONTRACT MANUFACTURERS FOR A SIGNIFICANT PORTION OF OUR
FINISHED PRODUCTS, AND A DISRUPTION IN OUR RELATIONSHIPS WITH EITHER OF THESE
CONTRACT MANUFACTURERS COULD HAVE A NEGATIVE IMPACT ON OUR SALES.

In 1999, approximately 40% of our net sales were attributable to finished
products that were manufactured by two independent contract manufacturers
located in Korea and China. We expect that sales of products manufactured by our
contract manufacturers will represent a material portion of our sales for the
next several years. Although we believe that we maintain good relations with
these contract manufacturers, we do not have written long term supply contracts
with them and our relationships with them could deteriorate in the future. If
either of our contract manufacturers becomes unable to provide products in the
volumes needed, or at acceptable prices, we would have to identify and qualify
acceptable replacement manufacturers or manufacture the products internally. Due
to industry-wide capacity shortfalls, we could encounter difficulties in
locating, qualifying and entering into arrangements with replacement
manufacturers. As a result, a reduction in the production capability or
financial viability of either of our independent contract manufacturers, or a
termination of, or significant interruption in, our relationships with either of
them, may harm our business.

7
<PAGE>
OUR DEPENDENCE ON A FEW SIGNIFICANT CUSTOMERS EXPOSES US TO OPERATING RISKS AND
WE MAY NOT BE ABLE TO OBTAIN ORDERS FROM NEW CUSTOMERS.

Sales to our ten largest customers accounted for approximately 60% of our
net sales in 1999, 1998, and 1997. In 1999, our net sales to Newbridge Networks,
a subsidiary of Alcatel, accounted for approximately 12.4% of our net sales. No
other customer accounted for greater than 10% of our net sales in 1999. No
customer accounted for greater than 10% of our net sales in 1998 or 1997. If a
significant customer reduces or delays orders for any reason, our business may
be negatively affected. In addition, our ability to increase our sales will
depend in part upon our ability to obtain orders from new customers for whom
there is intense competition.

OUR DEPENDENCE ON SUPPLIERS TO DELIVER KEY COMPONENTS MAY AFFECT OUR ABILITY TO
DELIVER PRODUCTS TO OUR CUSTOMERS IN A TIMELY MANNER, WHICH MAY RESULT IN LOST
SALES.

We rely on outside suppliers that in some instances are single or limited
sources for key components used in our products, and for some components we have
made the strategic choice to purchase from only one supplier. If we have to
replace one or more of these sources, we could be delayed in, or even prevented
from, delivering our products to our customers. If supply delays and shortages
of certain key components persist, we may experience an interruption in
production until we locate alternative sources of supply or we may even be
forced to adjust our product designs and production schedules. Because of a
worldwide demand for and shortage of certain components, we have experienced
lengthening lead times and delivery times for some of the components that we
purchase. These components include ceramic packages, integrated circuits and
other components necessary for the production of our oscillator products. If we
are not able to obtain sufficient allocations of these components, our
production and shipment of product may be delayed, we may lose customers and our
business may be adversely affected.

OUR DEPENDENCE UPON INTERNATIONAL CUSTOMERS AND SUPPLIERS MAY REDUCE OUR NET
SALES OR IMPEDE OUR ABILITY TO SUPPLY PRODUCTS.

Our international sales represented approximately 43% of our net sales in
1999. This consisted of approximately 19% from customers in Canada, 9% from
customers in Asia, 6% from customers in Western Europe, 4% from customers in
Mexico and 5% from other international customers. We expect that the percentage
of sales to international customers will increase in the future. Furthermore, we
sell our products to manufacturers of communications infrastructure equipment
for incorporation into their own products, many of which we believe are sold by
those manufacturers to international customers. In manufacturing our products,
we rely on contract manufacturers and component suppliers in various countries.
As a result, our sales and our ability to manufacture our products are subject
to the risks associated with international commerce. International sales and our
relationships with suppliers may be harmed by many factors, including:

- changes in law or policy resulting in burdensome government controls,
tariffs, restrictions, embargoes or export or import license requirements;
and

- political or economic instability in international markets.

If our international sales or our relationships with our international
suppliers are adversely affected by any of these factors, our business may be
harmed.

SEVERAL KEY MANAGEMENT EMPLOYEES, INCLUDING ROBERT R. ZYLSTRA, OUR PRESIDENT AND
CHIEF EXECUTIVE OFFICER, HAVE ONLY RECENTLY JOINED US, AND WE CANNOT BE CERTAIN
THAT OUR MANAGEMENT TEAM WILL WORK TOGETHER EFFECTIVELY IN THE FUTURE.

Several key members of our management team have joined us within the last
one to two years, including Robert R. Zylstra, our President and Chief Executive
Officer, John R. Kerg, Jr., our Vice President of Sales and Marketing, and
Gregory T. Rogers, our Vice President of Engineering. We have

8
<PAGE>
little basis on which to judge their individual performance or whether they will
work together effectively in the future. If they do not perform well
individually or together, our ability to execute our business strategy may be
impaired and our business may suffer.

OUR SUCCESS DEPENDS ON OUR ABILITY TO RETAIN OUR KEY MANAGEMENT AND TECHNICAL
PERSONNEL AND ATTRACTING, RETAINING, AND TRAINING NEW TECHNICAL PERSONNEL.

Our future growth and success will depend in large part upon our ability to
retain our existing management and technical team and to recruit and retain
highly skilled technical personnel, including engineers. The labor market in
which we operate is highly competitive and, as a result, we may not be able to
retain and recruit key personnel. Our failure to hire, retain or adequately
train key personnel could have a negative impact on our performance.

PART OF OUR GROWTH STRATEGY IS TO MAKE ACQUISITIONS. IF WE ARE UNABLE TO DO SO,
OUR FUTURE RATE OF GROWTH MAY BE LIMITED.

An element of our growth strategy is to acquire businesses, technologies or
products that expand and complement our current products. We may not be able to
execute our acquisition strategy if we:

- are unable to identify suitable and available businesses, technologies or
products to acquire;

- do not have access to required capital at the necessary time; or

- are unwilling or unable to outbid larger companies with more resources.

OUR ACQUISITION STRATEGY INVOLVES FINANCIAL AND MANAGEMENT RISKS WHICH MAY
ADVERSELY AFFECT OUR INCOME IN THE FUTURE.

If we acquire additional businesses, technologies or products, we may face
additional risks, including the following:

- future acquisitions could divert management's attention from daily
operations or otherwise require additional management, operational and
financial resources;

- we might not be able to integrate future acquisitions into our business
successfully or operate acquired businesses profitably;

- we may realize substantial acquisition related expenses, including the
amortization of goodwill, which would reduce our net income in future
years;

- we may lose key employees and customers as a result of changes in
management; and

- our investigation of potential acquisition candidates may not reveal
problems and liabilities of or associated with the businesses,
technologies or products that we acquire.

If events such as those described above occur, our net income might be
adversely affected. If we issue shares of our common stock or other rights to
purchase our common stock in connection with any future acquisitions, we could
dilute our existing stockholders' interests and our net income per share may
decrease. If we issue debt in connection with any future acquisitions, lenders
may impose covenants upon us which could, among other things, restrict our
ability to increase capital expenditures or acquire additional businesses.

OUR SALES AND OPERATING RESULTS COULD FLUCTUATE SIGNIFICANTLY FROM PERIOD TO
PERIOD, THEREBY POTENTIALLY ADVERSELY AFFECTING THE MARKET PRICE OF OUR COMMON
STOCK.

Our quarterly and annual results could be affected by a wide variety of
factors that could adversely affect or lead to significant variability in our
net sales or operating results. In addition, because a significant portion of
our net sales in any particular quarter has historically come from the sale of
products to a relatively small number of customers, the loss or delay of sales
to one or a few of our

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customers could have a significant negative impact. A variety of other factors
could also cause this variability, including the following:

- decreases in capital spending by our customers' customers;

- competitive pricing pressures;

- component shortages resulting in manufacturing delays;

- delays in the development, introduction and manufacture of our customers'
products; and

- a downturn in general economic conditions.

We cannot predict the impact of these and other factors on our sales and
operating results in any future period. Results of operations in any period,
therefore, should not be considered indicative of the results to be expected for
any future period. Because of this difficulty in predicting future performance,
our operating results may fall below expectations of securities analysts or
investors in some future quarter or quarters. Our failure to meet these
expectations would likely adversely affect the market price of our Class A
common stock.

OUR BUSINESS COULD BE NEGATIVELY IMPACTED IF WE ARE UNABLE TO PUT IN PLACE THE
APPROPRIATE CONTROLS TO MANAGE OUR GROWTH EFFECTIVELY.

We have recently experienced substantial growth in our operations, the
number of our employees, our product offerings and the geographic area in which
we do business, and we will seek to continue to grow in the future. Our growth
places a significant strain on our management, operations and financial systems.
Our future operating results will depend upon our ability to continue to
implement and improve our operating and financial controls and management
information systems. Failure to manage our growth effectively may negatively
impact our business.

OUR BACKLOG MAY NOT RESULT IN FUTURE SALES.

Our backlog is comprised of orders which are subject to specific production
release orders under written contracts, verbal and written orders from
distributors with which we have had long-standing relationships and written
purchase orders from sales representatives. Backlog is not necessarily
indicative of future sales. In addition, our customers may cancel or defer
orders without significant penalty. Cancellations of pending purchase orders or
termination or reduction of purchase orders in progress could materially harm
our financial condition and operating results. We do not believe that our
backlog as of any particular date is necessarily representative of actual net
sales for any succeeding period, and we do not know whether our current order
backlog will necessarily lead to sales in any future period.

THIRD PARTIES MAY CLAIM THAT WE ARE INFRINGING UPON THEIR INTELLECTUAL PROPERTY,
AND, AS A RESULT, WE COULD SUFFER SIGNIFICANT LITIGATION COSTS OR LICENSING
EXPENSES OR BE PREVENTED FROM SELLING OUR PRODUCTS.

Intellectual property rights are uncertain and involve complex legal and
factual questions. We may unknowingly be infringing upon the intellectual
property rights of others and may be liable for that infringement. If we do
infringe upon the intellectual property rights of others, we could be forced
either to seek a license to use those intellectual property rights or to alter
our products so that they no longer infringe. A license could be very expensive
to obtain or may not be available at all. Similarly, changing our products or
processes to avoid infringing upon the rights of others may be costly or
impractical. Moreover, if we were to become involved in a dispute regarding
intellectual property, we might have to participate in costly and time-consuming
legal proceedings which could adversely affect us even if we were eventually to
prevail.

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RISKS RELATED TO OUR INDUSTRY

OUR PRINCIPAL MARKET IS THE COMMUNICATIONS INFRASTRUCTURE EQUIPMENT INDUSTRY;
CONSEQUENTLY, OUR FUTURE RATE OF GROWTH IS HIGHLY DEPENDENT ON THE DEVELOPMENT
AND GROWTH OF THE MARKET FOR COMMUNICATIONS EQUIPMENT AND MARKET ACCEPTANCE OF
OUR PRODUCTS.

Our business depends heavily upon capital expenditures by the providers of
communications services. In 1999, the majority of our net sales were to
manufacturers of communications infrastructure equipment, including indirect
sales through distributors and contract manufacturers, and we intend to increase
our sales to communications infrastructure equipment manufacturers in the
future. Communications service providers have experienced periods of capacity
shortage and periods of excess capacity. In periods of excess capacity,
communications network operators cut purchases of capital equipment, including
equipment utilizing our products. A slowdown in the manufacture and purchase of
communications infrastructure equipment could substantially reduce our net sales
and operating results and hurt our financial condition. Moreover, if for any
reason the market for communications infrastructure equipment fails to grow as
we expect, we may be unable to sustain our growth. In addition, our growth
depends upon the acceptance of our products by communications infrastructure
equipment manufacturers. If, for any reason, these manufacturers do not find our
products to be appropriate for their use, our future growth will be adversely
affected.

COMMUNICATIONS INFRASTRUCTURE EQUIPMENT MANUFACTURERS ARE SOMETIMES LOYAL TO A
SPECIFIC FREQUENCY CONTROL DEVICE SUPPLIER; WE MAY BE UNABLE TO SELL OUR
PRODUCTS TO THESE POTENTIAL CUSTOMERS, AND OUR ABILITY TO GROW MAY SUFFER AS A
RESULT.

We believe that once a communications infrastructure equipment manufacturer
has selected one supplier's frequency control component for a specific piece of
equipment, the manufacturer generally continues to rely upon that component and,
to the extent possible, subsequent generations of the same vendor's component.
Once a communications infrastructure equipment manufacturers' production line
has been configured for use and installation of a particular vendor's component,
that manufacturer must often make substantial technical modifications to its
production line and may experience production-line downtime, in order to switch
to another vendor's component. Accordingly, unless our products offer
performance, delivery or cost advantages that outweigh a customer's expense of
switching to them, it may be difficult for us to acquire orders from such a
customer.

CERTAIN COMMUNICATIONS INFRASTRUCTURE EQUIPMENT MANUFACTURERS ARE INCREASINGLY
RELYING UPON CONTRACT MANUFACTURERS, THEREBY DIMINISHING OUR ABILITY TO SELL OUR
PRODUCTS DIRECTLY TO THOSE EQUIPMENT MANUFACTURERS.

There is a growing trend among communications infrastructure equipment
manufacturers to outsource the manufacturing of their equipment or components.
As a result, our ability to persuade these original equipment manufacturers to
specify our products has been reduced and, in the absence of a manufacturer's
specification of our products, the prices that we can charge for them may be
subject to greater competition which in turn may harm our profitability and our
business.

OUR MARKET IS HIGHLY COMPETITIVE AND WE MAY LOSE BUSINESS TO LARGER AND
BETTER-FINANCED COMPETITORS.

The frequency control device market is highly competitive. Many domestic and
foreign companies participate in the market for our products. Certain of our
present competitors, as well as other potential competitors, have substantially
greater financial resources and more extensive engineering, manufacturing,
marketing, and customer support capabilities than we have. Unless we are able to
invest significant financial resources in acquiring or developing products and
enhancing customer support worldwide, and are able to gain customer acceptance
of our products, our ability to compete with other manufacturers and
distributors of frequency control devices may be limited.

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NEW GOVERNMENT REGULATIONS OR INDUSTRY STANDARDS COULD INTERFERE WITH OUR
BUSINESS GROWTH.

Most of our products are incorporated into communications systems that are
regulated domestically by the Federal Communications Commission and
internationally by other government agencies. Typically, service providers and
end-users of our products are responsible for compliance with these regulations.
However, regulatory changes, including changes in the allocation of the
available frequency spectrum, could negatively affect our business by making our
current products obsolete. Our net sales could be adversely affected if our
products fail to comply with all applicable domestic and international
regulations. Delays inherent in the governmental approval process have in the
past caused, and may in the future cause, cancellation, postponement or
rescheduling of the installation of communications systems by our customers or
our customers' customers. This in turn may have a negative impact on the sale of
our products to these customers.

In addition, the increasing demand for wireless communications has exerted
pressure on regulatory bodies world-wide to adopt new standards for wireless
communications systems. The approval of new standards generally follows
extensive investigation of, and deliberation over, competing technologies. If we
are unable to produce products which permit our customers to comply with
standards which apply to their product, our business may be adversely affected.

PUBLIC CONCERN OVER HEALTH RISKS POSED BY WIRELESS DEVICES MAY DECREASE DEMAND
FOR SUCH PRODUCTS.

Claims have been made that handheld cellular telephones and related
infrastructure equipment may pose certain health risks. If wireless
communications equipment or other devices that incorporate our products were
determined or perceived to create a significant health risk, the market for
communications infrastructure products could be significantly impacted and our
business could be harmed.

RISKS RELATED TO OUR RELATIONSHIP WITH LYNCH

WE ARE EFFECTIVELY CONTROLLED BY LYNCH, OUR PRINCIPAL STOCKHOLDER, WHICH MAY
LIMIT YOUR ABILITY TO INFLUENCE STOCKHOLDER MATTERS OR TO RECEIVE A PREMIUM FOR
YOUR SHARES THROUGH A CHANGE IN CONTROL.

Upon completion of this offering, our principal stockholder, Lynch, will own
6,500,000 shares of our Class B common stock. Because each share of Class B
common stock is entitled to cast five votes per share on all matters requiring
stockholder approval, our principal stockholder will have the right to cast 97%
of the total votes that can be cast on any matter requiring stockholder
approval. As long as Lynch owns a majority of the voting power of our
outstanding common stock, Lynch will continue to be able to elect our entire
board of directors and to remove any director, with or without cause, without
calling a special meeting, and investors in this offering will not be able to
affect the outcome of any stockholder vote. As a result, Lynch will control all
matters affecting us, including:

- the composition of our board of directors and, through it, any
determination with respect to our business direction and policies,
including the appointment and removal of officers;

- any determinations with respect to acquisitions, mergers or other business
combinations;

- our financing; and

- administration of, or changes to, the agreements providing for our
separation from Lynch.

Conflicts of interest may arise between Lynch and us in a number of areas,
including those listed above. Lynch is not obligated to distribute its shares of
Class B common stock to its own stockholders and is not prohibited from selling
a controlling interest in us to a third party. Moreover, if Lynch were to
distribute its shares of Class B common stock to its own stockholders, such
shares would be converted into shares of Class A common stock five years after
the date of distribution, or sooner if

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<PAGE>
Lynch, in its discretion, accelerated the conversion date, and a single
stockholder of Lynch, Mario J. Gabelli (including a charitable foundation and a
partnership controlled by Mr. Gabelli), might be deemed to be the beneficial
owner of approximately 28.5% of the Company's Class A common stock, assuming
full exercise of all subscription rights, including by Mr. Gabelli. The
interests of Mr. Gabelli might conflict with those of other stockholders.
Moreover, Mr. Gabelli's ownership of a substantial portion of the Company's
common stock could delay, defer or prevent a change in control of the Company,
and some transactions might be more difficult or impossible to accomplish
without his support. Mr. Gabelli has not advised us whether he intends to
exercise any of his subscription rights.

WE MAY HAVE LIABILITIES ARISING FROM OUR STATUS AS A MEMBER OF LYNCH'S
CONSOLIDATED TAX GROUP.

Even if the rights offering is fully subscribed, we will continue as a
member of Lynch's consolidated tax group under federal income tax law until the
M-tron securities held by Lynch do not constitute either 80% of the voting power
or the market value of our outstanding stock. Each member of a consolidated
group for federal income tax purposes is severally liable for the federal income
tax liability of each other member of the consolidated group. Similar rules may
apply under state income tax laws. If Lynch or members of its consolidated tax
group fail to pay tax liabilities arising prior to the time that we are no
longer a member of Lynch's consolidated tax group, we could be required to make
payments in respect of these tax liabilities. Such payments, if required, could
materially adversely affect our financial condition.

OUR STOCK PRICE AND BUSINESS MAY SUFFER SO LONG AS LYNCH OR ANOTHER ENTITY
CONTINUES TO OWN A SUBSTANTIAL PORTION OF OUR COMMON STOCK.

The liquidity of our common stock in the market will be constrained unless
and until Lynch elects to sell or distribute some significant portion of its
shares of our Class B common stock to unaffiliated persons. The potential sale
of our shares by Lynch could adversely affect market prices. In addition,
because of the relatively limited liquidity of the market for our Class A common
stock, relatively small trades of our common stock may have a disproportionate
effect on our Class A common stock price. Also, so long as Lynch or another
entity owns a controlling interest in us, we may face significant difficulty
hiring and retaining key personnel, many of whom might be attracted by the
potential of operating our business as a fully independent entity.

A DISTRIBUTION OF THE SHARES OF OUR CLASS B COMMON STOCK TO LYNCH'S STOCKHOLDERS
OR FUTURE SALES OF OUR CLASS A COMMON STOCK COULD DEPRESS OUR STOCK PRICE.

Sales of substantial amounts of our stock in the public market, or the
perception that these sales may occur, could adversely affect the market price
of our stock. After this offering, the shares of Class A common stock offered
under this prospectus, other than shares acquired by an affiliate of us, as the
term "affiliate" is defined in Rule 144 under the Securities Act of 1933, as
amended, will be freely tradable. No other shares of Class A common stock will
be outstanding upon consummation of this offering. If Lynch were to distribute
its shares of its Class B common stock to its stockholders, such Class B shares
would convert into an equal number of shares of Class A common stock having one
vote per share five years after the date of such distribution unless Lynch, in
its sole discretion, accelerated the date of such conversion. Any shares of
Class B common stock that were transferred by Lynch to an unaffiliated person or
entity would convert into an equal number of shares of Class A common stock
having one vote per share immediately upon the transfer of such shares to such
entity or person which was not controlled by or was not under common control
with Lynch. We are unable to predict whether significant amounts of our common
stock will be sold in the open market in anticipation of, or following, a
distribution by Lynch, including sales of our common stock by short-sellers or
persons engaged in arbitrage or hedging transactions involving our common stock
and/or

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<PAGE>
Lynch common stock. We are also unable to predict whether significant amounts of
our common stock will be sold by Lynch or what the impact of such a sale might
be on the price for our common stock.

WE DERIVE CERTAIN INTANGIBLE BENEFITS FROM LYNCH'S OWNERSHIP OF US. IF WE CEASED
TO BE A SUBSIDIARY OF LYNCH, WE WOULD NO LONGER BE PROVIDED THESE BENEFITS.

Although we have operated in all material respects as a free-standing
subsidiary, we have historically derived intangible benefits from being a
subsidiary of Lynch, including the management advisory and oversight services
provided by Lynch. These benefits would be lost to us if Lynch ceased to own a
majority of the voting power of our common stock. The loss of these benefits
might adversely affect our business.

RISKS RELATED TO THE PURCHASE OF OUR SHARES IN THE OFFERING

THE EXERCISE OF YOUR RIGHTS IS IRREVOCABLE.

Once you exercise your rights, you may not revoke the exercise. You will not
receive interest on your subscription funds delivered to our subscription agent
upon the exercise of your rights pending delivery of certificates for your
shares and the return of any funds not applied to the purchase of such shares.

THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK, AND THERE MAY BE NO
MEANINGFUL PUBLIC MARKET FOR OUR COMMON STOCK AFTER THIS OFFERING; OUR STOCK
PRICE MAY DECLINE BELOW THE SUBSCRIPTION PRICE AND COULD BE HIGHLY VOLATILE.

There has been no public market for our common stock and an active public
market may not develop. If an active public market for our common stock does not
develop, you may be unable to sell any shares that you may purchase in this
offering, and the price of our common stock may decrease below the subscription
price. There can be no assurance that any shares of our Class A common stock
will be sold in this offering.

The stock market in general, and the stock prices of technology and
communications companies in particular, have experienced extreme price and
volume fluctuations. This volatility is often unrelated or disproportionate to
the operating performance of these companies. Because we serve the
communications industry, we expect our stock to be similarly volatile. Broad
market and industry factors may reduce our stock price, regardless of our
operating performance. Many of the additional factors that might cause
volatility in our stock price are beyond our control. Some of these factors
include:

- changes in financial estimates by securities analysts;

- changes in the economic performance or market valuations of communications
companies;

- actions by institutional stockholders or by Lynch;

- announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments or the
market's response to any such announcements; and

- potential litigation.

In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against that company. The institution of securities class action
litigation against us could result in substantial costs to us and a diversion of
our management's attention and resources.

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IT MAY BE DIFFICULT FOR INVESTORS TO SELL OUR COMMON STOCK IF OUR COMMON STOCK
IS NOT LISTED ON A SECURITIES EXCHANGE.

We intend to file an application to the American Stock Exchange for
quotation of our Class A common stock. If we meet the listing criteria and our
application is approved, our Class A common stock will be traded on the American
Stock Exchange. The listing and continued trading of our Class A common stock on
the American Stock Exchange will be conditioned upon our meeting certain
criteria.

The American Stock Exchange requires that, in order for our securities to be
listed for quotation, we must have a public float with a market value of at
least $3,000,000 at a price of at least $3.00 per share. In addition, we will
have to meet the following distribution criteria:

- a public float of at least 500,000 shares and at least 800 public
stockholders; or

- a public float of at least 1,000,000 shares and at least 400 public
stockholders; or

- a public float of at least 500,000 shares, at least 400 public
stockholders and an average daily volume of at least 2,000.

If we fail to meet any of these criteria, we may not be able to list our
Class A common stock on the American Stock Exchange. If we are unable to list
our Class A common stock on the American Stock Exchange, we will try to qualify
for listing on another securities exchange, however there can be no assurance
that we will be able to do so. If we cannot do so, it may be difficult for
investors to sell their Class A common stock.

OUR NET TANGIBLE BOOK VALUE PER SHARE WILL BE DILUTED UPON THE CONSUMMATION OF
THE OFFERING.

Based upon a subscription price of $5.00 per share, purchasers of Class A
common stock in this offering will experience an immediate and substantial
dilution in their net tangible book value per share. For example, if 1,006,790
shares of our Class A common stock are sold pursuant to this offering such
dilution would be $3.72 per share of Class A common stock, and if 500,000 shares
of our Class A common stock are sold pursuant to this offering, such dilution
would be $3.99 per share of Class A common stock.

YOU WILL BE RELYING ON THE JUDGMENT OF OUR MANAGEMENT REGARDING OUR USE OF A
SIGNIFICANT PORTION OF THE NET PROCEEDS OF THIS OFFERING.

We will be using $1,500,000 of the net proceeds from this offering to
satisfy our obligation to pay Lynch that amount with respect to a dividend that
we declared shortly prior to this offering and that we paid to Lynch in the form
of a demand promissory note. We have not designated any specific use for the
balance of the net proceeds from the sale of Class A common stock described in
this prospectus. Rather, we expect to use that balance, if any, for general
corporate purposes, including satisfaction of other indebtedness, working
capital, research and development, capital expenditures, and for potential
acquisitions of complementary products, technologies or businesses. You will be
relying on the judgment of our management regarding the application of the
proceeds. Our management will have the ability to apply the proceeds of this
offering as it deems appropriate without stockholder approval.

WE MAY BE OBLIGATED TO PAY TWO OF OUR OFFICERS SUBSTANTIAL ADDITIONAL
COMPENSATION ON A ONE TIME BASIS IF LYNCH SELLS A MAJORITY OF ITS HOLDINGS OF
OUR STOCK.

In the event that, at any time before 2009, Lynch sells a majority of its
stock interest in us in one or a series of transactions, we will be obligated to
pay two of our officers, if they are still employed by us as of the last of such
sales, a total of 4% of the excess of the value of Lynch's interest in us
determined on the basis of the weighted-average per share price paid to Lynch
over our book value immediately prior to the consummation of this offering.
Thus, by way of illustration, if Lynch were to sell a majority of its stock
interest in us in 2001 at a per share price of $7.50 per share, we would be
obligated to pay such officers if they were then employed by us a total of
approximately $1,750,000 of additional compensation in 2001, thereby resulting
in a one-time after-tax reduction in net income for

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that year of $1,155,000 (using our book value as of June 30, 2000 and assuming
an effective tax rate of 34%).

DELAWARE LAW AND CERTAIN PROVISIONS OF OUR CHARTER MAY DELAY OR PREVENT US FROM
BEING ACQUIRED, WHICH COULD AFFECT THE VALUE OF OUR STOCK.

As a Delaware corporation, we are subject to the Delaware General
Corporation Law, including Section 203. Generally, Section 203 may prevent a
person or entity owning 15% or more of our outstanding voting stock from
engaging in a merger or business combination with us. Our board of directors has
resolved that Section 203 shall not apply to a person or entity acquiring 15% or
more of our voting stock directly from Lynch. Otherwise, however, as a result of
the application of Section 203, potential acquirers might be discouraged from
attempting to acquire us, even if we were no longer affiliated with Lynch.

We are authorized to issue up to 1,000,000 shares of preferred stock and to
determine the price, privileges, voting rights and other terms of the shares.
The issuance of any preferred stock with superior rights to our common stock
could reduce the value of our common stock. Moreover, specific rights we may
grant to future holders of our preferred stock could be used to restrict our
ability to merge with or sell our assets to a third party, preserving control of
us by our then existing stockholders and management and preventing you from
realizing a premium on your shares.

YOU SHOULD BE AWARE OF THE TAX EFFECTS OF THE RECEIPT AND EXERCISE OF THE
RIGHTS.

When the right is transferred to you on the basis of your ownership of Lynch
common stock, the fair market value of the right will be taxable as follows:

- first, as a dividend, up to the amount of Lynch's current and/or
accumulated earnings and profits, if any, attributable to the right;

- then, as a non-taxable reduction of your basis in the Lynch common stock
in respect of which the right was distributed, up to the amount thereof;
and

- finally, if there is any excess between one and two above, as gain
recognized as if the Lynch common stock had been sold.

You will not recognize any gain or loss for tax purposes upon exercise of
the right.

FORWARD-LOOKING STATEMENTS

Some of the information in this prospectus contains forward-looking
statements concerning our business, operations, financial performance and
financial condition. These statements can be identified by the use of
forward-looking terms such as "may," "will," "expect," "anticipate," "estimate,"
"continue," or other similar words. Forward-looking statements are included, for
example, in the discussions under "Our Separation from Lynch", "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Our Business." The forward-looking statements involve risks and uncertainties
and actual results may differ materially from those expressed or implied in
those statements. Factors that could cause differences, include, but are not
limited to, those discussed under "Risk Factors" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

THE OFFERING

We are distributing the rights to Lynch at no cost and Lynch is, in turn,
distributing the rights, at no cost, to those persons that are holders of
outstanding shares of Lynch common stock on the record date, , 2000.
Each person that is a holder of shares of Lynch common stock on the record date
will receive one right for every 1.5 shares of Lynch common stock owned by that
holder on the record date. You should be aware that, in order to be considered a
holder of Lynch common stock as of the record date, you would normally have to
have acquired shares of Lynch's common stock more

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<PAGE>
than two business days before the record date since it takes three days, with
the third day being the settlement date, to process an acquisition of publicly
traded stock. Each right will carry a basic subscription privilege which
entitles the holder to purchase one share of M-tron Class A common stock as well
as an over-subscription privilege to purchase additional shares that are not
purchased by other rights holders. No fractional shares will be issued. We are
offering up to 1,006,790 shares of our Class A common stock in the aggregate.
You are not required to exercise any or all of your rights unless you wish to
purchase shares under your over-subscription privilege, in which case you must
exercise all of your rights.

PURPOSE OF THE OFFERING

This rights offering is, essentially, our initial public offering. The
rights offering is different from a traditional initial public offering in that
it is initially directed only to Lynch's stockholders. The primary purposes of
the offering are to give Lynch's stockholders an opportunity to purchase shares
of our Class A common stock, to create an initial public market for our common
stock, to facilitate future access to public markets, to give us the option of
using shares of our Class A common stock to finance future acquisitions, if any,
and to obtain additional capital. We believe that the rights offering has an
advantage over a traditional initial public offering because it gives us the
opportunity to offer our common stock to persons who already have an initial
interest in us by virtue of their ownership interest in our parent, Lynch.

EXPIRATION DATE

The rights will expire at 5:00 p.m., Eastern Standard Time, on ,
2000 unless extended by us. In no case will we extend the time to exercise the
rights past , 2000. After expiration of the offering period,
unexercised rights will be null and void and no longer exercisable by the
holder. We will not be obligated to honor any purported exercise of rights
received by the subscription agent after the expiration time, regardless of when
the documents relating to such exercise were sent, except when you have timely
transmitted the documents under the guaranteed delivery procedures described
below. Notice of any extension of the expiration time will be made through a
press release issued by us.

SUBSCRIPTION PRIVILEGES

The holders of rights have a basic subscription privilege which entitles
them to purchase one share of our Class A common stock for each right held, as
well as an over-subscription privilege to purchase additional shares that are
not purchased by other rights holders. You are not required to exercise any or
all of your rights unless you wish to purchase shares under your
over-subscription privilege, in which case you must exercise all of your rights.
We will send you certificates representing shares that you purchase with your
subscription privilege as soon as practicable after the rights offering closes.

DETERMINATION OF SUBSCRIPTION PRICE

Prior to the rights offering, there has been no public market for our common
stock. We determined the subscription price based upon our business potential
and prospects and current market conditions. We believe that any valuation of
our business and our common stock, given the fact that there has been no public
market for our common stock and the potential for volatility in the market
place, is highly speculative. Accordingly, the actual value or resale value of
our common stock may be significantly higher or lower than the subscription
price.

PLAN OF DISTRIBUTION

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Idaho, Illinois, Maryland, Oregon and Utah, we will engage the services of a
licensed broker-dealer to act as our broker-dealer of record in those 6 states.
Such broker-dealer will not receive any compensation or other remuneration for
such services, but will be reimbursed for its accountable expenses up to an
agreed upon amount. We will also indemnify such broker-dealer against specified
liabilities, including liabilities under the Securities Act, which it may incur
in connection with services rendered by it. Where shares are held indirectly
through a broker, bank or other institution, we will reimburse the institutions'
reasonable out-of-pocket costs in distributing this prospectus and other
materials to beneficial owners of the stock.

Under the securities laws of the states, the rights may not be distributed
and the underlying securities sold unless the rights and securities have been
registered or qualified for sale in the states or an exemption from that
requirement is available and is complied with by us.

We have appointed , to assist with the rights offering in the
role of subscription agent. You should deliver your subscription certificate,
payment of the subscription price and notice of guaranteed delivery, if
applicable, to the subscription agent. The address to which these documents and
payment should be delivered is:

Telephone:

Facsimile:

The subscription agent will hold all subscriptions and subscription proceeds
in escrow until the earlier of the termination or close of the rights offering
and the acceptance or rejection of the subscription by us. The subscription
agent will be responsible for delivering stock certificates to rights holders
and will be responsible for delivering refunds to rights holders if the rights
offering is terminated, if a subscription certificate is rejected or if an
over-payment is made in connection with a rights holder's exercise of the
over-subscription privilege. Subscription proceeds will be held in an escrow
account. Subscribers may not withdraw funds from the escrow account. Escrowed
proceeds will be released to us on the date that the applicable subscription
certificate is accepted by us. We will pay the fees and expenses of the
subscription agent in connection with the rights offering.

EXERCISE OF RIGHTS

You may exercise your rights, in whole or in part, by delivering to the
subscription agent, at or prior to 5:00 p.m., Eastern Standard Time, on
, 2000, or such later date to which we may extend the rights
offering:

- your properly completed and duly executed subscription certificate;

- any required signature guarantees or other supplemental documentation;

- your payment in full of $5.00 per share of M-tron Class A common stock
subscribed for under your basic subscription privilege and for any shares
of M-tron Class A common stock as to which you wish to exercise your
over-subscription privilege.

We may reject any subscription documents the subscription agent receives
after 5:00 p.m., Eastern Standard Time, on , 2000, regardless of
when the documents were originally mailed.

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<PAGE>
METHOD OF PAYMENT

Payments for the shares must be made in U.S. dollars for the full number of
shares for which you have subscribed, and over-subscribed, either by:

- check or bank draft drawn upon a U.S. bank payable to , as
subscription agent, or

- wire transfer of immediately available funds to the subscription agent.

For detailed wiring instructions, contact at . Any
wire transfer of funds should clearly indicate the identity of the rights holder
who is paying the subscription price by the wire transfer. Evidence of such wire
transfer should be delivered to the subscription agent via facsimile at
. The subscription price will be deemed to have been received by the
subscription agent only upon:

- clearance of any uncertified check;

- receipt by the subscription agent of any certified check or bank draft
drawn upon a U.S. bank; or

- receipt of good funds in the subscription agent's account designated in
the wiring instructions provided by the subscription agent.

If paying by uncertified personal check, please note that funds paid in this
manner may take up to five business days to clear. Accordingly, holders of
rights who wish to pay the subscription price by means of uncertified personal
check are urged to make payment sufficiently in advance of the date on which the
rights expire to ensure that such payment is received and cleared by such date
and are urged to consider payment by means of certified or cashier's check,
money order or wire transfer of funds.

GUARANTEED DELIVERY PROCEDURES

If you want to exercise your rights, whether in whole or in part, but time
will not permit your subscription certificate to reach the subscription agent on
or prior to 5:00 p.m., Eastern Standard Time, on , 2000, you may exercise
your rights if you satisfy the following guaranteed delivery procedures:

- you send, and the subscription agent receives, payment in full for each
share of common stock being purchased through the subscription privilege
and the over-subscription privilege in the method described above under
"The Offering--Method of payment," on or prior to 5:00 p.m., Eastern
Standard Time, on , 2000;

- you send, and the subscription agent receives, on or prior to 5:00 p.m.,
Eastern Standard Time, on , 2000, a notice of guaranteed delivery,
substantially in the form provided with the attached instructions, from a
member firm of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an office or correspondent in the United States;
and

- you send, and the subscription agent receives, your properly completed and
duly executed subscription certificate and the related nominee holder
certification, if applicable, including any required guarantees, within
three business days following the date of your notice of guaranteed
delivery.

A notice of guaranteed delivery must state your name, the number of rights
that you hold, and the number of shares of common stock that you wish to
purchase under the subscription privilege and over-subscription privilege. A
notice of guaranteed delivery must also guarantee the delivery of your
subscription certificate to the subscription agent within three business days
following the date of the notice of guaranteed delivery. A notice of guaranteed
delivery may be delivered to the subscription

19
<PAGE>
agent in the same manner as your subscription certificate at the addresses set
forth above under "The Offering--Plan of distribution" or may be transmitted to
the subscription agent by facsimile transmission, to facsimile number
. You can obtain additional copies of the form of notice of
guaranteed delivery by requesting it from the subscription agent at the same
address.

SIGNATURE GUARANTEES

Your signature on each subscription certificate must be guaranteed by an
Eligible Guarantor Institution, as defined in Rule 17Ad-15 of the Securities
Exchange Act of 1934, and required under the standards and procedures adopted by
the subscription agent. Eligible Guarantor Institutions include banks, brokers,
dealers, credit unions, national securities exchanges and savings associations,
each as defined.

Signatures on the subscription certificate do not need to be guaranteed if
the subscription certificate provides that the shares of Class A common stock to
be purchased are to be delivered directly to the record owner of such rights or
if the subscription certificate is submitted for the account of a member firm of
a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc., or a commercial bank or trust company
having an office or correspondent in the United States.

SHARES HELD FOR OTHERS

If you hold shares of Lynch common stock for others on the record date, you
should provide a copy of this prospectus to the respective beneficial owners of
those shares as soon as possible, ascertain such beneficial owners' intentions
and obtain instructions with respect to the rights, as set forth in the
instructions we have provided to you for your distribution to the beneficial
owners. If the beneficial owner so instructs, you should complete subscription
certificates and, in the case of the over-subscription privilege, the related
nominee holder certification and submit them to the subscription agent with the
proper payment. If you hold shares of Lynch common stock for the account(s) of
more than one beneficial owner, you may exercise the number of rights to which
all such beneficial owners in the aggregate otherwise would have been entitled
had they been direct record holders of Lynch common stock on the record date for
the rights offering, provided that, you, as a nominee record holder, make a
proper showing to the subscription agent by submitting the form entitled
"Nominee Holder Certification" which we will provide to you with your rights
offering materials.

If you are a beneficial owner of Lynch common stock or you will receive your
rights through a broker, custodian bank or other nominee, we will ask your
broker, custodian bank or other nominee to notify you of this rights offering.
If you wish to exercise your rights, you will need to contact your broker,
custodian bank or nominee and request it to effect the transaction in accordance
with your instructions. To indicate your decision with respect to your rights,
you should complete and return to your broker, custodian bank or other nominee
the form entitled "Beneficial Owners Election Form". You should receive this
form from your broker, custodian bank or other nominee with the other rights
offering materials. If you wish to obtain a separate rights certificate, you
should contact the nominee as soon as possible and request that a separate
rights certificate be issued to you. You should be aware that nominee record
holders may establish deadlines for receiving instructions from beneficial
holders significantly in advance of the expiration date for the rights.

AMBIGUITIES IN EXERCISE OF THE RIGHTS

If you do not specify the number of rights being exercised on your
subscription certificate, or if your payment is not sufficient to pay the total
subscription price for all of the shares that you indicate

20
<PAGE>
you wish to purchase, you will be deemed to have exercised the maximum number of
rights that could be exercised for the amount of the payment that the
subscription agent receives from you.

If your payment exceeds the total subscription price for all of the rights
shown on your subscription certificate, your payment will be applied in the
following order:

- to subscribe for the number of shares of our Class A common stock, if any,
that you indicated on the subscription certificate(s) that you wished to
purchase through your subscription privilege; then

- to subscribe for shares of our Class A common stock until your
subscription privilege has been fully exercised; then

- to subscribe for additional shares of our Class A common stock pursuant to
the over-subscription privilege (subject to any applicable limitation).

Any excess payment remaining after the foregoing allocation will be returned
to you as soon as practicable following the closing of the rights offering by
mail, without interest or deduction.

OUR DECISIONS ARE BINDING

All questions concerning the timeliness, validity, form and eligibility of
any exercise of rights will be determined by us and our determinations will be
final and binding. We reserve the right, in our sole discretion, to waive any
defect or irregularity, or permit a defect or irregularity to be corrected
within such time as we may determine, or reject the purported exercise of any
right. Subscriptions will not be deemed to have been received or accepted until
all irregularities have been waived or cured within such time as we determine in
our sole discretion. We reserve the right, in our sole discretion, to reject any
subscriptions not properly submitted or the acceptance of which would, in the
opinion of our counsel, be unlawful. Neither Lynch, M-tron, the information
agent, the soliciting agent, if any, nor the subscription agent will be under
any duty to give notification of any defect or irregularity in connection with
the submission of subscription certificates or incur any liability for failure
to give such notification.

RIGHT TO TERMINATE OR MODIFY RIGHTS OFFERING

We may withdraw the rights and terminate the rights offering at any time
prior to the expiration of the rights, for any reason. If we withdraw the rights
and terminate the rights offering, any funds received from rights holders will
be promptly refunded by the subscription agent without interest or penalty. Our
board of directors, in its sole discretion, may amend the terms and conditions
of the rights and the offering at any time prior to the expiration of the
rights.

RISK OF LOSS ON DELIVERY OF SUBSCRIPTION CERTIFICATE FORMS AND PAYMENTS

The instructions accompanying the subscription certificate should be read
carefully and followed in detail. Do not send subscription certificates to Lynch
or to M-tron. The method of delivery of subscription certificates and payment of
the subscription price to the subscription agent will be at the election and
risk of the rights holders but, if sent by mail it is recommended that such
certificates and payments be sent by registered mail, properly insured, with
return receipt requested, and that a sufficient number of days be allowed to
ensure delivery to the subscription agent and clearance of payment at or prior
to 5:00 p.m., Eastern Standard Time, on , 2000.

OVER-SUBSCRIPTION PRIVILEGE

Subject to the limitations described below, each subscription right also
entitles you to exercise an over-subscription privilege to purchase a portion of
the shares of our Class A common stock that are not purchased pursuant to the
exercise of the rights holders' basic subscription rights. You are entitled

21
<PAGE>
to exercise your over-subscription privilege only if you exercise all of the
basic subscription rights that are evidenced by your subscription certificate.
If you wish to exercise your over-subscription privilege, you must indicate the
number of additional shares that you would like to purchase in the space
provided on your subscription certificate and, when you send in your
subscription certificate, you must also send the full purchase price for the
number of additional shares that you have requested to purchase pursuant to the
exercise of your over-subscription privilege (in addition to the full purchase
price for the number of shares that you will purchase pursuant to the full
exercise of your basic subscription privilege). If over-subscription privileges
are exercised with respect to more than the number of shares of our Class A
common stock that are available for purchase pursuant to the exercise of the
over-subscription privileges, we will allocate the available shares pro rata
among those rights holders who exercised their over-subscription privilege based
on the number of rights evidenced by their respective subscription certificates.
If all available shares are not so allocated, as could occur if some holders of
rights did not exercise their over-subscription privileges to the full extent of
their respective pro rata shares of the available shares, we will continue to
allocate the remaining available shares among those rights holders whose
exercise of the over-subscription privilege has not been fully satisfied, again
based on the number of rights evidenced by their respective subscription
certificates. If you have requested to purchase more shares than are allocated
to you, we will return the unused portion of the amount tendered by you, without
interest, promptly after the consummation of this offering. Notwithstanding the
foregoing, in certain circumstances, in order to comply with applicable state
securities laws, we may not be able to honor all over-subscription privileges
even if we have shares available.

To determine if you have fully exercised your basic subscription privilege,
we will consider only the basic subscription privileges held by you in the same
capacity. For example, if you were granted rights to purchase shares of our
common stock by reason of your individual ownership of Lynch common stock and by
reason of your joint ownership, with your spouse, of other shares of Lynch
common stock, you would only need to fully exercise your basic subscription
privilege with respect to your individually owned rights in order to exercise
your over-subscription privilege with respect to your individually owned rights.
You would not have to subscribe for any shares under the basic subscription
privilege owned jointly with your spouse to exercise your individual
over-subscription privilege.

When you complete the portion of the subscription certificate to exercise
the over-subscription privilege, you will be representing and certifying that
you have fully exercised your basic subscription privilege received in respect
of shares of Lynch common stock you hold in that capacity. You must exercise
your over-subscription privilege at the same time as you exercise your basic
subscription privilege in full.

If you own your shares of Lynch common stock through your broker, dealer or
other nominee holder who will exercise your over-subscription privilege on your
behalf, the nominee holder will be required to certify to us and the
subscription agent:

- the number of shares of Lynch common stock held on , 2000, the
record date, on your behalf;

- the number of rights you exercised under your basic subscription
privilege;

- that your entire basic subscription privilege held in the same capacity
has been exercised in full; and

- the number of shares of our Class A common stock you subscribed for
pursuant to the over-subscription privilege.

Your nominee holder must also disclose to us certain other information
received from you.

22
<PAGE>
If you exercised your over-subscription privilege and are allocated less
than all of the shares of our Class A common stock for which you wished to
subscribe, the excess funds you paid for shares of our Class A common stock that
are not allocated to you will be returned in full by mail, without interest or
deduction, as soon as practicable after the expiration date of the rights.

EXERCISE OF LESS THAN ALL RIGHTS

If you subscribe for fewer than all of the shares represented by your
subscription certificate, you may (1) attempt to sell your remaining rights, or
(2) receive from a new subscription certificate representing the
unused rights. See "The Offering-Transferability of rights" below if you do not
wish to exercise any or all of your rights, but instead, want to find out about
how you may be able to sell them.

TRANSFERABILITY OF RIGHTS

It is not anticipated that a formal market will be made in the rights or
that they will be traded on any exchange. Although an informal market may
develop, there is no assurance that any market will develop for the rights.

You may transfer all of the rights, including over-subscription rights,
evidenced by a single subscription certificate by signing the subscription
certificate for transfer in accordance with the appropriate form printed on the
subscription certificate.

You may transfer a portion of the rights, including over-subscription
rights, evidenced by a single subscription certificate by delivering to
the subscription certificate properly signed for transfer, with
separate written instructions to register a portion of the rights in the name of
your transferee and to issue a new subscription certificate to the transferee
covering the transferred rights. In that event and by appropriate written
instructions, you may elect to receive a new subscription certificate covering
the rights you did not transfer, or may request that sell your
retained rights in the manner described below.

If you wish to transfer all or a portion of your rights, you should allow a
sufficient amount of time prior to the expiration time for:

- the transfer instructions to be received and processed by ;

- new subscription certificates to be issued and transmitted; and

- the rights evidenced by the new subscription certificates to be exercised
or sold by the intended recipients.

It may require from two to ten business days, or more, to complete transfers
of rights, depending upon how you deliver the subscription certificate and
payment and the number of transactions you request. Neither Lynch, nor M-tron
nor the subscription agent will be liable to you or any transferee of rights if
subscription certificates or any other required documents are not received in
time for exercise or sale prior to the expiration time.

If you exercise or sell rights in part, a new subscription certificate for
the remaining rights will be issued to you only if the subscription agent
receives a properly endorsed subscription certificate from you no later than
5:00 p.m., Eastern Standard Time, on the fifth business day prior to the
expiration date. It will not issue new subscription certificates for partially
exercised or sold subscription certificates submitted after that time and date.
If you do submit a subscription certificate after that time and date, you will
not be able to exercise the unexercised or unsold rights.

Unless you make other arrangements with the subscription agent, a new
subscription certificate issued after 5:00 p.m., Eastern Standard Time, on the
fifth business day before the expiration date will be held for pick-up by you at
.

23
<PAGE>
If you request a reissuance of a subscription certificate, the delivery of
that document will be at your risk.

You, and not Lynch, M-tron or the subscription agent, will be responsible
for paying any commissions, fees and other expenses, including brokerage
commissions and transfer taxes, that you may incur in the purchase, sale or
exercise of rights.

If you do not exercise your rights prior to the expiration time, those
rights will expire and will no longer be exercisable by you.

PROCEDURES FOR DEPOSITORY TRUST COMPANY PARTICIPANTS

We expect that you will be able to exercise your subscription privilege
through the facilities of the Depository Trust Company. If your rights are held
of record through the Depository Trust Company, you may exercise your basic
subscription privilege and your over-subscription by instructing the Depository
Trust Company to transfer your rights from your account to the account of the
subscription agent, together with certification as to the aggregate number of
rights you are exercising and the number of shares of our Class A common stock
you are subscribing for, including any over-subscription, under your
subscription privilege and your subscription price payment for each share you
subscribed for under your subscription and over-subscription privilege.

MINIMUM SUBSCRIPTION AMOUNT

We are conducting the rights offering on a best efforts basis. Thus, we
cannot guarantee that any of our shares will be sold. The rights offering is not
conditioned upon our receipt of subscriptions for any minimum number of shares
of our Class A common stock. However, we may cancel the rights offering at any
time prior to its completion, in which case all subscription payments will be
returned without interest or penalty.

NO REVOCATION

Once you exercise your subscription privilege, you may not revoke that
exercise. Rights not exercised prior to their expiration will be null and void
as of and after such time.

NO BOARD RECOMMENDATION

Neither our Board of Directors nor the Board of Directors of Lynch makes any
recommendation to you about whether you should exercise any rights. In addition,
the members of those Boards, including Mario J. Gabelli, Chairman of Lynch, have
not advised us whether they intend to exercise any subscription rights they may
receive as shareholders of Lynch or whether, if they do exercise their
subscription rights, they intend to exercise their over-subscription privilege.
If you exercise rights, you risk investment loss on money invested. We cannot
assure you that anyone purchasing shares of our Class A common stock will be
able to sell those shares in the future at a higher price. An investment in our
Class A common stock must be made in accordance with your evaluation of your
best interest.

NO FRACTIONAL SHARES

No fractional shares will be issued. If your rights would allow you to
purchase a fractional share, you may exercise your rights only by rounding down
to, and paying for, the nearest whole share, or any lesser number of whole
shares. We will accept any inadvertent subscription indicating a purchase of
fractional shares by rounding downward to the nearest number of whole shares and
refunding without interest any payment received for a fractional share as soon
as practicable.

24
<PAGE>
STATE AND FOREIGN SECURITIES LAW

The rights may not be exercised by any person, and neither this prospectus,
nor the subscription certificate shall constitute an offer to sell or a
solicitation of an offer to purchase any shares of our common stock, in any
jurisdiction in which such transactions would be unlawful.

No action has been taken in any jurisdiction outside the United States to
permit offers and sales of the rights or the offer, sale or distribution of the
shares of our common stock. Consequently, we may reject subscriptions that
relate to the exercise of rights by any holder of rights outside the United
States, and we may also reject subscriptions from holders in jurisdictions
within the United States and we may refuse to distribute rights to any eligible
subscriber if we or Lynch should determine that we or Lynch may not lawfully
issue securities to such subscribers. We or Lynch may do so even if we or Lynch
could qualify the securities for sale or distribution by taking other actions or
modifying the terms of the offering or the distribution in such jurisdictions
which either corporation may decline to do in its sole discretion. In such
event, rights holders who are residents of these jurisdictions will not be
eligible to participate in the rights offering.

Subscription certificates will not be mailed to eligible subscribers whose
addresses are outside the United States or who have an APO or FPO military
address, but will be held by the subscription agent for their account. To
exercise such rights, these subscribers must notify the subscription agent by
the expiration date and must establish to the satisfaction of the subscription
agent that such exercise is permitted under applicable law.

ISSUANCE OF STOCK CERTIFICATES

Stock certificates for shares purchased in the rights offering will be
issued to you as soon as practicable after the expiration date. will
deliver subscription payments to us only after consummation of the rights
offering and the issuance of stock certificates to those exercising rights.

If you exercise rights, you will have no rights as a stockholder until
certificates representing shares you purchased are issued. Unless otherwise
instructed in your subscription certificate form, shares purchased by the
exercise of rights will be registered in the name of the person exercising the
rights.

QUESTIONS OR REQUESTS FOR ASSISTANCE

If you have questions or need assistance concerning the procedure for
exercising the rights, or if you would like additional copies of this
prospectus, the Instructions for Subscription Certificates or the Notice of
Guaranteed Delivery, you should contact our subscription agent at ( ) -
.

OUR SEPARATION FROM LYNCH

OVERVIEW

We are the successor to a South Dakota corporation that transferred all of
its assets and liabilities to us, other than its investment in another
corporation that is engaged in a different line of business than ours, in
connection with a reorganization of certain subsidiaries and affiliates of
Lynch. Lynch has agreed to indemnify us against any liabilities that might arise
out of such reorganization or that are attributable to any of its other
subsidiaries or affiliates. Currently, we are an indirect wholly-owned
subsidiary of Lynch. After the consummation of this offering, Lynch will
continue to own all of our Class B common stock, which will be entitled to cast
at least 97% of the votes that may be cast by the holders of our common stock,
but we will be a separate publicly-held company. The termination of our status
as a wholly-owned subsidiary of Lynch is sometimes referred to in this
prospectus as the "Separation."

25
<PAGE>
BENEFITS OF THE SEPARATION

We believe that we will realize benefits from the Separation, including the
following:

GREATER STRATEGIC FOCUS. In addition to our business, Lynch generates
significant revenue from other lines of business. Our focus will be on
developing businesses and strategic opportunities for our products.

BETTER INCENTIVES FOR EMPLOYEES AND GREATER ACCOUNTABILITY. We expect that
the motivation of our employees and the focus of our management will be
strengthened by incentive compensation programs tied to the market performance
of our common stock. The separation will enable us to offer our employees
compensation directly linked to the performance of our business, which we expect
to enhance our ability to attract and retain qualified personnel.

MORE DIRECT ACCESS TO CAPITAL MARKETS. As a separate, public company, we
will have more direct access to the capital markets to issue debt or equity
securities and to grow through acquisitions.

SEPARATION AND ON-GOING INTER-COMPANY ARRANGEMENTS

We have entered into a separation agreement providing for the separation of
our business from Lynch. Lynch will continue to provide to us certain management
advisory and oversight services, including strategic, merger and acquisition,
and financial services, essentially on the same basis as it has provided such
services in the past. These services will be provided for a fee equal to
$100,000 per annum, plus out-of-pocket expenses. The dollar amount of this fee
will increase annually by an amount equal to the percentage increase in the
consumer price index for the preceding year. The management services arrangement
would terminate if Lynch were to cease to own a majority of the voting power of
our common stock.

LYNCH'S CONTROL OF US FOLLOWING THE SEPARATION

After the completion of this offering, Lynch will own 100% of the
outstanding shares of our Class B common stock representing at least 97% of the
voting power of our capital stock. Lynch has advised us that it may consider
various alternatives with respect to its ownership of our Class B common stock,
including a possible distribution of such Class B common stock to its own
stockholders. In this connection, in order to preserve Lynch's ability to make
such a distribution on a tax-free basis, which requires, among other things,
that Lynch own stock having 80% of the voting power of all of our capital stock,
the Class B common stock has five votes per share. Nonetheless, Lynch is not
obligated to distribute any of its shares of our common stock to the holders of
Lynch's common stock and it is not prohibited from selling such shares to a
third party.

Any shares of Class B common stock that are distributed by Lynch to the
holders of its common stock will convert into an equal number of shares of
Class A common stock which has one vote per share five years after the date of
such distribution unless Lynch, in its sole discretion, accelerates the date of
such conversion. Any shares of Class B common stock that are transferred by
Lynch to an unaffiliated person or entity will convert into an equal number of
shares of Class A common stock having one vote per share immediately upon the
transfer of such shares to such entity or person which is not controlled by or
is not under common control with Lynch.

26
<PAGE>
USE OF PROCEEDS

We estimate that at a subscription price of $5.00 per share, the net
proceeds from the sale of the 1,006,790 shares of Class A common stock that we
are offering will be approximately $ million after deducting estimated
offering expenses payable by us.

We expect to use the net proceeds from this offering to pay a demand
promissory note in the principal amount of $1.5 million that we distributed to
Lynch as a dividend shortly before this offering. The balance of the net
proceeds of this offering, if any, will be used for general corporate purposes,
including capital expenditures at our Yankton, South Dakota facility, increasing
our working capital, including inventory, satisfaction of other existing
indebtedness, increases in spending on research and development and for
potential acquisitions of complementary products, technologies or businesses. As
of the date of this prospectus, we cannot specify with certainty the particular
uses (other than payment of the note to Lynch) for the net proceeds that we will
receive in this offering. Accordingly, our management will have broad discretion
in applying our net proceeds of this offering. Pending the uses described above,
we intend to invest the net proceeds in investment grade, interest-bearing
instruments.

DIVIDEND POLICY

We currently intend to retain earnings, if any, to support the development
of our business and do not anticipate paying cash dividends for the foreseeable
future. Payment of future dividends, if any, will be at the discretion of our
Board of Directors after taking into account various factors, including our
financial condition, operating results and current and anticipated cash needs.
In addition, our current credit facility imposes restrictions upon our payment
of cash dividends in excess of 50% of net income for the prior fiscal year
without our lender's consent.

27
<PAGE>
CAPITALIZATION

The following table presents our capitalization as of June 30, 2000, on an
actual basis and as adjusted to give effect to the receipt by us of the net
proceeds, after deducting estimated offering expenses payable by us, from the
sale of 1,006,790 shares of Class A common stock in this offering at a
subscription offering price of $5.00 per share. There can be no assurance that
any shares of our Class A common stock will be sold pursuant to this offering.

<TABLE>
<CAPTION>
JUNE 30, 2000
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Demand note due to parent(1)................................ $1,500
$
Short-term notes payable to bank and related parties........ 695
Due to parent............................................... 118
Long-term notes payable to related parties, less current
portion................................................... 99
Stockholders' equity:
Preferred Stock, $.01 par value, 1,000,000 shares
authorized, none issued or outstanding..................
Class A common stock, $0.01 par value, 12,000,000 shares
authorized, shares issued and outstanding, actual
and shares as adjusted.................................. 0
Class B common stock, $0.01 par value, 13,000,000 shares
authorized, shares issued and outstanding, actual
and as adjusted(2)...................................... 0
Additional paid-in capital................................ 0
Retained earnings.........................................
Less: treasury stock...................................... 0
Net assets(3)............................................... 5,058
------
------
Total capitalization........................................ $7,470
$
======
======
</TABLE>

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

(1) The amount shown in the above table as "Demand note due to parent" reflects
our obligation to pay Lynch $1.5 million with respect to a dividend which we
declared shortly prior to this offering. Such dividend was paid in the form
of a demand promissory note in the principal amount of $1.5 million. The
effect of this dividend has been reflected retroactively in the combined
financial statements as of and for the six months ended June 30, 2000.

(3) The information in the above table excludes 1,125,000 shares of Class A
common stock that are reserved for issuance under our 2000 Stock Option
Plan.

(3) The amount shown in the above table as net assets represents the net
investment of Lynch in us, after giving effect to the dividend discussed in
Note (1) above.

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<PAGE>
DILUTION

Our net tangible book value as of June 30, 2000, was $5,058,000, or $0.78
per common share. Net tangible book value represents our total tangible assets
less total liabilities, divided by the total number of shares of our common
stock outstanding. After giving effect to the sale of 1,006,790 shares of
Class A common stock at a subscription price of $5.00 per share and deducting
the estimated offering expenses payable by us, our pro forma net tangible book
value as of June 30, 2000 would have been $9,591,950 or $1.28 per share. This
represents an immediate increase in pro forma net book value of $0.50 per share
to existing stockholders and an immediate dilution of $3.72 per share to new
investors purchasing shares of our Class A common stock in this offering. The
following table illustrates the per share dilution to the new investors.

<TABLE>
<S> <C>
Subscription price per share................................ $5.00
Pro forma net tangible book value per share as of June 30,
2000.................................................... $0.78
Increase in pro forma net tangible book value per share
attributable to new investors........................... $0.50
Pro forma net tangible book value per share after this
offering.................................................. $1.28
Dilution per share to new investors......................... $3.72
</TABLE>

The amounts of the "Pro forma net tangible book value per share after this
offering" would be less, and the "Dilution per share to new investors" would be
more, if less than 1,006,790 shares of our Class A common stock were sold
pursuant to this offering. For example, if only 500,000 shares of our Class A
common stock were sold pursuant to this offering, the "Pro forma net tangible
book value per share after this offering" would be $1.01 and the "Dilution per
share to new investors" would be $3.99.

The following table summarizes, on a pro forma basis as of June 30, 2000,
the differences between the existing stockholders and the new investors with
respect to the number of shares of common stock purchased, the total
consideration paid and the average price paid per share at a subscription price
of $5.00 per share, after deducting estimated offering expenses payable by us,
in each case assuming a sale of 1,006,790 shares of our Class A common stock
pursuant to this offering:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- -------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........................ 6,500,000 87% $5,058,000 50% $0.78
New investors................................ 1,006,790 13% 5,033,950 50% 5.00
--------- ---- ---------- ---- -----
Total.................................. 100% 100% $1.34
========= ==== ========== ==== =====
</TABLE>

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

The information in the tables above excludes options under our 2000 Stock
Option Plan to purchase shares of Class A common stock which we have
granted effective upon consummation of this offering at an exercise price per
share equal to the subscription price.

29
<PAGE>
SELECTED COMBINED FINANCIAL INFORMATION

The following selected combined financial data for the five years ended
December 31, 1999 are derived from our audited financial statements and are
presented on the basis described in Note 1 of the Notes to Combined Financial
Statements. The financial data for the six month periods ended June 30, 1999 and
2000 are derived from unaudited financial statements. The unaudited financial
statements include all adjustments, consisting of normal recurring accruals,
which we consider necessary for a fair presentation of the financial position
and the results of operations for these periods.

Operating results for the six months ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the entire year ending
December 31, 2000. The following data should be read in conjunction with the
combined financial statements, related notes, and other financial information
included elsewhere in this prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF INCOME DATA:
Net sales........................... $20,118 $18,433 $22,828 $22,798 $26,467 $12,371 $18,484
Cost of products sold............... 14,666 13,244 16,862 16,816 19,338 8,973 12,892
------- ------- ------- ------- ------- ------- -------
Gross profit........................ 5,452 5,189 5,966 5,982 7,129 3,398 5,592
Research and development expenses... 801 834 779 674 856 426 397
Selling, general and administrative
expenses.......................... 3,174 3,142 3,577 3,880 4,428 2,180 3,023
Equity-based compensation expense... 0 0 0 0 62 -- 364
------- ------- ------- ------- ------- ------- -------
Operating income.................... 1,477 1,213 1,610 1,428 1,783 792 1,808
Interest expense.................... 222 163 195 186 232 85 76
Other (income)...................... 0 0 0 0 (17) 0 0
------- ------- ------- ------- ------- ------- -------
Income before income taxes.......... 1,255 1,050 1,415 1,242 1,568 707 1,732
Income tax expense.................. 408 373 409 425 510 227 561
------- ------- ------- ------- ------- ------- -------
Net income.......................... $ 847 $ 677 $ 1,006 $ 817 $ 1,058 $ 480 $ 1,171
======= ======= ======= ======= ======= ======= =======

<CAPTION>
6/30/00
--------
COMBINED BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Cash................................ $ 158 $ 36 $ 81 $ 3 $ 125 $ 2
Working capital..................... 1,013 1,275 1,875 2,469 3,361 2,894
Total assets........................ 7,375 6,389 8,858 8,898 10,940 13,535
Demand note due to parent(1)........ 0 0 0 0 0 1,500
Due to parent....................... 0 0 0 0 118 118
Long-term notes payable to related
parties, less current portion..... 342 95 0 0 199 99
Net assets(1)....................... 2,495 3,172 3,927 4,745 5,387 5,058
</TABLE>

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

(1) Includes our obligation to pay Lynch $1.5 million with respect to a dividend
which we declared shortly prior to this offering. Such dividend was paid in
the form of a demand promissory note in the principal amount of $1.5
million. The effect of this dividend has been reflected retroactively in the
combined financial statements as of and for the six months ended June 30,
2000.

30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our results of operations and
financial condition in conjunction with the financial statements and other
financial information included elsewhere in this prospectus. This discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results may be materially different from those anticipated in these
forward-looking statements resulting from a variety of factors, including, but
not limited to, those under "Risk Factors" and elsewhere in this prospectus.

OVERVIEW

Over the past two years, we have introduced new management executives in
three areas critical to our success. In early 2000, we added Robert R. Zylstra,
our President and Chief Executive Officer. In early 1999, we added Gregory T.
Rogers, our Vice President of Engineering, and John R. Kerg, Jr., our Vice
President of Sales and Marketing. Under the leadership of our new CEO, the
management team has focused on developing and implementing our strategic
initiatives to grow the business in the communications infrastructure industry.

Virtually all of our net sales in 1999 were derived from the delivery of
frequency control devices, including packaged quartz crystals and oscillator
modules. The demand for our frequency control products depends upon many
factors, including continued investment in the expansion and improvement of
communications infrastructure and the need for more advanced frequency control
devices. In 1999, the majority of our net sales was related to the
communications infrastructure industry.

We recognize net sales at the time of shipment to the customer. Sales of our
custom designed products are final and are made with no right of return after
shipment.

A significant portion of our net sales has been derived from customers
outside the United States and we expect that to continue. Our international
sales represented approximately 43% of our net sales in 1999. This consisted of
approximately 19% from customers in Canada, 9% from customers in Asia, 6% from
customers in Western Europe, 4% from customers in Mexico and 5% from other
international customers. All of our sales are denominated in United States
dollars and therefore our currency risk on international sales is limited.

We manufacture products at our Yankton, South Dakota facility. In addition,
we utilize the services of two contract manufacturers in South Korea and China
to produce product for us. In 1999, sales of products manufactured for us in
South Korea and China represented approximately 40% of our net sales. All of our
purchases from our contract manufacturers are denominated in United States
dollars.

We derive a significant portion of our net sales from our ten largest
customers. Our top ten customers accounted for approximately 60% of net sales in
1999. In 1999, Newbridge Networks, a subsidiary of Alcatel, accounted for
approximately 12.4% of our net sales. No other customers accounted for more than
10% of our net sales in 1999.

31
<PAGE>
Our customers include original equipment manufacturers, contract
manufacturers and distributors. Over recent years, sales to contract
manufacturers and distributors have increased at a higher rate than sales to
original equipment manufacturers. As a general matter, sales to both contract
manufacturers and distributors generate lower margins than sales to original
equipment manufacturers. Sales to contract manufacturers and distributors
comprised approximately 41% of our net sales in 1999. Other factors that can
affect our gross margins include product mix in any given period, competitive
pressures and manufacturing costs. We expect that over time our increased
emphasis on working closely with designers at original equipment manufacturers
to have our products specified for use in the products of the original equipment
manufacturers will contribute positively to our overall gross margins.

Cost of products sold consists of the cost of manufacturing services on
products produced by our two contract manufacturers and the cost of purchased
components and direct materials cost for internally manufactured components,
compensation and employee benefits for manufacturing personnel and purchasing
and manufacturing overhead cost. We expect our cost of products sold to decrease
as a percentage of sales as the scale of our operations increases and provides
greater coverage of fixed costs.

Research and development expenses consist primarily of compensation and
related costs for personnel as well as costs related to materials, supplies and
depreciation of equipment utilized in our research and development efforts. All
research and development cost is expensed as incurred. We intend to increase our
spending on research and development significantly by increasing the size of our
research and development staff.

Selling, general and administrative expenses consist primarily of wages and
benefits, as well as expenses related to marketing, administrative and support
activities and a management fee paid to Lynch, our parent, for services provided
to us.

Equity-based compensation expense consists of compensation that accrued to
the benefit of certain executives based upon our financial performance over a
defined period of time.

BASIS OF PRESENTATION

We are the successor to a South Dakota corporation that transferred all of
its assets and liabilities to us, other than its investment in another
corporation that is engaged in a different line of business than ours, in
connection with a reorganization of certain subsidiaries and affiliates of our
parent, Lynch. Our combined financial statements have been prepared using the
historical basis of assets and liabilities and historical results of operations
of our predecessor, including the accounts of its wholly-owned foreign
subsidiary but excluding any assets or liabilities relating to our predecessor's
investment in another corporation. Significant intercompany accounts and
transactions have been eliminated.

The historical financial information presented in this prospectus reflects
periods during which we did not operate as an independent public company. Such
information, therefore, may not necessarily reflect our results of operations,
financial condition or cash flows in the future or what they would have been had
we been an independent public company during the reporting periods. It is likely
that our administrative expenses will increase as a result of additional
financial reporting requirements, stock listing and transfer fees, directors'
fees, insurance compensation, and other costs associated with being a public
company.

32
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, our combined
financial data expressed as a percentage of net sales:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31 JUNE 30
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Sales................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of products sold.................... 73.9 73.8 73.1 72.6 69.7
----- ----- ----- ----- -----
Gross profit............................. 26.1 26.2 26.9 27.4 30.3
Research and development expenses........ 3.4 3.0 3.2 3.4 2.2
Selling, general and administrative
expenses............................... 15.6 17.0 16.8 17.6 16.4
Equity-based compensation expense........ -- -- 0.2 -- 2.0
----- ----- ----- ----- -----
Operating income......................... 7.1 6.2 6.7 6.4 9.7
Interest expense......................... 0.9 0.8 0.9 0.7 0.4
Other (income)........................... -- -- (0.1) -- --
----- ----- ----- ----- -----
Income before income taxes............... 6.2 5.4 5.9 5.7 9.3
Income tax expense....................... 1.8 1.8 1.9 1.8 3.0
----- ----- ----- ----- -----
Net income............................... 4.4% 3.6% 4.0% 3.9% 6.3%
===== ===== ===== ===== =====
</TABLE>

SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1999

NET SALES. Net sales increased $6.1 million, or 49.4%, to $18.5 million for
the six months ended June 30, 2000 from $12.4 million for the six months ended
June 30, 1999. The increase in net sales was generally due to increased demand
for most of our products by existing customers and increased demand by
communications infrastructure equipment suppliers and, to a lesser extent, was
enhanced by sales of our temperature controlled oscillators, which were first
introduced in mid-1999. Continuing a recent trend, sales to contract
manufacturers and distributors increased at a greater rate than sales to other
customers. Sales to contract manufacturers and distributors accounted for 44.3%
of our net sales, in the six months ended June 30, 2000, compared to 38.7% of
our net sales, in the six months ended June 30, 1999.

GROSS PROFIT. Gross profit increased $2.2 million, or 64.6%, to
$5.6 million, or 30.3% of net sales, for the six months ended June 30, 2000 from
$3.4 million, or 27.4% of net sales, for the same period in 1999. The
improvement in gross margin was due to increased net sales resulting in better
factory utilization and the absence of manufacturing inefficiencies and quality
control problems which we experienced in 1999 as we rapidly increased the rate
of throughput at our South Dakota facility to meet increased customer demand. On
the other hand, improvements in the gross margin percentage were partially
offset by increased sales of products to contract manufacturers and distributors
at lower margins.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
decreased $29,000, or 6.8%, to $397,000, or 2.2% of net sales, for the six
months ended June 30, 2000, compared to $426,000, or 3.4% of all sales, for same
period in 1999. The decrease in expense resulted from temporarily lower
employment costs for the department. We expect total research and development
expense to be approximately $1.0 million for the year ending December 31, 2000
and $2.0 million for the year ending December 31, 2001. The additional research
and development funds will be used to invest in product development, hire
additional engineers and continue to use outside services to support our new
product initiatives.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $843,000, or 38.7%, to $3.0 million, or 16.4%
of net sales, for the six months ended June 30, 2000 from

33
<PAGE>
$2.2 million, or 17.6% of net sales, for the same period in 1999. The increased
expense was primarily due to increased commissions associated with our increase
in net sales and increased incentive compensation as a result of increased
profitability.

EQUITY-BASED COMPENSATION EXPENSE. Equity-based compensation expense was
$364,000 for the six months ended June 30, 2000 compared to zero for the same
period in 1999. The increased expense was due to our improved financial
performance and the addition of our new President and Chief Exeutive Officer in
January, 2000.

INTEREST EXPENSE. Interest expense for both periods was less than $100,000.
Lower borrowing levels for 2000 were partially offset by higher interest rates
for the first half of 2000.

INCOME TAX EXPENSE. Income tax expense increased $334,000, or 146.1%, to
$561,000 for the six months ended June 30, 2000 from $227,000 for the same
period in 1999. The effective tax rate was approximately 32.4% and 32.1% for the
six-month periods ending June 30, 2000 and June 30, 1999, respectively. The
State of South Dakota does not levy an income tax.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

NET SALES. Net sales increased $3.7 million, or 16.1%, to $26.5 million in
1999 from $22.8 million in 1998. The increase in net sales was primarily due to
increased sales volume of frequency control devices delivered to communications
infrastructure equipment suppliers, including increased sales of voltage
controlled crystal oscillators in 1999 arising from an increase in sales to a
non-U.S. customer. Net sales for 1999 were also increased by the introduction in
1999 of our temperature controlled oscillators.

GROSS PROFIT. Gross profit increased $1.1 million, or 19.2%, to
$7.1 million, or 26.9% of net sales, in 1999 from $6.0 million, or 26.2% of net
sales, in 1998. The primary reason for the improvement in gross profit was the
increase in volume of products manufactured and shipped. The gross margin
percentage benefitted from increased volume which resulted in a better
utilization of fixed overhead, but that was offset by manufacturing
inefficiencies and certain quality control problems which were experienced as we
rapidly increased the rate of throughput at our South Dakota facility to meet
increased customer demand.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
increased $182,000, or 27.0%, to $856,000, or 3.2% of net sales, in 1999 from
$674,000, or 3.0% of net sales, in 1998. The increase in research and
development expense was due to increased staffing and the finalization of a
number of new products and enhancements of existing lines, including the
development of the temperature controlled oscillator.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $548,000, or 14.1%, to $4.4 million, or 16.8%
of net sales in 1999, from $3.9 million, or 17.0% of net sales, in 1998. The
increased expense was primarily due to increased commissions associated with our
increase in net sales and, to a lesser extent, the addition of our Vice
President of Sales and Marketing to fill a position which had been vacant since
mid-1997.

EQUITY-BASED COMPENSATION EXPENSE. Equity-based compensation expense for
the year ended December 31, 1999 was $62,000. The plan under which the expense
accrued was adopted in 1999 and no such expense was accrued during the year
ended December 31, 1998.

INTEREST EXPENSE. Interest expense increased to $232,000 in 1999 from
$186,000 in 1998 as a result of increased borrowings and higher interest rates.

INCOME TAX EXPENSE. Income tax expense increased to $510,000 in 1999 from
$425,000 in 1998 due primarily to improved earnings. The effective tax rates
were 32.5% in 1999 and 34.2% in 1998.

34
<PAGE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

NET SALES. Net sales for 1998 were $22.8 million, unchanged from 1997.
Sales volume and types of products sold remained relatively constant for 1997
and 1998.

GROSS PROFIT. Gross profit for 1998 was $6.0 million, unchanged from 1997.
Types of products sold and costs associated with sales remained relatively
constant for 1997 and 1998.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
decreased $105,000, or 13.5%, to $674,000, or 3.0% of net sales, in 1998 from
$779,000, or 3.4% of net sales, in 1997. This decrease was caused, primarily, by
lower employment costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $303,000, or 8.5%, to $3.9 million, or 17.0%
of net sales, in 1998 from $3.6 million, or 15.6% of net sales, in 1997. The
increased expense, both in dollar terms and as a percentage of sales, was due to
increased commissions as a percent of sales and increased marketing expenses.

INTEREST EXPENSE. Interest expense was $186,000 in 1998 and $195,000 in
1997.

INCOME TAX EXPENSE. Income tax expense was $425,000 in 1998 and $409,000 in
1997. The effective tax rates were 34.2% in 1998 and 28.9% in 1997.

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth our unaudited quarterly results of operations
data for the eight quarters ended June 30, 2000, and the data expressed as
percentages of our net sales for the same periods. This information has been
prepared on the same basis as the audited combined financial statements
appearing elsewhere in this prospectus and, in our opinion, contains all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the unaudited quarterly results of operations set forth below.
Results of operations for any previous quarter are not necessarily indicative of
the results you can expect for the entire year or any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
(IN THOUSANDS)
-------------------------------------------------------------------------------------
SEP 30 DEC 31 MAR 31 JUN 30 SEP 30 DEC 31 MAR 31 JUN 30
1998 1998 1999 1999 1999 1999 2000 2000
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales....................... $5,648 $5,807 $5,425 $6,946 $7,088 $7,008 $8,410 $10,074
Cost of products sold........... 4,195 4,153 3,902 5,071 5,085 5,280 5,811 7,081
------ ------ ------ ------ ------ ------ ------ -------
Gross profit................ 1,453 1,654 1,523 1,875 2,003 1,728 2,599 2,993
Research and development
expenses...................... 176 185 202 224 204 226 200 197
Selling, general and
administrative expenses....... 913 989 988 1,192 1,131 1,117 1,374 1,649
Equity-based compensation
expense....................... -- -- -- -- 25 37 174 190
------ ------ ------ ------ ------ ------ ------ -------
Operating income................ 364 480 333 459 643 348 851 957
Interest expense................ 50 40 35 50 77 70 48 28
Other (income).................. -- -- -- -- (17) -- -- --
------ ------ ------ ------ ------ ------ ------ -------
Income before income taxes...... 314 440 298 409 583 278 803 929
Income tax expense.............. 109 153 98 129 189 94 260 301
------ ------ ------ ------ ------ ------ ------ -------
Net income...................... $ 205 $ 287 $ 200 $ 280 $ 394 $ 184 $ 543 $ 628
====== ====== ====== ====== ====== ====== ====== =======
</TABLE>

35
<PAGE>
PERCENTAGE OF NET SALES

<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------
SEP 30 DEC 31 MAR 31 JUN 30 SEP 30 DEC 31 MAR 31 JUN 30
1998 1998 1999 1999 1999 1999 2000 2000
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales......................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of products sold............. 74.3 71.5 71.9 73.0 71.7 75.3 69.1 70.3
----- ----- ----- ----- ----- ----- ----- -----
Gross profit.................. 25.7 28.5 28.1 27.0 28.3 24.7 30.9 29.7
Research and development
expense......................... 3.1 3.2 3.7 3.2 2.9 3.2 2.4 1.9
Selling, general and
administrative expense.......... 16.2 17.0 18.3 17.2 16.0 16.0 16.3 16.4
Equity-based compensation
expense......................... -- -- -- -- .3 .5 2.0 1.9
----- ----- ----- ----- ----- ----- ----- -----
Operating income.................. 6.4 8.3 6.1 6.6 9.1 5.0 10.2 9.5
Interest expense.................. 0.8 0.7 0.6 0.7 1.1 1.0 0.6 0.3
Other (income).................... -- -- -- -- (0.2) -- -- --
----- ----- ----- ----- ----- ----- ----- -----
Income before income taxes........ 5.6 7.6 5.5 5.9 8.2 4.0 9.6 9.2
Income tax expense................ 1.9 2.6 1.8 1.9 2.7 1.3 3.1 3.0
----- ----- ----- ----- ----- ----- ----- -----
Net income........................ 3.7% 5.0% 3.7% 4.0% 5.5% 2.7% 6.5% 6.2%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>

Our operating results have historically been subject to quarterly and annual
fluctuations. We anticipate that factors affecting our future operating results
will include the timing of significant orders, patterns of capital spending by
the communications industry, market acceptance of new or enhanced versions of
our products and changes in the pricing of our products. In addition, the timing
and level of our research and development expenditures could cause quarterly
results to fluctuate. A substantial portion of our annual revenues comes from
sales to a relatively small number of customers. Our revenues and operating
results for a period may be affected by the timing of orders received or orders
shipped during a period. See "Risk Factors--Risks Related to Our Business--Our
sales and operating results can fluctuate significantly from period to period,
thereby potentially adversely affecting the market price of our stock."

LIQUIDITY AND CAPITAL RESOURCES

As a free-standing subsidiary of Lynch, we have historically managed our own
cash, debt, receivables and payables. We do not expect our separation from Lynch
to have a material impact on the management of our capital resources.

As of June 30, 2000, we had working capital of $2.9 million, as compared to
$3.4 million as of December 31, 1999. The decrease in our working capital
position was due to the declaration of a dividend in the amount of $1.5 million
in the form of a demand promissory note payable to Lynch plus an increase in
accounts payable reflecting higher levels of activity which was offset in part
by increased accounts receivable and decreased amounts borrowed under our line
of credit. As of June 30, 2000, we had $600,000 outstanding on our line of
credit, compared to $2.7 million outstanding at December 31, 1999. At June 30,
2000 we had $3.1 million available on our line of credit.

Cash provided by (used in) operating activities was $2.4 million for the six
months ended June 30, 2000, $(285,000) for the six months ended June 30, 1999,
$58,000 in 1999, $1.1 million in 1998, and $102,000 in 1997. Net cash provided
by operating activities for the six months ended June 30, 2000 was due primarily
to increased profitability from increased sales volumes. In addition, accounts
payable increased also reflecting the increased activity, offset by increases in
accounts receivable and inventory that also reflected the increased activity.
Net cash used in operating activities for the six months ended June 30, 1999 was
due to lower levels of sales activity in this period compared to 2000 combined
with increased investments in accounts receivable and inventory partially offset
by increased levels of

36
<PAGE>
accounts payable. Net cash used in operating activities in 1999 was due to
increased accounts receivable and inventory levels related to the growth in our
business in the second half of 1999, partially offset by increased accounts
payable and accrued liabilities. Net cash provided by operating activities in
1998 was due to profitable operations supplemented by increases in accounts
payable and accrued expense and by decreases in accounts receivable partially
offset by increased levels of inventory. Net cash provided by operating
activities in 1997 was due to profitable operations supplemented by increases in
accounts payable and accrued expenses almost completely offset by increased
accounts receivable and inventory levels.

Net cash used in investing activities was $320,000 for the six months ended
June 30, 2000, $342,000 for the six months ended June 30, 1999, $804,000 in
1999, $878,000 in 1998 and $679,000 in 1997. Net cash used in investing
activities for each of these periods was for investments in fixed assets. We
expect 2000 capital expenditures to be approximately $2 million. The increase is
principally related to second half 2000 expenditures of approximately $800,000
for capacity expansion at our Yankton, South Dakota facility and approximately
$500,000 for equipment which is expected to reduce our costs. For 2001, we
expect capital expenditures to be approximately $3 million, principally for
additional capacity increases.

Net cash provided by (used in) financing activities was $(2.2) million for
the six months ended June 30, 2000, $640,000 for the six months ended June 30,
1999, $868,000 in 1999, $(311,000) in 1998 and $623,000 in 1997. Net cash used
in financing activities for the six months ended June 30, 2000 was for repayment
of our line of credit of $2.1 million and repayment of $100,000 of long-term
debt. Net cash provided by financing activities for the six months ended
June 30, 1999 was from increased net borrowings of $640,000 under terms of a
share repurchase effected on January 1, 1999. Net cash provided by financing
activities in 1999 was from increased net borrowings under our line of credit of
868,000. Net cash used in financing activities in 1998 resulted from decreased
net borrowings under our line of credit of $217,000 and repayments of $94,000 of
long-term debt. Net cash provided by financing activities in 1997 was from
increased net borrowings of $1.1 million under our line of credit partially
offset by $250,000 payment of long-term debt and $250,000 of dividends to Lynch.

At June 30, 2000 we had a $3.7 million revolving credit facility that is
secured by substantially all of our personal property. As of June 30, 2000,
$600,000 was borrowed against the facility and $3.1 million of credit remained
available, subject to borrowing base provisions. Interest on the amounts
outstanding under the facility accrue at the bank's prime rate minus 0.5%. Our
effective interest rate was 9.0% at June 30, 2000. The revolving credit
agreement presently requires us, among other things, to maintain a specified
minimum tangible net worth ratio and limits capital expenditures and the
payments of dividends on capital stock. As of June 30, 2000, we were in
compliance with all covenants under the revolving credit agreement. The
revolving credit facility expires in May 2001. Subsequent to this offering, we
do not anticipate paying any dividends on our common stock for the foreseeable
future.

Our primary capital requirements are for working capital to fund the
necessary levels of inventory and accounts receivable to sustain the Company's
sales growth, for capital expenditures and for acquisitions. We believe that
anticipated cash flow from operations and the amounts available under our line
of credit, together with the proceeds from this offering, after payment of
indebtedness, will satisfy our projected working capital and capital expenditure
requirements at least through the next twelve months. To the extent that we grow
more rapidly than expected, we may need additional cash to finance our operating
and investing activities. In addition as part of our growth strategy, we intend
to make acquisitions from time to time. Such acquisitions may require us to
engage in public or private debt or equity issuances. We cannot be certain that
financing will be available to us when we need it on favorable terms or at all.
Also, any debt financing could increase our debt to equity ratio and may limit
our ability to fund capital expenditures and dividends. Future issuances of
shares to finance or to effect acquisitions could result in dilution.

37
<PAGE>
QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISKS

We may be exposed to market risk from changes in interest rates on
borrowings under our revolving line of credit.

As of December 31, 1999, we were subject to interest rate risk on
approximately $2.7 million of variable rate debt. Each 1.0% of increase in the
interest rate would impact annual pre-tax earnings by approximately $27,000 if
applied to that total.

We are not exposed to significant market risk from fluctuations in foreign
currency exchange rates because our products are sold in U.S. dollars. In 2000,
we began to use forward foreign exchange contracts to hedge the impact of
foreign currency fluctuations on certain committed purchases of parts and
supplies. However, we do not hold or issue derivative financial instruments for
trading purposes.

BACKLOG

We had backlog orders of approximately $13.8 million at June 30, 2000
compared with $6.2 million at June 30, 1999. We had backlog orders of
approximately $6.9 million at December 31, 1999, compared with $3.6 million at
December 31, 1998. We include as backlog those orders which are subject to
specific production release orders under written contracts, verbal and written
orders from distributors with which we have had long-standing relationships, as
well as written purchase orders from sales representatives. Our customers may
cancel or defer orders without significant penalty. We believe that
substantially all of our backlog at June 30, 2000, will be shipped during 2000.
See "Risk Factors--Risks Related to Our Business--Our backlog may not result in
future sales" for a discussion of risks associated with our backlog.

IMPACT OF ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities (as amended by SFAS
No. 137 with respect to the effective date) which will be effective for us in
January 2001. SFAS No. 133 requires us to recognize all derivatives as assets or
liabilities on the balance sheet and to measure them at fair value on a
marked-to-market basis. This applies whether the derivatives are stand-alone
instruments, such as forward currency exchange contracts and interest rate swaps
or collars, or embedded derivatives, such as call options contained in
convertible debt investments. Along with the derivatives, the underlying hedged
items are also to be marked-to-market on an ongoing basis. These market value
adjustments are to be included either in net earnings in the Statement of
Operations or in other comprehensive income (and accumulated in stockholders'
equity), depending on the nature of the transaction. We do not expect SFAS
No. 133 to have a significant effect on our results of operations or financial
position.

38
<PAGE>
OUR BUSINESS

OVERVIEW

We are a leading designer, manufacturer and marketer of custom designed
frequency control devices that provide essential frequency control and timing
references for infrastructure equipment used by the communications industry. Our
devices support fixed and mobile wireless, copper wire, coaxial cable and fiber
optic long haul and last mile systems. Our products are incorporated into, among
other things, cellular base stations, microwave radios, transceivers, network
switches and routers and ethernet and fiber optic systems. We sell our products
to communications original equipment manufacturers, contract manufacturers and
to distributors. Original equipment manufacturers who use our products include:
ADC Telecommunications; Cirrus Logic; Cisco Systems; Ericsson; Lucent
Technologies; Marconi; Newbridge; Nortel Networks and Paradyne. Our contract
manufacturer customers include: Celestica; Flextronics International; Jabil
Circuit; SCI Systems and Solectron. Our distributor customers include: All
American Semiconductor; Arrow Electronics; Avnet and Pioneer Standard
Electronics.

Our products are quartz crystal based frequency control devices consisting
of packaged quartz crystals and oscillator modules incorporating those crystals.
Our frequency control devices produce an electrical signal that is used either
as a carrier signal for the transmission of information, as a timing signal for
digital circuits, or as a reference frequency for devices that transmit and
receive information. Our products enable communications infrastructure equipment
manufacturers and communications service providers to meet the increasing
demands of their customers because they produce an electrical signal that is:

- accurate-the nominal frequency of the signal does not drift significantly;

- stable-the nominal frequency of the signal does not vary significantly
when our product is subjected to a range of operating temperatures;

- has low phase noise-the signal does not add noise that can degrade the
performance of the communications system; and

- has low phase jitter-the signal has excellent waveform stability, thereby
preventing time-base distortion of the signal.

Increased accuracy allows for better frequency management in a
communications system, thereby permitting more signals/data to be transmitted in
a given amount of frequency spectrum. An accurate signal is also essential as a
reference for the transmission of digital information, which must be transmitted
in precisely timed pulses.

Low phase noise and low phase jitter is essential to the accurate
transmission and reception of information over any given signal, since both
phase noise and phase jitter can distort or degrade the desired signal. In
addition, our frequency control devices are used as reference oscillators for
phase locked loop synthesizers that are capable of generating higher frequency
signal generation. Low phase jitter is essential in such applications since
inaccuracies in data transmission that are created by phase jitter will be
multiplied to the same extent that the frequency of a signal is multiplied by
the synthesizer.

Our products exhibit low aging characteristics, that is, the performance of
our products will not deteriorate significantly over time. Low aging is
essential to our customers since our products are often expected to be used
without replacement, over long periods of time in applications such as remotely
located cellular transmission stations.

We believe that quartz crystal based technology is the best means of
producing low aging frequency control devices that are accurate and stable with
low phase noise and low phase jitter. Our frequency control devices generate
signals that are significantly more accurate than those produced by

39
<PAGE>
high volume manufacturers, and more reliable than those produced by many other
producers of frequency control devices. There are frequency control devices that
are based upon materials other than quartz, such as silicon and lithium niobate,
but these devices are either not as accurate as are required by our customers or
are too expensive for most applications. In addition, some frequency control
devices use relatively new technologies that we do not use, such as surface
acoustic wave technology and surface transverse wave technology, to produce
signals at higher frequencies than the signals produced by our products. To
date, however, these devices have not proven to be competitive, in terms of cost
or performance, with our frequency control devices, except in applications
requiring very high frequency generation.

In addition we sell crystals and oscillators which are used outside the
communications infrastructure industry. These frequency control devices are used
in microprocessor and computer applications. We expect this portion of our
business to decline over time as we increase our emphasis on the growing
communications infrastructure market.

We have over 35 years of experience designing, manufacturing and marketing
crystal based frequency control products. Our customers rely on the skills of
our engineering and design team to help them solve frequency control problems
during all phases of their products' life cycles, including product design,
prototyping, manufacturing and subsequent product improvements. Our resources
allow us to design and prototype custom frequency control solutions quickly and
our involvement with our customers during the early phases of their products'
life cycles permits us to provide excellent service and support throughout all
phases of the products' life cycles.

INDUSTRY BACKGROUND

The communications industry is in the midst of a rapid expansion that is
attributable to, among other things:

- increased use of mobile wireless communications for voice, video, paging
and data transmission;

- growth in demand for high speed Internet access and other information
transmission and retrieval services;

- deregulation and privatization of the communications industry worldwide;
and

- development and expansion of new fixed wireless high speed, high capacity
information transmission systems to support the convergence of voice,
video and data transmission.

INCREASED GLOBAL DEMAND FOR MOBILE WIRELESS VOICE AND INFORMATION
TRANSMISSION SERVICES REQUIRES AN EXPANSION OF WIRELESS INFRASTRUCTURE. The
rapid increase in the use of mobile wireless systems by consumers and businesses
for transmitting voice, video, paging and data signals over analog, cellular,
digital cellular and digital personal communications services (PCS) systems is
driving the expansion of wireless infrastructure. Strategies Unlimited, a market
research firm specializing in wireless communications, estimates that the number
of global cellular/PCS subscribers will grow from 313 million in 1998 to
approximately 1.3 billion by 2004. Wireless service providers are expected to
expand their current infrastructure and implement new services that permit
wireless transmission of integrated voice, video and data traffic. We believe
these factors will require a substantial increase in capital investment for
wireless communications infrastructure equipment employing frequency control
devices. For example, Strategies Unlimited estimates that sales of wireless base
stations, cell site equipment and switch equipment will grow from $35.1 billion
in 1998 to $75.2 billion in 2003.

GLOBAL DEMAND FOR HIGH SPEED, HIGH CAPACITY INFORMATION TRANSMISSION SYSTEMS
IS DRIVEN BY THE RAPID GROWTH IN USE OF HIGH SPEED INTERNET ACCESS AND OTHER
INFORMATION TRANSMISSION AND RETRIEVAL SERVICES. Demand for information
transmission and retrieval services over the Internet and other communications
networks has grown dramatically as businesses and consumers increase their use
of the

40
<PAGE>
Internet as a global communications medium. Consumers are using the Internet for
e-mail, audio, video, multimedia services, information gathering and shopping.
Businesses are using the Internet to reach individual and business consumers and
to enhance communications within their own organizations. This increased usage
requires expanded capacity which is being met by additions to and upgrades in
the communications infrastructure using equipment that employs precision
frequency control devices.

DEREGULATION AND PRIVATIZATION OF THE COMMUNICATIONS SERVICES INDUSTRY
WORLDWIDE FOSTERS COMPETITION AMONG SERVICE PROVIDERS, WHICH LEADS TO INCREASED
DEMAND FOR HIGH SPEED, HIGH CAPACITY INFORMATION TRANSMISSION EQUIPMENT. In the
United States, local telephone exchange carriers, such as the regional Bell
operating companies, were, until recently, the exclusive owners and operators of
the copper wire connections between network backbones and their subscribers,
commonly known as the last mile. The Federal Communications Act of 1996
intensified the competitive environment in the United States by requiring these
telephone companies to provide access to portions of their networks, including
the last mile, to competing providers. Outside the United States, many countries
are privatizing their state-run telephone companies, liberalizing their laws and
opening their markets to foreign investment and competition. To compete in this
environment, many service providers seek to differentiate themselves and
increase market share by offering integrated voice, video and data services.
These integrated services are provided using high speed, high capacity
information transmission equipment that employs precision frequency control
devices.

LIMITATIONS OF EXISTING ACCESS TECHNOLOGIES ARE DRIVING THE DEPLOYMENT OF
FIXED WIRELESS HIGH SPEED, HIGH CAPACITY INFORMATION TRANSMISSIONS SYSTEMS. New
fixed wireless technology offers quality of service comparable to land-line
alternatives at data transmission speeds significantly faster than copper wire
networks or coaxial cable and can be deployed in a much shorter time and at a
much lower cost. These new fixed wireless systems employ frequency control
devices in virtually all of their components.

OUR COMPETITIVE ADVANTAGES

We believe that we are well positioned for continued and increased success
in the evolving communications industry because:

- we are focused on serving the communications infrastructure industry;

- our design and engineering expertise enables us to provide collaboration
and design support services to original equipment manufacturers;

- our integrated manufacturing capability allows us to implement rapidly
production of new products;

- we provide high quality, reliable products; and

- we provide extensive customer service and technical support.

WE ARE FOCUSED ON SERVING THE COMMUNICATIONS INFRASTRUCTURE INDUSTRY. We
focus on providing frequency control devices to the communications
infrastructure industry. We believe that the technical requirements of this
market are unique and that our industry focus allows us to better understand and
serve the needs and requirements of our customers.

OUR DESIGN AND ENGINEERING EXPERTISE ENABLES US TO PROVIDE COLLABORATION AND
DESIGN SUPPORT SERVICES TO ORIGINAL EQUIPMENT MANUFACTURERS. We have a design
engineering group with many years of experience in the manufacture and design of
frequency control devices. This experience provides us with the ability to
design frequency control devices that meet the increasingly demanding needs of
communication systems. To address these needs, designers of communications
infrastructure equipment have a broad range of options available to them. We
believe that by collaborating with the original equipment

41
<PAGE>
manufacturers' designers early in the product development process, we increase
our opportunity to have a designer specify our frequency control devices for use
in the product being designed.

OUR INTEGRATED MANUFACTURING CAPABILITY ALLOWS US TO IMPLEMENT RAPIDLY
PRODUCTION OF NEW PRODUCTS. Competitive pressures are creating the need for
original equipment manufacturers to reduce the design to production cycle time
for new products. Our Yankton, South Dakota factory can perform each of the
major processes required to convert basic quartz bars into finished frequency
control devices. We can build custom crystal blanks, custom plated crystals,
custom designed finished crystals and custom designed oscillators, all within
our Yankton facility. With this level of integration, we can offer faster
turn-around on both prototype devices and custom made, high performance devices.

WE SUPPLY HIGH QUALITY, HIGHLY RELIABLE FREQUENCY CONTROL DEVICES. We
carefully control the manufacturing processes in our South Dakota facility and
at our contract manufacturers. We believe that this control, and the attention
to quality that drives it, allows us to offer high quality, highly reliable
products.

WE PROVIDE EXTENSIVE SERVICE AND TECHNICAL SUPPORT TO OUR CUSTOMERS. Our
sales and customer service personnel have direct responsibility for specific
customers and have the authority to respond to nearly all customer concerns.
This allows us to quickly and effectively resolve customer issues as they arise.
We believe that the quality of our customer service and technical support has
been instrumental in winning repeat business in the past and our reputation for
customer service and technical support will help us to win new business in the
future.

STRATEGY

Our objective is to build on the strength of our core expertise in packaged
quartz crystal and oscillator technologies to become the supplier of choice to
original equipment manufacturers who supply infrastructure equipment to the
communications industry.

LEVERAGE OUR REPUTATION AS A SERVICE ORIENTED AND DEPENDABLE SUPPLIER OF
HIGH QUALITY, HIGHLY RELIABLE FREQUENCY CONTROL DEVICES. We intend to take
advantage of our reputation as a service oriented, high quality supplier of
reliable frequency control devices to achieve significant growth in market
share. We believe that our focus on quality and reliability allows us to meet
the increasingly demanding needs of our customers and that our customers will
continue to turn to us to meet those needs. As the communications infrastructure
evolves, we believe that our growth will be driven both by expanding our
business with existing customers and by adding new customers.

CAPITALIZE ON CHANGES TO OUR SALES PROCESS TO INCREASE OUR PENETRATION AT
EXISTING CUSTOMERS AND TO ACQUIRE NEW CUSTOMERS. We have reorganized to make
our sales representatives more accountable for the quality of service provided
to our customers. Our new system assigns key account representatives who are
responsible for ensuring the quality of service to their customers. The improved
level of service that we provide to our existing customers allows us to build
closer relationships with key customer personnel thereby resulting in greater
sales opportunities. In addition, our new system will focus the efforts of our
key account representatives on penetrating new customer accounts.

INCREASE OUR DESIGN AND ENGINEERING CAPABILITIES AND CREATE HIGHER VALUE
SOLUTIONS FOR OUR CUSTOMERS' DESIGN ENGINEERS. We intend to increase our
investment in technical resources, including design and engineering personnel,
to enable us to provide a higher level of design and engineering support to our
customers. We believe that increasing our technical participation with our
original equipment manufacturer customers in the early stages of their design
process will lead to our frequency control devices being designed into their
products more regularly.

INCREASE OUR MANUFACTURING CAPACITY TO TAKE ADVANTAGE OF COMMUNICATIONS
INFRASTRUCTURE INDUSTRY GROWTH. To capitalize on strong demand we have
committed to expand our manufacturing capacity at

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<PAGE>
our main facility in South Dakota. We intend to increase the use of our offshore
contract manufacturers who have recently committed to adding capacity on our
behalf. In addition, our long term objective is to reduce the time it takes to
manufacture our products which will result in further increases in our
manufacturing capacity. To that end, we have dedicated additional resources to
evaluating our manufacturing processes and to identifying and implementing
process improvements.

PURSUE SELECTED STRATEGIC ACQUISITIONS AND MERGERS. We believe that we can
significantly enhance our business opportunities by acquiring technology,
product portfolios and/or customer base. Some of these may offer immediate sales
opportunities while others may meet longer term objectives. We plan to pursue
these opportunities by making strategic acquisitions or by acquiring or
licensing technology.

EXPAND OUR PRODUCT LINE TO INCLUDE A BROADER RANGE OF FREQUENCY CONTROL
DEVICES. We intend to design, manufacture and sell devices that control higher
frequencies or provide greater precision than our current products. These
devices will serve certain applications within the communications infrastructure
industry for which we do not currently provide products. We intend to achieve
this through a combination of increased research and development and strategic
acquisitions, if they are appropriate. We are currently planning to more than
triple our expenditures on research and development over the next two years.

PRODUCTS

Our products are high quality, reliable, technically advanced frequency
control devices, including packaged quartz crystals and oscillator modules
incorporating those crystals.

An oscillator is a device that produces an output signal of a specific
frequency. In a quartz crystal based oscillator, an output signal is generated
by applying an electric voltage to a quartz crystal. The application of an
electric voltage to a quartz crystal causes the crystal to vibrate at a specific
resonant frequency. The frequency at which a quartz crystal will vibrate is
directly related to the thickness of the crystal. Quartz crystal based
oscillators are ideal for use in frequency control devices because they produce
stable and predictable frequencies when subjected to specific electrical
voltages and are relatively insensitive to environmental conditions. These
products enable higher precision in frequency management and timing or pulse
control.

Currently, our oscillator products operate at frequencies ranging from 32
kilohertz to 160 megahertz. However, many of our products, through amplification
or other means, are ultimately incorporated into products that operate at
frequencies in excess of 160 megahertz.

Our products are employed in numerous applications within the communications
infrastructure industry, including:

- Network switches/routers

- Modems

- Wireless transmitters/receivers

- Digital signal processors

- Multiplexers

- Data recovery/regeneration devices

- Repeaters

- Data transceivers

- Line interface devices

- Base station controllers

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<PAGE>
Our products are incorporated into end products that serve all elements of
the communications infrastructure industry, including:

- Fiber Optic Long Haul--A fiber optic connection between widely separated
data transmitting and receiving locations, commonly known as a network
backbone.

- Fiber Optic Last Mile--The fiber optic connections between a network
backbone and individual network users.

- Fixed Wireless--The wireless connections between fixed information
transmitting and receiving locations.

- Mobile Wireless--The wireless connections between fixed and mobile
information transmitting and receiving locations.

- Copper Long Haul--A copper wire, including coaxial cable, network
backbone.

- Copper Last Mile--The copper wire connections between a network backbone
and individual network users.

A description of our principal products and their chief applications is set
forth in the following table:

<TABLE>
<CAPTION>
RANGE OF RANGE
PRODUCT DESCRIPTION APPLICATION FREQUENCIES OF PRICES
------------------- ----------------------------------- ----------------------------------- ----------- ---------
<S> <C> <C> <C> <C>
Digitally Ultra stable temperature Applications requiring the greatest 5.000mhz $35.00 to
Compensated Crystal compensated crystal oscillator accuracy and stability over a wide to $90.00*
Oscillators range of temperatures 156.250mhz

Temperature Oscillator whose frequency output Applications requiring devices that 5.000mhz $12.76 to
Compensated Crystal remains stable over a range of operate accurately over a wide to $98.18
Oscillators operating temperatures range of temperatures 156.250mhz

Voltage Controlled Variable frequency oscillator Applications requiring a high 1.544mhz $3.46 to
Crystal Oscillators degree of accuracy over various to $84.33
frequencies 156.250mhz

Clock Oscillators Reference oscillator Commercial and industrial 32.768khz $0.75 to
applications to $88.83
160.000mhz

Packaged Crystals Primary frequency control element All quartz crystal based frequency 32.768khz $0.09 to
of a quartz crystal based control devices to $44.95
oscillator 160.000mhz
</TABLE>

* The prices shown are estimated. The digitally compensated crystal
oscillators currently are not sold commercially.

The crystals and oscillators we sell for use in non-communications
applications are used in certain industrial applications such as security
systems, metering systems and industrial control systems as well as in various
computer peripheral equipment such as printers, modems, monitors, video cards
and sound cards. These non-communications applications do not require the
quality and reliability demanded by manufacturers of communications
infrastructure equipment.

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<PAGE>
RESEARCH AND DEVELOPMENT

At June 30, 2000, we employed 11 engineers and technicians in South Dakota
who devoted most of their time to research and development. By December 31,
2001, we intend to more than double the number of engineers and technicians who
perform research and development. Our research and development expense was
approximately $856,000 in 1999, $673,000 in 1998 and $778,000 in 1997. As part
of our strategy, we intend to raise significantly our research and development
spending through 2001. We will spend approximately $3 million on research and
development through December 31, 2001.

CUSTOMERS

We market and sell our frequency control devices primarily to:

- original equipment manufacturers of communications infrastructure
equipment;

- contract manufacturers for original equipment manufacturers; and

- distributors who sell to original equipment manufacturers and contract
manufacturers.

Original equipment manufacturers who use our products include: ADC
Telecommunications; Cirrus Logic; Cisco Systems; Ericsson; Lucent Technologies;
Marconi Networks; Newbridge Networks; Nortel Networks and Paradyne. Our contract
manufacturer customers include: Celestica; Flextronics International; Jabil
Circuit; SCI Systems and Solectron. Our distributor customers include: All
American Semiconductor; Arrow Electronics; Avnet Sterling and Pioneer Standard
Electronics.

In 1999, Newbridge Networks accounted for approximately 12.4% of net sales.
No other customer accounted for more than 10% of our 1999 revenues. In 1998, no
customer accounted for more than 10% of our net sales. Sales to our ten largest
customers accounted for approximately 60% of net sales for 1999, 1998 and 1997.

SALES AND MARKETING

In order to focus our sales effort, earlier this year we reorganized our
sales personnel. We now use key account representatives to foster the strongest
possible sales relationship between us and our original equipment manufacturer
customers. Our key account representatives have full access to our applications
engineering group, enabling us to bring our best design and engineering support
to the customer effectively and efficiently. This combination of relationship
management and technical support is critical to achieving our goal of being
designed into our customers' products. Working below our key account
representatives is our network of manufacturers' representatives and inside
sales representatives who service all of our customers. Our key account
representatives serve as the contact person for the customers to whom they are
assigned and ensure that we meet the global needs of those customers. Our key
account representatives are also responsible for acquiring new customers. In
addition to our key account representatives, we use our senior management team
on a proactive basis to help build high level relationships with our high
priority customers and to help penetrate new accounts.

We work actively to sell our products through distributors and to contract
manufacturers. These customers represent a growing part of our shipments as many
of our target original equipment manufacturers continue to rely more heavily on
the services and capabilities of these companies. We believe that these customer
relationships also give us opportunities to grow our business outside of our
focal markets. A portion of our sales management team focuses on these customers
with the objective of rapidly growing our business in all applications and
markets.

Our international sales represented approximately 43%, 36% and 43% of our
net sales for 1999, 1998 and 1997, respectively. In 1999, this consisted of
approximately 19% from customers in Canada,

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<PAGE>
9% from customers in Asia, 6% from customers in Western Europe, 4% from
customers in Mexico and 5% from other international customers. We are increasing
our international sales efforts by adding distributors and manufacturers'
representatives in Western Europe and Asia.

Our website includes an online search engine that allows design engineers to
choose from our products based on a menu of performance characteristics. We plan
to expand the number of online resources available through out website for use
by product design engineers and purchasing personnel. We also expect to upgrade
our website generally, to help penetrate the design and engineering groups at
our original equipment manufacturer customers and increase the site's customer
service features.

BACKLOG

COMPETITION

Frequency control devices are sold in a highly competitive industry. There
are numerous domestic and international manufacturers who are capable of
providing custom designed quartz crystals and oscillator modules comparable in
quality and performance to our products. Our competitors include Vectron
International (a division of Dover Corporation), CTS Corporation and Saronix. We
do not operate in the same markets as high volume manufacturers of standard
products; rather we focus on manufacturing lower volumes of custom designed
frequency control devices. Many of our competitors and potential competitors
have substantially greater financial, engineering, manufacturing and marketing
resources than we do. We seek to manufacture custom designed, high performance
crystals and oscillators, which we believe we can sell competitively based upon
performance, quality, order response time and a high level of engineering
support.

MANUFACTURING

We have one manufacturing facility in Yankton, South Dakota, and have
long-term relationships with two contract manufacturers in Asia. We maintain a
rigorous quality control system and are an ISO 9001 qualified manufacturer.

Our South Dakota facility has the capability to start with a plain piece of
quartz and produce from that a packaged quartz crystal or a finished high
performance oscillator. We have processes in place for sawing and lapping quartz
and for high-vacuum metal deposition. In addition, we produce many of our own
thick film coatings for ceramic substrate, and we have automated assembly and
test systems for production of finished oscillator modules.

In 1990, we established a working relationship with a contract manufacturer
located in South Korea, and in 1994, we established a working relationship with
a contract manufacturer located in the People's Republic of China. While we do
not have written long term agreements with them, we believe that we are the
largest customer for each of these contract suppliers and, as such, believe that
from time to time we receive preferential treatment on production scheduling
matters. We established, and we monitor and audit, the process control and
quality control systems at our contract manufacturers to ensure quality and
reliability. In order to serve our markets and maintain profitability, we review
our

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<PAGE>
manufacturing costs on a product-by-product basis to determine at which facility
the product should be produced.

We attempt to utilize standard parts and components that are available from
multiple vendors located in the United States or internationally. For selected
critical components, we do enter into long term supply agreements, with
appropriate cancellation privileges, to ensure an adequate availability of
product. Certain components used in our products are available from only a
limited number of sources. Despite the risks associated with purchasing
components from single sources or from a limited number of sources, we have made
the strategic decision to select single source or limited source suppliers in
order to obtain higher quality goods and lower pricing, and to receive more
timely delivery and maintain quality control.

INTELLECTUAL PROPERTY

We hold one patent, but do not consider it to be critical to our business.
We believe that our technological position depends primarily on the technical
competence and creative ability of our engineering and technical staff in areas
of product design and manufacturing processes as well as proprietary know how
and information. We require our key personnel to execute confidentiality
agreements.

To the best of our knowledge, we are not infringing on the intellectual
property rights of others. However, intellectual property rights are uncertain
and involve complex legal and factual questions. It is possible that we may
unknowingly be infringing on the intellectual property rights of others and may
be liable for that infringement. See "Risk Factors--Risks Related to Our
Business--Third parties may claim that we are infringing upon their intellectual
property, and we could suffer significant litigation costs or licensing expenses
or be prevented from selling our products."

FACILITIES

Our operations are conducted through the following facilities:

<TABLE>
<CAPTION>
APPROXIMATE
LOCATION SQUARE FEET USES OWNED/LEASED
-------- ----------- --------------------------------------------- ------------
<S> <C> <C> <C>
Yankton, South Dakota 16,000 Principal executive and corporate office, Leased
sales office
Yankton, South Dakota 35,000 Research and development, manufacturing and Owned
assembly and training
Hong Kong, China 1,000 Sales office Leased
</TABLE>

The lease on our South Dakota office facility expires on September 30, 2003,
with options to renew until 2006. We have committed to make capital expenditures
of approximately $825,000 for the second half of 2000 to expand our production
capacity at our owned facility.

LITIGATION

From time to time, we have been involved in litigation. However, no such
matters have been material to our business. We are not currently involved in any
material litigation.

EMPLOYEES

As of June 30, 2000, we employed 206 people, including 20 in engineering,
147 in manufacturing and quality assurance, 19 in customer service, technical
support and customer training, 6 in sales and marketing, and 14 in
administration. We also employ independent contractors and temporary employees.
None of our employees is represented by a labor union, and we consider our
employee relations to be good.

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<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS

Our executive officers, directors and key employees, and their ages as of
August 31, 2000, were as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- -------- ------------------------------------------
<S> <C> <C>
Robert R. Zylstra......................... 52 President and Chief Executive Officer,
Director

David L. Rein, Sr......................... 56 Senior Vice President and Chief Financial
Officer

Robert J. Jenks........................... 48 Senior Vice President of Operations

John R. Kerg, Jr.......................... 42 Vice President of Sales and Marketing

Gregory T. Rogers......................... 40 Vice President of Engineering

Jeffrey A. Kocak.......................... 38 Director of Quality Systems

Kwok Sun Leung............................ 51 Managing Director, M-tron Industries,
Limited, Hong Kong

Anthony J. Santoro(1)(2).................. 58 Chairman of the Board of Directors

E. Val Cerutti(1)(2)...................... 60 Director
</TABLE>

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

(1) Member of our Audit Committee.

(2) Member of our Compensation Committee.

Executive officers are elected to serve in such capacities by the Board of
Directors until the next annual meeting of the Board of Directors, or until
their respective successors have been duly elected and qualified, or until their
earlier death, resignation, disqualification or removal from office. There are
no family relationships between any of our executive officers.

ROBERT R. ZYLSTRA, our President and Chief Executive Officer and one of our
directors, joined us in January of 2000. From July, 1997 to January, 2000,
Mr. Zylstra served as General Manager of Product Technologies and New Business
Ventures with the Data Storage and Information Management Business of Imation
Corp. In this role, he was charged with managing a mature business and growing a
portfolio of assorted technologies into a major business. From 1994 to 1997, he
served as Manufacturing Director for Imation's and 3M Corporation's Data Storage
and Information Management Business. Prior to Imation's spin-off from 3M in
1996, Mr. Zylstra held a variety of domestic and international positions with
3M. He has an MS in mechanical engineering from the University of Iowa and a BS
in mathematics and physics from Iowa State University.

DAVID L. REIN, SR., our Chief Financial Officer, joined us in 1979. Prior to
joining us, he served in various financial positions with NCR Corporation. He
has an MBA from the University of Michigan and a BS from Lehigh University.

ROBERT J. JENKS, our Senior Vice President of Operations, with
responsibility for manufacturing and supply, joined us as a Technical Director
in 1993. He became our Director of Operations in 1995 and has held his current
position since 1997. Prior to joining us, Mr. Jenks served in various design and
manufacturing positions with E.F. Johnson Company. He has a BS from North Dakota
State University.

JOHN R. KERG, JR., our Vice President of Sales and Marketing, joined us in
April of 1999. Before joining us, Mr. Kerg served as Corporate Marketing Manager
of Pioneer Standard Electronics, Inc.

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<PAGE>
from 1989 to 1999, and as Headend Microwave Technician for Cox
Communications, Inc. from 1982 to 1989. He has a BS in electrical engineering
technology from ETI Technical College and an MBA from Cleveland State College.

GREGORY T. ROGERS, our Vice President of Engineering, joined us in February
of 1999 as Director of Engineering. He was promoted to Vice President of
Engineering in June 2000. Prior to joining us, Mr. Rogers served as a contract
engineer with General Electric Company from 1998 to 1999, and a production
manager with Bliley Electric Company from 1995 to 1998. From 1986 to 1995, he
held various positions with Murata Electronics, North America, Inc., most
recently as Engineering Manager. He has a BS from Gannon University in
electronical engineering technology and mechanical engineering technology.

JEFFREY A. KOCAK, our Director of Quality Systems, joined us in 1988.
Mr. Kocak has held his current position since 1995, and from 1988 to 1995 held
various quality assurance positions with us. Prior to joining us, Mr. Kocak
served as an electronic technician and a senior electronic technician with
Litton Microwave Systems. He has an Electronics Technology degree from Jackson
Area Technical Institute.

KWOK SUN LEUNG, Managing Director of our wholly owned Hong Kong subsidiary,
M-tron Industries, Limited, joined us in October of 1993. Mr. Leung supervises
our Hong Kong operations. Prior to joining us, Mr. Leung served as Regional
Account Manager for Texas Instruments, Inc. from 1991 to 1993, as Factory
Manager at PopBridge Manufacturing Co., Ltd., in China, from 1990 to 1991 and as
a Regional Distribution Manager for Intel Semiconductor Ltd. from 1989 to 1990.
Mr. Leung has a Diploma of Electronic Engineering from Hong Kong Polytechnic.

ANTHONY J. SANTORO, our Chairman of the Board of Directors, joined us in
of 2000. He currently serves as Chancellor of Roger Williams University.
From 1993 through 2000, he served as President of Roger Williams University.
From 1992 through 1993, he served as Dean and Vice President of Roger Williams
University School of Law.

E. VAL CERUTTI, our Director, joined us in of 2000. He has
served as business consultant since 1992. From 1975 through 1992, he served as
President and Chief Operating Officer of Stella D'oro Biscuit Co., Inc., a
producer of bakery products. He also currently serves as a Director of Spinnaker
Industries, Inc., The Gabelli Convertible Securities Fund and The Gabelli Gold
Fund. Mr. Cerutti has also served as a director of the South Dakota corporation
that was our predecessor since September, 1999.

COMPENSATION OF DIRECTORS

Non-employee directors receive a cash retainer of $ per
quarter, a fee of $ for each Board of Directors meeting they
attend in person and a fee of $ for each Board of Directors
meeting attended by telephone, which lasts for at least one hour, and each
committee meeting that the director attends. A director who is an employee of
the Company is not compensated for services as a member of the Board of
Directors or any committee thereof. As described under "Benefit Plans-Stock
Option Plan," non-employee directors also are eligible to receive stock options
under our 2000 Stock Option Plan and currently receive options to purchase
shares of Class A common stock upon their initial election as a director.

BOARD COMMITTEES

AUDIT COMMITTEE

The Audit Committee of the Board of Directors reviews, acts on and reports
to the Board of Directors with respect to various auditing and accounting
matters, including the recommendation of our independent auditors, the scope of
the annual audits, fees to be paid to the independent auditors, the

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performance of our independent auditors and our accounting practices. The
members of the Audit Committee are Messrs. Santoro and Cerutti.

COMPENSATION COMMITTEE

The Compensation Committee of the Board of Directors determines the
salaries, benefits and stock option grants for our employees, consultants,
directors and other individuals compensated by us and also administers our stock
option plan. The members of the Compensation Committee are Messrs. Santoro and
Cerutti.

EXECUTIVE COMPENSATION

The following table sets forth information with respect to compensation we
paid in 1997, 1998 and 1999 for services to us by our former chief executive
officer and the two other highest-paid executive officers (sometimes called the
"named executive officers") whose total salary and bonus for the year exceeded
$100,000. Our former chief executive officer retired in January 2000 and Robert
R. Zylstra became our President and Chief Executive Officer. Mr. Zylstra was not
previously an officer or employee, and does not appear in the following table.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
------------------------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C>
Martin J. Kiousis .................................. 1999 $114,479 $62,792 $3,572
President and Chief Executive Officer 1998 115,031 40,500 3,894
(retired in January 2000) 1997 103,052 97,200 4,627

Robert J. Jenks .................................... 1999 126,089 16,745 200
Vice President-Operations 1998 119,194 10,800 200
1997 76,206 19,100 200

David L. Rein, Sr. ................................. 1999 89,586 16,745 200
Vice President and Chief Financial Officer 1998 84,752 10,800 200
1997 76,206 19,100 200
</TABLE>

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

(1) Reflects 401(k) plan contributions in the amount of $200 per year. Also
reflects, in the case of Mr. Kiousis, the personal use of a company vehicle
and the taxable portion of life insurance. Does not reflect profits realized
by Messrs. Kiousis, Jenks and Rein on the buy-back of our stock, interest
paid on the notes which we issued to them in connection with such buy back
or additional consideration that we agreed to pay to them in connection with
such buy-back. See "Certain Transactions-Stock Redemption and Note
Issuance".

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<PAGE>
BENEFIT PLANS

STOCK OPTION PLAN. We adopted and approved our 2000 Stock Option Plan to
provide for grants of stock options to our employees, consultants, employees and
consultants of our subsidiaries and our non-employee directors. Our stock option
plan permits grants of incentive stock options meeting the requirements of
Section 422 of the Internal Revenue Code, and also nonqualified stock options
that do not meet the requirements of Section 422. We have reserved 1,125,000
shares of our Class A common stock for issuance upon exercise of options granted
under our stock option plan. The maximum number of shares that may be subject to
options granted to any participant under our stock option plan in any fiscal
year is 500,000. Options may not be granted under our stock option plan after
, 2010. We currently grant non-employee directors options to purchase
shares of Class A common stock upon their election as directors.
Effective as of the consummation of this offering, we intend to grant options to
purchase an aggregate of shares of Class A common stock, with an
exercise price equal to the subscription price. Of the total grants, our
executive officers and key employees are expected to receive the following
grants:

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME UNDERLYING OPTIONS
---- ------------------
<S> <C>
Robert R. Zylstra..........................................

David L. Rein, Sr..........................................

Robert J. Jenks............................................

John R. Kerg, Jr...........................................

Gregory T. Rogers..........................................

Jeffrey A. Kocak...........................................
</TABLE>

The options to be issued to our executive officers and key employees as of
the consummation of this offering will vest as follows: 75% of such options will
vest on the third anniversary of the date of grant and the final 25% will vest
on the fourth anniversary of the date of grant.

Our stock option plan will generally be administered by a committee of our
Board of Directors consisting of two or more non-employee directors; however,
our Board of Directors will be responsible for actions pertaining to grants of
options to non-employee directors. If no committee is selected, our stock option
plan will be administered by our Board of Directors.

We may not grant incentive stock options at exercise prices less than the
fair-market value of our Class A common stock on the date of grant, or, for an
option granted to a person holding more than 10% of our voting stock, at less
than 110% of such fair-market value. The exercise price of non-qualified options
granted to employees and consultants will be determined by the committee of our
Board of Directors that administers our stock option plan or our Board of
Directors if no such committee has been established. The exercise price of
non-qualified stock options granted to non-employee directors will be determined
by our Board of Directors. An optionee exercising an option may pay the exercise
price in cash. If approved by the committee, or our Board of Directors with
respect to options granted to a non-employee director, an optionee may pay the
exercise price with previously acquired shares of our common stock that the
optionee has held for six months or longer or through a cashless exercise of
such option.

An optionee who leaves us because of death, disability or retirement will
have all of his or her options outstanding vest immediately, and have three
months to exercise his or her options in the case of retirement and one year to
exercise his or her options in the case of death or disability, unless otherwise
determined by the committee. If an optionee's employment or service with us is
terminated for any reason other than death, disability or retirement, all of his
or her options will immediately terminate, unless otherwise determined by the
committee. Options may not be transferred other than

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by will or the laws of descent and distribution and may be exercised during the
lifetime of an optionee only by the optionee. The term of each option, which is
fixed at the date of grant, may not exceed ten years from the date the option is
granted, except that an incentive option granted to a person holding more than
10% of our voting stock may be exercisable only for five years. Options may be
made exercisable in whole or in installments at dates specified at the time of
grant. In the event of a change in control, all options will automatically
become fully exercisable unless the committee determines prior to a change in
control that the option will be honored or assumed or new rights substituted
immediately following the change in control.

Our Board of Directors may at any time amend, suspend or terminate our stock
option plan and may amend the terms of any outstanding option, except that no
amendment, suspension or termination may impair the rights of the optionees as
they relate to outstanding options unless such amendment, suspension or
termination is made to comply with applicable law, stock exchange rules or
intended accounting treatment. However, no amendment will be made to our stock
option plan without the approval of our stockholders to the extent such approval
is required by law or stock exchange rules.

The grant of an option will create no tax consequences for the optionee or
us. Upon exercising an option, other than an incentive stock option, the
optionee will generally recognize ordinary income equal to the difference
between the exercise price and the fair market value of the shares acquired on
the date of exercise and we generally will be entitled to a tax deduction in the
same amount. An optionee generally will not recognize taxable income upon
exercising an incentive stock option and we will not be entitled to any tax
deduction with respect to an incentive stock option if the optionee holds the
shares for the applicable periods specified in the Internal Revenue Code.

401(K) PLAN. All of our employees are eligible to participate in the Lynch
Corporation 401(k) Savings Plan after having completed one year of service, as
defined in the plan, and having reached the age of 18.

The Lynch Corporation 401(k) Savings Plan permits our employees to make
contributions by deferring a portion of their compensation. Participating
employees also share in contributions made by their respective employers. The
annual mandatory employer contribution to each participant's account is equal to
25% of the first $800 of the participant's contribution. In addition, the
employer may make a discretionary contribution of up to 75% of the first $800 of
the participant's contribution. We intend to seek the adoption of changes to
Lynch's 401(k) plan that will, among other changes, enhance our employer
contributions with respect to our employees, early in 2001. A participant's
interest in both employee and employer contributions and earnings thereupon are
fully vested at all times.

Employee and employer contributions are invested in guaranteed investment
contracts, certain mutual funds or common stock of Lynch, as determined by the
participants. With respect to the individuals listed in the Summary Compensation
Table, each of Messrs. Jenks and Rein deferred $10,000 under the Lynch
Corporation 401(k) Savings Plan during 1999, which amounts have been included
for each such individual in the 1999 Summary Compensation Table.

BONUS PLAN. We have in place a discretionary bonus plan that is based upon
an objective measure of corporate performance and on subjective evaluation of
individual performance for its executive officers and other key personnel. The
plan provides for an annual bonus pool equal to between 25% and 35% of the
amount by which our consolidated earnings before taxes for the calendar year
exceed 20% of our average controllable capital employed in the business during
the year. Before any amount is allocated to the bonus pool, however, our 2000
earnings before income taxes must exceed the level attained in 1999. For 2000
approximately 50 employees are participants in the plan. The Board of Directors
may take into consideration other factors and circumstances in determining the
amount of the bonus pool and awarding bonuses such as progress toward
achievement of strategic goals and qualitative aspects of management
performance. We had similar plans in effect in 1999 and 1998. The total bonuses
paid to named executive officers for 1999 and 1998 were $96,282 and $62,100,

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<PAGE>
respectively. Our Board of Directors will review and implement a bonus program
for 2001. However, there can be no assurances that it will mirror the current
program.

EMPLOYMENT AGREEMENTS. We have entered into an employment agreement with
Robert R. Zylstra, our President and Chief Executive Officer, which terminates
in January 2002. The agreement provides for an initial salary of $175,000 per
year, plus participation in our bonus program. Mr. Zylstra's bonus for 2000 will
be not less than $100,000 if we meet our 2000 plan target for earnings before
interest, tax, depreciation and amortization. In addition, Mr. Zylstra's
employment agreement provides that (1) upon the consummation of this offering,
he will be entitled to receive an option to purchase 225,000 shares of our
Class A common stock at the subscription price and (2) on each of the first
three anniversaries of the consummation of this offering he will be entitled to
receive an option to purchase 75,000 shares of our Class A common stock at the
then current fair market value provided that in the immediately preceding year
our return on equity was at least 18%. Any options issued to Mr. Zylstra
pursuant to the terms and conditions of his employment agreement will vest as
follows: 75% of such options will vest on the third anniversary of the date of
grant and the final 25% will vest on the fourth anniversary of the date of
grant. Mr. Zylstra has agreed that he will not compete with us for a period of
two years after termination of his employment with us and that he will maintain
the confidentiality of information concerning our business and affairs.

As of January 1, 1998, Robert Jenks entered into a three year employment
agreement to act as our Senior Vice President of Operations with primary
responsibility for manufacturing, operations and engineering. Mr. Jenks'
employment agreement provides for a base salary of not less than $120,000 per
year plus participation in our bonus plan. Mr. Jenks also agreed that he will
not compete with us for a period of two years after termination of his
employment with us and will maintain confidential information as to our business
and affairs.

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<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth information known to us regarding the
beneficial ownership of our common stock as of September, 2000, and as adjusted
to reflect the sale of shares offered by the prospectus for:

- each executive officer;

- each of our directors;

- all directors and executive officers as a group; and

- each person known to us to be the beneficial owner of more than 5% of our
outstanding shares of common stock.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
BEFORE THE OFFERING AFTER THE OFFERING
------------------------------------ ------------------------------------
PERCENTAGE OF PERCENTAGE OF
TOTAL VOTING TOTAL VOTING
NAME AND ADDRESS CLASS A CLASS B POWER CLASS A CLASS B POWER
---------------- -------- --------- ------------- -------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
All Executive Officers and Directors as
a group (5 persons).................. 0 0 0 (1) (1) (1)

PRINCIPAL STOCKHOLDER
Lynch Corporation(2) .................. 0 6,500,000 100.0% 0 6,500,000 97%
401 Theodore Fremd Avenue Rye,
New York 10580
</TABLE>

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

(1) The number of shares beneficially owned by all executive officers and
directors as a group after the offering will depend upon whether any of our
executive officers and directors purchases shares pursuant to this offering.
Effective as of the consummation of this offering, we will award each of the
executive officers and directors in the group in this table options to
purchase shares of Class A common stock at an exercise price equal to the
subscription price. The number of shares underlying each executive officer's
options is not included in this table since the options are not exercisable
within 60 days of the date of this prospectus.

(2) Reflects shares held indirectly by Lynch through a wholly-owned subsidiary.
Mario J. Gabelli, the Chairman of Lynch, may be deemed to beneficially own
approximately 28.5% of the common stock of Lynch (including shares of Lynch
held by a charitable foundation of which Mr. Gabelli is a trustee and a
limited partnership in which Mr. Gabelli is the general partner and has an
approximate 6% interest). Mr. Gabelli disclaims beneficial ownership of the
shares of our common stock held by Lynch through its subsidiary, as well as
shares of Lynch held by the charitable foundation and, except for his
ownership interest in the limited partnership, the shares held by the
partnership.

Beneficial ownership is determined in accordance with the rules of the SEC
and generally means sole or shared power to vote or direct the voting or to
dispose or direct the disposition of any common stock. Except as indicated by
footnote, and subject to community property laws where applicable, the persons
named in the table above have sole voting and investment power with respect to
all shares of common stock shown as beneficially owned by them. The percentage
of beneficial ownership is based upon 6,500,000 shares of Class B common stock
outstanding as of the date of the Separation, and 1,006,790 shares of Class A
common stock and 6,500,000 shares of Class B common stock outstanding after
completion of this offering, assuming full exercise of all subscription rights.

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<PAGE>
CERTAIN TRANSACTIONS

STOCK REDEMPTION AND NOTE ISSUANCE

As of January 1, 1999, we purchased from Messrs. Kiousis, Jenks and Rein
equity interests in our company equal to 5%, 2% and 2% of our outstanding stock,
respectively, all of which had been sold to such executives prior to
January 1997, except for a 2% interest that was sold to Mr. Jenks and a 1%
interest that was sold to Mr. Rein, each in January 1998. The aggregate purchase
price that was paid to such executives for their equity interests was $416,269,
which was equal to the book value of the repurchased interests at that time. Of
the purchase price, $117,925 was paid to Lynch on behalf of the executives to
satisfy loans that had been made by Lynch to such executives to finance their
purchase of such interests. We issued promissory notes to the executives for the
remaining balance of $298,344, in the following principal amounts: Mr. Kiousis,
$237,229; Mr. Jenks, $10,904; and Mr. Rein, $50,211. Interest on the notes is
payable quarterly at 10% per annum with principal installments payable annually
beginning January 2000 through maturity in January 2002.

In connection with the purchase of shares described above, we granted each
of Messrs. Kiousis, Jenks and Rein the right to receive additional consideration
in an amount equal to the product of (a) the increase in our book value between
the date of grant and the date of exercise of their right, multiplied by (b) a
percentage, which was equal to the percentage of our stock that had been owned
by such executives prior to the buy-back that is described above. As noted
above, that percentage was 5% in the case of Mr. Kiousis, and 2% in the case of
each of Messrs. Rein and Jenks. Each executive's right to receive such
consideration was to vest at varying rates from January 1, 1999 through
January 1, 2001.

Mr. Kiousis was paid $53,324 at the time of his resignation in
January 2000, in full settlement of his right to receive such additional
consideration. Effective as of the consummation of this offering, we will pay
Messrs. Jenks and Rein cash settlement payments of $ and
$ , respectively, in full settlement of their rights to
receive such additional consideration. In addition, if Lynch were to sell a
majority of its stock interest in us prior to January 1, 2009, in one or a
series of transactions, each of Messrs. Jenks and Rein, assuming that they were
then employed by us, would be entitled to receive from us a contingent payment
equal to 2% of the excess of the value of Lynch's stock interest in us,
determined on the basis of the weighted average per share price paid to Lynch,
over the book value of that interest immediately prior to the consummation of
this offering. We may pay this amount, at our option, in cash or our stock.
Thus, by way of illustration, if Lynch were to sell a majority of its stock
interest in M-tron in 2001 at a per share price of $7.50, we would be obligated
to pay each of Messrs. Jenks and Rein approximately $875,000 of additional
compensation in 2001, thereby resulting in a one-time after-tax reduction in net
income for that year of $1,155,000 (using our book value as of June 30, 2000 and
assuming an effective tax rate of 34%).

MANAGEMENT FEE; DIVIDEND

We paid Lynch a fee of $100,000 in the aggregate for certain management
services provided to us by Lynch in 1999 and we expect to pay Lynch the same
amount on an annualized basis in 2000. See "Arrangements Between Us and Lynch."
We also expect to make a payment of $1.5 million to Lynch in respect of a
previously declared dividend upon consummation of the offering.

ARRANGEMENTS BETWEEN US AND LYNCH

We have provided below a summary description of the separation agreement and
the assignment and assumption agreement executed by Lynch and us. This
description, which summarizes the material terms of the agreements, is not
complete. You should read the full text of these agreements, which have been
filed with the Securities and Exchange Commission as exhibits to the
registration statement of which this prospectus is a part.

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<PAGE>
SEPARATION AGREEMENT

The separation agreement contains the key provisions relating to our
becoming a public company.

THE SEPARATION. We will become a public company at the closing of this
offering. As previously noted, on , 2000, we became the successor to
a South Dakota corporation that transferred all of its assets and liabilities to
us, other than its investment in another corporation that is engaged in a
different line of business than ours, in connection with a reorganization of
certain subsidiaries and affiliates of Lynch. The separation agreement sets
forth various interim and ongoing relationships between Lynch and us, including
matters relating to:

- taxes;

- management services;

- directors and officers insurance; and

- securities matters relating to a spin-off or other offering.

COVENANTS BETWEEN US AND LYNCH. In addition to the documents that
transferred to us our predecessor's assets and liabilities, other than its
investment in another corporation, we have agreed with Lynch for Lynch to
provide certain management advisory and oversight services to us, and we have
agreed to exchange information, engage in auditing practices and resolve
disputes in particular ways.

MANAGEMENT SERVICES. Lynch will provide to us certain management advisory
and oversight services, including strategic, merger and acquisition, and
financial services, essentially on the same basis as it has provided such
services to us in the past. These services will be provided for a fee equal to
$100,000 per annum, plus out-of-pocket expenses. The dollar amount of this fee
will increase over time by at least the percentage increase in the consumer
price index. The management services agreement would terminate if Lynch were to
cease to own a majority of the voting power of our common stock.

TAX MATTERS. The separation agreement allocates responsibilities for tax
matters between us and Lynch. In general, the agreement provides that while we
are a member of Lynch's consolidated group, we must pay to Lynch the same amount
that we would have paid in taxes to the Internal Revenue Service if we had not
been a member of Lynch's consolidated group. The agreement also provides for
compensation or reimbursement as appropriate, in the event that we were to cease
being a member of Lynch's consolidated group, to reflect redeterminations after
we ceased being a member of Lynch's consolidated group of our tax liability for
periods during which we were a member of Lynch's consolidated group.

The separation agreement also requires us to indemnify Lynch for any taxes
that might become payable by it or its subsidiaries in certain circumstances,
including if Lynch were to distribute its Class B common stock to its
stockholders and some other entity thereafter acquired a controlling interest in
us which had the effect of causing the distribution not to qualify for tax-free
treatment to Lynch. Lynch must indemnify us for any taxes that were attributable
to itself or its other subsidiaries for all periods during which we are a member
of Lynch's consolidated group, as well as for any taxes that might result if the
reorganization of certain of Lynch's subsidiaries and affiliates that
immediately preceded the Separation was not tax-free or if any distribution by
Lynch of its Class B common stock to its stockholders were not tax-free, other
than by reason of the subsequent acquisition of a controlling interest in us by
another entity.

The indemnity obligations of Lynch and us include any interest and penalties
on taxes.

Each member of a consolidated group for United States federal income tax
purposes is jointly and severally liable for the group's federal income tax
liability. Accordingly, we could be required to pay a deficiency in the group's
federal income tax liability for a period during which we are a member of the
group even if the separation agreement allocates that liability to Lynch or
another member.

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<PAGE>
The separation agreement also assigns responsibilities for administrative
matters, in the event that we cease being a member of Lynch's consolidated
group, such as the filing of returns, payment of taxes due, retention of records
and conduct of audits, examinations or similar proceedings.

EMPLOYEE MATTERS. All of our eligible employees will continue to
participate in the Lynch Corporation 401(k) Savings Plan, as described under
"Management-Benefit Plans-401(k) Plan" after the public offering.

INFORMATION EXCHANGE; AUDITING PRACTICES. We and Lynch have agreed to share
information with each other, for a variety of purposes, unless the sharing would
be commercially detrimental. Also, so long as Lynch is required to consolidate
our results of operations and financial position, we have agreed to various
procedures to ensure that auditing of our respective financial statements is
facilitated, including our agreement not to select a different independent
accounting firm from that used by Lynch without Lynch's consent and our mutual
agreement to notify each other of any change in accounting principles.

DISPUTE RESOLUTION. If problems arise between us and Lynch, which cannot be
resolved, the parties will resort to binding arbitration.

GENERAL RELEASE OF PRE-SEPARATION CLAIMS. In the separation agreement,
subject to specified exceptions, we released Lynch and its affiliates, agents,
successors and assigns, and Lynch released us, and our affiliates, agents,
successors and assigns, from any liabilities arising from events occurring on or
before the separation date, including events occurring in connection with the
activities to implement the transfer of assets and liabilities to us, this
offering and the distribution. This provision does not impair either party's
enforcement of the separation agreement or any ancillary agreement or
arrangement.

INDEMNIFICATION. In general, we have agreed to indemnify Lynch and its
affiliates, agents, successors and assigns from all liabilities, including
environmental liabilities, arising from our business or any of our contracts.
Lynch has agreed to indemnify us and our affiliates, agents, successors and
assigns from all liabilities that are attributable to any of Lynch's
subsidiaries and affiliates, other than those of our predecessor.

These indemnification provisions do not apply to amounts collected under
insurance policies.

LIABILITY ARISING FROM THIS PROSPECTUS. We will bear any liability arising
from any untrue statement of a material fact or any omission of a material fact
in this prospectus.

INSURANCE MATTERS. The separation agreement also contains provisions
governing our directors and officers insurance from the separation date until
Lynch ceases to own a majority of the voting power of our common stock. In
general, we agree to reimburse Lynch for our allocable portion, to be determined
by negotiation, of premium expenses related to this insurance coverage during
this period.

EXPENSES. All of the out-of-pocket costs and expenses related to this
offering, as well as the costs and expenses related to the transfer of assets
and liabilities to us, will be borne by us.

ASSIGNMENT AND ASSUMPTION AGREEMENT

As previously noted, we are the successor to a South Dakota corporation that
transferred all of its assets and liabilities to us, other than its investment
in another corporation, in connection with a reorganization of certain
subsidiaries and affiliates of Lynch. The assignment and assumption agreement
transferred to us the assets and liabilities that we received and assumed from
our predecessor. We have been, and our predecessor was, operated in all material
respects as a free-standing subsidiary of Lynch, and we own, lease or license
the assets used in our business.

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DESCRIPTION OF CAPITAL STOCK

GENERAL

Our authorized capital stock consists of 25,000,000 shares of common stock,
of which 12,000,000 shares are Class A common stock and 13,000,000 shares are
Class B common stock, and 1,000,000 shares of preferred stock. All shares have a
par value of $.01 solely for the purpose of a statute or regulation imposing a
tax or fee based upon our capitalization. As of , 2000, we had
6,500,000 shares of Class B common stock issued and outstanding. No shares of
Class A common stock or preferred stock were outstanding.

COMMON STOCK

The holders of our common stock:

- have equal ratable rights to dividends from funds legally available, when,
as and if declared by our Board of Directors; and

- are entitled to share ratably in all our assets available for distribution
to holders of our common stock upon liquidation, dissolution or winding up
of our affairs.

The holders of our Class A common stock are entitled to one vote per share
on all matters that stockholders may vote on at all meetings of stockholders.
The holder of our Class B common stock, Lynch, is entitled to five votes per
share on all matters that stockholders may vote on at all meetings of
stockholders. Any shares of Class B common stock that are distributed by Lynch
to the holders of its common stock will convert into an equal number of shares
of Class A common stock which has one vote per share five years after the date
of such distribution unless Lynch, in its sole discretion, accelerates the date
of such conversion. Any shares of Class B common stock that are transferred by
Lynch to an unaffiliated person or entity will convert into an equal number of
shares of Class A common stock having one vote per share immediately upon the
transfer of such shares to such entity or person which is not controlled by or
is not under common control with Lynch. The Class B common stock has been given
so-called super voting power so as to preserve Lynch's ability to distribute
such common stock to its stockholders on a tax-free basis, which requires, among
other things, that Lynch own stock having 80% of the voting power of all of our
capital stock.

All of the shares of our Class B common stock now outstanding are fully paid
and nonassessable, and the shares of our Class A common stock to be issued upon
completion of this offering will be fully paid and nonassessable. We have no
redemption, sinking fund, conversion or preemptive rights with respect to the
shares of our common stock. The holders of our common stock do not have
cumulative voting rights. Subject to the rights of any future series or classes
of capital stock, the holders of more than 51.5% of our outstanding shares of
Class B common stock voting for the election of directors can elect all of our
directors to be elected, if they so choose. In that event, the holders of the
remaining shares, including the holders of shares of the Class A common stock,
will not be able to elect any of our directors.

PREFERRED STOCK

Our Board of Directors is authorized to issue shares of preferred stock in
one or more classes or series and to fix the voting powers, designations,
preferences and other special rights, and the qualifications, limitations and
restrictions of each class or series, without any further vote or action of the
stockholders. The issuance of any preferred stock could dilute the voting power
or otherwise affect the rights of the holders of our common stock. The issuance
of preferred stock could have the effect of acting as an anti-takeover device to
delay or prevent a change in control of our company. There are no shares of
preferred stock currently outstanding and we have no present plans to issue
preferred stock.

58
<PAGE>
POTENTIAL ANTI-TAKEOVER EFFECT OF DELAWARE LAW AND CERTAIN PROVISIONS OF OUR
CHARTER DOCUMENTS

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW. Section 203 of the
Delaware General Corporation Law prevents an "interested stockholder" (defined
in Section 203, generally, as a person owning 15% or more of a corporation's
outstanding voting stock) from engaging in a "business combination" (as defined
in Section 203) with a publicly-held Delaware corporation for three years
following the date such person became an interested stockholder unless
(1) before such person became an interested stockholder, the board of directors
of the corporation approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination; (2) upon
consummation of the transaction that resulted in the interested stockholder's
becoming an interested stockholder, the interested stockholder owns at least 85%
of the voting stock of the corporation outstanding at the time the transaction
commenced (excluding stock held by directors who are also officers of the
corporation and by employee stock plans that do not provide employees with the
rights to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer); or (3) following the transaction in
which such person became an interested stockholder, the business combination is
approved by the board of directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of two-thirds of
the outstanding voting stock of the corporation not owned by the interested
stockholder. Our board of directors has resolved that Section 203 shall not
apply to a person or entity acquiring 15% or more of our voting stock directly
from Lynch.

LIMITATION ON DIRECTORS' LIABILITY; INDEMNIFICATION OF DIRECTORS AND
OFFICERS. Our Certificate of Incorporation contains provisions that eliminate
the personal liability of our directors for monetary damages resulting from
breaches of their fiduciary duty other than liability for breaches of the duty
of loyalty, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, violations under Section 174 of the
Delaware General Corporation Law or any transaction from which the director
derived an improper personal benefit. Our By-laws contain provisions requiring
the indemnification of our directors and officers to the fullest extent
permitted by Section 145 of the Delaware General Corporation Law, including
circumstances in which indemnification is otherwise discretionary. We believe
that these provisions are necessary to attract and retain qualified persons as
directors and officers, but they may embolden our directors or officers to
resist takeover attempts.

TRANSFER AGENT AND REGISTRAR

Our transfer agent and registrar with respect to our Class A common stock
will be .

59
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of this offering, assuming all subscription rights are
exercised, we will have shares of Class A common stock outstanding and
6,500,000 shares of Class B common stock outstanding. Of these shares, the
1,006,790 shares of Class A common stock sold in this offering will be freely
tradeable without restriction under the Securities Act except for any shares
which may be acquired by an affiliate of us, as the term "affiliate" is defined
in Rule 144 under the Securities Act of 1933, as amended. Persons who may be
deemed to be affiliates generally include individuals or entities that control,
are controlled by, or are under common control with, us and may include our
directors and officers as well as any of our significant stockholders.

Other than the shares of Class A common stock issued in this offering, as of
the closing of this offering no other shares of Class A common stock will be
outstanding. We have issued options to purchase shares of Class A common
stock to our executive officers and employees and non-employee directors, but
none of such options initially vest prior to the first anniversary of the
closing of this offering. The shares of Class A common stock will be eligible
for sale in the public market following this offering, subject to either
registration under the Securities Act of 1933, as amended or compliance with the
volume and manner of sale limitations and other requirements of Rule 144 under
the Securities Act of 1933, as amended or pursuant to another exemption from the
registration requirements of the Securities Act of 1933, as amended. If Lynch
were to distribute its shares of its Class B common stock to its stockholders,
such Class B shares would convert into an equal number of shares of Class A
common stock five years after the date of such distribution unless Lynch, in its
sole discretion, accelerated the date of such conversion. Any shares of Class B
common stock that were transferred by Lynch to an unaffiliated person or entity
would convert into an equal number of shares of Class A common stock having one
vote per share immediately upon the transfer of such shares to such entity or
person which was not controlled by or was not under common control with Lynch.
We expect that shares of our common stock distributed to Lynch stockholders
would be freely transferable, except for shares of common stock received by
persons who may be deemed to be affiliates. Persons who are affiliates would be
permitted to sell the shares of our common stock received by them in a
distribution by Lynch only through registration under the Securities Act of
1933, as amended, or under an exemption from registration, such as the one
provided by Rule 144. Shares of our common stock that were transferred by Lynch
to an unaffiliated person would be deemed to be "restricted securities" as
defined in Rule 144, as are the shares of Class B common stock that are now held
by Lynch, and could not be sold other than through registration under the
Securities Act of 1933, as amended or under an exemption from registration, such
as the one provided by Rule 144.

As of the date of this prospectus, we have 1,125,000 shares of Class A
common stock reserved for issuance upon exercise of options granted or to be
granted under our 2000 Stock Option Plan. We intend to file a registration
statement on Form S-8 under the Securities Act of 1933, as amended covering all
shares issuable upon the exercise of options under our 2000 Stock Option Plan.
Upon the effectiveness of the registration statement on Form S-8, the shares
will be immediately available for sale in the public market, subject to the
terms of the related options (including vesting provisions). Sales of
substantial amounts of our shares, or the prospect of such sales, could
materially adversely affect the market price of our shares and our ability to
raise capital through an offering of securities.

Under Rule 144, as in effect on the date of this prospectus, once we have
been a public company for at least 90 days, a person who has beneficially owned
restricted securities, as that term is defined under Rule 144, for at least one
year, will be entitled to sell in any three-month period a number of shares of
Class A common stock that does not exceed the greater of

- 1% of the then outstanding number of shares, or

- the average weekly reported trading volume of our shares on all national
securities exchanges and/or reported through the automated quotation
system of a registered securities association, if

60
<PAGE>
applicable, during the four calendar weeks immediately preceding the date
on which notice of the sale is filed with the SEC.

Sales pursuant to Rule 144 are also subject to requirements relating to
manner of sale, notice and availability of current public information about us.
Under Rule 144(k), if at least two years have elapsed since restricted
securities comprised of Class A common stock were acquired from us or an
affiliate of ours, the holder of those shares is permitted to sell the shares
without restriction, so long as the holder is not an affiliate of ours and has
not been an affiliate for at least 90 days prior to the date of sale.

Any of our employees, directors or consultants who purchased, or were
awarded shares of Class A common stock or options to purchase shares of Class A
common stock pursuant to a written compensatory plan or contract is entitled to
rely on the resale provisions of Rule 701 under the Securities Act of 1933, as
amended, which permits stockholders to sell their Rule 701 shares without having
to comply with Rule 144's holding period restrictions, in each case commencing
90 days after the date of this prospectus. In addition, holders who are not
affiliates may sell Rule 701 shares without complying with the public
information, volume and notice provisions of Rule 144. Effective as of the date
of the closing of this offering, we will have outstanding options to purchase
shares of our Class A common stock to our employees and directors.
Pursuant to Rule 701, shares of Class A common stock issued upon exercise of
these options will be available for sale in the public market beginning 90 days
after the date of this prospectus, subject to any applicable lock-up agreements.
However, such options will not initially vest prior to the first anniversary of
the closing of this offering.

FEDERAL INCOME TAX CONSEQUENCES

The following discussion summarizes the material Federal income tax
consequences of the acquisition, ownership and exercise or lapse of a right and
of the acquisition, ownership and disposition of the common stock that may be
acquired on its exercise. This discussion is based on the current provisions of
the Internal Revenue Code of 1986, as amended, existing and proposed Treasury
regulations thereunder and current administrative rulings and court decisions,
all of which are subject to change. Any change, which may or may not be
retroactive, could alter the tax consequences described herein. This discussion
is addressed to a person that will hold a right and the shares of our Class A
common stock acquired on exercise of a right as a capital asset and that, for
Federal income tax persons, is a U.S. citizen or resident or a domestic
corporation, partnership, trust or estate. This summary does not purport to deal
with all aspects of taxation that may be relevant to a particular person in
light of his particular circumstances or to taxpayers subject to special
treatment under the Federal income tax law, including financial institutions,
broker-dealers, foreign persons or persons holding rights or shares of our
Class A common stock as part of a straddle, "synthetic security" or other
integrated investment, including a "conversion transaction".

Neither we nor Lynch has obtained, or will obtain, a private letter ruling
from the Internal Revenue Service or an opinion of tax counsel with respect to
any Federal income tax consequences of the rights distribution. We believe that
the relevant material Federal income tax consequences should be as described
below. However, no assurance can be provided that positions contrary to those
described below will not be taken by the Internal Revenue Service or by a court.

RIGHTS TRANSFERRED TO HOLDERS OF SHARES OF LYNCH COMMON STOCK

Rights transferred to a holder of shares of Lynch common stock in respect of
that stock generally should be subject to the federal income tax rules
applicable to investment options, or warrants. A transfer by Lynch of rights
should be treated as a distribution of property by Lynch to the stockholder in
an amount equal to the fair market value on the date of the distribution of the
rights distributed. That distribution should be taxable, first, as a dividend to
the extent of the current and/or accumulated

61
<PAGE>
earnings and profits, if any, of Lynch as of the end of the taxable year in
which the distribution takes place which are attributable to the shares of Lynch
common stock owned by that stockholder; second, as a non-taxable reduction of
the stockholder's basis in his shares of Lynch common stock, on a share-by-share
basis, to the extent thereof; and third, as gain recognized as though there had
been a sale or exchange of Lynch common stock. A rights holder's basis in a
right subject to these rules will be equal to its fair market value on the date
of distribution, and his holding period in that right will begin on the day
after the date of distribution.

The portion of a distribution constituting a dividend will be eligible for
the dividends received deduction otherwise generally available to a corporate
holder of Lynch common stock. In the case of any corporate stockholder that has
not held a share of Lynch common stock for more than two years on the
distribution announcement date, the portion, if any, of the distribution taxable
as a dividend will be subject to the provisions of Section 1059 of the Internal
Revenue Code applicable to "extraordinary dividends" if the amount taxable as a
dividend is at least 10% of the holder's basis in the share of Lynch common
stock. Section 1059 sometimes aggregates dividends paid within specified time
periods. If Section 1059 applies to a corporate holder, the untaxed portion of
the dividend (generally, the portion qualifying for the dividends received
deduction), if any, would reduce the corporate holder's tax basis in its Lynch
common stock, on a share-by-share basis, but not below zero, and any excess
generally would be taxable as capital gain.

A holder of rights subject to the rules applicable to investment options
will not recognize any gain or loss on exercise of the right. The rights
holder's tax basis in our common stock acquired on exercise will be equal to the
sum of the price paid for our common stock on exercise of the right and the
rights holder's tax basis in the right exercised. The rights holder's holding
period for the shares of our common stock acquired on exercise of a right will
begin on the date of exercise.

Upon a sale, exchange or other taxable disposition of a right subject to the
rules applicable to investment options, the rights holder will recognize capital
gain or loss equal to the difference between the amount realized for the right
and the rights holder's tax basis in the right. That gain or loss will be
short-term capital gain or loss.

If a holder of a right subject to the investment options rules fails to
exercise the right and it lapses unexercised, the rights holder will recognize a
short-term capital loss, on the date the right expires, in an amount equal to
the rights holder's tax basis in the right.

OUR COMMON STOCK

The Federal income tax rules generally applicable to common stock will apply
to the shares of our Class A common stock issued on exercise of a right. You
will recognize gain or loss upon the sale of shares of our Class A common stock
acquired by exercise of the rights in an amount equal to the difference between
the amount realized from the sale and your tax basis in the shares. The gain or
loss recognized will be long-term or short-term capital gain or loss, depending
on whether you have held the shares for more than one year or for one year or
less.

INFORMATION REPORTING AND BACKUP WITHHOLDING

Information reporting by Lynch to the Internal Revenue Service will apply in
respect of rights distributed in respect of our common stock.

LEGAL MATTERS

The validity of the rights that we are distributing and of the shares of
Class A common stock offered by this prospectus will be passed upon for us by
Finn Dixon & Herling LLP, Stamford, Connecticut.

62
<PAGE>
EXPERTS

The financial statements and schedule of M-tron Industries, Inc. at
December 31, 1999 and 1998, and for each of the three years in the period ended
December 31, 1999, appearing in this prospectus and registration statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given on the authority of such firm as experts in accounting and
auditing.

ADDITIONAL INFORMATION

We have filed a registration statement on Form S-1 with the SEC for the
rights which we are distributing and for the stock we are offering by this
prospectus. This prospectus does not include all of the information contained in
the registration statement. You should refer to the registration statement and
its exhibits for additional information. Whenever we make reference in this
prospectus to any of our contracts, agreements or other documents, the
references are not necessarily complete and you should refer to the exhibits
attached to the registration statement for copies of the actual contract,
agreement or other document. When we complete this offering, we will also be
required to file annual, quarterly and special reports, proxy statements and
other information with the SEC.

You can read our SEC filings, including the registration statement, over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file with the SEC at its public reference facilities at 450
Fifth Street, NW, Washington, DC 20549, 7 World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. You may also obtain copies of the documents at
prescribed rates by writing to the Public Reference Section of the SEC at 450
Fifth Street, NW, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference facilities.

63
<PAGE>
INDEX TO COMBINED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Auditors.............................. F-2

Combined Financial Statements of M-tron Industries, Inc.

Combined Balance Sheets as of December 31, 1998 and 1999 and
June 30, 2000 (unaudited)................................. F-3

Combined Statements of Income for the years ended
December 31, 1997, 1998 and 1999 and the six months ended
June 30, 1999 (unaudited) and June 30, 2000 (unaudited)... F-4

Combined Statements of Net Assets for the years ended
December 31, 1997, 1998 and 1999 and the six months ended
June 30, 1999 (unaudited) and June 30, 2000 (unaudited)... F-5

Combined Statements of Cash Flows for the years ended
December 31, 1997, 1998, and 1999 and the six months ended
June 30, 1999 (unaudited) and June 30, 2000 (unaudited)... F-6

Notes to Combined Financial Statements...................... F-7

Schedule II--Valuation and Qualifying Accounts.............. S-1
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
M-tron Industries, Inc.

We have audited the accompanying combined balance sheets of the net assets
and operations to be contributed to M-tron Industries, Inc. (see Note 1) as of
December 31, 1999 and 1998, and the related combined statements of income, net
assets and cash flows for each of the three years in the period ended
December 31, 1999. Our audits also included the financial statement schedule
listed in Item 16(b). These financial statements and schedule are the
responsibility of the management of M-tron Industries, Inc. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 audits provide a reasonable basis
for our opinion.

In our opinion, the accompanying financial statements referred to above
present fairly, in all material respects, the combined financial position of the
net assets and operations to be contributed to M-tron Industries, Inc. (see
Note 1) at December 31, 1999 and 1998, and the combined results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States. 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/ ERNST & YOUNG LLP

Des Moines, Iowa
October 25, 2000

F-2
<PAGE>
M-TRON INDUSTRIES, INC.

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1998 1999 2000
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash................................................. $ 2,787 $ 124,847 $ 2,117
Accounts receivable, less allowance for doubtful
accounts of $39,000 in 1998, $47,000 in 1999 and
$57,000 in 2000.................................... 2,921,764 3,598,716 6,223,397
Inventories.......................................... 3,213,150 4,375,202 4,551,524
Prepaid expenses and other........................... 134,825 123,868 84,974
Deferred income taxes................................ 192,387 220,100 240,752
----------- ----------- -----------
Total current assets................................... 6,464,913 8,442,733 11,102,764
Property, plant, and equipment, at cost:
Land................................................. 19,836 19,836 19,836
Buildings and improvements........................... 997,232 1,174,244 1,174,244
Machinery and equipment.............................. 7,139,144 7,714,165 7,992,398
----------- ----------- -----------
8,156,212 8,908,245 9,186,478
Less accumulated depreciation........................ (5,723,178) (6,410,674) (6,753,887)
----------- ----------- -----------
2,433,034 2,497,571 2,432,591
----------- ----------- -----------
Total assets........................................... $ 8,897,947 $10,940,304 $13,535,355
=========== =========== ===========

LIABILITIES AND NET ASSETS
Current liabilities:
Accounts payable..................................... $ 1,361,110 $ 1,420,814 $ 4,113,120
Accrued bonuses...................................... 108,058 134,538 710,064
Other accrued expenses............................... 449,445 608,321 860,876
Income tax payable................................... 271,847 144,637 329,579
Demand note due to Parent............................ -- -- 1,500,000
Current portion of notes payable to related
parties............................................ -- 99,448 99,448
Notes payable to bank................................ 1,805,301 2,673,539 595,398
----------- ----------- -----------
Total current liabilities.............................. 3,995,761 5,081,297 8,208,485
Due to parent.......................................... -- 117,925 117,925
Long-term notes payable to related parties, less
current portion...................................... -- 198,896 99,448
Deferred income taxes.................................. 157,605 155,636 51,936
Commitments
Net assets............................................. 4,744,581 5,386,550 5,057,561
----------- ----------- -----------
Total liabilities and net assets....................... $ 8,897,947 $10,940,304 $13,535,355
=========== =========== ===========
</TABLE>

SEE ACCOMPANYING NOTES.

F-3
<PAGE>
M-TRON INDUSTRIES, INC.

COMBINED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
YEAR ENDED DECEMBER 31, (UNAUDITED)
--------------------------------------- -------------------------
1997 1998 1999 1999 2000
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales..................... $22,828,387 $22,797,643 $26,467,152 $12,371,581 $18,483,697
Cost of products sold......... 16,862,108 16,815,682 19,337,833 8,973,381 12,891,440
----------- ----------- ----------- ----------- -----------
Gross profit.................. 5,966,279 5,981,961 7,129,319 3,398,200 5,592,257
Research and development
expenses.................... 778,460 673,427 855,592 426,037 396,645
Selling, general, and
administrative expenses..... 3,577,335 3,880,096 4,428,383 2,180,118 3,023,396
Equity based compensation
expense..................... -- -- 62,294 -- 364,000
----------- ----------- ----------- ----------- -----------
Operating income.............. 1,610,484 1,428,438 1,783,050 792,045 1,808,216
Other expense (income):
Interest expense............ 195,443 186,495 232,403 84,879 76,615
Other....................... -- -- (17,256) -- --
----------- ----------- ----------- ----------- -----------
Income before income taxes.... 1,415,041 1,241,943 1,567,903 707,166 1,731,601
Income tax expense............ 409,365 424,825 509,665 227,248 560,590
----------- ----------- ----------- ----------- -----------
Net income.................... $ 1,005,676 $ 817,118 $ 1,058,238 $ 479,918 $ 1,171,011
=========== =========== =========== =========== ===========
</TABLE>

SEE ACCOMPANYING NOTES.

F-4
<PAGE>
M-TRON INDUSTRIES, INC.

COMBINED STATEMENTS OF NET ASSETS

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
YEAR ENDED DECEMBER 31, (UNAUDITED)
------------------------------------ -------------------------
1997 1998 1999 1999 2000
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at beginning of period..... $3,171,787 $3,927,463 $4,744,581 $4,744,581 $5,386,550
Net income....................... 1,005,676 817,118 1,058,238 479,918 1,171,011
Dividends........................ (250,000) -- -- -- (1,500,000)
Redemption of equity interests... -- -- (416,269) (416,269) --
---------- ---------- ---------- ---------- ----------
Balance at end of period........... $3,927,463 $4,744,581 $5,386,550 $4,808,230 $5,057,561
========== ========== ========== ========== ==========
</TABLE>

SEE ACCOMPANYING NOTES.

F-5
<PAGE>
M-TRON INDUSTRIES, INC.

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
----------------------------------- -----------------------
1997 1998 1999 1999 2000
---------- --------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................ $1,005,676 $ 817,118 $1,058,238 $ 479,918 $1,171,011
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation............................ 589,221 645,431 739,601 340,634 385,000
Deferred income taxes................... (60,490) 5,466 (29,682) (14,841) (121,040)
Changes in operating assets and
liabilities:
Accounts receivable................... (371,023) (231,838) (676,952) (1,019,319) (2,624,682)
Inventories........................... (1,882,534) 337,164 (1,162,052) (1,071,752) (176,322)
Prepaid expenses and other............ 9,799 12,923 10,957 30,336 38,894
Accounts payable...................... 329,067 (253,969) 59,704 922,367 2,692,306
Accrued bonuses and expenses.......... 141,404 (153,372) 185,356 216,118 828,081
Income taxes payable.................. 340,488 (68,641) (127,210) (168,614) 181,630
---------- --------- ---------- ---------- ----------
Net cash provided by (used in) operating
activities.............................. 101,608 1,110,282 57,960 (285,153) 2,374,878

INVESTING ACTIVITIES
Purchases of property, plant, and
equipment............................... (688,245) (878,042) (804,138) (341,581) (335,619)
Proceeds from sales of equipment.......... 8,774 -- -- -- 15,600
---------- --------- ---------- ---------- ----------
Net cash used in investing activities..... (679,471) (878,042) (804,138) (341,581) (320,019)

FINANCING ACTIVITIES
Payment of related party debt............. -- -- -- -- (99,448)
Payments of long-term debt................ (247,693) (94,355) -- -- --
Net increase (decrease) in notes payable
to bank................................. 1,121,151 (216,575) 868,238 640,377 (2,078,141)
Dividends paid............................ (250,000) -- -- -- --
---------- --------- ---------- ---------- ----------
Net cash provided by (used in) financing
activities.............................. 623,458 (310,930) 868,238 640,377 (2,177,589)
---------- --------- ---------- ---------- ----------
Net (decrease) increase in cash........... 45,595 (78,690) 122,060 13,643 (122,730)
Cash at beginning of year................. 35,882 81,477 2,787 2,787 124,847
---------- --------- ---------- ---------- ----------
Cash at end of period..................... $ 81,477 $ 2,787 $ 124,847 $ 16,430 $ 2,117
========== ========= ========== ========== ==========

SUPPLEMENTAL DISCLOSURES
Interest paid in cash..................... $ 185,888 $ 191,246 $ 217,053 $ 80,474 $ 88,210
Income taxes paid to parent............... $ 90,000 $ 488,000 $ 644,792 $ 251,792 $ 500,000
Noncash financing activities:
Notes issued to related parties for
redemption of common stock............ $ -- $ -- $ 298,344 $ 298,344 $ --
Unpaid dividend......................... $ -- $ -- $ -- $ -- $1,500,000
Payable to parent for redemption of
common stock.......................... $ -- $ -- $ 117,925 $ -- $ --
</TABLE>

SEE ACCOMPANYING NOTES.

F-6
<PAGE>
M-TRON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) AND 2000 (UNAUDITED)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

BACKGROUND

M-tron Industries, Inc. (the "Company"), a Delaware corporation, is an
indirect wholly-owned subsidiary of Lynch Corporation ("Lynch"). The Company was
established in August 2000 for the purpose of succeeding to the business of
M-tron Industries, Inc., ("M-tron South Dakota"), a South Dakota corporation, a
wholly-owned subsidiary of Lynch. It is anticipated that in November 2000, all
assets and liabilities related to the business that had previously been
conducted by M-tron South Dakota will be received by the Company except for
M-tron South Dakota's investment in 48% of the outstanding common stock of
Spinnaker Industries, Inc. ("Spinnaker").

DESCRIPTION OF BUSINESS

The Company manufactures and sells packaged quartz crystal frequency control
devices to customers throughout the United States and internationally. The
Company operates in one business segment for financial reporting purposes.

BASIS OF PRESENTATION

The accompanying combined financial statements have been prepared using the
historical basis of assets and liabilities and historical results of operations
of M-tron South Dakota, including the accounts of M-tron Industries Limited
("M-tron Limited"), its wholly-owned foreign subsidiary, but excludes M-tron
South Dakota's investment in Spinnaker. Significant intercompany accounts and
transactions have been eliminated.

The historical financial information presented herein reflects periods
during which the Company did not operate as an independent public company. Such
information, therefore, may not necessarily reflect the results of operations,
financial condition or cash flows of the Company in the future or what they
would have been had the Company been an independent public company during the
reporting periods.

Lynch has historically provided certain advisory and oversight services such
as finance, cash management, legal, and human resources to its various business
units. Lynch charges the Company $100,000 per year for these services based
principally on an informal allocation of its corporate overhead associated with
being a public company (see Note 5). In the opinion of management, these costs
are reasonable; however, the costs of these services allocated to the Company
are not necessarily indicative of the costs that would have been incurred by the
Company on a stand-alone basis. As a result, the financial position, results of
operations, and cash flows of the Company presented may not be fully indicative
of what the financial position, results of operations, and cash flows would have
been if the Company had operated on a stand-alone basis. It is likely that the
Company's administrative expenses will increase as a result of additional
financial reporting requirements, stock listing and transfer fees, directors'
fees, insurance, compensation, and other costs associated with being a public
company.

INTERIM FINANCIAL STATEMENTS (UNAUDITED)

The interim financial information as of June 30, 2000 and for the six months
ended June 30, 1999 and 2000 is unaudited. In the opinion of management, the
information furnished in the unaudited interim combined financial statements
reflects all adjustments necessary for a fair presentation of the

F-7
<PAGE>
M-TRON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) AND 2000 (UNAUDITED)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (CONTINUED)
financial position and results of operations as of June 30, 2000 and for the six
months ended June 30, 1999 and 2000.

USE OF ESTIMATES

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

2. SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTS RECEIVABLE AND CONCENTRATIONS OF CREDIT RISK

The Company has certain concentrations of credit risk with respect to trade
receivables (see Note 10). The Company performs initial and periodic credit
evaluations of its customers, generally does not require collateral, and
maintains allowances for potential credit losses.

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined by
the last-in, first-out (LIFO) method for manufactured products and by the
first-in, first-out (FIFO) method for purchased products.

PROPERTY, PLANT AND EQUIPMENT

Depreciation of property, plant and equipment is provided using the
straight-line method over the estimated useful lives of the assets as follows:

<TABLE>
<S> <C>
Buildings and improvements.................................. 6-40 years
Machinery and equipment..................................... 5-7 years
</TABLE>

REVENUE RECOGNITION

The Company recognizes revenues at the time of shipment. The majority of the
Company's sales are for delivery of custom designed frequency control devices.
All such sales are final with no right of return after shipment. Certain of the
Company's sales are subject to returns in the normal course of the Company's
business; however, the Company accrues for amounts related to product returns if
probable and reasonably estimable.

INCOME TAXES

The Company files a consolidated income tax return with Lynch. All income
taxes reflected by the Company have been computed on a separate return basis.
The Company follows the liability method of accounting for income taxes, under
which deferred income tax assets and liabilities are determined based on the
difference between financial reporting and income tax bases of assets and
liabilities using the enacted marginal tax rates. Deferred income tax expense is
based on the changes in the asset or liability from period to period. The
current portion of deferred income taxes is determined based on

F-8
<PAGE>
M-TRON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) AND 2000 (UNAUDITED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the classification of the related asset or liability for financial reporting
purposes. Temporary differences result primarily from depreciation, inventory
valuation, certain reserves and accruals.

RESEARCH AND DEVELOPMENT

Research and development costs are incurred to develop new and improved
products. Research and development costs are charged to expense when incurred.

ADVERTISING

The Company expenses advertising costs as incurred. Advertising expense was
approximately $159,000 in 1997, $315,000 in 1998 and $235,000 in 1999 and
$125,000 and $117,000 for the six months ended June 30, 1999 and June 30, 2000,
respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments primarily include accounts receivable, accounts
payable and notes payable to related parties and bank. Management believes the
fair value of accounts receivable and accounts payable approximate their
carrying value in the balance sheet as of each balance sheet date due to the
short term nature of these financial instruments. The fair value of the notes
payable to related parties and the bank is estimated to approximate their
carrying amount as of each balance sheet date. The fair value of the notes
payable to related parties is estimated based on interest rates set using
arms-length negotiations between the Company and the note holders. The fair
value of notes payable to bank is estimated based on anticipated interest rates
which management believes would currently be available to the Company for
similar borrowings, taking into account the current credit risk of the Company
and other market factors.

FOREIGN OPERATIONS

The Company has operations in Hong Kong through its wholly-owned subsidiary,
M-tron Limited. The Company uses the U. S. dollar as its functional currency for
M-tron Limited.

NET ASSETS

Net assets represents the net investment by Lynch and, for 1997 and 1998, by
certain minority shareholders. The Company intends to pay a dividend of
$1.5 million to Lynch. Payment of the dividend is to be in the form of a demand
promissory note. The effect of the dividend has been retroactively reflected in
the financial statements as of and for the six months ended June 30, 2000.

EMERGING ACCOUNTING ISSUES

The Company is not aware of any accounting standards which have been issued
that would require the Company to change current accounting policies or adopt
new policies, in which the effect would be material to the combined financial
statements.

F-9
<PAGE>
M-TRON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) AND 2000 (UNAUDITED)

3. INVENTORIES

Inventories are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1998 1999 2000
---------- ---------- ----------
<S> <C> <C> <C>
Raw materials.................................... $ 608,519 $1,296,033 $ 975,621
Work in process.................................. 812,435 890,867 1,670,230
Finished goods................................... 2,022,374 2,444,923 2,162,294
---------- ---------- ----------
3,443,328 4,631,823 4,808,145
Less LIFO reserve................................ (230,178) (256,621) (256,621)
---------- ---------- ----------
$3,213,150 $4,375,202 $4,551,524
========== ========== ==========
</TABLE>

Of the inventory values represented above, approximately 52.7%, 44.3% and
30.8% represents inventory accounted for under the FIFO method at December 31,
1998 and 1999 and June 30, 2000 respectively, and 47.3%, 55.7% and 69.2% under
the LIFO method at December 31, 1998 and 1999 and June 30, 2000.

The Company had reserves against excess and obsolete inventories of
approximately $243,000, $183,000 and $223,000 at December 31, 1998 and 1999 and
June 30, 2000, respectively. These reserves are netted against the respective
inventories summarized above.

4. NOTES PAYABLE TO BANK

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1998 1999 2000
---------- ---------- --------
<S> <C> <C> <C>
Notes payable to bank under:
Revolving credit agreement....................... $1,652,047 $2,575,936 $537,107
Overdraft agreement for subsidiary............... 153,254 97,603 58,291
---------- ---------- --------
$1,805,301 $2,673,539 $595,398
========== ========== ========
</TABLE>

The revolving credit agreement matured in March 2000 and was renewed through
May, 2001. Interest is payable monthly at a defined base rate (7.75%, 8.5% and
9.0% at December 31, 1998 and 1999 and June 30, 2000, respectively).

Borrowings under the revolving credit agreement are limited to the lesser of
$3,700,000 or a defined borrowing base determined by eligible accounts
receivable and inventories. Aggregate available borrowings at June 30, 2000 were
approximately $3,100,000. The note is secured by substantially all assets of the
Company. The revolving credit agreement requires the Company, among other
things, to maintain a specified minimum tangible net worth ratio and prohibits
the payments of cash dividends on capital stock in excess of 50% of earnings
without prior approval from the lender.

The bank overdraft agreement with a foreign bank covers outstanding checks
written by the foreign subsidiary. The overdraft is secured by a standby
documentary letter of credit which expires April 2001 and is renewable annually
thereafter. Interest is payable monthly on the bank overdraft agreement at a
defined base rate plus 2% (12.25%, 10.75% and 8.5% at December 31, 1998 and 1999
and June 30, 2000, respectively).

F-10
<PAGE>
M-TRON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) AND 2000 (UNAUDITED)

5. COMMITMENTS AND CONTINGENCIES

The Company leases office buildings under operating leases with terms of 2
to 3 years. The Company expects that generally leases will be renewed under
renewal options. Rental expense under these operating leases was approximately
$78,000 in 1997, $74,000 in 1998 and $66,000 in 1999 and $34,000 and $30,000 in
the six months ended June 30, 1999 and 2000, respectively.

Minimum future rental commitments applicable to noncancellable operating
leases at December 31, 1999 are as follows:

During 1997, 1998 and 1999, the Company paid management fees to Lynch in the
amount of $100,000. The Company paid management fees to Lynch of $50,000 in each
of the six months ended June 30, 1999 and 2000.

The Company has committed to make capital expenditures of $825,000 in the
second half of 2000 to expand production capacity.

The Company is involved in various legal proceedings of a nature considered
normal to its business. The Company accrues for amounts related to these legal
matters if it is probable that a liability has been incurred and an amount is
reasonably estimable. In management's opinion, the Company is not currently
involved in any material litigation.

6. INCOME TAXES

The Company had U. S. and foreign income before income taxes as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------ ---------------------
1997 1998 1999 1999 2000
---------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
U. S................................ $1,156,894 $1,223,867 $1,403,585 $625,005 $1,500,123
Foreign............................. 258,147 18,076 164,318 82,161 231,478
---------- ---------- ---------- -------- ----------
Total income before income taxes.... $1,415,041 $1,241,943 $1,567,903 $707,166 $1,731,601
========== ========== ========== ======== ==========
</TABLE>

F-11
<PAGE>
M-TRON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) AND 2000 (UNAUDITED)

6. INCOME TAXES (CONTINUED)
Components of income tax expense are as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Current expense:
Federal................................. $452,873 $416,286 $510,000 $229,598 $642,279
Foreign................................. 16,982 3,073 29,347 12,491 39,351
-------- -------- -------- -------- --------
Total current expense..................... 469,855 419,359 539,347 242,089 681,630
Deferred expense (benefit):
Federal................................. (60,490) 5,466 (29,682) (14,841) (121,040)
Foreign................................. -- -- -- -- --
-------- -------- -------- -------- --------
(60,490) 5,466 (29,682) (14,841) (121,040)
-------- -------- -------- -------- --------
$409,365 $424,825 $509,665 $227,248 $560,590
======== ======== ======== ======== ========
</TABLE>

A reconciliation of income tax expense with the amount computed by applying
the statutory federal income tax rate to pretax income is as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Amount based on federal statutory rate.... $481,000 $422,000 $533,000 $240,000 $589,000
Effect of foreign taxes................... (71,635) 2,825 (23,335) (12,752) (28,410)
-------- -------- -------- -------- --------
Income tax expense........................ $409,365 $424,825 $509,665 $227,248 $560,590
======== ======== ======== ======== ========
</TABLE>

The Company does not provide for U.S. income taxes on income of M-tron
Limited as earnings of M-tron Limited are considered to be permanently
reinvested and not subject to U.S. income taxes. Deferred income taxes on the
cumulative permanently reinvested earnings of M-tron Limited are not
determinable due to the various tax planning strategies of the Company and other
factors.

Components of deferred income taxes are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1998 1999 2000
--------- --------- --------
<S> <C> <C> <C>
Deferred income tax assets:
Accruals and reserves--current............................ $ 192,387 $ 220,100 $240,752
========= ========= ========
Deferred compensation--noncurrent......................... $ -- $ -- $102,000
Deferred income tax liabilities--depreciation, noncurrent... (157,605) (155,636) (153,936)
--------- --------- --------
Net deferred tax liability--noncurrent...................... $(157,605) $(155,636) $(51,936)
========= ========= ========
</TABLE>

F-12
<PAGE>
M-TRON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) AND 2000 (UNAUDITED)

6. INCOME TAXES (CONTINUED)
The approximate tax effect of each of the components of deferred income
taxes is equivalent to the Company's effective federal tax rate.

7. EMPLOYEE BENEFIT PLAN

The Company participates in the Lynch 401(k) plan which covers substantially
all the Company's employees meeting certain minimum service requirements. Under
the terms of the plan, participants may contribute up to 15% of their salary to
the plan and the Company will make a matching, nonelective contribution equal to
25% of the employee's first $800 contribution. The Company contributed $13,000
in 1997, $14,300 in 1998, $14,400 in 1999 and $7,200 in each of the six months
ended June 30, 1999 and 2000. In addition, the Company may elect to contribute
an additional amount to the plan at the discretion of the Board of Directors
(none in 1997, 1998, 1999 or for the six months ended June 30, 1999 and 2000).

8. DEFERRED COMPENSATION

In January 1999, concurrent with the redemption of the minority interests
(see Note 9), the Company established a deferred compensation plan through which
the former minority shareholders were awarded stock appreciation rights (SARs).
The SARs vest at varying rates from January 1, 1999 through January 1, 2001. All
SARs awarded under the program expire at the earlier of certain defined events
or December 31, 2008. The SARs provide the employees a certain percentage,
ranging from 2% to 5%, of the increase in the defined book value of the Company
from December 31, 1998 through the exercise date of the award. Vested amounts
are payable at the holder's option in cash or in an equivalent amount of Lynch
stock. In January 2000, the Company paid in cash the vested amount of a SAR owed
to a former minority shareholder that retired. The Company accounts for
stock-based compensation in accordance with Accounting Principles Board Opinion
No. 25 and related interpretations (APB 25). Expense related to the SAR's was
approximately $62,000 in 1999 and $64,000 for the six months ended June 30,
2000. The Company intends to settle such SAR's in cash upon the consummation of
a rights offering.

In addition to the benefits payable under the SARs, if Lynch were to sell a
majority of its stock interest in the Company prior to January 1, 2009, in one
or a series of transactions, the holders of the SARs, assuming that they are
then employed by the Company, would be entitled to receive from the Company a
contingent payment equal to an aggregate of 4% of the excess of the value of
Lynch's stock interest in the Company, determined on the basis of the weighted
average per share price paid to Lynch, over the book value of that interest
immediately prior to the consummation of a rights offering. The Company may pay
this amount, at its option, in cash or Company stock.

F-13
<PAGE>
M-TRON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) AND 2000 (UNAUDITED)

Expense under the alternative fair value method of FASB Statement No. 123
would be equivalent to expense as determined by APB 25 and, accordingly, pro
forma net income would not differ from amounts as reported.

In January 2000, the Company entered into an employment agreement with its
President through which the President may purchase shares of common stock of the
Company equal to 3% of the outstanding shares of common stock immediately
following an initial public offering ("IPO") of the Company's stock. The
purchase price of such shares would be equal to 33 1/3% of the public offering
price. The Company must complete an IPO prior to January 24, 2003 for the option
to acquire shares to be in effect. In the event of an IPO, the Company would
recognize compensation expense for the difference between the public offering
price and the reduced purchase price under the employment agreement. In the
event that the Company does not do an IPO by January 24, 2003, the President
shall be entitled to additional compensation equal to 3% of the increase in the
defined market value of the Company from January 1, 2000 through the end of the
last fiscal quarter next preceding his termination. The Company recognized
expense of $300,000 during the six months ended June 30, 2000 for the additional
compensation expected related to the increase in the defined market value of the
Company.

9. STOCK REDEMPTIONS AND NOTES PAYABLE TO RELATED PARTIES

On January 1, 1999, the Company redeemed all of the equity interests held by
the minority shareholders for an aggregate purchase price of $416,269 which was
equal to the book value of the interests at that time. The Company recorded the
redemption cost as a charge to the net assets. Of the redemption price, $117,925
was payable to Lynch for payment on shareholder loans outstanding. Notes payable
were issued for the remaining balance of $298,344. Interest on the notes is
payable quarterly at 10% with principal installments of $99,448 payable annually
beginning January 2000 through the notes maturity in January 2002. The Company
recorded approximately $30,000 and $10,000 of interest expense related to these
notes in 1999 and for the six months ended June 30, 2000, respectively.

10. CONCENTRATIONS

Sales to the Company's ten largest customers accounted for approximately 60%
of net sales in 1997, 1998 and 1999, and 61% and 67.5% of net sales for the six
months ended June 30, 1999 and 2000, respectively. In 1999, the Company had
sales to one customer that totaled approximately $3,300,000 or 12.4% of net
sales. The amount receivable from this customer was approximately $547,000 and
$657,000 at December 31, 1999 and June 30, 2000, respectively. There were no
sales to a single customer that exceeded 10% of net sales in 1997, 1998 or for
the six months ended June 30, 1999 or 2000. There were no material amounts were
due from a single customer at December 31, 1998.

The majority of the Company's net sales in 1998 and 1999 and for the six
months ended June 30, 1999 and 2000 were to manufacturers of communications
infrastructure equipment. Net sales to manufacturers of communications
infrastructure equipment for 1997 could not be derived from the Company's
accounting system.

The Company purchases from outside suppliers and contract manufacturers that
in certain cases are single or limited sources for key components that are
needed to produce products. The inability of

F-14
<PAGE>
M-TRON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) AND 2000 (UNAUDITED)

certain of these suppliers or manufacturers to supply components could
ultimately affect the Company's ability to deliver products to its customers in
a timely manner.

11. SEGMENT INFORMATION

The Company is principally engaged in one business segment for reporting
purposes which is the manufacturing and selling of quartz crystal frequency
control devices. The Company has its corporate headquarters and manufacturing
facilities in the United States and maintains a sales office in Hong Kong. The
Company attributes sales to and revenues from customers in different geographic
areas on the basis of the location of the customer. All of the Company's sales
are denominated in U.S. dollars. Net sales by customer location for the years
ended December 31, 1998 and 1999 and the six months ended June 30, 1999 and 2000
were as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------- -------------------
1998 1999 1999 2000
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales:
United States......................................... $14,500 $15,200 $ 7,000 $ 9,700
Canada................................................ 3,400 5,100 2,700 3,700
Asia.................................................. 2,000 2,400 1,000 2,300
Western Europe........................................ 1,100 1,600 700 900
All other............................................. 1,798 2,167 972 1,884
------- ------- ------- -------
$22,798 $26,467 $12,372 $18,484
======= ======= ======= =======
</TABLE>

Net sales by customer location for the year ended December 31, 1997 could
not be derived from the Company's accounting system.

12. SUBSEQUENT EVENT

The Company is currently in the process of registering shares of its common
stock for a rights offering. Effective upon the consummation of the rights
offering, the Company intends to adopt a stock option plan and to reserve
1,125,000 shares of its common stock to provide for grants of stock options to
certain employee and non-employee directors. No options have been granted. In
addition, the Company and its President intend to enter into a modified
employment agreement such that the President's rights to purchase shares of
common stock of the Company equal to 3% of the outstanding shares of common
stock immediately following an IPO of the Company's common stock will be
terminated. The new employment agreement is expected to provide that (1) upon
the consummation of a rights offering, the President will be entitled to receive
an option to purchase 225,000 shares of the Company's common stock at the
subscription price of the rights offering and (2) on each of the first three
anniversaries of the consummation of the rights offering the President will be
entitled to receive an option to purchase 75,000 shares of the Company's common
stock at the current fair market value on the date of grant, provided that in
the immediately preceding year the Company's return on equity was at least 18%.
Any options issued to the President pursuant to the terms and conditions of his
employment agreement will vest as follows: 75% of such options will vest on the
third anniversary of the date of grant and the final 25% will vest on the fourth
anniversary of the date of grant.

F-15
<PAGE>
M-TRON

UNTIL , 2000, ALL DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses payable by us in
connection with the sale and distribution of the securities being registered.
All of the amounts shown are estimated except the Securities and Exchange
Commission registration fee.

<TABLE>
<S> <C>
SEC registration fee........................................ $
Listing fee................................................. *
Blue sky fees and expenses.................................. *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Subscription Agent, transfer agent and registrar fees and
expenses.................................................. *
Miscellaneous fees & expenses............................... *
--------
Total....................................................... $ *
========
</TABLE>

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

* To be provided by amendment.

The Registrant will bear all of the foregoing and expenses.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Pursuant to Section 102(b)(7) of the Delaware Corporation Law (the "DGCL"),
the Registrant's Restated Certificate of Incorporation (the "Certificate of
Incorporation") (filed as Exhibit 3.1 to this Registration Statement) eliminates
the liability of the Registrant's directors to the Registrant or its
stockholders, except for liabilities related to breach of duty of loyalty,
actions not in good faith and certain other liabilities.

Section 145 of the DGCL provides for indemnification by the Registrant of
its directors and officers. In addition, the Registrant's Restated By-Laws (the
"By-laws") (filed as Exhibit 3.2 to this Registration Statement) requires the
Registrant to indemnify any current or former director or officer to the fullest
extent permitted by the DGCL. In addition, the Registrant has entered into
indemnity agreements with its directors (a form of which is filed as
Exhibit 10.4 to this Registration Statement), which obligate the Registrant to
indemnify such directors to the fullest extent permitted by the DGCL.

All of the Registrant's directors and officers will be covered by insurance
policies maintained by Lynch Corporation against specified liabilities for
actions taken in their capacities as such, including liabilities under the
Securities Act of 1933, as amended. After the distribution described in the
prospectus, the Registrant intends to obtain similar insurance policies for the
benefit of its officers and directors.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

(a) Within the past three years, the Registrant has issued and sold the
following securities:

(1) On October 24, 2000, the Registrant issued 100 shares of its common
stock to M-tron Industries, Inc., a South Dakota corporation ("M-tron South
Dakota"), for an aggregate consideration of $1,000.

(2) On , 2000, upon filing of the Registrant's amended and
restated certificate of incorporation and the assignment to the Registrant
of certain assets and liabilities of M-tron

II-1
<PAGE>
South Dakota, the shares of common stock held by M-tron South Dakota were
exchanged for shares of Class B common stock of the Registrant.

(3) On , 2000, the Registrant issued options to purchase an
aggregate of shares of Class A common stock to of its
executive officers and employees and non-employee directors, effective upon
consummation of the offering contemplated hereby and with a per share
exercise price equal to the initial public offering price in the offering.

(b) All transactions described in Item 15(a) above were effected in reliance
upon the exemption from the registration requirements of the Securities Act
contained in Section 4(2) of the Securities Act on the basis that such
transactions did not involve any public offering. The transactions described in
Item 15(a)(3) above were also effected in reliance upon the exemption from the
registration requirements contained in Rule 701 promulgated under the Securities
Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ------------------------------------------------------------
<S> <C>
2.1* Separation Agreement between Lynch and the registrant

2.2* General Assignment and Assumption Agreement between Lynch
and the registrant

3.1* Restated Certificate of Incorporation of the Registrant

3.2* Restated By-laws of the Registrant

4.1* Specimen of certificate of Class A common stock

4.2* Form of Subscription Certificate

4.3* Subscription Agreement between M-tron and

5.* Opinion of Finn Dixon & Herling LLP (including the consent
of such firm) regarding legality of securities being offered

10.1* 2000 Stock Plan

10.2* 2000 Stock Plan Agreement for employees and consultants

10.3* 2000 Stock Plan Agreement for non-employee directors

10.4* Employment Agreement with Robert R. Zylstra

10.5* Employment Agreement with Robert Jenks

10.6* Agreement with David Rein relating to cash settlement of
right to receive stock appreciation based consideration

10.7* Agreement with Robert Jenks relating to cash settlement of
right to receive stock appreciation based consideration

10.8* Amended and Restated Credit Agreement by and between the
registrant and The First National Bank of Omaha

21.1 List of Subsidiaries

23.1* Consent of Finn Dixon & Herling LLP (included as part of its
opinion filed as Exhibit 5 hereto)
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ------------------------------------------------------------
<S> <C>
23.2 Consent of Ernst & Young LLP

24 Powers of Attorney (included on page II-4)

27.1 Financial Data Schedule

99.1* Form of Letter to Lynch Stockholders

99.2* Form of Instructions to Lynch Stockholders as to Use of
Subscription Certificates

99.3* Form of Notice of Guaranteed Delivery for Subscription
Certificates

99.4* Form of Letter to Securities Dealers, Commercial Banks,
Brokers, Trust Companies and Other Nominees

99.5* Form of Broker Letter to Clients

99.6* Form of Special Notice to Eligible Lynch Stockholders Whose
Addresses are Outside the United States

99.7* Form of Nominee Holder Certification Form
</TABLE>

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

* To be filed by amendment.

(b) Financial Statement Schedule

<TABLE>
<S> <C>
Valuation and Qualifying Accounts........................... S-1
</TABLE>

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
person of the Registrant pursuant to the DGCL, the Certificate of Incorporation
and By-laws, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in such Securities Act, and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in such
Securities Act and will be governed by the final adjudication of such issue.

The Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, as amended, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was declared
effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, as amended, each post- effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Yankton, State of South
Dakota, on the 27th day of October, 2000.

<TABLE>
<S> <C> <C>
M-TRON INDUSTRIES, INC.

By: /s/ ROBERT R. ZYLSTRA
------------------------------------------
Robert R. Zylstra
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert R. Zylstra and Robert A. Hurwich, and each
of them, his [or her] attorneys-in-fact, each with the power of substitution,
for him [or her] in any and all capacities, to sign any and all amendments to
this Registration Statement (including post-effective statements), and to sign
any registration statement for the same offering covered by this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b)
promulgated under the Securities Act of 1933, as amended, and all post-effective
amendments thereto, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he [or she] might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact, or his [, her] or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof. This Power
of Attorney may be signed in several counterparts.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ ROBERT R. ZYLSTRA President and Chief Executive
-------------------------------------- Officer and Director (Principal October 27, 2000
Robert R. Zylstra Executive Officer)

Senior Vice President and Chief
/s/ DAVID L. REIN, SR. Financial Officer (Principal
-------------------------------------- Financing and Accounting October 27, 2000
David L. Rein, Sr. Officer)

/s/ GEORGE E. FUEHRER
-------------------------------------- Director October 27, 2000
George E. Fuehrer

/s/ ROBERT A. HURWICH
-------------------------------------- Director October 27, 2000
Robert A. Hurwich
</TABLE>

II-4