<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K
           (MARK ONE)
               (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                     FOR THE FISCAL YEAR ENDED JUNE 30, 2003

                                       OR

             ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                         FOR THE TRANSITION PERIOD FROM
                                 ______TO_______


                          COMMISSION FILE NUMBER 1-9125

                        AMERICAN TECHNICAL CERAMICS CORP.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                DELAWARE                               11-2113382
      -----------------------------                 ------------------
      (STATE OR OTHER JURISDICTION                   (I.R.S. EMPLOYER
    OF INCORPORATION OR ORGANIZATION)               IDENTIFICATION NO.)

 17 STEPAR PLACE, HUNTINGTON STATION, NY                   11746
-----------------------------------------              --------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (631) 622-4700
           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

   TITLE OF EACH CLASS              NAME OF EACH EXCHANGE ON WHICH REGISTERED
   -------------------              -----------------------------------------
 COMMON STOCK, PAR VALUE $.01                AMERICAN STOCK EXCHANGE

        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

         INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.

                            YES    X       NO
                                -------       ----------

         INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,
TO THE BEST OF THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [ X ]

         AS OF THE LAST BUSINESS DAY OF THE REGISTRANT'S MOST RECENTLY COMPLETED
SECOND FISCAL QUARTER ENDED DECEMBER 31, 2002, THE AGGREGATE MARKET VALUE OF THE
REGISTRANT'S COMMON STOCK (BASED UPON THE CLOSING SALES PRICE OF THE
REGISTRANT'S COMMON STOCK ON THE AMERICAN STOCK EXCHANGE ON SUCH DATE) HELD BY
NONAFFILIATES OF THE REGISTRANT WAS APPROXIMATELY $14,050,511. (FOR PURPOSES OF
THIS REPORT, ALL OFFICERS AND DIRECTORS HAVE BEEN CLASSIFIED AS AFFILIATES,
WHICH CLASSIFICATION SHALL NOT BE CONSTRUED AS AN ADMISSION OF THE AFFILIATE
STATUS OF ANY SUCH PERSON.)

         ON SEPTEMBER 15, 2003, THE REGISTRANT HAD OUTSTANDING 8,105,868 SHARES
OF COMMON STOCK.

         DOCUMENTS INCORPORATED BY REFERENCE: PORTIONS OF THE REGISTRANT'S PROXY
STATEMENT RELATING TO ITS ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER
19, 2003 ARE INCORPORATED INTO PART III OF THIS REPORT BY REFERENCE.



<PAGE>



                                     PART I

ITEM 1.           BUSINESS

           GENERAL

         The Registrant was incorporated in New York in 1966 as Phase
Industries, Inc., and changed its name to American Technical Ceramics Corp. in
June 1984. The Registrant was merged into a Delaware corporation in 1985 in
order to change its jurisdiction of incorporation. Unless the context indicates
otherwise, references to the Registrant herein include American Technical
Ceramics Corp., a Delaware corporation, and its subsidiaries, all of which are
wholly-owned.

         The Registrant designs, develops, manufactures and markets
RF/Microwave/Millimeter-Wave ceramic capacitors, thin film products, and other
passive components. The Registrant's products are focused primarily in the high
reliability market for ultra-high frequency ("UHF") and microwave applications,
including wireless electronics, medical electronics, semiconductor equipment,
satellite equipment and fiber optics. Capacitors function within electronic
circuits by storing and discharging precise amounts of electrical power. The
Registrant believes that it is a leading manufacturer of multilayer capacitors
("MLCs") for UHF and microwave applications. Selling prices for the Registrant's
MLCs typically range from $.10 to $7.50 or higher, whereas selling prices for
commodity-type MLC units typically range from $.005 to $.05. Thin film products
are ceramic substrates on which circuit patterns are printed by means of thin
film processes, and are used by customers as building blocks in electronic
circuits. Management believes the Registrant operates in only one industry
segment - the electronic components industry.

         The slowdown in the technology and telecommunications sectors that
began in the first half of calendar year 2001, combined with the weakness in the
global economy, continued to impact the Registrant's industry in fiscal year
2003. The markets that many of the Registrant's customers serve remained
depressed, which, in turn, impacted the component industry and the Registrant's
sales.

           PRODUCTS

         The Registrant's traditional line of MLCs are available in
predominantly four physical sizes designated "A" (.055 inch cube), "B" (.110
inch cube), "C" (.250 inch cube) and "E" (.380 inch cube); in three types of
dielectrics: low-loss porcelain (the 100 series), zero temperature coefficient
(the 700 series) and high dielectric constant (the 200 series); and in a variety
of capacitance values. The 100 series, the Registrant's basic product line, is
widely used in microwave equipment. The 700 series, because of its lower
temperature coefficient, is used in tuning circuits in UHF/Microwave and lower
frequency applications. The 200 series has high packaging density and is used in
microcircuits where high capacitance value is needed in a small space. The
Registrant's traditional line of MLC's is one of two product lines that accounts
for more than 10% of the Registrant's consolidated revenue, accounting for
approximately 72%, 70% and 59%, of the Registrant's revenues in fiscal years
2003, 2002 and 2001, respectively.

         The Registrant's MLCs are generally designed for critical performance
applications, and are characterized by a high degree of reliability, low power
dissipation and ruggedness. The MLCs can be broadly classified as either
commercial or "hi-rel", based primarily upon the amount of testing involved. All
are subject to precise measurement of capacitance, dissipation factor and
insulation resistance. The Registrant's products are used in commercial and
military applications, including wireless cellular and personal communications
systems (PCS), medical imaging (i.e., magnetic resonance imaging), radio
frequency power sources for semiconductor manufacturing, satellite
communications, numerous aerospace systems, including radar and electronic
warfare, and certain high-speed digital processing equipment.

         Approximately 89%, 88% and 93% of the Registrant's sales in fiscal
years 2003, 2002 and 2001, respectively, were to commercial (i.e., applications
other than hi-rel) customers. For fiscal years 2003, 2002 and 2001, the
Registrant estimates that approximately 11%, 12% and 7% of the Registrant's
sales, respectively, were sales of hi-rel products. See "Item 1. BUSINESS --
CUSTOMERS AND MARKETING -- FOREIGN SALES" and Note 9 of Notes to Consolidated
Financial Statements.

                                       2
<PAGE>

         Hi-rel MLCs are principally utilized in applications such as satellites
(including commercial communications satellites), high performance military
aircraft, spacecraft and missiles, and other defense applications such as radar
and electronic countermeasures. The Registrant produces its hi-rel MLCs to
precise customer specifications and subjects each hi-rel MLC to a battery of
performance and environmental tests. Such performance tests measure capacitance,
dissipation factor, insulation resistance and dielectric withstanding voltage.
The environmental tests are either designated by customers or specified by the
military and include temperature shock tests, humidity tests and tests of life
expectancy at elevated temperature and voltage levels.

         For commercial applications, the Registrant produces MLCs to precise
performance specifications similar to hi-rel MLCs, individually tests them for
certain electrical performance characteristics and conducts additional tests on
samples from production lots. However, the Registrant does not subject all such
commercial MLCs to environmental tests.

         The Registrant has historically pursued the high-performance MLC market
in which its products are typically applied in the manufacture of high-value
capital equipment and which has commanded higher unit selling prices. The MLCs
required for many of these applications constitute a small part of the circuit
cost and, because performance requirements are stringent and the cost of
component failure high, customers have been willing to pay the price premium
associated with higher performance products such as those the Registrant makes.
In recent years, the Registrant has automated its manufacturing processes to
enable it to produce certain of its existing MLCs for the medium - priced niche
market driven by wireless base-station infrastructure applications.

         Recently, the Registrant began marketing new capacitor products
targeted toward higher volume markets. The first of these new products is the
600S which is targeted toward the high-performance, lower-priced segment of the
wireless industry. The 600S capacitor is smaller (.06" x .03" rectangle) and
lower-priced (approximately two-thirds the price of the lowest-priced comparable
part) than the Registrant's traditional MLC's, and uses a new ceramic
formulation developed by the Registrant to optimize performance for cellular and
PCS operating frequencies. Sales from this product line, which was formally
launched on June 16, 2000, amounted to approximately 6%, 4% and 4% of the
Registrant's revenues in fiscal years 2003, 2002 and 2001, respectively.

         The Registrant also offers specialized capacitors designed to perform
at frequencies higher than the useful range of typical microwave MLCs. The
Registrant's Microcap(R), a single layer ceramic capacitor, was developed to
meet certain applications where small size is critical and which operate at
frequencies extending higher than those for which MLCs are typically chosen.
Manufactured and sold in both hi-rel and commercial versions, these products are
used in wideband wireless data communications, satellite communications,
military systems and other microwave and millimeter-wave applications. Another
product tailored to the same market, the 500S Broadband Microwave Capacitor
(BMC), is based on a patented construction designed to be compatible with
customers' high-volume surface-mount assembly technologies. Sales of these two
product types combined amounted to approximately 3%, 3% and 6% of the
Registrant's revenues in fiscal years 2003, 2002 and 2001, respectively.

         The Registrant has diversified its product line through the development
of custom product capability based on thin film technologies. The Registrant
produces metallized circuits and passive components on high-quality ceramic
substrates to customers' drawings and specifications. Thin film layers deposited
on the ceramic substrate may consist of a variety of materials with specific
conductive, resistive, capacitive, and other properties enabling the build-up of
the desired circuit pattern. As with a typical circuit board, the customer may
then attach discrete components and chips to complete the circuit. Thin film
products are used by the Registrant's customers in a broad range of
applications, including microwave components, fiber optic repeaters and
high-density packaging of devices, typically where requirements for high
reliability, small size and dimensional precision are paramount. In fiscal years
2003, 2002 and 2001, thin film sales represented approximately 13%, 17% and 24%
of the Registrant's revenues, respectively.

                                       3

<PAGE>



         In June 2000, the Registrant introduced a line of high power, passive
resistive products. In fiscal year 2002, the Registrant added thin film resistor
manufacturing capability to its resistive products line. Typically, thin film
resistors offer a higher degree of reliability and are better able to handle
power than their thick film counterparts. The Registrant's products, including
standard resistors, terminations, attenuators and other customized products,
consist of resistive and conductive layers deposited on a substrate of aluminum
nitride, a base material chosen for its high thermal conductivity and its
non-toxic properties. High power resistive products are used in many of the same
types of equipment as the Registrant's capacitor products. Other applications
for these products, which reflect an expansion of the Registrant's customer
base, include RF and microwave products, including power amplifiers, up and down
converters, and high power combiner/dividers. The markets for these products
include the wireless and telecommunication markets, including base station and
satellite communications, and a broad range of medical, military and other
commercial applications. Resistive product sales represented less than 1% of the
Registrant's revenues in each of fiscal years 2003, 2002 and 2001.

         In fiscal year 2002, the Registrant offered on a limited basis certain
products based upon a new high-density electronic packaging technology for radio
frequency (RF) and microwave frequency broadband applications. This technology,
commonly referred to as Low Temperature Co-fired Ceramic (LTCC), is based on
high performance dielectric ceramic materials, some manufactured by the
Registrant and others purchased from leading electronic materials manufacturers.
The Registrant markets this technology under the name CCP (Co-fired Ceramic
Packaging). Traditional RF and microwave circuits have been limited in size and
performance by the use of only two dimensions to incorporate all RF elements and
passive components, such as inductors, capacitors and resistors. LTCC technology
enables the user to design circuits in the third dimension with the integration
of the RF elements and passive components in the body of the electronic circuit.
LTCC technology also provides the ability to design circuits with integrated RF
components such as couplers, power dividers/combiners, filters and impedance
transformers, and passive devices. In the fiscal years 2003 and 2002, CCP sales
accounted for less than 1% of the Registrant's revenues. See "Item 1. BUSINESS
-- MANUFACTURING and -- RESEARCH AND DEVELOPMENT."

           MANUFACTURING

         The manufacturing process for MLCs involves four primary stages. The
first, or "white room" stage, includes tape casting, multi-layer lamination,
dicing and firing of ceramic chips. In this phase, layers of electrically
conducting material are printed onto ceramic tape in patterns, which eventually
form the electrodes of the capacitor. The screen-printing technology used for
the printing of such layers is referred to as "thick film". In the second, or
"termination" stage, the ceramic chips are coated with silver. In the third, or
"finishing" stage, the parts are then customized to specific order requirements
for commercial applications. This stage includes, but is not limited to, chip
plating, soldering of leads, laser marking and chip packaging. The chips are
tested electrically and inspected throughout the entire process. If the
customer's specifications call for a higher level of performance assurance, the
parts are put through a fourth stage, the hi-rel stage, where additional testing
is performed.

         The Registrant currently manufactures MLCs at its facilities in
Huntington Station, New York and Jacksonville, Florida. Its primary MLC
manufacturing site is Huntington Station, consisting of three manufacturing
facilities which aggregate approximately 54,000 square feet. Two of these
facilities house the Registrant's state-of-the-art chip fabrication operations.
These facilities are designed to provide optimum control of the Registrant's
manufacturing processes and product quality, while substantially increasing its
output capability.

         In August 2000, the Registrant purchased another building next to its
existing facilities in New York which will add a minimum of 22,000 additional
square feet of production and production support space to the New York facility
complex when such space is required to support capacity expansion.

                                       4

<PAGE>



         The Registrant manufactures its 500 and 600 series capacitors at its
facility in Jacksonville, Florida. During fiscal year 2003, the Registrant
expanded the offering of the 600 series to include an additional case size to
better serve the EIA (Electronic Industry Association) product standardization
use by its customers. The Jacksonville facility is also the site of manufacture
for the Registrant's thin film, Microcap(R) SLC, resistor and CCP product lines,
and serves as the Registrant's new product technology center. The Jacksonville
facilities aggregate over 99,000 square feet of space with 37,000 square feet
committed to custom circuit operations.

         Portions of the Jacksonville facility have been redesigned over the
last few years in order to accommodate what the Registrant refers to as its
"Factory of the Future". Utilizing recently developed and acquired materials,
processes and equipment, the Registrant can manufacture MLC products at this
facility at higher degrees of precision and control and at a substantially lower
cost with accompanying high output. Moreover, the manufacturing operations at
this facility are flexible, enabling the Registrant to produce ceramic
structures of a wide variety of sizes, shapes and internal configurations.

         As differentiated from the "thick film" technology used in MLC
manufacture, the manufacture of thin film circuits involves a method for the
deposition of layers of conducting and other materials using "sputtering"
technology. Unlike the manufacture of capacitors, where all products flow
through the same manufacturing sequences, manufacturing processes for custom
thin film products vary significantly in accordance with each customer's
specifications.

         Microcap(R) SLCs, resistive products, CCP products, and BMCs all
utilize various combinations of the production methods described in the
preceding discussions. The manufacture of each of these product lines involves
dedicated equipment in addition to sharing equipment used in connection with the
manufacture of the product lines previously discussed.

         In order to realize the potential of its expanding and diversifying
product lines and to more fully integrate all facets of its operations, the
Registrant is in the process of replacing its existing information system with a
modern Enterprise Resource Planning System. Utilizing, commercially available
information technology, the new system is intended to provide improved
functionality and efficiency for better planning, control and responsiveness.
During fiscal year 2002, the Registrant implemented the first phase of this
system, and is currently implementing the second phase.

         The Registrant utilizes a wide variety of specialized equipment for the
fabrication, handling and testing of its products, including equipment that it
has designed and constructed. The Registrant considers its capability to create
its own unique equipment solutions tailored to the particular needs of its
product lines and technologies to be a competitive advantage.

         Before full market introduction of a new product, the Registrant
generally establishes a production line for the product and manufactures
substantial quantities to evaluate and verify its ability to consistently meet
quality and performance standards. Such efforts involve the dedication of
equipment, materials and labor, and, to the extent that these efforts do not
result in saleable product, all costs are expensed. During fiscal years 2001 and
2002, the Registrant's resistive product line was in this phase of development.
During fiscal year 2003, the Registrant completed development of the resistive
product line. The resistive product line is currently shipping product to
various customers and is qualified at major commercial users. During fiscal
years 2003 and 2002, the Registrant's CCP product line was also in the
development phase.

         To complement its own manufacturing efforts and to provide a wide
variety of product offerings to its customers, the Registrant has from time to
time entered into arrangements with other manufacturers to produce certain
products to the Registrant's specifications. These products accounted for
approximately 5% of the Registrant's consolidated revenues in each of fiscal
years 2003, 2002 and 2001.

                                       5

<PAGE>



         The historical pattern of industry price declines has largely prevented
MLC producers, including the Registrant, from increasing prices and has forced
the Registrant and competitors to rely on advances in productivity and
efficiency in order to improve profit margins. Accordingly, the Registrant
continuously looks to improve the production yields and efficiency of its
manufacturing processes. The Registrant conducts continuous improvement programs
targeted at streamlining manufacturing processes and increasing yields, and has
established statistical process control techniques for maintaining key process
steps within specified bounds and providing data to support continuous
improvement. For additional information with respect to yields and efficiencies,
see "Item 1. BUSINESS -- RESEARCH AND DEVELOPMENT".

         During fiscal year 2002, the Registrant's manufacturing facilities were
operated under ISO-9002 registration. In fiscal year 2003, the Registrant
attained ISO-9001 status, a higher level certification which includes product
design capability. In addition, in fiscal year 2003, the Registrant's European
sales and distribution office achieved ISO-9001:2000 certification status.

           CUSTOMERS AND MARKETING

         The Registrant markets its products primarily to customers in the
wireless base-station infrastructure, fiber optic telecommunications, military,
medical, semiconductor manufacturing and aerospace industries. The customers
included within these industries are manufacturers of microwave, high frequency
and fiber optic systems, subsystems and equipment, including original equipment
manufacturers (OEMs) and suppliers thereto, and government contractors and
subcontractors. Most of the Registrant's products are used in the manufacture of
capital equipment.

         The Registrant promotes its products through specialized trade shows,
industry trade journal advertisements, a site on the Internet's World Wide Web
and catalog direct mail programs. In fiscal year 2000, the Registrant started
taking orders, on a limited basis, via its web site. In fiscal year 2004, the
Registrant intends to greatly expand the products it makes available for sale
via its web site.

         The Registrant shipped to over 2,100 customers in fiscal year 2003 as
compared to approximately 1,800 and 1,900 customers in fiscal years 2002 and
2001, respectively. The top ten customers combined accounted for approximately
29% of net sales in each of fiscal years 2003, 2002 and 2001. No customer
accounted for more than 10% of the Registrant's net sales in fiscal years 2003
and 2001. Sales to various divisions of General Electric Company, a major
medical electronics OEM, accounted for approximately 10% of the Registrant's net
sales in fiscal year 2002.

         The Registrant is a qualified producer of capacitors with the Defense
Logistics Agency of the United States Department of Defense. This qualified
status covers several varieties and types of capacitors. Maintenance of its
qualified producer status is critical in order for the Registrant to continue to
sell its hi-rel military product line. To date, the Registrant has not
encountered any difficulty in maintaining its status as a qualified producer,
and the Registrant believes it is presently the only supplier with such
qualification for some of these product types.

         The Registrant typically sells its products through a combination of
logistics arrangements and a large number of individual purchase orders. Certain
individual purchase orders are subject to pricing agreements. Neither pricing
agreements nor logistics arrangements are firm purchase orders, but each still
requires that the Registrant commit to produce semi-finished or finished goods
inventory in anticipation of receiving a purchase order for immediate shipment.
The supply shortage for electronic components that began during fiscal year 2000
continued into the first half of fiscal year 2001. The shortage, which was
exacerbated by historically high capital expenditure spending as a percentage of
revenue by telecommunications service providers, caused customers to alter their
buying behaviors in an attempt to ensure a source of supply. As the shortage
eased in the second half of fiscal year 2001, customers began to utilize their
inventories of parts resulting in a decline in orders. In fiscal year 2002,
customers reverted to their preferred method of ordering using pricing
agreements and logistics arrangements with very short lead times. See "Item 1.
BUSINESS -- SALES BACKLOG" and "Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS".

                                       6
<PAGE>

         Customers are invoiced simultaneously with merchandise shipments, and
invoices are generally payable on a 30-day basis. Customers may also charge
their purchases through the use of a credit/debit card. Sales returns are
authorized and accepted by the Registrant in the normal course of business. An
evaluation of the returned product is performed and typically results in either
a credit or a shipment of replacement product to customers. The Registrant
believes that it has provided an adequate reserve for returns in the
accompanying consolidated financial statements.

         In the United States, the Registrant principally sells its products
through independent sales representatives who are compensated on a commission
basis. In foreign countries, the Registrant historically has utilized both
resellers, who purchase products from the Registrant for resale, and sales
representatives. In fiscal year 2000, the Registrant established a wholly-owned
subsidiary in Stockholm, Sweden. During fiscal year 2002, the Registrant elected
to dissolve its subsidiary in the United Kingdom and expanded the scope of the
Swedish subsidiary's activities to serving most of the Registrant's customers in
Europe, thereby reducing the Registrant's reliance on resellers in this area.
The Registrant continues to rely primarily on local, independently-owned
resellers and independent sales representatives in all other foreign markets.
See "Item 1. BUSINESS -- FOREIGN SALES" and Note 9 of Notes to Consolidated
Financial Statements.

         During fiscal year 2002, the Registrant established a wholly-owned
subsidiary in the United States which established a representative office in the
People's Republic of China to service the growing market in China.

         At June 30, 2003, the Registrant utilized approximately 15 sales
representative organizations in the United States and approximately 18 sales
representative and reseller organizations in foreign countries, principally
Europe, Canada and the Far East. The Registrant's sales representatives and
resellers generally have substantial engineering expertise, which enables them
to assist the Registrant in providing a high level of service to assist
customers in generating product specifications and in providing applications
assistance and maintaining contact with key customers. The Registrant employs
regional sales managers to supervise its sales representatives and resellers and
a staff of sales and applications specialists to provide direct contact with and
support to customers.

           FOREIGN SALES

         In fiscal years 2003, 2002 and 2001, sales to customers located outside
the United States constituted 41%, 35% and 28% of net sales, respectively. The
Registrant's foreign customers are located primarily in Europe, Canada and the
Far East. See "Item 1. BUSINESS -- CUSTOMERS AND MARKETING" and Note 9 of Notes
to Consolidated Financial Statements. Export sales were made through the
Registrant's foreign sales corporation subsidiary until January 2002, at which
time the subsidiary was liquidated. All foreign sales, except sales by the
Registrant's wholly-owned subsidiary in Stockholm, Sweden (and, until its
dissolution in fiscal year 2002, its subsidiary in Sussex, England), are
denominated in United States dollars. In certain circumstances, the Registrant
attempts to reduce the risk of doing business in foreign countries through the
use of prepayment and by working closely with its foreign representatives and
distributors in assessing business environments.

           SALES BACKLOG

        The Registrant's sales backlog was $9,129,000, $9,325,000 and
$16,153,000 at June 30, 2003, 2002 and 2001, respectively. Backlog generally
consists of a combination of the Registrant's standard products and custom
manufactured parts that require a longer lead time to produce. Historically, the
long-term trend in customer requirements for the Registrant's standard products
was toward shorter lead times. However, during fiscal year 2000 and the first
half of fiscal year 2001, a supply shortage in the electronics component
marketplace caused customers to change their typical buying behavior to ensure
an adequate source of supply. This buying pattern changed abruptly in the latter
half of fiscal year 2001, primarily as a result of the slowdown in the wireless
infrastructure, fiber optic and semiconductor manufacturing equipment sectors.
The Registrant experienced order cancellations and decreased bookings from its
customers in these industries as they attempted to rationalize their inventory
levels to the demand for their products. In fiscal year 2002, customers returned
to historical patterns of ordering with shorter lead times, and this trend is
expected to continue for the foreseeable future. See "Item 1. BUSINESS --
CUSTOMERS AND MARKETING".

                                       7
<PAGE>

        The Registrant offers its Quik-Pick 48 Hour System(R) program pursuant
to which products are shipped within 48 hours from the time the order is placed.
This program has consistently gained in popularity with its customers. In order
to offer this program, the Registrant has to maintain higher inventory levels of
certain products in proportion to total sales than it had in the past and higher
than those maintained by some other capacitor manufacturers. The future
contribution of the Quik-Pick program to the financial results of the Registrant
depends critically on the Registrant's ability to accurately predict customer
demand for the various products offered through the program.

             RESEARCH AND DEVELOPMENT

        The technology upon which the Registrant's products are based is subject
to continued development of materials and processes to meet the demands of new
applications and increased competition. The Registrant pursues a
process-oriented strategy in which it conducts efforts aimed at developing
integrated sets of materials and associated processes and equipment to provide
the capability to create new or enhanced classes of products. Once a new set of
technologies is established, the Registrant then seeks to develop and introduce
various products using such technologies. The Registrant believes its future
successes depend upon its ability to identify the requirements for future
products and product enhancements, and to define, implement and successfully
employ the technologies needed to meet those requirements. Accordingly, the
Registrant believes that its research and development efforts are critical to
its continued success.

        The Registrant conducts most of its research and development activities
at its facility in Jacksonville, Florida. Activities are focused on the
development of new products and improvement of existing products. Improvements
in materials and process technology, and the development of specialized
production equipment, are directed toward reducing product cost, as well as
enhancing performance requirements that are identified through frequent customer
contacts by the Registrant's sales and technical personnel. Products are
introduced after extensive in-house testing and evaluations at selected customer
sites. See "Item 1. BUSINESS -- MANUFACTURING".

        The Registrant often pursues programs with individual customers whom it
considers to be leaders in their respective industries to develop special
products to meet their specific requirements. The Registrant typically conducts
such programs when it believes such products have potential applications
reaching well beyond the initial customer's requirements. The Registrant's
expansion of the 600S product line arose from one such program conducted in past
years.

        In light of the continuing downturn in the economy, the Registrant's
research and development efforts remain focused on enhancements and extensions
to its core product lines. For example, the Registrant continued its efforts on
developing enhancements to its line of specialty higher frequency capacitors.
The Registrant also continued development activities on its new resistive
product line by adding thin film resistor manufacturing capability to its
resistive products line. Typically thin film resistors offer a higher degree of
reliability and are better able to handle power than their thick film
counterparts. The thin film capability also allows for the development of finer
line width and resolution, which is used in the manufacture of higher frequency
termination and attenuators. See "Item 1. BUSINESS -- PRODUCTS".

        The Registrant has also continued to develop the technology underlying
its LTCC initiative. While the Registrant continues to believe in the long-term
prospects for this technology, LTCC is an extremely complicated project that
will require the development and refinement of the new processes. The initial
phases of the LTCC process, renamed CCP (Co-fired Ceramic Packaging), were
completed during fiscal year 2003, and the Registrant intends to continue to
enhance its capabilities and expand its offering of these products during fiscal
year 2004.

        Expenditures for research and development were approximately $2,766,000,
$3,644,000 and $4,180,000 in fiscal years 2003, 2002 and 2001, respectively,
representing approximately 6%, 7% and 5% of net sales, respectively. The
Registrant anticipates that research and development expenditures in fiscal year
2004, expressed as a percentage of net sales, will be comparable to fiscal year
2003.

                                       8
<PAGE>

              RAW MATERIALS

        The principal raw materials used by the Registrant include silver,
palladium, gold, other precious metals and titanate, and other powders that are
used in ceramic manufacture. Precious metals are available from many sources,
although palladium is generally available only from a limited number of metal
dealers who obtain their product requirements from the Republic of South Africa
or the Russian Federation. The major consumers of palladium are the automotive
and electronics industries.

        In fiscal year 2002, in an effort to align its inventory of palladium
with current and anticipated demand, the Registrant sold a substantial portion
of its palladium inventory to one of its vendors in an arms-length transaction
for approximately $3.3 million. The Registrant believes that it maintains
adequate inventories of palladium and believes it will be able to purchase
additional quantities of palladium in the ordinary course of business. In
addition, the Registrant's newer products are being designed to minimize or
eliminate the usage of palladium. See "Item 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"

          COMPETITION

        Competition in the broad MLC industry continues to be intense and, in
general, is based primarily on price. In the UHF/Microwave market segment, where
price has historically been less important, competition has been based primarily
on high performance product specifications, achieving consistent product
reliability, fast deliveries and high levels of customer service. The Registrant
believes any competitive advantage it may have results from its ability to
achieve consistent quality and reliability, fast deliveries and high levels of
customer service. Potential growth of some commercial market applications may in
the future increase the competitive importance of price in this market. The
Registrant believes it competes in the UHF/Microwave capacitor market with
several other manufacturers, both domestically and abroad, including AVX
Corporation, Dover Corporation, Tekelec, Spectrum Control, Inc., Murata
Manufacturing Co. Ltd and Taiyo Yuden, most of which are larger and have broader
product lines and greater financial, marketing and technical resources than the
Registrant. There are other large commodity-type MLC manufacturers who have
attempted to develop products for the UHF/Microwave market segment. While the
Registrant believes these efforts have not produced significant results to date,
there can be no assurance that such efforts will not be successful in the
future. New product developments may lead the Registrant into markets where
there are existing competitors that may have significantly greater financial and
technical resources and greater expertise in mass production techniques than the
Registrant. Competition in the Registrant's other product areas is similar in
nature to that of the capacitor market. The primary competition for the
Registrant's thin film products are Aeroflex Inc. and Reinhardt Microtech AG.
The primary competition for the Registrant's resistive products are MCE
Technologies (recently acquired by Aeroflex Inc.), Anaren Inc. and EMC
Corporation.

             ENVIRONMENTAL COMPLIANCE

        The Registrant produces hazardous waste in limited quantities in the
production of its products. Accordingly, the Registrant's manufacturing
operations are subject to various federal, state and local laws restricting the
discharge of such waste into the environment. The Registrant recycles some of
its hazardous wastes and disposes of the remainder through licensed carriers,
which are required to deposit such waste at licensed waste sites. The Registrant
believes that it is in material compliance with all applicable federal, state
and local environmental laws and does not currently anticipate having to make
material capital expenditures to remain in material compliance therewith.

                                       9
<PAGE>



             PATENTS AND PROPRIETARY INFORMATION

        Although the Registrant has manufacturing and design patents and pending
patent applications, and although the Registrant will continue to seek the
supplemental protection afforded by patents, the Registrant generally considers
protection of its products, processes and materials to be more dependent upon
proprietary knowledge and on rapid assimilation of innovations than on patent
protection. The Registrant's porcelain and ceramic formulations are considered
trade secrets, which are protected by internal non-disclosure safeguards and
employee confidentiality agreements. There can be no assurance that the steps
taken by the Registrant to protect its rights will be adequate to deter
misappropriation, or that an independent third party will not develop
functionally equivalent technology.

             EMPLOYEES

        At June 30, 2003, the Registrant employed 335 persons at its facilities
in New York, of which seven were employed on a part-time basis; 190 persons at
its facilities in Florida, of which one was employed on a part-time basis; three
persons in sales offices in Asia and nine persons in sales offices in Europe. Of
the 537 persons employed by the Registrant, 434 were involved in manufacturing
and testing activities and as support personnel, 78 were involved in selling,
general and administrative activities, and 25 were involved in research and
development activities. None of the Registrant's employees are covered by
collective bargaining agreements. The Registrant considers its relations with
its employees to be satisfactory.

             CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

        Statements in this Annual Report on Form 10-K under the captions
"Business" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations", as well as statements made in press releases and oral
statements that may be made by the Registrant or by officers, directors or
employees of the Registrant acting on the Registrant's behalf that are not
statements of historical fact, constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that could cause the actual results of the Registrant to be
materially different from the historical results or from any future results
expressed or implied by such forward-looking statements. The cautionary
statements set forth below identify certain factors that could cause such
differences. In addition to statements which explicitly describe risks and
uncertainties, readers are urged to consider statements labeled with terms such
as "believes", "belief", "expects", "plans", "anticipates", or "intends" to be
uncertain and forward-looking. All cautionary statements made in this Annual
Report on Form 10-K should be read as being applicable to all related
forward-looking statements wherever they appear. Any forward-looking statement
represents the Registrant's expectations or forecasts only as of the date it was
made and should not be relied upon as representing its expectations or forecasts
as of any subsequent date. The Registrant undertakes no obligation to correct or
update any forward-looking statements, whether as a result of new information,
future events or otherwise, even if its expectations or forecasts change.

        The Registrant's products are used in the production of a variety of
highly complex electronic products manufactured for the military and for
commercial use. Accordingly, demand for the Registrant's products is highly
dependent upon demand for the products in which they are used. From time to
time, including the present, the Registrant's results have been negatively
impacted by a general decrease in demand for technology and electronic products
in the United States and abroad. There can be no assurance that the demand for
such products will increase or that, even if it does increase, the demand for
the Registrant's products will increase. In addition, there can be no assurance
that the Registrant will not receive order cancellations after orders are booked
into backlog. Moreover, a majority of the Registrant's costs are fixed, and the
Registrant may not be able to reduce costs if sales volumes were to decline.

         The Registrant produces and ships product based upon orders received
from its customers. If these orders are cancelled prior to shipment it could
affect the Registrant's profitability. See "Item 1. BUSINESS -- CUSTOMERS AND
MARKETING."

                                       10
<PAGE>

        The Registrant offers a broad variety of products to its customers.
Gross margins can vary significantly from product to product and across product
lines. Accordingly, a change in the mix of products sold by the Registrant
during a particular period could lead to distinctly different financial results
for that period as compared to other periods.

        The Registrant expects that international sales will continue to
constitute a substantial portion of its total sales. These sales expose the
Registrant to certain risks, including, without limitation, barriers to trade,
fluctuations in foreign currency exchange rates (which may make the Registrant's
products less price competitive), political and economic instability, changes in
monetary policy, tariff regulations and other United States and foreign laws and
regulations that may apply to the export of the Registrant's products, as well
as the generally greater difficulties of doing business abroad.

        During fiscal year 2003, the Registrant's ten largest customers
accounted for approximately 29% of net sales. The Registrant expects that sales
to a relatively small number of customers will continue to account for a
significant portion of its net sales for the foreseeable future. A loss of one
or more of such key customers could affect the Registrant's profitability. See
"Item 1. BUSINESS -- CUSTOMERS AND MARKETING."

        The technology upon which the Registrant's products are based is subject
to continuous development of materials and processes. The Registrant's business
is in large part contingent upon the continuous refinement of its technological
and engineering expertise and the development of new or enhanced products and
technologies to meet the rapidly developing demands of new applications and
increased competition. There can be no assurance that the Registrant will
continue to be successful in its efforts to develop new or refine existing
products, that such new products will meet with anticipated levels of market
acceptance or that the Registrant will otherwise be able to timely identify and
respond to technological improvements made by its competitors. Significant
technological breakthroughs by others could also have a material adverse effect
on the Registrant's business.

        The Registrant's business may be adversely affected by difficulties in
obtaining raw materials and other items needed for the production of its
products, the effects of quality deviations in raw materials and fluctuations in
prices of such materials. Palladium, a precious metal used in the production of
the Registrant's capacitors, is currently available from a limited number of
metal dealers who obtain product from the Republic of South Africa or the
Russian Federation. In June 2002, the Registrant reduced the level of its
inventories of palladium on hand. See "Item 1. BUSINESS -- RAW MATERIALS" and
"Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS". Accordingly, a prolonged cessation or reduction of exports of
palladium by the Republic of South Africa or the Russian Federation, or a
significant increase in the price of palladium, could have a material adverse
effect on the Registrant's business.

        Certain raw materials used by the Registrant may fluctuate in price. To
the extent that the Registrant is unable to pass on increases in the costs of
such materials to its customers, this may adversely affect the gross profit
margins of those products using such materials.

        Competition in the MLC industry is intense and, in general, is based
primarily on price. In the UHF/Microwave market segments, where price has
historically been less important, competition has been based primarily on high
performance product specifications, achieving consistent product reliability,
fast deliveries and high levels of customer service. The Registrant competes
with a number of large MLC manufacturers who have broader product lines and
greater financial, marketing and technical resources than the Registrant. Growth
of some commercial market applications has increased, and is expected to
continue to increase, the competitive importance of price. There can be no
assurance that the Registrant will be able to improve the productivity and
efficiency of its manufacturing processes in order to respond to pricing
pressures, or to successfully design new processes and products, and the failure
to do so could have a material adverse effect on the Registrant's business.

        The Registrant produces limited quantities of hazardous wastes in the
production of its capacitors. Accordingly, the inherent risks of environmental
liability and remediation costs associated with the Registrant's manufacturing
operations may result in substantial unforeseen liabilities.

                                       11
<PAGE>


        The Registrant has not received any claims that its products or the
technologies upon which they are based infringe the intellectual property rights
of others. Any such claims in the future may result in the Registrant being
required to enter into royalty arrangements, cease manufacturing the infringing
products or utilizing the infringing technologies, pay damages or defend
litigation, any of which could have a material adverse effect on the
Registrant's business.

        The Registrant's business may also be adversely affected by matters and
events affecting businesses generally, including, without limitation, political
and economic events, labor unrest, acts of God, war, acts of terrorism and other
events outside of the Registrant's control.

ITEM 2.           PROPERTIES

        The Registrant's primary production facilities are located in Huntington
Station, New York and Jacksonville, Florida. The Registrant's principal
executive office is located in Huntington Station, New York, and its principal
research and development facility is located in Jacksonville, Florida. The
following table sets forth the address of each facility, its primary function,
the square footage occupied by the Registrant and whether the facility is leased
or owned.

<TABLE>
<CAPTION>
        ADDRESS OF FACILITY                PRIMARY FUNCTION                  SQUARE FOOTAGE OCCUPIED       TYPE OF OCCUPANCY
        -------------------                ----------------                  -----------------------       -----------------
<S>                                        <C>                               <C>                           <C>
        10 Stepar Place
        Huntington Station, New York       Production                                    10,900            Owned

        11 - 13 Stepar Place
        Huntington Station, New York       Future production use                         22,000            Owned

        15 Stepar Place
        Huntington Station, New York       Production                                    35,000            Leased from Principal
                                                                                                           Stockholder (1)
        One Norden Lane
        Huntington Station, New York       Production                                     8,400            Owned

        17 Stepar Place
        Huntington Station, New York       Corporate, sales, administration              18,000            Owned

        2201 Corporate Square Blvd.        Production, research                          99,700            Leased from Principal
        Jacksonville, Florida              and development                                                 Stockholder (1)

        8810 Corporate Square Court
        Jacksonville, Florida              Production                                     7,500            Leased

        Ellipsvaegen 5
        SE-141 75                          Sales and                                      3,401            Leased
        Kungens Kurva, Sweden              distribution office

        Leihen Mansion 2307
        No. 40 Fuming Road,
        Futian Dist. Shenzhen              Sales office                                     863            Leased
</TABLE>


         (1)      See "Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS"
                  and Notes 4 and 7 of Notes to Consolidated Financial
                  Statements.

        In fiscal year 2001, the Registrant purchased a 22,000 square foot
facility adjacent to its existing New York facilities. This new facility is
currently idle, but is expected to be used for future production and product
support capacity.

        In fiscal year 2002, the Registrant added approximately 38,000 square
feet to its Jacksonville facilities for various purposes, including expansion of
its thin film capacity and to accommodate commercial manufacture of its new
resistive product line. See "Item 1. BUSINESS -- MANUFACTURING".

                                       12

<PAGE>

        In fiscal year 2003, the Registrant moved into larger space in the same
Kungens Kurva facility to enable it to handle the increased activity due to the
closing of the Registrant's facility in Sussex, England. See "Item 1. BUSINESS
-- CUSTOMERS AND MARKETING".

ITEM 3.           LEGAL PROCEEDINGS

        The Registrant is not currently a party to any material legal
proceedings.

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

        No matters were submitted to a vote of security holders during the
quarter ended June 30, 2003.

             EXECUTIVE OFFICERS

        The executive officers of the Registrant are as follows:

        Victor Insetta, age 63, co-founded the Registrant in 1966 and has served
as President and Chief Executive Officer and a director of the Registrant since
its organization.

        Richard Monsorno, age 51, has been employed by the Registrant in various
capacities since 1983. In August 1996, he was appointed Senior Vice President -
Technology.

        Kathleen M. Kelly, age 49, has been employed by the Registrant in
various capacities since 1974. She has served as Vice President - Administration
and as corporate Secretary since November 1989.

        David B. Ott, age 61, joined the Registrant in June 1999 as Vice
President - New York Manufacturing, and in December 2000, was appointed Senior
Vice President, New York Manufacturing. From 1997 until his employment by the
Registrant, he served as Chief Operating Officer of Great Lakes Industries, LLC,
a manufacturer of metal and ceramic materials.

        Judah Wolf, age 57, has been managing the Registrant's thin film
operations in Jacksonville, Florida since 1993. In 1999, he was appointed Vice
President - Thin Film Operations. In August 2001, he was appointed Senior Vice
President, Thin Film Products.

        Stephen Beyel, age 39, joined the Registrant as a RF Engineer in 1988.
Since 1991, he has held various managerial positions within the Registrant's
Sales Department. He was appointed Vice President, Sales in November 2000 and
Senior Vice President, Sales in April 2003.

        Andrew R. Perz, age 44, has been with the Registrant as Controller since
1998, and was appointed Vice President, Controller in November 2000. Prior to
his employment by the Registrant, he held a financial management position at
Lumex Inc. from July 1989 to January 1998.

        Harrison Tarver, age 57, has been employed by the Registrant in various
capacities since 1973, principally in positions relating to quality assurance.
He was appointed Vice President, Quality Assurance in December 2000.

        The officers serve at the discretion of the Board of Directors and there
are no family relationships among the officers listed and any directors of the
Registrant.

                                       13
<PAGE>


                                     PART II

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

            MARKET INFORMATION

        The Registrant's common stock is traded on the American Stock Exchange
("AMEX") under the symbol "AMK". The table below sets forth the quarterly high
and low sales prices for the common stock on the AMEX for the fiscal years ended
June 30, 2003 and June 30, 2002.

<TABLE>
<CAPTION>
                                                  FISCAL 2003                           FISCAL 2002
                                                  -----------                           -----------

Quarter Ended:                                High         Low                     High                 Low
--------------                               -----        ------                   ----                 ---
<S>                                   <C>               <C>                  <C>                  <C>
September                             $       5.10      $     2.10           $     10.85          $      7.50

December                                      6.00            2.75                 10.85                 8.00

March                                         5.03            3.51                 11.50                 7.60

June                                          5.63            3.78                  8.90                 5.00
</TABLE>

                  NUMBER OF STOCKHOLDERS

        As of September 15, 2003, there were approximately 329 holders of record
of the Registrant's common stock. The Registrant believes numerous shares are
held of record by brokerage and other institutional firms for their customers.

                  DIVIDENDS

        The Registrant has not paid any cash dividends on its common stock
during the past two fiscal years. It is the present policy of the Registrant's
Board of Directors to retain earnings to finance the expansion of the
Registrant's operations and not to pay cash dividends on its common stock.

           SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

        The following table details securities authorized for issuance under
equity compensation plans as of June 30, 2003:

<TABLE>
<CAPTION>
                                                                                                      Number of securities
                                                                                                     remaining available for
                               Number of securities to                                                future issuance under
                               be issued upon exercise        Weighted-average exercise price       equity compensation plans
                               of outstanding options,       of outstanding options, warrants         (excluding securities
                                 warrants and rights                    and rights                  reflected in column (a))
         Plan category                   (a)                                (b)                                (c)
----------------------------- ---------------------------    ----------------------------------    ----------------------------
<S>                           <C>                            <C>                                   <C>
Equity compensation plans
approved by security holders          1,381,200                           $ 6.64                             251,000
</TABLE>

        The Registrant has no securities authorized for issuance under equity
compensation plans that have not been approved by security holders. In the past,
the Registrant has issued treasury shares in payment of stock bonuses which were
not granted pursuant to a plan approved by stockholders. See "Item 5. SALES OF
UNREGISTERED SECURITIES". It is the Registrant's current intention that any
future stock awards or bonuses will be made pursuant to the terms of its
existing Incentive Stock Plan (which was approved by stockholders) or another
plan approved by stockholders.

                                       14
<PAGE>



                  SALES OF UNREGISTERED SECURITIES

        In March 2001 and in June 2001, the Registrant issued an aggregate of
9,750 shares, of common stock to twelve employees as a stock bonus.

        In June 2001 and again in July 2002, pursuant to the terms of employment
agreements between the Registrant and three key employees, the Registrant issued
1,000 shares of common stock, in each month, to each of such employees.

        In June 2001, the Registrant awarded 1,000 shares of common stock to
each of its five non-employee directors and 1,000 shares of common stock to each
of six officers as stock bonuses. The shares were issued in July 2001.

        In June 2002, pursuant to the terms of employment agreement between the
Registrant and a key employee, the Registrant issued 2,000 shares of common
stock to such employee.

        In June 2002, the Registrant issued 1,000 shares of common stock to each
of seven officers as stock bonuses. The bonuses were awarded in June 2001 and
were contingent upon the officer remaining employed by the Registrant on June
30, 2002.

        In June 2003, the Registrant issued 1,000 shares of common stock to each
of seven officers as stock bonuses. The bonuses were awarded in August 2002 and
were contingent upon the officer remaining employed by the Registrant on June
30, 2003.

        None of the shares listed above were registered under the Securities Act
of 1933 in reliance on the exemption provided by Section 4(2) thereunder or
because they were issued in a transaction that did not constitute a sale
requiring registration under the Securities Act of 1933.

 ITEM 6.                   SELECTED FINANCIAL DATA

         The following information should be read in conjunction with the
Consolidated Financial Statements and Notes thereto and other information set
forth following Item 14. of this report. The Consolidated Financial Statements
include the operations of the Registrant and its wholly-owned subsidiaries,
American Technical Ceramics (Florida), Inc., American Technical Ceramics Europe
AB, Phase Components Ltd. and American Technical Ceramics (China), Ltd.


                           FISCAL YEARS ENDED JUNE 30,
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                             2003            2002             2001           2000           1999
                                                             ----            ----             ----           ----           ----
<S>                                                      <C>             <C>              <C>             <C>            <C>
INCOME STATEMENT DATA:
Net sales (1)                                            $ 49,048         $  49,585        $    84,585     $  66,692      $   37,688
                                                         ------------    ------------     ------------    -----------    -----------
Gross profit (1)                                         $ 14,332         $   9,624        $    36,721     $  29,946      $   13,838
                                                         ------------    ------------     ------------    -----------    -----------
(Loss)/income from operations                            $   (755)        $  (6,596)       $    16,122     $  13,989      $    3,130
                                                         ------------    ------------     ------------    -----------    -----------
Net (loss)/income                                        $   (501)        $  (4,243)       $    10,332     $   9,071      $    2,129
                                                         ------------    ------------     ------------    -----------    -----------
Basic net (loss)/income per common share (2)             $  (0.06)        $   (0.53)       $      1.30     $    1.18      $     0.28
                                                         ------------    ------------     ------------    -----------    -----------
Diluted net (loss)/income per common share (2)           $  (0.06)        $   (0.53)       $      1.24     $    1.11      $     0.28
                                                         ------------    ------------     ------------    -----------    -----------
Cash dividends paid per common share                     $      -         $     -          $      -        $      -       $      -
                                                         ------------    ------------     ------------    -----------    -----------

BALANCE SHEET DATA:
Property, plant and equipment,                           $ 27,021         $  29,740        $    32,089     $  22,902      $   18,791
                                                         ------------    ------------     ------------    -----------    -----------
Total assets                                             $ 63,548         $  66,574        $    76,576     $  59,787      $   43,622
                                                         ------------    ------------     ------------    -----------    -----------
Long-term debt, less current portion                     $  3,290         $   2,368        $     7,211     $   3,486      $    3,691
                                                         ------------    ------------     ------------    -----------    -----------
Working capital                                          $ 31,485         $  28,375        $    33,662     $  27,087      $   19,160
                                                         ------------    ------------     ------------    -----------    -----------
</TABLE>
(1)  Amounts for periods prior to fiscal year 2001 have been restated to reflect
     the adoption of Emerging Issues Task Force Issue No. 00-10, "Accounting for
     Shipping and Handling Fees and Costs" ("EITF No. 00-10"), effective July 1,
     2000.

                                       15

<PAGE>


(2)  Per share data was revised to reflect the 2-for-1 stock split of the
     Registrant's common stock effected in the form of a 100 percent stock
     dividend effective April 24, 2000.

QUARTERLY FINANCIAL DATA:
(unaudited)                   (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                 BASIC             DILUTED
                                                                              NET (LOSS)         NET (LOSS)
                                                           NET INCOME           /INCOME            /INCOME
   QUARTER ENDED       NET SALES        GROSS PROFIT        /(LOSS)          PER SHARE (1)      PER SHARE (1)
   -------------       ---------        ------------        -------          ---------          ----------
<S>                  <C>              <C>                <C>               <C>                 <C>
Fiscal 2003
-----------
September            $       12,487   $         4,086    $         338     $          0.04    $           0.04
December                     11,561             3,429             (330)              (0.04)              (0.04)
March                        11,930             3,308             (299)              (0.04)              (0.04)
June                         13,070             3,509             (210)              (0.03)              (0.03)
                     ---------------  -----------------  ---------------   ------------------  ----------------
   Total             $       49,048   $        14,332    $        (501)    $         (0.06)    $         (0.06)
                     ---------------  -----------------  ---------------   ------------------  ----------------

Fiscal 2002
-----------
September            $       13,905   $          4,457   $         298     $          0.04     $          0.04
December                     11,582              2,336          (1,038)              (0.13)              (0.13)
March                        11,956              2,544          (1,057)              (0.13)              (0.13)
June                         12,142                287          (2,446)              (0.30)              (0.30)
                     ---------------  -----------------  ---------------   ------------------  ----------------
   Total             $       49,585   $          9,624   $      (4,243)    $         (0.53)    $         (0.53)
                     ---------------  -----------------  ---------------   ------------------  ----------------
</TABLE>

(1)  Earnings per share amounts for each quarter are required to be computed
     independently. As a result, the sum may differ from the total year earnings
     per share amounts.

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

        The following information should be read in conjunction with the
Consolidated Financial Statements and Notes thereto and other information set
forth following Item 15. of this Report. See also "CAUTIONARY STATEMENTS
REGARDING FORWARD-LOOKING STATEMENTS" in Part I of this Report.

           GENERAL

        After reaching peak business levels in the first half of fiscal year
2001, the Registrant experienced a rapid decline in sales volume, as did the
entire electronic component industry, due to a drastic slowdown in the wireless
infrastructure and fiber optic markets. After bottoming out in the second
quarter of fiscal year 2002, sales have rebounded modestly. However, demand from
the wireless infrastructure and fiber optics markets remains depressed. Sales
for fiscal year 2003 were essentially level with fiscal year 2002.

        In response to the industry downturn, the Registrant instituted a series
of cost reduction measures in the second half of fiscal year 2001. The measures
included headcount reduction, spending control measures and the closure of the
Registrant's sales office in England, among others. Additionally, certain
inventory was written down to net realizable value and excess palladium was sold
at a significant loss in fiscal year 2002. Current year losses have declined
primarily as a result of these cost reduction measures. Most recently, the
Registrant has selectively added personnel in order to improve customer service
and build for the future.

                                       16
<PAGE>


        The Registrant has developed new products which, to some extent, have
helped to offset the decreased business. Many of these new products sell into
the same markets as the Registrant's traditional products and, as such, the
benefits of the newer products has been limited. As product demand increases,
the Registrant expects to benefit from sales volume improvement from traditional
products and also from products that have been introduced during the past two
years. Demand improvement will largely depend on increased capital expenditures
in the markets the Registrant serves.

        Many of the customers the Registrant serves have begun to use facilities
in Asia to build their product. Production and major new technology
infrastructure projects have shifted into this region. China is a growing market
and the Chinese government continues to spend significant money on encouraging
the growth of the electronic components industry. The Registrant has responded
by opening its first sales office in the Far East in China. Based upon its
experience in Europe, the Registrant believes that maintaining a local sales
office will enable it to remain in close contact with its customers and
strengthen relationships with the major manufacturers in the region.

        The Registrant expects that bookings will be flat throughout the
remainder of the calendar year and will gradually increase thereafter. The
increases are anticipated to be in part from an increase in orders due to an
economic recovery and in part due to sales of new product offerings which the
Registrant has recently introduced. There can be no assurance, however,
concerning the timing of an economic recovery, if any, or the level of
acceptance of any of the Registrant's new products.

                 RESULTS OF OPERATIONS

              FISCAL YEAR 2003 COMPARED WITH FISCAL YEAR 2002

        Net sales for the fiscal year ended June 30, 2003 were $49,048,000, a
decrease of 1% from the $49,585,000 recorded in the fiscal year ended June 30,
2002. Domestic sales decreased by 12% to $28,697,000 in fiscal year 2003 from
$32,459,000 in fiscal year 2002. International sales increased by 19% to
$20,351,000 in fiscal year 2003 from $17,126,000 in fiscal year 2002. Although
overall sales remained at levels comparable to the prior year, there was an
increase in sales of larger case size capacitors and EIA case capacitors and a
decline in sales of thin film products. The increase in foreign sales is
indicative of the Registrant's customers migrating production overseas,
penetration into the Asian market and improved sales in Europe.

        Orders have improved significantly from the lows experienced in the
second quarter of fiscal year 2002. Total bookings in fiscal year 2003 were
$48,767,000, compared to $42,976,000 in fiscal year 2002, representing an
increase of approximately 13%. Growth has come from the military and wireless
infrastructure markets offset partially by a decrease in orders from the medical
electronics market.

        Gross margins were 29% of net sales in fiscal year 2003, compared to 19%
in fiscal year 2002. The increase in gross margins was attributable in part to
cost reduction measures implemented by the Registrant in fiscal year 2002 in
response to the industry downturn and increased precious metal recovery, as well
as the lack of inventory write-downs to net realizable value and a loss on the
sale of palladium (a precious metal used in the manufacture of certain core
products) both of which occurred in fiscal 2002. In June 2002, the Registrant
sold a portion of its palladium inventory to align inventory levels with
anticipated demand. The Registrant believes its current level of inventory is
appropriate for current sales and production levels.

        Operating expenses totaled $15,087,000, or 31% of net sales, in fiscal
year 2003, compared to $16,220,000, or 33% of net sales, in fiscal year 2002.
The decrease in operating expenses from the prior fiscal year was attributable
to decreased staff as a result of the cost reduction measures discussed above,
lower severance costs and other restructuring costs, and decreased research and
development spending. Operating expenses also decreased as a percentage of sales
for the same reasons.

        Net interest expense was $250,000 in fiscal year 2003, compared to net
interest expense of $305,000 in fiscal year 2002. The decrease in net interest
expense was attributable primarily to the retiring of all outstanding bank debt
in the first quarter of fiscal year 2003.


                                       17

<PAGE>

        The effective income tax benefit rate for fiscal year 2003 was
approximately 50%, as compared to 37% for fiscal year 2002. The increase in the
effective income tax rate was primarily due to the impact of foreign tax
benefits in relation to the low level of pre-tax loss.

        As a result of the foregoing, the Registrant reported a net loss of
$501,000, or $.06 per common (and diluted) share, for fiscal year 2003, compared
to a net loss of $4,243,000, or $0.53 per common (and diluted) share, for fiscal
year 2002.

              FISCAL YEAR 2002 COMPARED WITH FISCAL YEAR 2001

        Net sales for the fiscal year ended June 30, 2002 were $49,585,000, a
decrease of 41% from the $84,585,000 recorded in the fiscal year ended June 30,
2001. Domestic sales decreased by 47% to $32,459,000 in fiscal year 2002 from
$60,964,000 in fiscal year 2001. International sales decreased by 27% to
$17,126,000 in fiscal year 2002 from $23,621,000 in fiscal year 2001. The
decrease in total net sales resulted primarily from a decrease in demand for the
Registrant's products in both foreign and domestic markets across virtually all
product lines.

        Following the dramatic decrease in orders in the second half of fiscal
year 2001, orders remained low throughout fiscal year 2002. Although the rate of
cancellations has returned to historical levels, the Registrant has not
experienced any significant increase in order levels. Total bookings in fiscal
year 2002 were $42,976,000, compared to $76,286,000 in fiscal year 2001,
representing a decline of approximately 44%. Orders from customers in the
wireless infrastructure, fiber optic and semiconductor manufacturing equipment
markets remain significantly below the levels obtained in the first half of
fiscal year 2001. These customers are heavily dependent on activity in the
telecommunications industry which remains depressed. Accordingly, it is unclear
when orders may be expected to increase.

        The Registrant has responded to the decrease in business levels by
instituting a series of cost reduction initiatives. During fiscal year 2002, the
Registrant implemented a series of workforce reductions, scaled back its
research and development efforts and significantly reduced capital spending. In
addition, in the fourth quarter of fiscal year 2002, the Registrant sold a large
portion of its palladium raw material inventory that it deemed to be excess
based on anticipated business levels for $3.3 million. The Registrant recognized
a loss of $1,360,000 (after tax), or $.17 per share, during the fourth quarter
of fiscal year 2002 as a result of this transaction.

        Gross margins were 19% of net sales in fiscal year 2002, compared to 43%
in fiscal year 2001. The decrease in gross margins was primarily attributable to
lower sales in relation to fixed costs, the loss on the sale of palladium,
inventory write-downs to net realizable value as a result of excess quantities,
customer requirements and other causes, and a reduction of benefits from
reclaiming activity, offset partially by the net effect of the workforce
reductions and other cost controls discussed above.

        Operating expenses totaled $16,220,000, or 33% of net sales, in fiscal
year 2002, compared to $20,599,000, or 24% of net sales, in fiscal year 2001.
The decrease in operating expenses from the prior fiscal year was attributable
to decreased staff as a result of the cost reduction measures discussed above,
lower commissions related to the lower sales volume, lower bonus accruals due to
decreased profitability, and decreased research and development spending,
partially offset by severance costs and other restructuring costs of
approximately $406,000. As a percentage of sales, operating expenses increased
due to the lower level of sales and the fixed nature of certain expenses.

        Net interest expense was $305,000 in fiscal year 2002, compared to net
interest expense of $226,000 in fiscal year 2001. The increase in net interest
expense was attributable to decreased interest income due to lower prevailing
interest rates, offset partially by an increase in cash available for investing
and lower interest expense on loans.

        The effective income tax benefit rate for fiscal year 2002 was
approximately 37%, as compared to an effective income tax rate of 35% for fiscal
year 2001. The increase in the effective income tax rate was due to operating
losses and the impact of certain credits.

                                       18
<PAGE>


        As a result of the foregoing, the Registrant reported a net loss of
$4,243,000, or ($.53) per common share and per common share assuming dilution,
for fiscal year 2002, compared to net income of $10,332,000, or $1.30 per common
share ($1.24 per common share assuming dilution), for fiscal year 2001.

              LIQUIDITY AND CAPITAL RESOURCES

        The Registrant's financial position at June 30, 2003 remains strong as
evidenced by working capital of $31,485,000, compared to working capital of
$28,375,000 at June 30, 2002. The Registrant's current ratio at June 30, 2003
was 7.3:1, compared to 4.4:1 at June 30, 2002. The Registrant's quick ratio at
June 30, 2003 increased to 3.7:1, compared to 2.0:1 at June 30, 2002. The
improvement in the current and quick ratios were primarily due to the retiring
of the Registrant's bank debt in July 2002 and positive cash flows from
operations in excess of capital expenditures.

        Cash and investments increased to $11,696,000 at June 30, 2003, compared
to $10,154,000 at June 30, 2002. The increase in cash and investments was
primarily the result of positive cash flow from operations in excess of capital
expenditures and collection of tax refunds partially offset by the retiring of
the bank debt. Accounts receivable increased by $393,000 to $6,721,000 at June
30, 2003, compared to $6,328,000 at June 30, 2002. Inventories decreased by
$273,000 to $15,144,000 at June 30, 2003, compared to $15,417,000 at June 30,
2002. The Registrant continues to maintain high finished goods inventory levels
to keep customer lead times to a minimum and maintain good customer service.
Other current assets decreased by $1,624,000 primarily due to the collection of
income tax receivables as a result of losses incurred in fiscal 2002.

        Current portion of long-term debt decreased $3,921,000 to $355,000, at
June 30, 2003 compared to $4,276,000 at June 30, 2002. The decrease in the
current portion of long-term debt was due to the retiring of the bank debt in
the first quarter of fiscal year 2003. Accounts payable increased by $147,000 to
$1,025,000 at June 30, 2003, compared to $878,000 at June 30, 2002. Accrued
expenses decreased by $375,000 to $2,843,000 at June 30, 2003, compared to
$3,218,000 at June 30, 2002.

        The Registrant leases its facility in Jacksonville, Florida from a
partnership controlled by the Registrant's President, Chief Executive Officer
and principal stockholder under a capital lease. The rental payments under this
lease have been adjusted several times, most recently as of September 2002,
primarily to reflect certain additions to the facility and market value
adjustments as required by the terms of the lease based upon independent
appraisals. See "Item 2. PROPERTIES". Effective September 1, 2002, the
Registrant is obligated to pay approximately $719,000 per annum under this
lease, an increase from $461,000 per annum during fiscal year 2002. The payments
due over the remaining seven years of this capital lease, including the portion
related to interest, total approximately $5,214,000. See "Item 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS" and Note 4 of Notes to Consolidated
Financial Statements.

        At June 30, 2002, the Registrant had available two credit facilities
with Bank of America, N.A. ("Bank of America"): a $4,000,000 revolving line of
credit against which no borrowings were incurred, and an $8,500,000 equipment
line of credit against which the Registrant had borrowings of $4,047,000
outstanding. Both lines bore interest at 1 1/2% above the one month LIBOR rate,
or approximately 3.3% at June 30, 2002. The outstanding principal balance of the
equipment line rolled over periodically into a self-amortizing term note of not
less than four nor more than seven years.

        Each of these credit facilities was subject to certain financial
covenants, including maintenance of asset and liability percentage ratios. One
such covenant required the Registrant to maintain a certain level of annualized
earnings before interest, taxes, depreciation and amortization (EBITDA) to
current debt plus annual interest payments. Due to the losses incurred by the
Registrant during fiscal year 2002, the Registrant was not in compliance with
this covenant. The Registrant held discussions with Bank of America concerning
possible amendments to the terms of these facilities which proved to be
unsuccessful. Accordingly, in July 2002, the Registrant repaid the outstanding
balance of the equipment facility and terminated both of these facilities.

                                       19

<PAGE>



        The Registrant is in the process of seeking a line of credit or other
form of financing for planned purchases of equipment. If the Registrant is
unable to secure such financing on acceptable terms, the Registrant believes
that it will be able to fund such purchases from cash on hand and cash generated
from operations.

         Capital expenditures for the fiscal year ended June 30, 2003 totaled
$1,708,000, including expenditures for machinery and equipment and planned
leasehold improvements. The Registrant intends to use cash on hand, cash
generated through operations, and available credit, if any, to finance budgeted
capital expenditures, primarily for equipment acquisition, of approximately
$4,700,000 in fiscal year 2004.

        Aggregate contractual obligations as of June 30, 2003 mature as follows:

<TABLE>
<CAPTION>
                                                                Payments Due by Period (in 000's)
                                       ------------------------------------------------------------------------------------
                                                             Less
                                                            than 1             1- 3             4- 5            After 5
   Contractual Obligations                Total              year             years             years            years
   ----------------------------------  -------------    ---------------    -------------    --------------    -------------
<S>                                    <C>              <C>                <C>              <C>               <C>
   Bank Debt                           $        ---     $         ---       $       ---     $        ---      $        ---
   Capital Lease Obligations                  3,645               355             1,316            1,135                839
   Operating Leases                           1,786               453             1,230              103                ---
                                       -------------    ---------------    -------------    --------------    -------------
   Total Contractual Obligations       $      5,431      $        808        $    2,546       $    1,238        $       839
                                       =============    ===============    =============    ==============    =============
</TABLE>

        As described above, in July 2002, the Registrant repaid the outstanding
balance of its equipment line from Bank of America. Accordingly, the Registrant
currently has no outstanding long-term bank debt, or available committed lines
of credit.

        The Registrant routinely enters into binding and non-binding purchase
obligations in the ordinary course of business, primarily covering anticipated
purchases of inventory and equipment. The terms of these commitments generally
do not extend beyond six months. None of these obligations are individually
significant. The Registrant does not expect that these commitments will
materially adversely affect its liquidity in the foreseeable future.

     CRITICAL ACCOUNTING POLICIES

        The Securities and Exchange Commission ("SEC") issued disclosure
guidance for "critical accounting policies." The SEC defines "critical
accounting policies" as those that require the application of management's most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain and may
change in subsequent periods. The Registrant's significant accounting policies
are described in Note 1 to its consolidated financial statements contained in
"Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" of this report. The
Registrant believes that the following accounting policies require the
application of management's most difficult, subjective or complex judgments:

           ALLOWANCES FOR DOUBTFUL ACCOUNTS RECEIVABLE

        The Registrant performs ongoing credit evaluations of its customers and
adjusts credit limits based upon payment history and a customer's current
creditworthiness, as determined by its review of the customer's current credit
information. The Registrant continuously monitors collections and payments from
its customers and maintains an allowance for estimated credit losses based upon
its historical experience and any specific customer collection issues that the
Registrant has identified. While such credit losses have historically been
within the Registrant's expectations and the allowances established, the
Registrant cannot guarantee that it will continue to experience the same credit
loss rates that it has in the past. Should the financial position of its
customers deteriorate resulting in an impairment of their ability to pay amounts
due, the Registrant's revised estimate of such losses and any actual losses in
excess of previous estimates may negatively impact its operating results.

                                       20
<PAGE>



           SALES RETURNS AND ALLOWANCES

        In the ordinary course of business, the Registrant accepts returns of
products sold for various reasons and grants sales allowances to customers.
While the Registrant engages in extensive product quality control programs and
processes, its level of sales returns is affected by, among other things, the
quality of its manufacturing process. The Registrant maintains an allowance for
sales returns and allowances based upon historical returns and allowances
granted. While such returns and allowances have historically been within the
Registrant's expectations, actual return and allowance rates in the future may
differ from current estimates, which could negatively impact its operating
results.

           INVENTORY VALUATION

        The Registrant values inventory at the lower of aggregate cost
(first-in, first-out) or market. When the cost of inventory is determined by
management to be in excess of its market value, such inventory is written down
to its estimated net realizable value. This requires the Registrant to make
estimates and assumptions about several factors (e.g., future sales quantities
and selling prices, and percentage complete and failure rates for work in
process) based upon historical experience and its projections for future
periods. Changes in factors such as the level of order bookings, the product mix
of order bookings and the Registrant's manufacturing processes could have a
material impact on the Registrant's assessment of the net realizable value of
inventory in the future.

           VALUATION OF DEFERRED TAX ASSETS

        The Registrant regularly evaluates its ability to recover the reported
amount of its deferred income taxes considering several factors, including its
estimate of the likelihood of the Registrant generating sufficient taxable
income in future years during the period over which temporary differences
reverse. Presently, the Registrant believes that it is more likely than not that
it will realize the benefits of its deferred tax assets based primarily on its
history of and projections for taxable income in the future, and its intention
to carry back net operating losses to generate refunds of income taxes
previously paid. In the event that actual results differ from its estimates or
the Registrant adjusts these estimates in future periods, the Registrant may
need to establish a valuation allowance against a portion or all of its deferred
tax assets, which could materially impact its financial position or results of
operations in future periods.

           VALUATION OF LONG-LIVED AND INTANGIBLE ASSETS

        The Registrant assesses the recoverability of long-lived assets whenever
the Registrant determines that events or changes in circumstances indicate that
the carrying amount may not be recoverable. Its assessment is primarily based
upon its estimate of future cash flows associated with these assets. The
Registrant believes that the carrying amount of its long-lived assets is
recoverable. However, should its operating results deteriorate, or anticipated
new product launches not occur or not attain the commercial acceptance that the
Registrant anticipates, the Registrant may determine that some portion of its
long-lived assets are impaired. Such determination could result in non-cash
charges to income that could materially affect its financial position or results
of operations for that period.

           INFLATION

        The Registrant does not expect the effects of inflation to have a
significant impact on its liquidity or results of operations.

                                       21

<PAGE>


           ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

        In December 2002, the Financial Accounting Standards Board issued SFAS
No. 148, "Accounting for Stock-Based Compensation - Transaction and Disclosure"
("SFAS No. 148"), - an amendment of FASB Statement No. 123", which provides
alternative methods of transition for a voluntary change to the fair value-based
method of accounting for stock-based employee compensation. In addition, SFAS
No. 148 amends the disclosure requirements of FASB Statement 123 to require more
prominent and more frequent disclosures in financial statements about the
effects of stock-based compensation. The Registrant adopted the disclosure
provisions of SFAS No. 148 effective, January 1, 2003. The Registrant continued
to apply the intrinsic value-based method to account for stock options through
fiscal year 2003.

        In July 2003, the Registrant elected to transition to a fair value-based
method of accounting for stock-based employee compensation. The Registrant will
use the prospective method for the transition as permitted by SFAS 148. Under
the prospective method, stock compensation expense for new awards will be
recognized for any new option grants or stock awards granted on or after July 1,
2003 based upon the award's fair value. Outstanding stock options granted prior
to July 1, 2003, will continue to be accounted for under the intrinsic value
method. Stock compensation expense for new awards will be calculated using the
Black-Scholes Pricing Model to estimate fair value. The adoption of this
standard will increase recognized stock compensation expense to the extent stock
options or awards are granted after June 30, 2003.

        In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN No.
46"). Previously, consolidation of variable interest entities was largely based
on controlling voting rights. This interpretation clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements", to
entities where the company is vulnerable to a majority of the entity's risk of
loss or is entitled to receive a majority of the entity's residual returns even
if there is no controlling voting interest. The Registrant will adopt FIN No. 46
effective July 1, 2003. The Registrant is currently assessing the impact of the
adoption of FIN No. 46 on its financial position and consolidated results of
operations.

ITEM 7A.         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        The Registrant has identified three market risks relative to its
business: foreign currency exchange rate risk, commodity price risk and security
price risk. The Registrant has managed its market risk exposures in order to
minimize their potential impact on its consolidated financial condition and
results of operations. Specifically:

     a)  Foreign currency exchange rate risk. With the exception of sales by the
         Registrant's wholly-owned subsidiary in Sweden (which are denominated
         in Krona), all transactions are, and are anticipated to be, denominated
         in U.S. Dollars. At the present time, the contribution of the Swedish
         subsidiary to the Registrant's consolidated results of operations is
         not significant. See Note 9 of Notes to Consolidated Financial
         Statements. Accordingly, fluctuations in exchange rates would not
         presently have a material adverse effect on the Registrant's
         operations.

     b)  Commodity price risk. The Registrant uses certain precious metals in
         the manufacturing of its products (primarily palladium and gold), and
         is therefore subject to certain commodity price risks. The Registrant
         believes that, based upon its current levels of production and
         inventories of palladium and gold, it will need to buy additional
         quantities of palladium during the next fiscal year at prevailing
         market prices. Additionally, the Registrant believes that the price of
         palladium and gold will remain stable due to the lower demand coming
         from the electronics industry. If prices were to begin rising
         significantly, the Registrant may decide to purchase a longer-term
         supply of the metals to protect against unstable pricing.

     c)  Security price risk. The Registrant's current portfolio of marketable
         securities consists of U.S. Treasury notes and other government
         securities with varying maturities of up to three years. The Registrant
         believes it can effectively manage any exposure resulting from
         declining prices by holding any securities which decline substantially
         in value until maturity.

                                       22


<PAGE>



ITEM 8.          FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The Registrant's Consolidated Financial Statements and the Notes thereto
begin on page F-2 of this report.

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

        None.

ITEM 9A.         CONTROLS AND PROCEDURES

        Evaluation of Disclosure Controls and Procedures. In response to the
requirements of the Sarbanes-Oxley Act of 2002, within 90 days prior to the date
of this report (the "Evaluation Date"), the Registrant's President and Chief
Executive Officer and Vice President - Controller carried out an evaluation of
the effectiveness of the Registrant's "disclosure controls and procedures" (as
defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)).
Based on that evaluation, these officers concluded that, as of the Evaluation
Date, the Registrant's disclosure controls and procedures were adequate and
effective to ensure that material information relating to the Registrant and the
Registrant's consolidated subsidiaries was made known to them by others within
those entities, particularly during the period in which this report was being
prepared.

        Changes in Internal Controls. There were no changes in the Registrant's
internal controls over financial reporting, identified in connection with the
evaluation of such internal controls that occurred during the Registrant's last
fiscal quarter, that have materially affected, or are reasonably likely to
materially affect, the Registrant's internal controls over financial reporting.


                                    PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        The information set forth under the caption "Election of Directors" in
the Registrant's Proxy Statement to be furnished in connection with its Annual
Meeting of Stockholders to be held November 19, 2003 is hereby incorporated by
reference.

ITEM 11.          EXECUTIVE COMPENSATION

        The information set forth under the caption "Executive Compensation" in
the Registrant's Proxy Statement to be furnished in connection with its Annual
Meeting of Stockholders to be held November 19, 2003 is hereby incorporated by
reference.

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The information set forth under the caption "Security Ownership of
Certain Beneficial Owners and Management" and the information relating to
beneficial ownership of the Registrant's common stock in the table under the
caption "Election of Directors" in the Registrant's Proxy Statement to be
furnished in connection with its Annual Meeting of Stockholders to be held
November 19, 2003 is hereby incorporated by reference. See also "Item 5. MARKET
FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS -- EQUITY
COMPENSATION PLAN INFORMATION".

                                       23
<PAGE>



ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The information set forth under the caption "Certain Relationships and
Related Transactions" in the Registrant's Proxy Statement to be furnished in
connection with its Annual Meeting of Stockholders to be held November 19, 2003
is hereby incorporated by reference.

ITEM 14.          PRINCIPAL ACCOUNTING FEES AND SERVICES

        The information set forth under the caption "Principal Accounting Fees
and Services" in the Registrant's Proxy Statement to be furnished in connection
with its Annual Meeting of Stockholders to be held November 19, 2003 is hereby
incorporated by reference.

                                     PART IV


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


<TABLE>
<CAPTION>
(a)  FINANCIAL STATEMENTS                                                                    PAGE NO.
     --------------------                                                                    --------
<S>                                                                                          <C>
     Index to Consolidated Financial Statements..........................................       F
     Independent Auditors' Report........................................................       F-1
     Consolidated Financial Statements
           Balance Sheets as of June 30, 2003 and 2002...................................       F-2
           Statements of Operations
              Fiscal Years Ended June 30, 2003, 2002 and 2001............................       F-3
           Statements of Stockholders' Equity and Comprehensive Income (Loss)
              Fiscal Years Ended June 30, 2003, 2002 and 2001............................       F-4
           Statements of Cash Flows
              Fiscal Years Ended June 30, 2003, 2002 and 2001............................       F-5
           Notes to Consolidated Financial Statements       .............................       F-6
</TABLE>

(b)  REPORTS ON FORM 8-K
     -------------------

        On September 3, 2003, the Registrant furnished a report on Form 8-K
together with the Registrant's Press Release announcing it's fourth quarter
financial results for the period ended June 30, 2003. The Form 8-K contained the
information required by "Item 9. Regulation FD Disclosure" and "Item 12.
Disclosure of Results of Operations and Financial Condition," in accordance with
SEC Release 33-8216.



                                       24

<PAGE>



(C)  EXHIBITS

        Unless otherwise indicated, the following exhibits were filed as part of
the Registrant's Registration Statement on Form S-18 (No. 2-96925-NY) (the
"Registration Statement") and are incorporated herein by reference to the same
exhibit thereto:

<TABLE>
<CAPTION>
EXHIBIT NO.       DESCRIPTION
-----------       -----------
<S>           <C> <C>
3(a)(i)       -   Certificate of Incorporation of the Registrant.

3(a)(ii)      -   Amendment to Certificate of Incorporation.  (4)

3(b)(i)       -   By-laws of the Registrant.

9(a)(i)       -   Restated Shareholders' Agreement, dated April 15, 1985, among
                  Victor Insetta, Joseph Mezey, Joseph Colandrea and the
                  Registrant.

10(b)         -   Lease, dated September 1, 2002, between Stepar Leasing, LLC
                  and the Registrant for premises at 15 Stepar Place, Huntington
                  Station, N.Y. (19)

10(c)(i)      -   Form of 1985 Employee Stock Sale Agreement between the
                  Registrant and various employees.

10(c)(ii)     -   Form of Employee Stock Bonus Agreement, dated as of July 1,
                  1993, between the Registrant and various employees. (3)

10(c)(iii)    -   Form of Employee Stock Bonus Agreement, dated as of April 19,
                  1994, between the Registrant and various employees. (3)

10(c)(iv)     -   Form of Employee Stock Bonus Agreement, dated as of April 20,
                  1995, between the Registrant and various employees. (4)

10(e)(i)      -   Second Amended and Restated Lease, dated as of May 16, 2000,
                  between V.P.I. Properties Associates, d/b/a V.P.I. Properties
                  Associates, Ltd., and American Technical Ceramics (Florida),
                  Inc. (13)

10(g)(iii)    -   Profit Bonus Plan, dated April 19, 1995, and effective for the
                  fiscal years beginning July 1, 1994. (4)

10(g)(iv)     -   Employment Agreement, dated April 3, 1985, between Victor
                  Insetta and the Registrant, and Amendments No. 1 through 4
                  thereto. (2)

10(g)(v)      -   Amendment No. 5, dated as of September 11, 1998, to Employment
                  Agreement between Victor Insetta and the Registrant. (8)

10(g)(vi)     -   Amendment No. 6, dated as of January 3, 2001, to Employment
                  Agreement between Victor Insetta and the Registrant. (20)

10(h)         -   Employment Agreement, dated September 1, 2000, between the
                  Registrant and Richard Monsorno. (14)

10(i)         -   Managers Profit Bonus Plan, dated December 7, 1999 and
                  effective January 1, 2000. (12)

10(k)         -   Consulting Agreement, dated October 2000, between the
                  Registrant and Stuart P. Litt. (14)

                                       25
<PAGE>


10(m) (i)     -   American Technical Ceramics Corp. 1997 Stock Option Plan.  (7)

10(m) (ii)    -   American Technical Ceramics Corp. 2000 Incentive Stock Plan.  (12)

10(p)         -   Second Amended and Restated Employment Agreement, dated as of
                  December 31, 2001, between Judah Wolf and the Registrant. (17)

10(r)         -   Employment Agreement, dated April 10, 2001, between the Registrant and David Ott. (15)

10(r)(i)      -   Amendment to Employment Agreement, dated as of January 1,
                  2001, between David Ott and the Registrant. (17)

10(s)         -   Employment Agreement, dated April 1, 2003, between the
                  Registrant and Stephen Beyel. (20)

21            -   Subsidiaries of the Registrant.  (18)

23            -   Consent of KPMG LLP.  (21)

31.1          -   Section 302 Certification of Chief Executive Officer. (21)

31.2          -   Section 302 Certification of Principal Accounting Officer.
                  (21)

32            -   Section 906 Certifications. (21)
</TABLE>

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


1.  Incorporated by reference to the Registrant's Annual Report on Form 10-K for
    the fiscal year ended June 30, 1989.

2.  Incorporated by reference to the Registrant's Annual Report on Form 10-K for
    the fiscal year ended June 30, 1993.

3.  Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
    for the fiscal year ended June 30, 1994.

4.  Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
    for the fiscal year ended June 30, 1995.

5.  Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
    for the fiscal year ended June 30, 1996.

6.  Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
    for the quarterly period ended March 31, 1997.

7.  Incorporated by reference to the Registrant's Annual Report on Form 10-K for
    the fiscal year ended June 30, 1997.

8.  Incorporated by reference to the Registrant's Annual Report on Form 10-K for
    the fiscal year ended June 30, 1998.

9.  Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
    for the quarterly period ended September 30, 1998.

10. Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
    for the quarterly period ended December 31, 1998.

                                       26
<PAGE>

11. Incorporated by reference to the Registrant's Annual Report on Form 10-K for
    the fiscal year ended June 30, 1999.

12. Incorporated by reference to the Registrant's Annual Report on Form 10-K/A
    for the fiscal year ended June 30, 2000.

13. Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
    for the quarterly period ended September 30, 2000.

14. Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
    for the quarterly period ended December 31, 2000.

15. Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
    for the quarterly period ended March 31, 2001.

16. Incorporated by reference to the Registrant's Annual Report on Form 10-K for
    the fiscal year ended June 30, 2001.

17. Incorporated by reference to the Registrant's Quarterly Report on Form
    10-Q/A for the quarterly period ended March 31, 2002.

18. Incorporated by reference to the Registrant's Annual Report on Form 10-K for
    the fiscal year ended June 30, 2002.

19. Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
    for the quarterly period ended September 30, 2002.

20. Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
    for the quarterly period ended March 31, 2003.

21.  Filed herewith.

(D)  FINANCIAL STATEMENT SCHEDULES
     -----------------------------

         Schedules have been omitted since they either are not applicable, not
     required or the information is included elsewhere herein.








                                       27
<PAGE>




                                   SIGNATURES

         PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

                        AMERICAN TECHNICAL CERAMICS CORP.

                                        BY: /S/ VICTOR INSETTA
                                            -------------------
                                               VICTOR INSETTA
                                                  President


Dated:        September 25, 2003

         PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT IN THE CAPACITIES AND ON THE DATES INDICATED:

<TABLE>
<CAPTION>
     NAME                                            TITLE                              DATE
     ----                                            -----                              ----
<S>                                        <C>                                  <C>
/S/ VICTOR INSETTA                               President and Director         September 25, 2003
---------------------------                  (Principal Executive Officer)
 Victor Insetta


/S/ ANDREW R. PERZ                             Vice President, Controller       September 25, 2003
-------------------                          (Principal Accounting Officer)
 Andrew R. Perz


/S/ STUART P. LITT                                   Director                   September 25, 2003
------------------
 Stuart P. Litt


/S/ O. JULIAN GARRARD III                            Director                   September 25, 2003
-------------------------
 O. Julian Garrard III


/S/ CHESTER E. SPENCE                                Director                   September 25, 2003
---------------------
 Chester E. Spence


/S/ THOMAS J. VOLPE                                  Director                   September 25, 2003
-------------------
 Thomas J. Volpe


/S/ DOV S. BACHARACH                                 Director                   September 25, 2003
--------------------
 Dov S. Bacharach
</TABLE>


                                       28



<PAGE>



ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



               AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                 Page Number
<S>                                                                                              <C>
              Independent Auditors' Report   . . . . . . . . . . . . . . . . . . . . . . . . .        F-1

              Consolidated Balance Sheets as of June 30, 2003 and 2002 . . . . . . . . . . . .        F-2

              Consolidated Statements of Operations
                 Fiscal Years Ended June 30, 2003, 2002 and 2001 . . . . . . . . . . . . . . .        F-3

              Consolidated Statements of Stockholders' Equity and
                 Comprehensive Income (Loss)
                 Fiscal Years Ended June 30, 2003, 2002 and 2001 . . . . . . . . . . . . . . .        F-4

              Consolidated Statements of Cash Flows
                 Fiscal Years Ended June 30, 2003, 2002 and 2001 . . . . . . . . . . . . . . .        F-5

              Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . .        F-6
</TABLE>

                                       F
<PAGE>


                          Independent Auditors' Report
                          ----------------------------


The Board of Directors and Stockholders
American Technical Ceramics Corp.:


We have audited the accompanying consolidated balance sheets of American
Technical Ceramics Corp. and subsidiaries (the "Company") as of June 30, 2003
and 2002, and the related consolidated statements of operations, stockholders'
equity and comprehensive income (loss) and cash flows for each of the years in
the three-year period ended June 30, 2003. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American Technical
Ceramics Corp. and subsidiaries as of June 30, 2003 and 2002, and the results of
their operations and their cash flows for each of the years in the three-year
period ended June 30, 2003, in conformity with accounting principles generally
accepted in the United States of America.




                                  /S/ KPMG LLP




Melville, New York
September 3, 2003



                                      F-1

<PAGE>


               AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                        ASSETS                                              JUNE 30, 2003         JUNE 30, 2002
                                                                                        ------------------    ------------------
<S>                                                                                     <C>                   <C>
CURRENT ASSETS
   Cash (including cash equivalents of $996,000 and
      $3,606,000, respectively)                                                         $       8,685,000     $       7,129,000
   Investments                                                                                  3,011,000             3,025,000
   Accounts receivable, net                                                                     6,721,000             6,328,000
   Inventories                                                                                 15,144,000            15,417,000
   Deferred income taxes, net                                                                   1,989,000             2,284,000
   Other current assets                                                                           940,000             2,564,000
                                                                                        ------------------    ------------------
                                           TOTAL CURRENT ASSETS                                36,490,000            36,747,000
                                                                                        ------------------    ------------------

PROPERTY, PLANT AND EQUIPMENT
   Land                                                                                           738,000               738,000
   Buildings                                                                                   10,115,000             8,678,000
   Leasehold improvements                                                                       5,105,000             5,019,000
   Machinery and equipment                                                                     41,317,000            40,880,000
   Computer equipment and software                                                              5,332,000             5,078,000
   Furniture, fixtures and other                                                                1,627,000             1,505,000
                                                                                        ------------------    ------------------
                                                                                               64,234,000            61,898,000
   Less:   Accumulated depreciation and amortization                                           37,213,000            32,158,000
                                                                                        ------------------    ------------------
                                                                                               27,021,000            29,740,000
                                                                                        ------------------    ------------------
OTHER ASSETS                                                                                       37,000                87,000
                                                                                        ------------------    ------------------
                                           TOTAL ASSETS                                 $      63,548,000      $     66,574,000
                                                                                        ==================    ==================

                         LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
   Current portion of long-term debt                                                    $         355,000      $      4,276,000
   Accounts payable                                                                             1,025,000               878,000
   Accrued expenses                                                                             2,843,000             3,218,000
   Income taxes                                                                                   782,000                   ---
                                                                                        ------------------    ------------------

                                           TOTAL CURRENT LIABILITIES                            5,005,000             8,372,000


LONG-TERM DEBT, NET OF CURRENT PORTION                                                          3,290,000             2,368,000
DEFERRED INCOME TAXES                                                                           3,300,000             3,642,000
                                                                                        ------------------    ------------------
                                           TOTAL LIABILITIES                                   11,595,000            14,382,000
                                                                                        ------------------    ------------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
   Common Stock -- $.01 par value; authorized 20,000,000 shares; issued
        8,502,758 and 8,492,258 shares, outstanding 8,088,618 and 8,074,118
        shares, respectively                                                                       85,000                85,000
   Capital in excess of par value                                                              11,418,000            11,380,000
   Retained earnings                                                                           41,670,000            42,171,000
   Accumulated  other comprehensive income (loss):

      Unrealized gain on investments available-for-sale, net                                        ---                   5,000
      Cumulative foreign currency translation adjustment                                          176,000               (46,000)
                                                                                        ------------------    ------------------
                                                                                                  176,000               (41,000)
                                                                                        ------------------    ------------------
    Less:   Treasury stock, at cost (414,140 and 421,140 shares, respectively)                  1,396,000             1,403,000
                                                                                        ------------------    ------------------
                                           TOTAL STOCKHOLDERS' EQUITY                          51,953,000            52,192,000
                                                                                        ------------------    ------------------
                                                                                          $    63,548,000       $    66,574,000
                                                                                        ==================    ==================
</TABLE>
See accompanying notes to consolidated financial statements.

                                      F-2

<PAGE>

             AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  FISCAL YEARS ENDED JUNE 30, 2003, 2002, 2001

<TABLE>
<CAPTION>
                                                                  2003                     2002                   2001
                                                                  ----                     ----                   ----
<S>                                                        <C>                       <C>                    <C>
Net sales                                                  $   49,048,000             $  49,585,000          $  84,585,000
Cost of sales                                                  34,716,000                39,961,000             47,864,000
                                                           -------------------       -----------------      ---------------

     Gross profit                                              14,332,000                 9,624,000             36,721,000
                                                           -------------------       -----------------      ---------------

Selling, general and administrative expenses                   11,972,000                12,403,000             16,003,000
Research and development expenses                               2,766,000                 3,644,000              4,180,000
Other                                                             349,000                   173,000                416,000
                                                           -------------------       -----------------      ---------------
     Operating expenses                                        15,087,000                16,220,000             20,599,000
                                                           -------------------       -----------------      ---------------

     (Loss)/income from operations                               (755,000)               (6,596,000)            16,122,000
                                                           -------------------       -----------------      ---------------

Other expense (income)
     Interest expense                                             359,000                   496,000                559,000
     Interest income                                             (109,000)                 (191,000)              (333,000)
     Other                                                            ---                  (160,000)                 ---
                                                           -------------------       -----------------      ---------------
                                                                  250,000                   145,000                226,000
                                                           -------------------       -----------------      ---------------

     (Loss)/income before provision for income taxes           (1,005,000)               (6,741,000)            15,896,000

Provision for income taxes                                       (504,000)               (2,498,000)             5,564,000


                                                           -------------------       -----------------      ---------------
     Net (loss)/income                                     $     (501,000)            $  (4,243,000)         $  10,332,000
                                                           ===================       =================      ===============

Basic net (loss)/income per common share                   $        (0.06)            $       (0.53)         $        1.30

Diluted net (loss)/income per common share                 $        (0.06)            $       (0.53)         $        1.24

                                                           -------------------       -----------------      ---------------
Basic weighted average common shares outstanding                8,074,000                 8,050,000              7,962,000
                                                           ===================       =================      ===============

                                                           -------------------       -----------------      ---------------
Diluted weighted average common shares outstanding              8,074,000                 8,050,000              8,315,000
                                                           ===================       =================      ===============
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-3

<PAGE>



               AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
                FISCAL YEARS ENDED JUNE 30, 2003, 2002, AND 2001


<TABLE>
<CAPTION>
                                                                                                                  Accumulated
                                                                                     Capital in                       Other
                                       Comprehensive            Common Stock        Excess of Par    Retained     Comprehensive
                                       Income/(Loss)          Shares     Amount         Value        Earnings      Income (Loss)
                                      ---------------------------------------------------------------------------------------------
<S>                                   <C>                    <C>        <C>         <C>             <C>           <C>
BALANCE AT JUNE 30, 2000                                     8,369,528  $ 84,000    $10,366,000    $36,082,000      $(168,000)

Net income                             $  10,332,000            ---         ---           ---       10,332,000          ---

Tax benefit of stock options exercised        ---               ---         ---         182,000        ---              ---

Stock award compensation                      ---               ---         ---         369,000        ---              ---

Exercise of stock options                     ---               81,905     1,000        343,000        ---              ---
Other comprehensive income, net of tax:
   Unrealized losses on investments
     available-for-sale, net of
     reclassification adjustment             112,000

   Foreign currency translation
     adjustment                             (182,000)
                                        ------------

Other comprehensive loss, net of tax         (70,000)            ---        ---           ---          ---            (70,000)
                                        ------------

Comprehensive income                   $  10,262,000
                                       ==============----------------------------------------------------------------------------

BALANCE AT JUNE 30, 2001                                     8,451,433  $ 85,000    $11,260,000    $46,414,000      $(238,000)

Net (loss)                             $  (4,243,000)            ---        ---           ---       (4,243,000)         ---

Tax benefit of stock options exercised        ---                ---        ---          57,000         ---             ---

Stock award compensation expense              ---                ---        ---        (112,000)        ---             ---

Exercise of stock options                     ---               40,825      ---         175,000         ---             ---

Other comprehensive income, net of tax:
   Unrealized losses on investments
     available-for-sale, net of
     reclassification adjustment             (51,000)

   Foreign currency translation
     adjustment                              248,000
                                       -------------

Other comprehensive Income, net of tax       197,000             ---        ---           ---           ---           197,000
                                       -------------

Comprehensive (loss)                   $  (4,046,000)
                                       =============-----------------------------------------------------------------------------

BALANCE AT JUNE 30, 2002                                     8,492,258    85,000    $11,380,000    $42,171,000        (41,000)

Net (loss)                             $    (501,000)            ---        ---           ---         (501,000)         ---

Tax benefit of stock options exercised       ---                 ---        ---           2,000         ---             ---

Stock award compensation expense             ---                 ---        ---          10,000         ---             ---

Exercise of stock options                    ---                10,500      ---          26,000         ---             ---

Other comprehensive income, net of tax:
   Unrealized losses on investments
     available-for-sale, net of
     reclassification adjustment              (5,000)

   Foreign currency translation
     adjustment                              222,000
                                       ------------

Other comprehensive Income, net of tax       217,000             ---        ---           ---           ---           217,000
                                       ------------

Comprehensive (loss)                   $    (284,000)
                                       =============-----------------------------------------------------------------------------
BALANCE AT JUNE 30, 2003                                     8,502,758    85,000    $11,418,000    $41,670,000        176,000
                                                    =============================================================================



<CAPTION>


                                                                Deferred
                                     Treasury Stock           Compensation                Total
                                     ---------------------------------------------------------------
<S>                                   <C>                        <C>                  <C>
BALANCE AT JUNE 30, 2000              $  (1,515,000)          $  (528,000)          $ 44,321,000

Net income                                  ---                      ---              10,332,000

Tax benefit of stock options exercised      ---                      ---                 182,000

Stock award compensation                     68,000               283,000                720,000

Exercise of stock options                   ---                      ---                 344,000
Other comprehensive income, net of tax:
   Unrealized losses on investments
     available-for-sale, net of
     reclassification adjustment

   Foreign currency translation
     adjustment


Other comprehensive loss, net of tax        ---                      ---                 (70,000)


Comprehensive income
                                      ---------------------------------------------------------------

BALANCE AT JUNE 30, 2001              $  (1,447,000)          $  (245,000)          $ 55,829,000

Net (loss)                                  ---                      ---              (4,243,000)

Tax benefit of stock options exercised      ---                      ---                  57,000

Stock award compensation expense             44,000               245,000                177,000

Exercise of stock options                   ---                      ---                 175,000

Other comprehensive income, net of tax:
   Unrealized losses on investments
     available-for-sale, net of
     reclassification adjustment

   Foreign currency translation
     adjustment


Other comprehensive Income, net of tax      ---                      ---                 197,000


Comprehensive (loss)
                                      ---------------------------------------------------------------

BALANCE AT JUNE 30, 2002              $  (1,403,000)                 ---              52,192,000

Net (loss)                                  ---                      ---                (501,000)

Tax benefit of stock options exercised      ---                      ---                   2,000

Stock award compensation expense              7,000                  ---                  17,000

Exercise of stock options                   ---                      ---                  26,000

Other comprehensive income, net of tax:
   Unrealized losses on investments
     available-for-sale, net of
     reclassification adjustment

   Foreign currency translation
     adjustment


Other comprehensive Income, net of tax      ---                      ---                 217,000


Comprehensive (loss)
                                      ---------------------------------------------------------------
BALANCE AT JUNE 30, 2003              $  (1,396,000)                 ---              51,953,000
                                      ---------------------------------------------------------------
</TABLE>


See accompanying notes to consolidated financial statements.

                                      F-4

<PAGE>


               AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  FISCAL YEARS ENDED JUNE 30, 2003, 2002, 2001


<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:                                   2003                  2002                  2001
                                                                  -----------------    -------------------    ------------------
<S>                                                               <C>                  <C>                    <C>
  Net (loss)/income                                               $       (501,000)    $     (4,243,000)      $    10,332,000
  Adjustments to reconcile net (loss)/income to net cash
     provided by operating activities:

       Depreciation and amortization                                     5,391,000            5,061,000             4,367,000

       Loss on disposal of fixed assets                                    459,000               98,000               114,000

       Stock award compensation expense                                     17,000              177,000               720,000

       Deferred income taxes                                               (45,000)             198,000              (550,000)

       Realized gain on sale of investments                                    ---             (160,000)                  ---

  Changes in operating assets and liabilities:

       Accounts receivable, net                                           (393,000)           5,202,000             1,156,000

       Inventories                                                         273,000            9,151,000            (8,435,000)

       Other assets                                                      1,682,000              632,000               362,000

       Accounts payable, accrued expenses and
         income taxes payable                                              556,000           (7,389,000)              810,000

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

  Net cash provided by operating activities                              7,439,000            8,727,000             8,876,000
                                                                  -----------------    -------------------    ------------------

CASH FLOWS FROM INVESTING ACTIVITIES:

       Capital expenditures                                             (1,708,000)          (3,156,000)          (12,973,000)

       Purchase of investments                                          (5,001,000)          (4,325,000)             (102,000)

       Proceeds from sale of investments                                 5,000,000            4,900,000                   ---

       Proceeds from sale of fixed assets                                   18,000              376,000                64,000

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

  Net cash used in investing activities                                 (1,691,000)          (2,205,000)          (13,011,000)
                                                                  -----------------    -------------------    ------------------

CASH FLOWS FROM FINANCING ACTIVITIES:

       Repayment of long-term debt                                      (4,436,000)          (3,444,000)             (465,000)

       Proceeds from exercise of stock options                              26,000              175,000               344,000

       Proceeds from issuance of debt                                          ---            2,000,000             3,784,000

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

  Net cash (used in)/provided by financing activities                   (4,410,000)          (1,269,000)            3,663,000
                                                                  -----------------    -------------------    ------------------

       Effect of exchange rate changes on cash                             218,000              217,000              (146,000)
                                                                  -----------------    -------------------    ------------------

       Net increase/(decrease) in cash and cash equivalents              1,556,000            5,470,000              (618,000)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                             7,129,000            1,659,000             2,277,000

                                                                  -----------------    -------------------    ------------------
CASH AND CASH EQUIVALENTS, END OF YEAR                            $      8,685,000     $      7,129,000       $     1,659,000
                                                                  =================    ===================    ==================

Supplemental cash flow information:
        Interest paid                                             $        397,000     $        459,000       $       486,000
        Income taxes paid                                                      ---     $      1,177,000       $     4,757,000
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-5

<PAGE>



               AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

              DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS

        American Technical Ceramics Corp. and its wholly-owned subsidiaries (the
"Company") are engaged in the design, development, manufacture and sale of
ceramic multilayer capacitors for commercial and military purposes in the United
States and for export, primarily to Western Europe, Canada and the Far East. In
fiscal years 2003 and 2001, no one customer accounted for more than 10% of
consolidated net sales. In fiscal year 2002, sales to various divisions of
General Electric Company accounted for approximately 10% of consolidated
revenues. The Company operates in one industry segment - the electronic
components industry.

              BASIS OF PRESENTATION

        The accompanying consolidated financial statements include the accounts
of American Technical Ceramics Corp. and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.

        Certain reclassifications have been made to prior year amounts to
conform to the current year presentation.

           REVENUE RECOGNITION

        The Company generates revenue from product sales to original equipment
manufacturers and resellers. The Company recognizes revenue when persuasive
evidence of an arrangement exists (which is evidenced by written purchase
arrangements), delivery has occurred and title has passed to the customer, the
selling price is fixed or determinable and collectibility of the resulting
receivable is reasonably assured. The Company does not perform any installation
services, and does not have any post-shipment obligations. The Company typically
warranties that its products will be free from defects in material and
workmanship for 90 days. However, defective product may be accepted beyond this
period. The Company provides for estimated sales returns when the underlying
sale is made, based upon historical experience and known events or trends, in
accordance with Statement of Financial Accounting Standards No. 48, "Revenue
Recognition when Right of Return Exists". Historically, product returns and
associated warranty costs have not been significant. The Company generally does
not grant price protection.

           CASH EQUIVALENTS

        The Company considers all highly liquid debt instruments with a maturity
of three months or less when purchased to be cash equivalents, including money
market accounts and certificates of deposit.

           INVESTMENTS

        The Company classifies its investments in debt and equity securities as
available-for-sale. Accordingly, these investments are reported at fair value
with unrealized holding gains and losses excluded from earnings and reported as
a component of accumulated other comprehensive income/(loss) within
stockholders' equity, net of tax. Classification of investments is determined at
acquisition and reassessed at each reporting date. Realized gains and losses are
included in the determination of net earnings at the time of sale and are
derived using the specific identification method for determining cost of
securities sold.

           INVENTORIES

        Inventories are stated at the lower of aggregate cost (first-in,
first-out) or market.

                                      F-6

<PAGE>

         COMPREHENSIVE INCOME

        The following table sets forth the components of the change in net
unrealized gains/(losses) on investments available-for-sale for the fiscal years
ended June 30, 2003, 2002 and 2001:

<TABLE>
<CAPTION>
                                                                                   2003               2002              2001
                                                                             -------------------------------------------------------
<S>                                                                          <C>                <C>               <C>
          Unrealized holding gains
                     arising during the period, net of tax                   $       (5,000)    $        50,000   $       112,000

          Less: reclassification adjustment for
                     gains included in net income, net of tax                           ---            (101,000)              ---

                                                                             -------------------------------------------------------
          Change in net unrealized (losses)/gains on investments
                     available-for-sale                                      $       (5,000)    $       (51,000)  $       112,000
                                                                             =======================================================
</TABLE>

        The deferred tax (benefit)/liability associated with unrealized holding
(losses)/gains arising during the fiscal years 2003, 2002 and 2001 was ($2,000),
($29,000) and $60,000, respectively. The tax benefit of the reclassification
adjustments for gains on sales of investments included in net income during
fiscal years 2003 and 2002 was ($5,000) and ($59,000), respectively.

           LONG-LIVED ASSETS

        Property, plant and equipment are stated at cost. Depreciation and
amortization are provided primarily using the straight-line method over the
estimated useful lives of the related assets as follows:

<TABLE>
<CAPTION>
<S>                                                <C>
Buildings                                                                               30 years
Leasehold improvements                             Lesser of the remaining lease term or 5 years
Machinery and equipment                                                                 10 years
Furniture, fixtures and other                                                       3 to 8 years
Computer equipment and software                                                          3 years
</TABLE>

        The Company reviews its long-lived assets for impairment whenever events
or circumstances indicate that the carrying amount of an asset may not be
recoverable. If the sum of the expected cash flows, undiscounted and without
interest, is less than the carrying amount of the asset, an impairment loss is
recognized as the amount by which the carrying amount of the asset exceeds its
fair value.

           INCOME TAXES

        Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be realized or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

                                      F-7

<PAGE>



           FOREIGN CURRENCY TRANSLATION

        The Company translates the financial statements of its foreign
subsidiaries (located in England and Sweden) by applying the current exchange
rate as of the balance sheet date to the assets and liabilities of the
subsidiary and a weighted average rate to such subsidiary's results of
operations. The resulting translation adjustment is recorded as a component of
stockholders' equity.

           STOCK-BASED COMPENSATION

        The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," in accounting for employee
stock-based compensation and makes pro-forma disclosures of net income and net
income per share as if the fair value method under Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation," had
been applied.

         The average per-share fair value of stock options granted during fiscal
years 2003, 2002 and 2001 was $2.50, $5.11 and $7.74, respectively, as
determined by the Black-Scholes option pricing model (assuming a risk-free
interest rate of 3.23%, 4.19% and 5.33%, respectively, expected life of five
years, expected volatility of 71.5%, 68.0% and 76.0%, respectively, and no
dividends). The weighted average remaining contractual life of options
outstanding as of June 30, 2003 was 6.9 years.

         The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," in accounting for employee
stock-based compensation and makes pro-forma disclosures of net income and net
income per share as if the fair value method under Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation," as
amended by SFAS No. 148, had been applied. Had compensation expense for the
Company's stock option plans been determined based on the fair value method at
the grant date for awards under these plans consistent with the methodology
prescribed under SFAS No. 123, the Company's net income/(loss) and
earnings/(loss) per share would have approximated the pro forma amounts
indicated below:

<TABLE>
<CAPTION>
                                                                                       Year Ended June 30,
                                                             ----------------------------------------------------------------------

                                                                       2003                      2002                     2001
                                                             -----------------------    --------------------     ------------------
<S>                                                          <C>                        <C>                      <C>
Net (loss)/income, as reported                                 $       (501,000)        $     (4,243,000)        $     10,332,000
Add: Stock-based employee compensation expense
  included in reported net income, net of related tax effects            19,000                  115,000                  701,000
Deduct: Total stock-based employee compensation
  expense determined under fair value based method for all
  awards, net of related tax effects                           $     (1,112,000)        $       (942,000)        $     (2,709,000)

Pro forma (loss)/net income                                    $     (1,594,000)        $     (5,070,000)        $      8,324,000

Loss/income per share:

    Basic - as reported                                                   (0.06)                   (0.53)                    1.30

    Basic - pro forma                                                     (0.20)                   (0.63)                    1.05

    Diluted - as reported                                                 (0.06)                   (0.53)                    1.24

    Diluted - pro forma                                                   (0.20)                   (0.63)                    1.00
</TABLE>

         The weighted-average fair value of each stock option included in the
preceding pro forma amounts was estimated using the Black-Scholes option pricing
model and is amortized over an expected grant life of five years.

                                      F-8
<PAGE>



           EARNINGS PER SHARE

        Basic earnings per share ("EPS") is computed by dividing income
available to common stockholders (which for the Company equals its net income)
by the weighted average number of common shares outstanding, and dilutive EPS
adds the dilutive effect of stock options and other common stock equivalents.
Antidilutive shares aggregating 1,381,000, 920,000 and 798,000, respectively,
have been omitted from the calculation of dilutive EPS for the fiscal years
ended June 30, 2003, 2002 and 2001, respectively. A reconciliation between
numerators and denominators of the basic and diluted earnings per share is as
follows:

<TABLE>
<CAPTION>
                   YEAR ENDED JUNE 30, 2003             YEAR ENDED JUNE 30, 2002             YEAR ENDED JUNE 30, 2001
                   ------------------------             ------------------------             ------------------------
                 INCOME       SHARES     PER-SHARE    INCOME        SHARES     PER-SHARE    INCOME       SHARES    PER-SHARE
              (NUMERATOR)   (DENOMINATOR) AMOUNT   (NUMERATOR)   (DENOMINATOR)  AMOUNT   (NUMERATOR)  (DENOMINATOR)  AMOUNT
<S>           <C>           <C>           <C>       <C>          <C>           <C>       <C>          <C>          <C>
Basic EPS     ($501,000)      8,074,000    ($0.06) ($4,243,000)   8,050,000     ($0.53)  $10,332,000   7,962,000      $1.30

Effect of Dilutive
Securities:
   Stock
  Options          --           --          --          --            --          --          --         331,000       --

Stock Awards       --           --          --          --            --          --          --          22,000       --
            --------------- ------------ --------- ------------- ------------- --------- ------------- ----------- --------

Diluted EPS   ($501,000)      8,074,000    ($0.06) ($4,243,000)   8,050,000     ($0.53)  $10,332,000   8,315,000      $1.24
            =============== ============ ========= ============= ============= ========= ============= =========== ========
</TABLE>

           IMPACT OF NEW ACCOUNTING STANDARDS

         In July 2002, the Company adopted Statement of Financial Accounting
Standards No. 143, "Accounting for Asset Retirement Obligations" ("SFAS No.
143"). SFAS No. 143 addresses financial accounting requirements for retirement
obligations associated with retirement of tangible long-lived assets and for the
associated asset retirement costs. The adoption of SFAS No. 143 did not have any
impact on the Company's consolidated results of operations or financial
position.

         In July 2002, the Company adopted Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS No. 144"), which addresses financial accounting and reporting for
the impairment or disposal of long-lived assets. SFAS No. 144 establishes
accounting guidelines for the impairment of long-lived assets to be held and
used; to be disposed of other than by sale; and to be disposed of by sale. The
adoption of SFAS No. 144 did not have any impact on the Company's consolidated
results of operations or financial position.

        In January 2003, the Company adopted Statement of Financial Accounting
Standards No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities" ("SFAS No. 146"), which is effective for exit or disposal activities
initiated after December 31, 2002. SFAS No. 146 applies to costs associated with
an exit activity, including restructuring costs. Companies will record a
liability for exit or disposal activity as such amounts are incurred and can be
measured at fair value. Such adoption had no impact on the Company's
consolidated results of operations or financial position.

                                      F-9
<PAGE>



        In December 2002, the Financial Accounting Standards Board issued SFAS
No. 148, "Accounting for Stock-Based Compensation - Transaction and Disclosure"
("SFAS No. 148"), - an amendment of FASB Statement No. 123", which provides
alternative methods of transition for a voluntary change to the fair value-based
method of accounting for stock-based employee compensation. In addition, SFAS
No. 148 amends the disclosure requirements of FASB Statement 123 to require more
prominent and more frequent disclosures in financial statements about the
effects of stock-based compensation. The Company adopted the disclosure
provisions of SFAS No. 148 effective, January 1, 2003. The Company continued to
apply the intrinsic value-based method to account for stock options through
fiscal year 2003.

        In July 2003, the Company elected to adopt SFAS No. 123 and to
transition to a fair value-based method of accounting for stock-based employee
compensation. The Company will use the prospective method for the transition as
permitted by SFAS 148. Under the prospective method, stock compensation expense
for new awards will be recognized for any new option grants or stock awards
granted on or after July 1, 2003 based upon the award's fair value. Outstanding
stock options granted prior to July 1, 2003 will continue to be accounted for
under the intrinsic value method. Stock compensation expense for new awards will
be calculated using the Black-Scholes Pricing Model to estimate fair value. The
adoption of this standard will increase recognized stock compensation expense to
the extent stock options or awards are granted after June 30, 2003.

        In December 2002, the Company adopted the Financial Accounting Standards
Board Statement of Financial Interpretation No. 45, "Guarantor's Accounting and
Disclosure Requirements of Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN No. 45"). It requires among other things, certain
disclosures about warranty obligations. The Company typically warranties that
its products will be free from defects in material and workmanship for 90 days.
However, defective product may be accepted beyond this period. The Company
provides for estimated sales returns when the underlying sale is made.
Historically, product returns and associated warranty costs have not been
significant.

        In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN No.
46"). Previously, consolidation of variable interest entities was largely based
on controlling voting rights. This interpretation clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements", to
entities where the company is vulnerable to a majority of the entity's risk of
loss or is entitled to receive a majority of the entity's residual returns even
if there is no controlling voting interest. The Company will adopt FIN No. 46
effective July 1, 2003. The Company is currently assessing the impact of the
adoption of FIN No. 46 on its financial position and consolidated results of
operations.

     ACCOUNTING ESTIMATES

        The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Such estimates include, but are not limited to, provisions for
doubtful accounts receivable and sales returns, net realizable value of
inventory, and assessments of the recoverability of the Company's long lived
assets (including deferred taxes). Actual results could differ from those
estimates.


                                      F-10
<PAGE>


                       SUPPLEMENTAL CASH FLOW INFORMATION

        During fiscal year 2003, significant non-cash activities included (i) a
tax benefit of $2,000 resulting from stock options exercised, (ii) deferred
compensation expense of $17,000 in connection with awards of an aggregate of
7,000 shares of common stock with a cost basis of $7,000, (iii) amortization of
interest income of $8,000 related to net premiums on purchases of available for
sale securities, and (iv) the adjustment of a capital lease relating to the
Company's Jacksonville, Florida facility to reflect certain additions to the
facility. The adjustment increased both fixed assets and the related long-term
debt by $1,437,000.

        During fiscal year 2002, significant non-cash activities included (i) a
tax benefit of $57,000 resulting from stock options exercised, and (ii) deferred
compensation expense of $67,000 in connection with awards of an aggregate of
7,000 shares of common stock with a cost basis of $44,000.

        During fiscal year 2001, significant non-cash activities included (i) a
tax benefit of $182,000 resulting from stock options exercised, and (ii)
securing a $795,000 mortgage to finance the acquisition of a building.


NOTE 2.           INVESTMENTS

        Investments consist of the following:

<TABLE>
<CAPTION>
                                                                    Gross                 Gross
                                                                 Unrealized            Unrealized
June 30, 2003                                  Cost                 Gains                Losses              Fair Value
-------------                            ----------------      ----------------      ----------------      ----------------
<S>                                      <C>                   <C>                   <C>                   <C>
U.S. Government obligations              $   3,011,000         $        ---          $        ---          $   3,011,000
                                         ----------------      ----------------      ----------------      ----------------
</TABLE>

<TABLE>
<CAPTION>
                                                                    Gross                 Gross
                                                                 Unrealized            Unrealized
June 30, 2002                                  Cost                 Gains                Losses              Fair Value
-------------                            ----------------      ----------------      ----------------      ----------------
<S>                                      <C>                   <C>                   <C>                   <C>
U.S. Government obligations              $   3,018,000         $      7,000          $        ---          $   3,025,000
                                         ----------------      ----------------      ----------------      ----------------
</TABLE>

        Gross realized gains of approximately $160,000 is included in other
income for fiscal year 2002.

         At June 30, 2003, all of the Company's investments in U. S. Government
obligations contractually mature within three years.

     NOTE 3.      INVENTORIES

         Inventories consist of the following:

<TABLE>
<CAPTION>
                                                          June 30, 2003                  June 30, 2002
                                                          -------------                  -------------
<S>                                                    <C>                            <C>
Raw materials                                          $     7,055,000                 $    7,753,000
Work in process                                              4,361,000                      3,968,000
Finished goods                                               3,728,000                      3,696,000
                                                       ------------------             ------------------
                                                       $    15,144,000                 $   15,417,000
                                                       ==================             ==================
</TABLE>

           In June 2002, the Company sold a substantial portion of its palladium
inventory to one of its vendors for approximately $3,290,000, resulting in a
loss of $2,160,000 which was recognized as a component of cost of sales.


                                      F-11
<PAGE>




 NOTE 4.          LONG-TERM DEBT

        Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                           June 30, 2003                  June 30, 2002
                                                           -------------                  -------------
<S>                                                    <C>                            <C>
Notes payable to banks                                 $           ---                $     4,047,000
Obligations under capital leases                             3,645,000                      2,597,000
                                                       ------------------             ------------------
                                                             3,645,000                      6,644,000
Less: Current portion                                          355,000                      4,276,000
                                                       ------------------             ------------------
     Long-term debt                                    $     3,290,000                $     2,368,000
                                                       ==================             ==================
</TABLE>

              NOTES  PAYABLE TO BANKS

        At June 30, 2002, the Company had available two credit facilities with
Bank of America, N.A. ("Bank of America"): a $4,000,000 revolving line of credit
against which no borrowings were incurred, and an $8,500,000 equipment line of
credit against which the Company had borrowings of $4,047,000. Both lines bore
interest at 1 1/2% above the one month LIBOR rate, or approximately 3.3% at June
30, 2002. The outstanding principal balance of the equipment line rolled over
periodically into a self-amortizing term note of not less than four nor more
than seven years.

        Each of these credit facilities was subject to certain financial
covenants, including maintenance of asset and liability percentage ratios. One
such covenant required the Company to maintain a certain level of annualized
earnings before interest, taxes, depreciation and amortization (EBITDA) to
current debt plus annual interest payments. As of June 30, 2002, due to the
losses incurred by the Company during fiscal year 2002, the Company was not in
compliance with this covenant. The Company held discussions with Bank of America
concerning possible amendments to the terms of these facilities which proved to
be unsuccessful. Accordingly, in July 2002, the Company repaid the outstanding
balance of the equipment facility and terminated both of these facilities.

     OBLIGATIONS UNDER CAPITAL LEASES

           The Company leases an administrative office, manufacturing and
research and development complex located in Jacksonville, Florida (the
"Jacksonville Facility") from a partnership controlled by the Company's
President, Chief Executive Officer and principal stockholder under a capital
lease. At June 30, 2003, the Jacksonville Facility has an aggregate cost of
$5,104,000 and a net book value of $2,705,000. The lease is for a period of 30
years, was capitalized using an interest rate of 10.5% and expires on September
30, 2010. The lease provides for base rent of approximately $719,000 per annum.
The lease further provides for annual increases in base rent for years beginning
after May 1, 1999, based on the increase in the Consumer Price Index ("CPI")
since May 1, 1998 applied to base rent. The lease also provides for increases to
the base rent in connection with any new construction at the Jacksonville
Facility. Under the lease, upon any new construction being placed into use, the
base rental is subject to increase to the fair market rental of the Jacksonville
Facility, including the new construction. In August 2002, the base monthly
rental was increased to approximately $60,000 for fiscal year 2003, effective
September 1, 2002, to reflect the addition of a new manufacturing facility at
the Jacksonville Facility. In fiscal year 2002, the base rental was
approximately $43,000 per month.

                                      F-12

<PAGE>



         The following table sets forth the future minimum lease payments
(excluding rental adjustments) under this capital lease by fiscal year and the
present value of the minimum lease payments as of June 30, 2003:

<TABLE>
<CAPTION>
<S>                                                     <C>
2004                                                    $         719,000
2005                                                              719,000
2006                                                              719,000
2007                                                              719,000
2008                                                              719,000
2009 and thereafter                                             1,619,000
                                                        --------------------
Total minimum lease payments                                    5,214,000
Less: Amount representing interest                              1,569,000
                                                        --------------------
Present value at June 30, 2003                                  3,645,000
Less: Current portion                                             355,000
                                                        --------------------
                                                                3,290,000
                                                        ====================
</TABLE>

 NOTE 5.          INCOME TAXES

        The components of income/(loss) before income taxes are as follows:

<TABLE>
<CAPTION>
                                                                             Fiscal Years Ended June 30,
                                                               --------------------------------------------------------
                                                                    2003                2002                2001
                                                               ---------------     ---------------     ----------------
<S>                                                            <C>                 <C>                 <C>
                                    Domestic                   $     (931,000)     $  (6,784,000)      $    16,085,000

                                    Foreign                           (74,000)            43,000              (189,000)
                                                               ---------------     ---------------     ----------------
                                                               $   (1,005,000)     $  (6,741,000)      $    15,896,000
                                                               ===============     ===============     ================
</TABLE>

        The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                                   Years Ended June 30,
                                                   -----------------------------------------------------
                                                       2003               2002                2001
                                                  ---------------    ---------------     ---------------
<S>                                               <C>                <C>                 <C>
CURRENT:
    Federal                                       $    (464,000)     $ (2,716,000)       $  5,714,000
    State                                                 5,000            26,000             304,000
    Foreign                                               ---              (6,000)             96,000
                                                  ---------------    ---------------     ---------------
       Total Current                                   (459,000)       (2,696,000)          6,114,000
                                                  ---------------    ---------------     ---------------

DEFERRED:
    Federal                                              (5,000)          446,000            (470,000)
    State                                               (40,000)         (248,000)            (80,000)
                                                  ---------------    ---------------     ---------------
        Total Deferred                                  (45,000)          198,000            (550,000)
                                                  ---------------    ---------------     ---------------
                                                  $    (504,000)     $ (2,498,000)       $  5,564,000
                                                  ===============    ===============     ===============
</TABLE>


                                      F-13


<PAGE>




        The following table reconciles the Federal statutory rate to the
Company's effective tax rate:

<TABLE>
<CAPTION>
                                                                          Years Ended June 30,
                                                           ---------------------------------------------------
                                                               2003               2002               2001
                                                           --------------     -------------      -------------
<S>                                                        <C>                <C>                <C>
Tax provision computed at statutory rate                           34.0%              34.0%              35.0%
State tax and State tax credit, net of Federal tax effect           2.3                2.1                0.9
FSC/EIE benefit                                                    12.4                1.1               (2.8)
Tax credits and other, net                                          1.4               (0.1)               1.9
                                                           --------------     -------------      -------------
                                                                   50.1%              37.1%              35.0%
                                                           ==============     =============      =============
</TABLE>

        The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June 30,
2003 and 2002, are presented below.

<TABLE>
<CAPTION>
                                                                                            June 30,
                                                                             --------------------------------------
                                                                                    2003                2002
                                                                             -----------------     ----------------
<S>                                                                          <C>                   <C>
Deferred tax assets:
   Allowance for doubtful accounts receivable
       and sales returns                                                     $       155,000        $      234,000
   Inventories                                                                     1,447,000             1,581,000
   Accrued expenses                                                                  387,000               471,000
   Net operating loss and tax credit carry forwards                                  375,000               330,000
    Valuation allowance                                                             (159,000)              (95,000)
                                                                             ------------------    -----------------
      Total deferred tax assets                                                    2,205,000             2,521,000
                                                                             ------------------    -----------------

Deferred tax liabilities:
   Plant and equipment, principally due to differences
       in depreciation and capital leases                                         (3,508,000)           (3,817,000)
    Unrealized appreciation on investments available-for-sale                            ---                (2,000)
    Other                                                                             (8,000)              (60,000)
                                                                             ------------------    -----------------
        Total deferred tax liabilities                                            (3,516,000)           (3,879,000)
                                                                             ------------------    -----------------
             Net deferred tax liability                                      $    (1,311,000)         $ (1,358,000)
                                                                             ==================    =================
</TABLE>

        In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, expected future
taxable income and tax planning strategies in making this assessment. Based upon
the level of historical taxable income, expected future taxable income over the
periods in which the deferred tax assets are deductible, and reversals of
deferred tax liabilities, management believes (although there can be no
assurance) that it is more likely than not that the Company will realize the
benefits of these deductible differences in the United States. However, due to
the uncertainties of realizing certain foreign tax loss carryforwards, a
valuation allowance has been provided against the associated deferred tax asset.

        As of June 30, 2003, the Company had available United States and foreign
net operating loss and credit carryforwards aggregating $497,000. Unites States
net operating loss and credit carryforwards expire in various years through
2023. Foreign net operating losses carry forward indefinitely.

        The Company had no undistributed earnings of foreign subsidiaries as of
June 30, 2003. Consequently no accrual of U.S. income taxes on the earnings of
these subsidiaries is needed.

                                      F-14
<PAGE>

NOTE 6.       STOCK-BASED COMPENSATION

           STOCK OPTIONS

        On April 1, 1997, the Board of Directors approved the American Technical
Ceramics Corp. 1997 Stock Option Plan (the "1997 Option Plan") pursuant to which
the Company may grant options to purchase up to 800,000 shares of the Company's
common stock. On April 11, 2000, the Board of Directors approved the American
Technical Ceramics Corp. 2000 Incentive Stock Plan (the "2000 Plan" and
collectively with the 1997 option plan, the "Plan") pursuant to which the
Company may grant options or stock awards covering up to 1,200,000 shares of the
Company's common stock. Options granted under the Plans may be either incentive
or non-qualified stock options. The term of each incentive stock option shall
not exceed ten years from the date of grant (five years for grants to employees
who own 10% or more of the voting power of the Company's common stock), and
options may vest in accordance with a vesting schedule established by the plan
administrator (typically 25% per year during the first four years of their
term). Unless terminated earlier by the Board, the 1997 Option Plan will
terminate on March 31, 2007. Unless terminated earlier by the Board, the 2000
Plan will terminate on April 10, 2010.

        Disposition of shares acquired pursuant to the exercise of incentive
stock options under both plans may not be made by the optionees within two years
following the date that the option is granted, nor within one year after the
exercise of the option, without the written consent of the Company. Since the
Company measures compensation cost under Opinion No. 25, the Company has not
recognized compensation cost for these options upon grant as the exercise price
was equal to the fair market value of the stock at the date of grant.

         On January 16, 2002, the Company filed a Schedule TO with the
Securities and Exchange Commission and commenced an offer to exchange
outstanding options under its existing stock option plans having an exercise
price per share of $19.50 or more for new options. The offer expired on February
13, 2002. The Company accepted for exchange options to purchase an aggregate of
432,000 shares of common stock. On August 15, 2002, the Company issued 407,000
new options in exchange for the options tendered and accepted for exchange. The
new options were issued at the closing price of the Company's common stock on
August 15, 2002, which was $2.35 per share. No compensation expense was
recognized as a result of these exchanges.

     Stock option activity for fiscal years 2003, 2002 and 2001 is as follows:

<TABLE>
<CAPTION>
                                               2003                          2002                            2001
                                   ------------------------------------------------------------ -------------------------------
                                                    Weighted                       Weighted                        Weighted
                                      Shares         Average        Shares         Average           Shares        Average
                                    Subject to      Exercise      Subject to       Exercise        Subject to      Exercise
                                      Options         Price        Options          Price           Options         Price
                                   -------------- ------------  --------------- --------------- --------------  ---------------
<S>                                <C>            <C>           <C>             <C>             <C>             <C>
Outstanding, beginning of year         919,800     $       8.98    1,347,025       $     14.22      1,263,930        $     15.28

Granted                                504,000             2.50      227,000              8.53        435,000              11.80

Canceled                               (19,850)            8.34     (469,750)            20.53       (246,000)             18.47

Expired                                (12,250)           12.35     (143,650)            21.13        (24,000)             16.94

Exercised                              (10,500)            2.60      (40,825)             4.30        (81,905)              4.20
                                   --------------               ---------------                 ----------------
Outstanding, end of year             1,381,200      $      6.64      919,800       $      8.98      1,347,025         $    14.22
                                   ==============               ===============                 ================
</TABLE>

                                      F-15
<PAGE>

         The following table summarizes significant ranges of outstanding and
exercisable options at June 30, 2003:


<TABLE>
<CAPTION>
                                            Options Outstanding                                     Options Exercisable
                       ---------------------------------------------------------------     ---------------------------------------
   Actual Range of                          Weighted-Average
 Exercise Prices 150%      Number           Remaining Life in        Weighted-Average           Number            Weighted-Average
      increment          Outstanding               Years               Exercise Price          Outstanding         Exercise Price
---------------------- ---------------    ----------------------     -----------------     ------------------     ----------------
<S>                    <C>                <C>                        <C>                   <C>                    <C>
$   2.35   -   3.99          463,000               7.1                  $    2.35                  334,250            $   2.35

    4.00   -   5.63          360,700               5.3                  $    4.30                  294,950            $   4.16

    5.64   -   9.09          205,500               8.2                  $    8.62                   64,500            $   8.17

     9.10  -  15.75          306,000               7.4                  $   11.97                  152,250            $  11.97

    15.76  -  23.50           38,000               6.8                  $   19.50                   28,500            $  19.50

        44.00                  8,000               6.9                  $   44.00                    6,000            $  44.00
---------------------- ---------------    ----------------------     -----------------     ------------------     ----------------

$    2.35  -  44.00        1,381,200               6.9                  $    6.64                  880,450            $   5.89
                       ===============                                                     ==================
</TABLE>

         At June 30, 2003, an aggregate of 251,000 shares were available for
option grants or awards under the 1997 Option Plan and 2000 Plan.

         OTHER STOCK-BASED COMPENSATION

        In fiscal years 2003, 2002 and 2001, the Company awarded an aggregate of
7,000, 7,000 and 6,000 shares of common stock, respectively, to officers and
certain other employees. These awards resulted in compensation expense of
$38,000, $88,000 and $309,000, respectively (including $21,000, $21,000 and
$45,000 of payments made to offset tax liabilities associated with these
awards), measured by the market value of the shares at June 30, 2003, June 28,
2002 and June 29, 2001, respectively.

        In fiscal year 2001, the Company awarded 9,750 shares of its common
stock to employees for services rendered. These awards resulted in compensation
expense of $172,000 (including payments made to offset tax liabilities
associated with these awards of $67,000), measured by the market value of the
shares on the date of grant.

        In fiscal year 2001, the Company awarded an aggregate of 5,000 shares of
common stock to each of its non-employee directors. These awards resulted in
compensation expense of $286,000 (including $218,000 of payments made to offset
tax liabilities associated with these awards), measured by the market value of
the shares on the date of grant.

        In fiscal year 2000, the Company awarded an aggregate of 12,000 shares
of common stock to three employees. These awards resulted in an accrual of
deferred compensation of $528,000 to be amortized to compensation expense over
the 24 month period these shares were to be earned. In fiscal years 2002 and
2001, these awards resulted in compensation expense of $95,000 and $312,000,
respectively (including payments made to offset tax liabilities associated with
these awards of $7,000 and $29,000, respectively).

        Treasury shares with an aggregate cost basis of $7,000, $44,000 and
$68,000 were issued in connection with the awards granted in fiscal years 2002,
2001 and 2000, respectively. Accordingly, treasury stock was reduced for the
cost of the shares on a specific identification, first-in first-out, basis.


                                      F-16
<PAGE>



     NOTE 7.        COMMITMENTS AND CONTINGENCIES

           OPERATING LEASES

        The Company had a related party operating lease with the Company's
President, Chief Executive Officer and principal stockholder, for a rented
facility which expired December 31, 2001. The Company and the related party
agreed to continue the lease on a month-to-month basis under the existing terms
until a new agreement was finalized. Rent expense under this related party
operating lease was approximately $429,000, $523,000 and $511,000 for the fiscal
years ended June 30, 2003, 2002 and 2001, respectively. In September 2002, the
Company and the related party reached a new agreement on a long-term lease
pursuant to which the Company pays $410,000 per annum, subject to annual
increases based upon increases in the CPI. The lease expires in September 2007,
subject to two five-year renewal options.

        Rent expense to unrelated parties was approximately $93,000, $181,000
and $128,000 for the fiscal years ended June 30, 2003, 2002 and 2001,
respectively. Minimum rent payments under existing lease commitments extending
through the year ended June 30, 2004 are approximately $43,000.

     CONTINGENCIES

        The Company is party to certain legal proceedings that arose in the
normal course of its business. The Company does not believe that the resolution
of such matters will have a significant effect on the Company's financial
position or results of operations.

     EMPLOYMENT AGREEMENTS

        The Company has an employment agreement with its President and Chief
Executive Officer, which provides for annual base compensation of $323,000 as
well as additional annual compensation equal to 2.5% of net income before such
additional compensation and income taxes. The Company, at its option, may pay
the additional annual compensation in stock, cash or a combination thereof,
subject to certain limitations.

        The agreement expires March 1st of each year but is renewed
automatically for an additional one year in the absence of written notice to the
contrary by either party at least 120 days prior to the March 1st renewal date.
In addition, if there is a change in control of the Company or the employee's
employment is terminated by the Company before the expiration of the agreement
other than for cause (as defined in the agreement), the employee is entitled to
the greater of (a) all compensation due under the remaining term of the
agreement, or (b) a payment equal to three times his average annual compensation
(including any incentives) over the last five years.

        In September 2000, the Company entered into a three year employment
agreement with an executive officer. The agreement provides initially for annual
base compensation of $175,000, increasing to $185,500 beginning September 1,
2001 and to $196,630 beginning September 1, 2002, and participation in the
Company's Officers' Bonus Plan. If the officer is terminated by the Company
during the term of the agreement other than for cause (as defined in the
agreement), (i) the officer will be entitled to receive his base salary for a
period of one year, (ii) the Company shall continue to provide family medical
coverage for a period of 18 months, and (iii) all exercisable options may be
exercised for a period of one year after termination.

        In April 2001, the Company entered into a three year agreement with
another executive officer which was amended in January 2002. The agreement
provides for annual base compensation of $150,000 and participation in the
Company's Officers' Bonus Plan. If the officer is terminated by the Company
during the term of the agreement other than for cause (as defined in the
agreement), the officer will be entitled to receive his base salary for one
year.

                                      F-17
<PAGE>



        In December 2001, the Company renewed a four year employment agreement
with an officer. The agreement provides for annual base compensation of
$125,000, with annual increases of 8% over the rate in effect during the
immediately preceding year, plus additional compensation based upon specific
performance measures. The agreement includes termination provisions providing
for payments depending on the nature of the termination.

        In April 2003, the Company entered into a three year agreement with
another executive officer. The agreement provides for annual base compensation
of $160,000, plus additional compensation based upon specific performance
measures. If the officer is terminated by the Company during the term of the
agreement other than for cause (as defined in the agreement), the officer will
be entitled to receive his base salary for one year from the date of
termination.

NOTE 8.           OTHER DATA

           ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
                                                     June 30, 2003           June 30, 2002
                                                     -------------           -------------
<S>                                                <C>                     <C>
Accrued commissions and bonuses                    $        520,000        $         499,000
Accrued payroll and related expenses                      2,015,000                2,386,000
Other                                                       308,000                  333,000
                                                   -----------------       ------------------
                                                   $      2,843,000        $       3,218,000
                                                   =================       ==================
</TABLE>





     VALUATION AND QUALIFYING ACCOUNTS

         Valuation and qualifying accounts included in the accompanying
consolidated financial statements consist of the following:

<TABLE>
<CAPTION>
                                                         Balance -             Additions                              Balance -
                                                        Beginning of          Charged to          Deductions /          End of
                  Classification                           Period               Expense         Other Additions         Period
---------------------------------------------------   -----------------    ------------------   -----------------   ---------------
<S>                                                   <C>                  <C>                  <C>                 <C>
For the year ended June 30, 2003:
 Allowance for doubtful accounts receivable
   and sales returns                                   $     665,000          1,597,000           1,824,000          $   438,000
For the year ended June 30, 2002:
 Allowance for doubtful accounts receivable
   and sales returns                                   $     444,000          1,737,000           1,516,000          $   665,000
For the year ended June 30, 2001:
 Allowance for doubtful accounts receivable
   and sales returns                                   $     530,000            909,000             995,000          $   444,000
</TABLE>

        EMPLOYEE BENEFIT DEFINED CONTRIBUTION PLAN

        Effective November 1, 1985, the Company established a voluntary savings
and defined contribution plan under Section 401(k) of the Internal Revenue Code.
This Plan covers all U.S. employees meeting certain eligibility requirements and
allows participants to contribute a portion of their annual compensation. For
the fiscal years ended June 30, 2003, 2002 and 2001, the Company provided a
matching contribution of $542,000, $539,000 and $555,000, respectively, which
was equal to 50% of each participant's contribution up to a maximum of 6% of
annual compensation. Employees are 100% vested in their own contributions and
become fully vested in the employer contributions over five years.

                                      F-18
<PAGE>



              PROFIT BONUS PLAN

        Effective commencing in fiscal year 1995, the Company adopted a Profit
Bonus Plan for the benefit of eligible employees, as defined. The plan provides
that, for each fiscal year, the Board of Directors, in its discretion, may
establish a bonus pool not to exceed 10% of pretax income of the Company for the
subject fiscal year. The bonus pool is then allocated among eligible employees
in accordance with the terms of the plan. For fiscal years 2003 and 2002, no
compensation expense was recognized pursuant to this plan. For fiscal year 2001,
the Company recognized related compensation expense of $1,590,000 pursuant to
this plan.

        Effective January 1, 2000, the Company adopted a Managers Profit Bonus
Plan for the benefit of eligible employees, as defined. The plan provides that,
for each fiscal year, the Board of Directors, in its discretion, may allocate a
percentage of the Company's pre-tax profits (not to exceed 2.5% of such profits)
for equal distribution among participants in the plan. Participants in the
Managers Profit Bonus Plan are no longer eligible to participate in the Profit
Bonus Plan described above. For fiscal years 2003, 2002 and 2001, the Company
recognized compensation expense of $12,000, $11,000 and $397,000, respectively,
in respect of this plan.

        The Company has a bonus plan for executive officers. This plan provides
for a majority of the eligible employees to receive a cash bonus equal to at
least 0.5% of the Company's pre tax income. In addition, two of the employees
have different plans that provide for bonus calculations based upon other
factors, including product line profitability and achievement of bookings
quotas. For fiscal years 2003, 2002 and 2001, the Company recognized
compensation expense of $67,000, $145,000 and $1,624,000, respectively, pursuant
to this plan.

NOTE 9.           FOREIGN OPERATIONS

        The Company markets and distributes a portion of its products sold
abroad through its wholly-owned subsidiary, American Technical Ceramics Europe
AB, located in Sweden. During fiscal year 2002, the Company closed its
wholly-owned subsidiary located in the United Kingdom as part of cost reduction
measures instituted during fiscal year 2002. The business activity from the
United Kingdom has been moved to the Company's wholly-owned subsidiary in
Sweden. During fiscal year 2002, the Company established a wholly-owned
subsidiary in the United States which established a representative office in the
People's Republic of China to service the Chinese market. The following table
summarizes certain financial information covering the Company's operations by
geographic area for fiscal years 2003, 2002 and 2001. Net sales information is
based upon country of origin.

<TABLE>
<CAPTION>
                                   2003                  2002                  2001
                             ------------------    ------------------    ------------------
<S>                          <C>                   <C>                   <C>
Net sales
    United States                 $ 42,204,000          $ 44,359,000          $ 77,235,000
    Sweden                           6,844,000             4,539,000             4,801,000
    United Kingdom                         ---               687,000             2,549,000
                             ------------------    ------------------    ------------------
 Total                            $ 49,048,000          $ 49,585,000          $ 84,585,000
                             ==================    ==================    ==================


Long-lived assets
    United States                 $ 26,974,000          $ 29,768,000          $ 31,934,000
    Sweden                              70,000                59,000                62,000
    China                               17,000                   ---                   ---
    United Kingdom                         ---                   ---               292,000
                             ------------------    ------------------    ------------------
 Total                            $ 27,061,000          $ 29,827,000          $ 32,288,000
                             ==================    ==================    ==================
</TABLE>

         U.S. sales include $13,507,000, $11,900,000 and $16,271,000 for export
in fiscal years 2003, 2002 and 2001, respectively. Export sales were primarily
to customers in Western Europe, Canada and the Far East.

                                      F-19
<PAGE>



 NOTE 10.     DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS

           CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE, AND
           ACCRUED EXPENSES

        The carrying amount approximates fair value due to the short maturity of
these instruments.

           INVESTMENTS

        Cost and fair value of the Company's investments is presented in Note 2.
Fair value is based upon quoted market prices.

           LONG-TERM DEBT

        At June 30, 2003, the fair value of the Company's capital lease
obligation with respect to its Jacksonville, Florida facility was $4,754,000
based on the present value of future cash flows and the Company's estimated
incremental borrowing rate of 2.6%.

        Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.

                                      F-20