UNITED STATES



SECURITIES AND EXCHANGE COMMISSION



Washington, DC 20549



FORM 10-Q



QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

|For the Quarterly Period Ended March 31, 2003         
|------------------------------------------------------
|Commission File Number 1-9014                         
|Chyron Corporation                                    
|(Exact name of registrant as specified in its charter)



|New York                                                       |  | 11-2117385                       
|-------------------------------------------------------------- |  | ---------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)
|5 Hub Drive, Melville, New York                                |  | 11747                            
|(Address of principal executive offices)                       |  | (Zip Code)                       
|(631) 845-2000                                                
|(Registrant's telephone number, including area code)          

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.



|Yes | X | No |  | 
|--- | - | -- |  | 



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



|Yes |  | No | X | 
|--- |  | -- | - | 



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



Common Stock $.01 Par Value - 39,633,988 as of May 9, 2003



This document consists of 22 pages



CHYRON CORPORATION



INDEX





|PART I  | FINANCIAL INFORMATION                                           | Page
|------- | --------------------------------------------------------------- | ----
|        |                                                                 |     
|Item 1. | Financial Statements                                            |     
|        | Consolidated Balance Sheets as of March 31, 2003 (unaudited)    |     
|        | and December 31, 2002                                           | 3   
|        | Consolidated Statements of Operations (unaudited) for the Three |     
|        | Months ended March 31, 2003 and 2002                            | 4   
|        | Consolidated Statements of Cash Flows (unaudited) for the Three |     
|        | Months ended March 31, 2003 and 2002                            | 5   
|        | Notes to Consolidated Financial Statements (unaudited)          | 6   
|        |                                                                 |     
|Item 2. | Management's Discussion and Analysis of Financial Condition     |     
|        | and Results of Operations                                       | 11  
|        |                                                                 |     
|Item 3. | Quantitative and Qualitative Disclosure About Market Risk       | 18  
|        |                                                                 |     
|Item 4. | Controls and Procedures                                         | 18  
|        |                                                                 |     
|PART II | OTHER INFORMATION                                               |     
|        |                                                                 |     
|Item 1. | Legal Proceedings                                               | 19  
|        |                                                                 |     
|Item 6. | Exhibits and Reports on Form 8-K                                | 19  
|        |                                                                 |     



CHYRON CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)

|                                                           | Unaudited |             
|---------------------------------------------------------- | --------- | ------------
|                                                           | March 31, | December 31,
|ASSETS                                                     | 2003      | 2002        
|Current assets:                                            |           |             
|Cash and cash equivalents                                  | $1,705    | $1,217      
|Restricted cash                                            | 1,000     | 1,000       
|Accounts receivable, net                                   | 7,209     | 6,827       
|Inventories, net                                           | 8,110     | 8,668       
|Marketable security                                        | 84        | 76          
|Prepaid expenses and other current assets                  | 836       | 636         
|Total current assets                                       | 18,944    | 18,424      
|                                                           |           |             
|Property and equipment, net                                | 4,065     | 4,420       
|Intangible assets, net                                     | 164       | 253         
|Pension asset                                              | 3,888     | 3,888       
|Other assets                                               | 1,016     | 1,002       
|TOTAL ASSETS                                               | $28,077   | $27,987     
|                                                           |           |             
|LIABILITIES AND SHAREHOLDERS' DEFICIT                      |           |             
|Current liabilities:                                       |           |             
|Accounts payable and accrued expenses                      | $7,883    | $8,166      
|Current portion of long-term debt                          | 4,878     | 5,141       
|Convertible senior notes                                   | 2,565     | 2,486       
|Capital lease obligations                                  | 88        | 92          
|Total current liabilities                                  | 15,414    | 15,885      
|                                                           |           |             
|Long-term debt                                             | 1,033     | 1,086       
|Convertible debentures                                     | 9,864     | 9,572       
|Capital lease obligations                                  | 107       | 128         
|Pension liability                                          | 2,200     | 2,222       
|Other liabilities                                          | 1,474     | 1,457       
|Total liabilities                                          | 30,092    | 30,350      
|                                                           |           |             
|Commitments and contingencies                              |           |             
|                                                           |           |             
|Shareholders' deficit:                                     |           |             
|Preferred stock, par value without designation             |           |             
|Authorized - 1,000,000 shares, issued - none               |           |             
|Common stock, par value $.01                               |           |             
|Authorized - 150,000,000 shares                            |           |             
|Issued and outstanding -  39,606,033 at March 31, 2003 and |           |             
|39,563,691 at December 31, 2002                            | 396       | 396         
|Additional paid-in capital                                 | 71,464    | 71,453      
|Accumulated deficit                                        | (73,528)  | (73,613)    
|Accumulated other comprehensive loss                       | (347)     | (599)       
|Total shareholders' deficit                                | (2,015)   | (2,363)     
|TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT                | $28,077   | $27,987     







See Notes to Consolidated Financial Statements



CHYRON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(In thousands, except per share amounts)



(Unaudited)

|                                                 | 2003    | 2002   
|------------------------------------------------ | ------- | -------
|                                                 |         |        
|Net sales                                        | $10,904 | $10,068
|Cost of products sold                            | 4,685   | 4,530  
|Gross profit                                     | 6,219   | 5,538  
|                                                 |         |        
|Operating expenses:                              |         |        
|Selling, general and administrative              | 4,248   | 4,615  
|Research and development                         | 1,060   | 1,054  
|                                                 |         |        
|Total operating expenses                         | 5,308   | 5,669  
|                                                 |         |        
|Operating income (loss)                          | 911     | (131)  
|                                                 |         |        
|Interest expense                                 | 543     | 568    
|                                                 |         |        
|Interest income                                  | (2)     | (3)    
|                                                 |         |        
|Other expense, net                               | 285     | 124    
|                                                 |         |        
|Net income (loss)                                | $85     | $(820) 
|                                                 |         |        
|Earnings (loss) per common share:                |         |        
|Basic                                            | $0.00   | $(0.02)
|Diluted                                          | $0.00   | $(0.02)
|                                                 |         |        
|Weighted average shares outstanding:             |         |        
|Basic                                            | 39,577  | 39,564 
|Diluted                                          | 39,582  | 39,564 
|                                                 |         |        
|Comprehensive income (loss):                     |         |        
|Net income (loss)                                | $   85  | $(820) 
|Other comprehensive income:                      |         |        
|Foreign currency translation gain                | 31      | 64     
|Unrealized gain on securities available for sale | 10      | 40     
|                                                 |         |        
|Total comprehensive income (loss)                | $ 126   | $(716) 





See Notes to Consolidated Financial Statements



CHYRON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(In thousands)
(Unaudited)



|                                                          | 2003   | 2002   
|--------------------------------------------------------- | ------ | -------
|CASH FLOWS FROM OPERATING ACTIVITIES                      |        |        
|Net income (loss)                                         | $  85  | $(820) 
|Adjustments to reconcile net income (loss) provided by    |        |        
|(used in) operating activities:                           |        |        
|Depreciation and amortization                             | 465    | 650    
|Non-cash settlement of interest liability                 | 356    | 339    
|Impairment of marketable security                         | 211    |        
|Amortization of debt issue costs                          | 90     | 105    
|Other                                                     | 120    | 21     
|Changes in operating assets and liabilities:              |        |        
|Accounts receivable                                       | (433)  | 1,261  
|Inventories                                               | 443    | (422)  
|Prepaid expenses and other assets                         | (311)  | (516)  
|Accounts payable and accrued expenses                     | (144)  | (1,281)
|Other liabilities                                         |        | 105    
|Net cash provided by (used in) operating activities       | 882    | (558)  
|                                                          |        |        
|CASH FLOWS FROM INVESTING ACTIVITIES                      |        |        
|Acquisitions of property and equipment                    | (67)   | (12)   
|Net cash used in investing activities                     | (67)   | (12)   
|                                                          |        |        
|CASH FLOWS FROM FINANCING ACTIVITIES                      |        |        
|Payments of term loan                                     | (475)  |        
|Borrowings (payments) on revolving credit agreements, net | 180    | (1,904)
|Payments of capital lease obligations                     | (21)   | (28)   
|Net cash used in financing activities                     | (316)  | (1,932)
|                                                          |        |        
|Effect of foreign currency rate fluctuations on cash and  |        |        
|cash equivalents                                          | (11)   | (2)    
|Change in cash and cash equivalents                       | 488    | (2,504)
|Cash and cash equivalents at beginning of period          | 1,217  | 4,342  
|Cash and cash equivalents at end of period                | $1,705 | $1,838 









See Notes to Consolidated Financial Statements





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



1.	BASIS OF PRESENTATION



General



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



Nature of Business



We provide signal distribution, automation and graphics products to the broadcast industry for use in digital television. Currently, our customers are facing capital budget constraints because of a slowdown in the U.S. and European economies, and there are few signs of growth in our traditional markets.  In addition, we have sustained losses from operations in each of the six years ended December 31, 2002. During 2001, we implemented two restructuring plans to reduce staff and curtail certain operating and discretionary expenses.  We planned that these actions would reduce operating costs by $11 million.  The combined savings in 2002 selling, general & administrative ("SG&A") and research and development ("R&D") expenses were $11.5 million as compared to 2001.



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



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



Our borrowing facility with our U.S. bank requires that for 2003 we achieve certain quarterly financial covenants with respect to our U.S. operations: a designated minimum EBITDA; maintain in a pledged account at our U.S. bank a minimum cash balance of $1 million at all times; achieve a set fixed charge ratio, and upon repayment on December 31, 2003 of the senior subordinated convertible notes plus accrued interest, maintain a minimum undrawn availability of $0.25 million at all times under our revolving line of credit.  While we met the financial covenants for all quarters of 2002 and the first quarter of 2003, our operating results in the past have caused us to violate the financial covenants in place at the time for which we either obtained waivers or amended our bank agreements.  We cannot be certain we will achieve these covenants for the remainder of 2003, although we believe that unless quarterly EBITDA for the U.S. business falls short of plan by more than 15% in any future quarter, we will likely achieve the covenants. There is no assurance we will not be in violation of bank covenants in the future because of fluctuations or deterioration in our operating results. At that point there is no assurance we will be able to obtain waivers or amend our bank agreements.  If not, we would be in violation of our financial covenants and the bank would have the right to demand full payment of all amounts owed them. We would then be required to settle the outstanding obligation. At March 31, 2003, we owed the U.S. bank $3.3 million, consisting of $2.4 million under our revolving credit line and $0.9 million under our outstanding term loan. Based on our agreed repayment schedule with the U.S. bank, we are repaying the term loan in varying monthly amounts until paid in full in September 2003.



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





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



- Make additional reductions in staff and overhead as per our contingent restructuring plan to save $0.8 million in cash outlays assuming implementation in June 2003. Such savings would be reduced by approximately $0.15 million for each month of delay.

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



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



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



2.	MARKETABLE SECURITY



During the quarter ended March 31, 2003 we evaluated our investment in equity securities of vizrt Ltd. (symbol VIZ - traded on Neuer market and Frankfurt stock exchange). Due to trading values that were below our cost for a period of time, we determined that the decline in market value was other than temporary and wrote this security down to its current fair value. Accordingly, an impairment loss of $0.2 million, which is included in other expense, was charged to earnings.



3.	INTANGIBLE ASSETS



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



The excess of the aggregate purchase price over the fair market value of net assets acquired, of approximately $1.1 million, has been ascribed to an exclusive sales and marketing agreement and is being amortized over three years pursuant to Statement of Financial Accounting Standards No. 142 "Goodwill and Intangible Assets." Amortization of this intangible approximated $0.09 million in the three months ended March 31, 2003 and 2002.  As of March 31, 2003 and December 31, 2002 the gross asset balance was $1.1 million and the accumulated amortization was $0.9 million and $0.8 million, respectively. Amortization for the year ended December 31, 2003 will be $0.25 million.



4.	INVENTORIES



Inventory is comprised of the following (in thousands):





|                 | March 31, | December 31,
|---------------- | --------- | ------------
|                 | 2003      | 2002        
|Finished goods   | $4,062    | $4,306      
|Work-in-progress | 837       | 615         
|Raw material     | 3,211     | 3,747       
|                 | $8,110    | $8,668      



5.	EQUITY BASED COMPENSATION



We account for our stock compensation plans in accordance with the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and its related interpretations, which requires that compensation cost be recognized on the date of grant for stock options issued based on the difference, if any, between the fair market value of our stock and the exercise price. Under this intrinsic value method prescribed under APB 25 there was no compensation expense recognized for the three months ended March 31, 2003 and 2002. We have adopted the disclosure requirements of SFAS 123, "Accounting for Stock-Based Compensation," which allows entities to continue to apply the provisions of APB 25 for transactions with employees and provides pro-forma earnings disclosures for employee stock grants as if the fair value based method of accounting in SFAS No. 123 had been applied to these stock grants. The following table illustrates the effect on net income (loss) and earnings (loss) per share if the fair value method had been applied (in thousands except per share amounts):



|                                                | Three Months Ended
|----------------------------------------------- | ------------------
|                                                | March 31,         
|                                                | 2003              
|                                                |                   
|Net income (loss)                               | $  85             
|Total stock-based compensation income (expense) |                   
|determined under fair value based method,       |                   
|net of related tax effects                      | 40                
|Pro forma net income (loss)                     | $125              
|Earnings (loss) per share:                      |                   
|Basic - as reported                             | $0.00             
|Basic - pro forma                               | 0.00              
|Diluted - as reported                           | 0.00              
|Diluted - pro forma                             | 0.00              

6.	SEGMENT INFORMATION



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



|                                 | Three Months Ended
|-------------------------------- | ------------------
|                                 | March 31,         
|                                 | (In thousands)    
|                                 | 2003              
|Net sales                        |                   
|Graphics                         | $5,299            
|Signal Distribution & Automation | 5,605             
|                                 |                   
|Operating income (loss)          |                   
|Graphics                         | 600               
|Signal Distribution & Automation | 311               
|                                 |                   
|Depreciation and amortization    |                   
|Graphics                         | 173               
|Signal Distribution & Automation | 292               
|                                 |                   
|Geographic sales                 |                   
|United States                    | 6,297             
|United Kingdom                   | 2,746             
|Other                            | 1,861             



7.	RECENT ACCOUNTING PRONOUNCEMENTS



In July 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities."  SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred as opposed to at the date an entity commits to an exit plan.  We have adopted SFAS 146 as of January 1, 2003, for any exit or disposal activities after that date, which did not have a material impact on the Company's Consolidated Financial Statements.



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



In December 2002, the Financial Accounting Standards Board issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure - an amendment of FASB Statement No. 123." The Company is choosing to continue with its current practice of applying the recognition and measurement principles of APB No. 25, "Accounting for Stock Issued to Employees."  The Company has adopted the disclosure requirements of SFAS No. 148.



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



Item 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS



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



- We cannot assure you that we will maintain profitability because we have a history of losses.
- Our future operating results are likely to fluctuate and therefore may fail to meet expectations, which could cause our stock price to decline.
- If we fail to successfully develop, introduce and sell new products, we may be unable to compete effectively in the future.
- If we are unable to keep up with rapid change in our industry, our business will not grow.
- We expend substantial resources in developing and selling our products, and we may be unable to generate significant revenue as a result of these efforts.
- Our customers may cancel or change their product plans after we have expended substantial time and resources in the design of their products.
- If the digital video market does not grow, we will be unable to increase our revenues.
- We will be unable to compete effectively if we fail to anticipate product opportunities based upon emerging technologies and standards and fail to develop products that incorporate these technologies and standards.
- We may not successfully develop strategic relationships that may be important to our business.
- We operate in a highly competitive environment and industry and we may lack resources needed to capture increased market share.
- We may encounter periods of industry-wide surface mount components shortage, resulting in pricing pressure and a risk that we could be unable to fulfill our customers' requirements.
- We depend upon one supplier for the software license of our Aprisa product.
- We depend on a limited number of suppliers of surface mount components.
- If we fail to adequately forecast demand for our products, we may incur product shortages or excess product.
- Problems in manufacturing our products, especially our new products, may increase the costs of our manufacturing process.
- We may be unable to grow our business if the markets in which we sell our products do not grow.
- Our business will suffer if our systems fail or become unavailable.
- In order to become consistently profitable, we will need to offset the general pattern of declines and fluctuations in the prices of our products.
- We depend upon third party dealers to market and sell our products and they may discontinue sale of our products, fail to give our products priority or be unable to successfully market, sell and support our products.
- Problems associated with international business operations could subject us to risks from financial, operational and political situations, and affect our ability to manufacture and sell our products.
- We may be unable to accurately predict quarterly results which could adversely affect the trading price of our stock.
- We may be unable to successfully grow our business if we fail to compete effectively with others to attract and retain key personnel.
- We may not be able to protect our proprietary technology and may be sued for infringing on the rights of others.
- Our future operating results may fluctuate or deteriorate and we would be in violation of restrictive bank covenants.
- We may not be able to successfully implement our contingency plan upon a decline in revenues.
- We are uncertain of our ability to obtain additional financing or refinance existing obligations for our future needs, and liquidity issues have and may continue to increase our cost of capital.
- The TV broadcast industry has historically expected substantial marketing expenses.
- We sell hardware and software service agreements to our customers that may become onerous because of product problems or the age of our products.
- Our warranties on products may prove insufficient and could cause us unexpected costs.
- If a new law or regulation is created pertaining to the telecommunications and television industries it could cause our customers to suffer and impede our ability to increase profits.
- Our principal stockholders have significant voting power and may vote for actions that may not be in the best interests of our stockholders.
- We have not issued dividends on our common stock for over thirteen years and do not anticipate doing so in the foreseeable future.
- The price of our common stock may be volatile.
- An increase in the number of shares of our common stock outstanding could reduce the price of our common stock.
- We have various mechanisms in place to discourage takeover attempts, which may reduce or eliminate your ability to sell your shares for a premium in a change of control transaction.
- It may be difficult to sell your shares and the value of your investment may be reduced because our common stock has experienced low trading volumes on the OTC Bulletin Board and currently lacks public market research analyst coverage.



Results of Operations



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



Comparison of the Three Months Ended March 31, 2003 and 2002



Consolidated revenues for the quarter ended March 31, 2003 were $10.9 million, an increase of $0.8 million, or 8% from the $10.1 million reported for the first quarter of 2002.



First quarter 2003 revenues from the Graphics division were $5.3 million as compared to $4.8 million for the first quarter of 2002, which represented an increase of 10%.  This increase is primarily due to an increase in sales of Duet products of $0.7 million, offset by a $0.2 million decrease in sales of legacy iNFiNiT! products. The increase in Duet products is primarily attributable to a greater level of customer confidence and acceptance in the U.S. market in addition to a wider product range. The Duet product was initially launched with only a sophisticated high-end unit, but now we also provide for a range of low cost packages running on PC based platforms to fully integrated systems.



First quarter 2003 revenues from the Signal Distribution and Automation division were $5.6 million as compared to $5.3 million for the first quarter of 2002, which represented an increase of 6%. This increase results primarily from increased sales of automation equipment.



Gross margins for the first quarter of 2003 increased to 57% from 55% in the comparable quarter in 2002. Margins in the Graphics division of approximately 57% in 2003 were comparable to 2002 margins. Contributing to this consistency are material costs that have remained consistent due to the ability to leverage off the numerous products within the range and strict containment of overhead costs. Margins in the Signal Distribution and Automation division also approximated 57%. This represented a slight increase over 2002 margins, driven primarily by the greater proportion of revenue from automation, which carries higher gross margins.



Selling, general and administrative (SG&A) expenses decreased by $0.3 million, to $4.3 million in the quarter ended March 31, 2003, compared to $4.6 million in the first quarter of 2002. The major components of the decrease are reductions in sales and marketing expenses (primarily travel, commissions and marketing salaries) of $0.2 million, $0.1 million in facility costs, and the balance attributable to reductions in costs of employee benefits and other administrative expenses.



Research and development (R&D) costs of $1.1 million in the first quarter of 2003 were consistent with 2002 expenditures of $1.1 million. This level of expenditure is consistent with our budgeted spending plans for 2003 and we believe is at a level that will not significantly drain our cash resources and will enable us to continue to invest in our next generation products.



Overall interest expense of $0.54 million in the three months ended March 31, 2003 was relatively consistent with expense levels in 2002 of $0.57 million. Reductions in interest expense result from lower interest rates, as well as lower average outstanding balances on our U.S. and U.K. credit facilities, in 2003 than 2002.  This was offset slightly by increased interest expense attributable to our debentures since we are not settling that liability in cash, but rather accruing interest through the issuance of additional debentures.  Interest income in each year is nominal as cash on hand is used primarily for operations and not invested in any long-term arrangements.



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





|                                  | Three Months Ended
|--------------------------------- | ------------------
|                                  | March 31,         
|                                  | 2003              
|                                  |                   
|Impairment of marketable security | $211              
|Foreign exchange transaction loss | 74                
|Other                             |                   
|                                  | $285              





During the quarter ended March 31, 2003 we evaluated our investment in equity securities of vizrt Ltd., that was trading below our cost for a period of time, and determined that the decline in the market value was other than temporary. Accordingly, the security was written down to its current fair value and a loss of $0.2 million was charged to earnings.



Liquidity and Capital Resources



During the first quarter of 2003, net cash of $0.9 million was provided by operations as compared to a use of cash of $0.6 million in the first quarter of 2002. The generation of cash from operations results primarily from net income of $0.08 million, increased by non-cash expenses totaling $1.2 million and offset by net changes in operating assets and liabilities of $0.4 million. In the first quarter of 2002, the net loss of $0.8 million, when adjusted for non-cash items totaling $1.1 million, resulted in positive cash flow of $0.3 million that was offset by a net use of $0.9 million from changes in operating assets and liabilities, primarily the reduction of accounts payable and accrued expenses.



At March 31, 2003, we had cash on hand, including restricted cash, of $2.7 million and working capital of $3.5 million. Due to the requirement of our U.S. bank to maintain a minimum cash balance of $1 million, such amount has been classified as restricted cash. The availability under the U.S. revolving line of credit was $0.5 million and under the U.K. overdraft facility was $0.1 million (collectively the "revolving lines of credit") at March 31, 2003.



We provide signal distribution and graphics products to the broadcast industry for use in digital television. Currently, our customers are facing capital budget constraints because of a slowdown in the U.S. and European economies, and there are few signs of growth in our traditional markets.  In addition, we have sustained losses from operations in each of the six years ended December 31, 2002. During 2001 we implemented two restructuring plans to reduce staff and curtail certain operating and discretionary expenses.  We planned that these actions would reduce operating costs by $11 million.  The combined savings in 2002 SG&A and R&D expenses were $11.5 million as compared to 2001.



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



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



Our borrowing facility with our U.S. bank requires that for 2003 we achieve certain quarterly financial covenants with respect to our U.S. operations: a designated minimum EBITDA; maintain in a pledged account at our U.S. bank a minimum cash balance of $1 million at all times; achieve a set fixed charge ratio, and upon repayment on December 31, 2003 of the senior subordinated convertible notes plus accrued interest, maintain a minimum undrawn availability of $0.25 million at all times under our revolving line of credit.  While we met the financial covenants for all quarters of 2002 and the first quarter of 2003, our operating results in the past have caused us to violate the financial covenants in place at the time for which we either obtained waivers or amended our bank agreements.  We cannot be certain we will achieve our covenants for the remainder of 2003, although we believe that unless quarterly EBITDA for the U.S. business falls short of plan by more than 15% in any future quarter, we will likely achieve the covenants. There is no assurance we will not be in violation of bank covenants in the future because of fluctuations or deterioration in our operating results. At that point there is no assurance we will be able to obtain waivers or amend our bank agreements.  If not, we would be in violation of our financial covenants and the bank would have the right to demand full payment of all amounts owed them. We would then be required to settle the outstanding obligation. At March 31, 2003, we owed the U.S. bank $3.3 million, consisting of $2.4 million under our revolving credit line and $0.9 million under our outstanding term loan. Based on our agreed repayment schedule with the U.S. bank, we are repaying the term loan in varying monthly amounts until paid in full in September 2003.



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



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



- Make additional reductions in staff and discretionary expenses as per our contingent restructuring plan to save $0.8 million in cash outlays assuming implementation in June 2003. Such savings would be reduced by approximately $0.15 million for each month of delay. A further restructuring may not be possible without impairing the business.

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



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



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



Recent Accounting Pronouncements



In July 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities."  SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred as opposed to at the date an entity commits to an exit plan.  We have adopted SFAS 146 as of January 1, 2003, for any exit or disposal activities after that date, which did not have a material impact on the Company's Consolidated Financial Statements.



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



In December 2002, the Financial Accounting Standards Board issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure - an amendment of FASB Statement No. 123." The Company is choosing to continue with its current practice of applying the recognition and measurement principles of APB No. 25, "Accounting for Stock Issued to Employees."  The Company has adopted the disclosure requirements of SFAS No. 148.



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



Item 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT

MARKET RISK



We are exposed to foreign currency and exchange risk in the normal course of business related to investments in our foreign subsidiaries and sales to foreign customers.  For the three months ended March 31, 2003 and 2002, sales to foreign customers were 42% and 47% of total sales, respectively.  Substantially all sales generated outside of the U.S. are denominated in British Pounds Sterling, Euros and U.S. Dollars. The net impact of foreign exchange transactions was a loss of $0.1 million and a loss of $0.1 million for the quarter ended March 31, 2003, and 2002, respectively. We record translation gain or loss as a separate component of other comprehensive income or loss.



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



Item 4.		CONTROLS AND PROCEDURES



Our disclosure controls and procedures are designed to ensure that material information relating to the Company are made known to our Chief Executive Officer ("CEO"), Chief Financial Officer ("CFO") and others in the Company involved in the preparation of this quarterly report, by others within the Company. Our CEO and CFO have reviewed our disclosure controls and procedures within 90 days prior to the filing of this quarterly report and have concluded that they are effective.  There were no significant changes in our internal controls or other factors that could significantly affect our internal controls subsequent to the last date they were reviewed by our CEO and CFO.





PART II.		OTHER INFORMATION



ITEM 1.	LEGAL PROCEEDINGS



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



ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K



(a)	Exhibits:





|Exhibit No. |  | Description of Exhibit                                                                                                                                  
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1        |  | Indemnification Agreement between Chyron Corporation and Joan Y. McCabe, dated April 10, 2003.                                                          
|            |  |                                                                                                                                                         
|10.2        |  | Severance Agreement between Chyron Corporation and Jerry Kieliszak, dated May 2, 2003.                                                                  
|            |  |                                                                                                                                                         
|99.         |  | Certification of Chief Executive Officer and Chief Financial Officer (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350)



(b)	Reports on Form 8-K:



A Form 8-K was filed on January 17, 2003 pertaining to changes in senior management. The Company named Michael Wellesley-Wesley as its President and Chief Executive Officer.



SIGNATURES



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





|             |  | CHYRON CORPORATION          
|------------ |  | ----------------------------
|             |  | (Registrant)                
|             |  |                             
|             |  |                             
|May 14, 2003 |  | /s/ Michael Wellesley-Wesley
|(Date)       |  | Michael Wellesley-Wesley    
|             |  | President and               
|             |  | Chief Executive Officer     
|             |  |                             
|May 14, 2003 |  | /s/ Jerry Kieliszak         
|(Date)       |  | Jerry Kieliszak             
|             |  | Chief Financial Officer and 
|             |  | Senior Vice President       





CERTIFICATIONS



CERTIFICATION BY
CHIEF EXECUTIVE OFFICER
UNDER EXCHANGE ACT RULES 13a-14 OR 15d-14



I, Michael Wellesley-Wesley, Chief Executive Officer, certify that:



1.	I have reviewed this quarterly report on Form 10-Q of Chyron Corporation (the "registrant") for the quarterly period ended March 31, 2003 (the "quarterly report");



2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;



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



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



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



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



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



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



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



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



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



Date: May 14, 2003





|/s/ Michael Wellesley-Wesley
|----------------------------
|Michael Wellesley-Wesley    
|President and               
|Chief Executive Officer     

CERTIFICATION BY
CHIEF FINANCIAL OFFICER
UNDER EXCHANGE ACT RULES 13a-14 OR 15d-14

I, Jerry Kieliszak, Chief Financial Officer, certify that:



1.	I have reviewed this quarterly report on Form 10-Q of Chyron Corporation (the "registrant") for the quarterly period ended March 31, 2003 (the "quarterly report");



2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;



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



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



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



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



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



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



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



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



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



Date: May 14, 2003



|/s/ Jerry Kieliszak      
|-------------------------
|Jerry Kieliszak          
|Senior Vice President and
|Chief Financial Officer