Table of Contents





|                                   
|-----------------------------------
|UNITED STATES                      
|SECURITIES
 AND EXCHANGE COMMISSION
|WASHINGTON, D.C. 20549             

---

FORM 10-Q

---

|                                                                                           
|-------------------------------------------------------------------------------------------
|(Mark One)                                                                                 
|xQUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
 EXCHANGE ACT OF 1934 
|For the quarterly period ended March 31, 2009                                              
|                                                                                           
|or                                                                                         
|                                                                                           
|oTRANSITION REPORT PURSUANT TO SECTION
 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  _____ to _____


Commission File Number: 1-5005


---

|                                                      
|------------------------------------------------------
|INTRICON CORPORATION                                  
|(Exact name of registrant as specified in its charter)

|                                                                 |  |                                      
|---------------------------------------------------------------- |  | -------------------------------------
|Pennsylvania                                                     |  | 23-1069060                           
|(State or
 other jurisdiction of
 incorporation or organization) |  | (I.R.S.
 Employer Identification No.)

|                                          |  |           
|----------------------------------------- |  | ----------
|1260 Red Fox Road
 Arden Hills, Minnesota |  | 55112     
|(Address of
 principal executive offices) |  | (Zip Code)

Registrants
 telephone number, including area code  (651) 636-9770

|                                                                                 
|---------------------------------------------------------------------------------
|N/A                                                                              
|Former name, former address and former fiscal year, if changed since
 last report

---

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.

xYeso
No

Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). o Yes o No

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated filer and smaller reporting company
in Rule 12b-2 of the Exchange Act.

|                          |                    
|------------------------- | -------------------
|Large accelerated filer o | Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting
company)          Smaller
reporting company x

Indicate by check mark
whether the registrant is a shell company (as defined by Rule 12b-2 of the
Exchange Act).

oYesx
No

The number of outstanding
shares of the registrants common stock, $1.00 par value, on April 17, 2009 was
5,350,811 (net of 515,754 treasury shares).

1







INTRICON CORPORATION

I N D E X

|                               |                |                                                                                                                  |    |             
|------------------------------ | -------------- | ---------------------------------------------------------------------------------------------------------------- | -- | ------------
|                               |                |                                                                                                                  |    | Page
Numbers
|                               |                |                                                                                                                  |    |             
|PART I:
 FINANCIAL INFORMATION |                |                                                                                                                 
|                               |                |                                                                                                                  |    |             
|                               | Item 1.        | Financial
 Statements                                                                                            |    |             
|                               |                |                                                                                                                  |    |             
|                               |                | Consolidated
 Condensed Balance Sheets as of
 March 31, 2009 (Unaudited) and December 31, 2008                   |    | 3-4         
|                               |                |                                                                                                                  |    |             
|                               |                | Consolidated
 Condensed Statements of Operations (Unaudited)
 for the Three Months Ended March 31, 2009 and 2008 |    | 5           
|                               |                |                                                                                                                  |    |             
|                               |                | Consolidated
 Condensed Statements of Cash Flows (Unaudited)
 for the Three Months Ended March 31, 2009 and 2008 |    | 6           
|                               |                |                                                                                                                  |    |             
|                               |                | Notes to
 Consolidated Condensed Financial Statements (Unaudited)                                                |    | 7-15        
|                               |                |                                                                                                                  |    |             
|                               | Item 2.        | Managements
 Discussion and Analysis of Financial Condition and Results of Operations                           |    | 16-24       
|                               |                |                                                                                                                  |    |             
|                               | Item 3.        | Quantitative
 and Qualitative Disclosures About Market Risk                                                      |    | 25          
|                               |                |                                                                                                                  |    |             
|                               | Item 4T.       | Controls
 and Procedures                                                                                         |    | 25          
|                               |                |                                                                                                                  |    |             
|PART II:
 OTHER INFORMATION    |                |                                                                                                                 
|                               |                |                                                                                                                  |    |             
|                               | Item 1.        | Legal
 Proceedings                                                                                               |    | 26          
|                               |                |                                                                                                                  |    |             
|                               | Item 1A.       | Risk
 Factors                                                                                                    |    | 26          
|                               |                |                                                                                                                  |    |             
|                               | Item 2.        | Unregistered
 Sales of Equity Securities and Use of Proceeds                                                     |    | 26          
|                               |                |                                                                                                                  |    |             
|                               | Item 3.        | Defaults
 Upon Senior Securities                                                                                 |    | 26          
|                               |                |                                                                                                                  |    |             
|                               | Item 4.        | Submission
 of Matters to a Vote of Security Holders                                                             |    | 26          
|                               |                |                                                                                                                  |    |             
|                               | Item 5.        | Other
 Information                                                                                               |    | 26          
|                               |                |                                                                                                                  |    |             
|                               | Item 6.        | Exhibits                                                                                                         |    | 27          
|                               |                |                                                                                                                  |    |             
|                               | Signatures     |                                                                                                                  | 28
|                               |                |                                                                                                                  |    |             
|                               | Exhibit
 Index |                                                                                                                  | 29

2

---



Table of Contents

PART I: FINANCIAL INFORMATION

ITEM 1. Financial Statements

INTRICON CORPORATIONConsolidated Condensed Balance SheetsAssets

|                                                                                                                           |  |                          |            |                   |   |            | 
|-------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | ----------------- | - | ---------- | 
|                                                                                                                           |  | March 31,2009(Unaudited) |            | December 31, 2008 |  
|Current assets:                                                                                                            |  |                          |            |                   |   |            | 
|                                                                                                                           |  |                          |            |                   |   |            | 
|Cash                                                                                                                       |  | $                        | 243,798    |                   | $ | 249,396    | 
|                                                                                                                           |  |                          |            |                   |   |            | 
|Restricted cash                                                                                                            |  |                          | 373,429    |                   |   | 385,916    | 
|                                                                                                                           |  |                          |            |                   |   |            | 
|Accounts receivable, less allowance for
 doubtful accounts of $284,000 at March 31, 2009 and $389,000 at December 31, 2008 |  |                          | 7,817,340  |                   |   | 9,524,743  | 
|                                                                                                                           |  |                          |            |                   |   |            | 
|Inventories                                                                                                                |  |                          | 8,841,434  |                   |   | 8,852,028  | 
|                                                                                                                           |  |                          |            |                   |   |            | 
|Refundable income tax                                                                                                      |  |                          | 41,083     |                   |   | 27,645     | 
|                                                                                                                           |  |                          |            |                   |   |            | 
|Note receivable from sale of discontinued
 operations                                                                      |  |                          |           |                   |   | 225,000    | 
|                                                                                                                           |  |                          |            |                   |   |            | 
|Other current assets                                                                                                       |  |                          | 1,258,180  |                   |   | 758,193    | 
|                                                                                                                           |  |                          |            |                   |   |            | 
|Total current assets                                                                                                       |  |                          | 18,575,264 |                   |   | 20,022,921 | 
|                                                                                                                           |  |                          |            |                   |   |            | 
|                                                                                                                           |  |                          |            |                   |   |            | 
|Machinery and equipment                                                                                                    |  |                          | 38,402,125 |                   |   | 38,016,681 | 
|                                                                                                                           |  |                          |            |                   |   |            | 
|Less: Accumulated depreciation                                                                                             |  |                          | 30,661,435 |                   |   | 30,103,771 | 
|                                                                                                                           |  |                          |            |                   |   |            | 
|Net
 machinery and equipment                                                                                               |  |                          | 7,740,690  |                   |   | 7,912,910  | 
|                                                                                                                           |  |                          |            |                   |   |            | 
|Goodwill                                                                                                                   |  |                          | 8,266,438  |                   |   | 8,266,438  | 
|                                                                                                                           |  |                          |            |                   |   |            | 
|Investment in partnerships                                                                                                 |  |                          | 1,299,826  |                   |   | 1,386,774  | 
|                                                                                                                           |  |                          |            |                   |   |            | 
|Other assets, net                                                                                                          |  |                          | 1,614,794  |                   |   | 1,872,774  | 
|                                                                                                                           |  |                          |            |                   |   |            | 
|Total assets                                                                                                               |  | $                        | 37,497,012 |                   | $ | 39,461,817 | 

(See accompanying notes to the consolidated condensed financial
statements)

3

---



Table of Contents

INTRICON CORPORATION Consolidated Condensed Balance SheetsLiabilities and Shareholders Equity

|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------- | ---------- | ------------------ | - | ---------- | -
|                                                                                                                                                                                                                   |  | March 31,
 2009
 (Unaudited) |            | December 31,
 2008 |  
|Current liabilities:                                                                                                                                                                                               |  |                              |            |                    |   |            |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Checks written in excess of cash                                                                                                                                                                                   |  | $                            | 12,548     |                    | $ | 95,082     |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Current maturities of long-term debt                                                                                                                                                                               |  |                              | 1,574,110  |                    |   | 1,503,762  |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Accounts payable                                                                                                                                                                                                   |  |                              | 3,250,054  |                    |   | 3,149,671  |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Income taxes payable                                                                                                                                                                                               |  |                              | 27,297     |                    |   | 39,997     |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Deferred gain                                                                                                                                                                                                      |  |                              | 120,478    |                    |   | 120,478    |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Partnership payable                                                                                                                                                                                                |  |                              | 260,000    |                    |   | 260,000    |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Other accrued liabilities                                                                                                                                                                                          |  |                              | 3,593,453  |                    |   | 4,251,707  |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Total current liabilities                                                                                                                                                                                          |  |                              | 8,837,940  |                    |   | 9,420,697  |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Long term
 debt, less current maturities                                                                                                                                                                           |  |                              | 5,908,226  |                    |   | 6,187,923  |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Other
 postretirement benefit obligations                                                                                                                                                                          |  |                              | 726,353    |                    |   | 760,608    |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Long term
 partnership payable                                                                                                                                                                                     |  |                              | 760,000    |                    |   | 760,000    |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Dynamic
 Hearing license agreement payable                                                                                                                                                                         |  |                              | 350,000    |                    |   | 525,000    |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Deferred
 income taxes                                                                                                                                                                                             |  |                              | 155,273    |                    |   | 155,273    |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Accrued
 pension liabilities                                                                                                                                                                                       |  |                              | 548,009    |                    |   | 578,388    |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Deferred
 gain                                                                                                                                                                                                     |  |                              | 731,337    |                    |   | 761,456    |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Total liabilities                                                                                                                                                                                                  |  |                              | 18,017,138 |                    |   | 19,149,345 |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Shareholders
 equity:                                                                                                                                                                                             |  |                              |            |                    |   |            |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Common shares, $1.00 par value per share;
 20,000,000 shares authorized; 5,868,573 and 5,858,006 shares issued;
 5,352,819 and 5,342,252 shares outstanding at March 31, 2009 and December
 31,2008, respectively. |  |                              | 5,868,573  |                    |   | 5,858,006  |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Additional paid-in capital                                                                                                                                                                                         |  |                              | 14,282,109 |                    |   | 14,121,772 |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Retained earnings                                                                                                                                                                                                  |  |                              | 926,044    |                    |   | 1,915,334  |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Accumulated other comprehensive loss                                                                                                                                                                               |  |                              | (331,774   | )                  |   | (317,562   | )
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Less: 515,754 common shares held in
 treasury, at cost                                                                                                                                                             |  |                              | (1,265,078 | )                  |   | (1,265,078 | )
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Total shareholders equity                                                                                                                                                                                         |  |                              | 19,479,874 |                    |   | 20,312,472 |  
|                                                                                                                                                                                                                   |  |                              |            |                    |   |            |  
|Total liabilities and shareholders equity                                                                                                                                                                         |  | $                            | 37,497,012 |                    | $ | 39,461,817 |  

(See accompanying notes to the consolidated
condensed financial statements)

4

---



Table of Contents

INTRICON CORPORATION Consolidated Condensed Statements of Operations(Unaudited)

|                                          |  |                              |            |                              |   |            |  
|----------------------------------------- |  | ---------------------------- | ---------- | ---------------------------- | - | ---------- | -
|                                          |  | Three Months Ended           |           
|                                          |  | March 31,
 2009
 (Unaudited) |            | March 31,
 2008
 (Unaudited) |  
|                                          |  |                              |            |                              |  
|Sales, net                                |  | $                            | 13,330,360 |                              | $ | 16,591,380 |  
|                                          |  |                              |            |                              |   |            |  
|Cost of sales                             |  |                              | 10,954,069 |                              |   | 12,746,689 |  
|Gross margin                              |  |                              | 2,376,291  |                              |   | 3,844,691  |  
|                                          |  |                              |            |                              |   |            |  
|Operating expenses:                       |  |                              |            |                              |   |            |  
|                                          |  |                              |            |                              |   |            |  
|Selling expense                           |  |                              | 779,590    |                              |   | 996,226    |  
|General and administrative expense        |  |                              | 1,581,223  |                              |   | 1,652,379  |  
|Research and development expense          |  |                              | 880,530    |                              |   | 787,773    |  
|                                          |  |                              |            |                              |   |            |  
|Total operating expenses                  |  |                              | 3,241,343  |                              |   | 3,436,378  |  
|                                          |  |                              |            |                              |   |            |  
|Operating (loss) income                   |  |                              | (865,052   | )                            |   | 408,313    |  
|                                          |  |                              |            |                              |   |            |  
|Interest expense                          |  |                              | (128,118   | )                            |   | (195,625   | )
|Interest income                           |  |                              | 3,140      |                              |   | 7,260      |  
|Equity in (loss) earnings of partnerships |  |                              | (86,948    | )                            |   | 22,156     |  
|Other income (expense), net               |  |                              | 53,615     |                              |   | (5,458     | )
|                                          |  |                              |            |                              |   |            |  
|(Loss) income before income taxes         |  |                              | (1,023,363 | )                            |   | 236,646    |  
|                                          |  |                              |            |                              |   |            |  
|Income tax (benefit) expense              |  |                              | (34,073    | )                            |   | 86,830     |  
|                                          |  |                              |            |                              |   |            |  
|Net (loss) income                         |  | $                            | (989,290   | )                            | $ | 149,816    |  
|                                          |  |                              |            |                              |   |            |  
|                                          |  |                              |            |                              |   |            |  
|Earnings (loss) per share:                |  |                              |            |                              |   |            |  
|                                          |  |                              |            |                              |   |            |  
|Basic and Diluted                         |  | $                            | (0.19      | )                            | $ | 0.03       |  
|                                          |  |                              |            |                              |   |            |  
|Average shares outstanding:               |  |                              |            |                              |   |            |  
|Basic                                     |  |                              | 5,343,033  |                              |   | 5,303,083  |  
|Diluted                                   |  |                              | 5,343,033  |                              |   | 5,589,894  |  

(See accompanying notes to the consolidated
condensed financial statements)

5

---



Table of Contents

INTRICON CORPORATION Consolidated Condensed Statements of Cash Flows
(Unaudited)

|                                                                                   |  |                              |            |                              |   |            |  
|---------------------------------------------------------------------------------- |  | ---------------------------- | ---------- | ---------------------------- | - | ---------- | -
|                                                                                   |  | Three months Ended           |           
|                                                                                   |  | March 31,
 2009
 (Unaudited) |            | March 31,
 2008
 (Unaudited) |  
|                                                                                   |  |                              |            |                              |  
|Cash flows from operating activities:                                              |  |                              |            |                              |   |            |  
|Net (loss) income                                                                  |  | $                            | (989,290   | )                            | $ | 149,816    |  
|Adjustments to reconcile net income to net
 cash provided by operating activities: |  |                              |            |                              |   |            |  
|Depreciation and amortization                                                      |  |                              | 616,471    |                              |   | 582,520    |  
|Stock-based compensation                                                           |  |                              | 137,454    |                              |   | 128,351    |  
|Loss (gain) on disposition of property                                             |  |                              | 1,190      |                              |   | (1,900     | )
|Change in deferred gain                                                            |  |                              | (30,119    | )                            |   | (27,521    | )
|Change in allowance for doubtful accounts                                          |  |                              | (104,637   | )                            |   | (4,353     | )
|Equity in loss (earnings) of partnerships                                          |  |                              | 86,948     |                              |   | (22,156    | )
|Provision for deferred income taxes                                                |  |                              |           |                              |   | 3,000      |  
|Changes in operating assets and
 liabilities:                                      |  |                              |            |                              |   |            |  
|Accounts receivable                                                                |  |                              | 1,805,311  |                              |   | (1,194,441 | )
|Inventories                                                                        |  |                              | 1,788      |                              |   | 174,131    |  
|Other assets                                                                       |  |                              | (307,372   | )                            |   | 83,045     |  
|Accounts payable                                                                   |  |                              | 100,057    |                              |   | (46,387    | )
|Accrued expenses                                                                   |  |                              | (875,559   | )                            |   | (969,581   | )
|Customer advances                                                                  |  |                              |           |                              |   | (190,062   | )
|Other liabilities                                                                  |  |                              | (6,964     | )                            |   | 1,211      |  
|Net cash provided by (used in) operating
 activities                               |  |                              | 435,278    |                              |   | (1,334,327 | )
|                                                                                   |  |                              |            |                              |   |            |  
|Cash flows from investing activities:                                              |  |                              |            |                              |   |            |  
|Purchases of property, plant and equipment                                         |  |                              | (384,238   | )                            |   | (457,546   | )
|Proceeds from sales of property, plant and
 equipment                              |  |                              |           |                              |   | 1,900      |  
|Proceeds from note receivable                                                      |  |                              | 225,000    |                              |   | 75,000     |  
|Net cash used in investing activities                                              |  |                              | (159,238   | )                            |   | (380,646   | )
|                                                                                   |  |                              |            |                              |   |            |  
|Cash flows from financing activities:                                              |  |                              |            |                              |   |            |  
|Proceeds from long-term borrowings                                                 |  |                              | 2,600,370  |                              |   | 1,953,480  |  
|Repayments of long-term borrowings                                                 |  |                              | (2,824,041 | )                            |   | (112,500   | )
|Proceeds from employee stock purchases and
 exercise of stock options              |  |                              | 30,390     |                              |   | 98,531     |  
|Change in restricted cash                                                          |  |                              | (1,178     | )                            |   | (33,008    | )
|Change in checks written in excess of cash                                         |  |                              | (82,534    | )                            |   | (214,648   | )
|Net cash (used in) provided by financing
 activities                               |  |                              | (276,993   | )                            |   | 1,691,855  |  
|                                                                                   |  |                              |            |                              |   |            |  
|Effect of exchange rate changes on cash                                            |  |                              | (4,645     | )                            |   | 35,027     |  
|                                                                                   |  |                              |            |                              |   |            |  
|Net (decrease) increase in cash                                                    |  |                              | (5,598     | )                            |   | 11,909     |  
|Cash,
 beginning of period                                                         |  |                              | 249,396    |                              |   | 381,247    |  
|                                                                                   |  |                              |            |                              |   |            |  
|Cash, end of
 period                                                               |  | $                            | 243,798    |                              | $ | 393,156    |  

(See accompanying notes to the consolidated
condensed financial statements)

6

---



Table of Contents

INTRICON CORPORATION

Notes to Consolidated
Condensed Financial Statements (Unaudited)

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                         
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | General                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                         
|   | In the opinion of management, the accompanying consolidated condensed
 financial statements contain all adjustments (consisting of normal recurring
 adjustments) necessary to present fairly IntriCon Corporations (IntriCon
 or the Company) consolidated financial position as of March 31, 2009 and
 December 31, 2008, and the consolidated results of its operations for the
 three months ended March 31, 2009 and 2008. Results of operations for the
 interim periods are not necessarily indicators of the results of the
 operations expected for the full year or any other interim period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                         
|   | Certain prior balances have been reclassified to be consistent with
 the March 31, 2009 presentation including: $356,000 of restricted cash
 previously included in cash on the balance sheet as of March 31, 2008 and
 $762,000 of cash previously included in checks written in excess of cash on
 the balance sheet as of March 31, 2008. The reclassifications did not impact
 previously reported net income or shareholders equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                         
|2. | New Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                         
|   | On December 4, 2007, the FASB issued SFAS No. 160, Noncontrolling
 Interests in Consolidated Financial Statements - an Amendment of ARB No. 51.
 SFAS No. 160 establishes new accounting and reporting standards for the
 noncontrolling interest in a subsidiary and for the deconsolidation of a
 subsidiary. Specifically, this statement requires the recognition of a
 noncontrolling interest (minority interest) as equity in the consolidated
 financial statements and separate from the parents equity. The amount of net
 income attributable to the noncontrolling interest will be included in
 consolidated net income on the face of the income statement. SFAS No. 160
 clarifies that changes in a parents ownership interest in a subsidiary that
 do not result in deconsolidation are equity transactions if the parent
 retains its controlling financial interest. In addition, this Statement requires
 that a parent recognize a gain or loss in net income when a subsidiary is
 deconsolidated. Such gain or loss will be measured using the fair value of
 the noncontrolling equity investment on the deconsolidation date. SFAS No.
 160 also includes expanded disclosure requirements regarding the interests of
 the parent and its noncontrolling interest. SFAS No. 160 is effective for
 fiscal years, and interim periods within those fiscal years, beginning after
 December 15, 2008. Earlier adoption is prohibited. The adoption of SFAS No.
 160 did not have a material effect on our results of operations or financial
 position.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                         
|   | On December 4, 2007, the FASB issued SFAS No. 141 (Revised 2007),
 Business Combinations. SFAS No. 141(R) will significantly change the accounting
 for business combinations. Under SFAS No. 141(R), an acquiring entity will be
 required to recognize all the assets acquired and liabilities assumed in a
 transaction at the acquisition-date fair value with limited exceptions. SFAS
 No. 141R will change the accounting treatment for certain specific items,
 including:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                         
|   | §                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Acquisition costs will be
 generally expensed as incurred;                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                         
|   | §                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Noncontrolling interests
 (formerly known as minority interests) will be valued at fair value at the
 acquisition date;                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                         
|   | §                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Acquired contingent liabilities will be recorded at fair value at the
 acquisition date and subsequently measured at either the higher of such
 amount or the amount determined under existing guidance for non-acquired
 contingencies;
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                         
|   | §                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | In-process research and development will be recorded at fair value as
 an indefinite-lived intangible asset at the acquisition date;                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                         
|   | §                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Restructuring costs associated with a business combination will be
 generally expensed subsequent to the acquisition date; and                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                         
|   | §                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Changes in deferred tax asset
 valuation allowances and income tax uncertainties after the acquisition date
 generally will affect income tax expense.                                                                                  

7

---



Table of Contents

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | SFAS No. 141(R) also includes a substantial number of new disclosure
 requirements. The statement applies prospectively to business combinations
 for which the acquisition date is on or after the beginning of the first
 annual reporting period beginning after December 15, 2008. Earlier adoption
 is prohibited. This standard will change our accounting treatment for
 business combinations on a prospective basis and was adopted by the Company
 in the first quarter of 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | In May 2008, the FASB issued SFAS No. 162, The Hierarchy of
 Generally Accepted Accounting Principles. SFAS No. 162 is intended to
 improve financial reporting by identifying a consistent framework, or
 hierarchy, for selecting accounting principles to be used in preparing
 financial statements that are presented in conformity with U.S. generally
 accepted accounting principles (GAAP) for nongovernmental entities. Prior to
 the issuance of SFAS No. 162, GAAP hierarchy was defined in the American
 Institute of Certified Public Accountants (AICPA) Statement on Auditing
 Standards No. 69 (SAS No. 69), The Meaning of Present Fairly in Conformity
 With Generally Accepted Accounting Principles. SAS No. 69 has been
 criticized because it is directed to the auditor rather than the entity. SFAS
 No. 162 addresses these issues by establishing that the GAAP hierarchy should
 be directed to entities because it is the entity (not its auditor) that is
 responsible for selecting accounting principles for financial statements that
 are presented in conformity with GAAP. SFAS No. 162 is effective 60 days
 following the U.S. Securities and Exchange Commissions approval of the
 Public Company Accounting Oversight Board Auditing amendments to AU Section
 411, The Meaning of Present Fairly in Conformity with Generally Accepted
 Accounting Principles. The Company does not expect SFAS 162 to have a material
 effect on our results of operations or financial position.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|3. | Product Warranty                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | In general, the Company warrants its products to be free from defects
 in material and workmanship and will fully conform to and perform to specifications for a period of one
 year. The following table presents changes in the Companys warranty
 liability for the three months ended March 31, 2009:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| |                                        |  |                                    |         |  
| | -------------------------------------- |  | ---------------------------------- | ------- | -
| |                                        |  | Three months ended
 March 31, 2009 |        
| | Beginning
 balance (December 31, 2008) |  | $                                  | 100,200 |  
| |                                        |  |                                    |         |  
| | Warranty
 expense                      |  |                                    | 31,000  |  
| | Closed
 warranty claims                |  |                                    | (41,500 | )
|
| | Ending
 balance (March 31, 2009)       |  | $                                  | 89,700  |  

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4. | Segment and Geographic Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | In accordance with SFAS No. 131, Disclosures about Segments of an
 Enterprise and Related Information, and based on the nature of our products
 and technology, the Company currently operates in two reportable segments:
 body-worn devices and electronic products. Previously, these were combined in
 the Companys miniature medical and electronics products segment. The
 Company determined in 2008 that these segments no longer meet the criteria
 for aggregation. The nature of the products and services has been deemed
 separately identifiable, as the Company has further developed technologies
 and products included in the body-worn device segment. This includes products
 and technologies developed both internally and externally with our strategic
 partners like Advanced Medical Electronics Corp. (AME) and Dynamic Hearing
 Pty Ltd. (Dynamic Hearing). Furthermore, as the underlying products and
 technology has changed, the economic characteristics of each business segment
 are not similar. Our electronics products segment margin is subject to more
 variability due to component material pricing and we believe our future revenue
 growth and margin will be different for each segment as a result of the
 proprietary technology included in our body-worn device products. Therefore,
 segment reporting has been retroactively applied to all periods presented.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Income (loss) from operations is total revenues less cost of sales
 and operating expenses. Identifiable assets by industry segment include both
 assets directly identifiable with those operations. General corporate assets
 consist primarily of cash and cash equivalents, and are included in the
 body-worn device segment. The accounting policies applied to determine
 segment information are the same as those described in the summary of
 significant accounting policies. The Company evaluates the performance of
 each segment based on income and loss from operations before income taxes.
 The following table summarizes data by industry segment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

8

---



Table of Contents

|                                                  |  |                    |            |                      |   |           |   |   |            |  
|------------------------------------------------- |  | ------------------ | ---------- | -------------------- | - | --------- | - | - | ---------- | -
|                                                  |  | Body Worn
 Devices |            | Electronic
 Products |   | TOTAL     |  
|At and for the three months ended March 31,
 2009 |  |                    |            |                      |   |           |  
|Revenues, net                                     |  | $                  | 11,844,000 |                      | $ | 1,486,000 |   | $ | 13,330,000 |  
|Loss from operations                              |  |                    | (702,000   | )                    |   | (163,000  | ) |   | (865,000   | )
|Total assets                                      |  |                    | 34,474,000 |                      |   | 3,023,000 |   |   | 37,497,000 |  
|Depreciation and amortization                     |  |                    | 536,000    |                      |   | 80,000    |   |   | 616,000    |  
|Capital expenditures                              |  |                    | 369,000    |                      |   | 15,000    |   |   | 384,000    |  
|                                                  |  |                    |            |                      |   |           |   |   |            |  
|At and for the three months ended March 31, 2008  |  |                    |            |                      |   |           |   |   |            |  
|Revenues                                          |  | $                  | 14,606,000 |                      | $ | 1,985,000 |   | $ | 16,591,000 |  
|Income from operations                            |  |                    | 460,000    |                      |   | (52,000   | ) |   | 408,000    |  
|Total assets                                      |  |                    | 36,295,000 |                      |   | 3,437,000 |   |   | 39,732,000 |  
|Depreciation and amortization                     |  |                    | 498,000    |                      |   | 85,000    |   |   | 583,000    |  
|Capital expenditures                              |  |                    | 451,000    |                      |   | 7,000     |   |   | 458,000    |  

The geographical distribution of long-lived assets to geographical
areas consisted of the following at:

|              |  |                 |           |                    |   |           | 
|------------- |  | --------------- | --------- | ------------------ | - | --------- | 
|              |  | March 31,
 2009 |           | December 31,
 2008 |  
|              |  |                 |           |                    |   |           | 
|United States |  | $               | 6,367,505 |                    | $ | 6,488,285 | 
|Other         |  |                 | 1,373,185 |                    |   | 1,424,625 | 
|              |  |                 |           |                    |   |           | 
|Consolidated  |  | $               | 7,740,690 |                    | $ | 7,912,910 | 

Long-lived assets consist of property and equipment as they are
difficult to move and relatively illiquid. Excluded from long-lived assets are
investments in partnerships, patents, license agreements and goodwill. The
Company capitalizes long-lived assets pertaining to the production of
specialized parts. These assets are periodically reviewed to assure the net
realizable value from the estimated future production based on forecasted sales
exceeds the carrying value of the assets.

The geographical distribution of net sales to geographical areas for
the three months ended March 31, 2009 and 2008 were as follows:

|                                   |  |                    |            |                 |   |            | 
|---------------------------------- |  | ------------------ | ---------- | --------------- | - | ---------- | 
|                                   |  | Three months ended |           
|Net Sales
 to Geographical
 Areas: |  | March 31,
 2009    |            | March 31,
 2008 |  
|                                  
|United
 States                     |  | $                  | 9,316,124  |                 | $ | 11,866,581 | 
|Germany                            |  |                    | 581,849    |                 |   | 988,950    | 
|China                              |  |                    | 566,869    |                 |   | 811,882    | 
|Switzerland                        |  |                    | 526,666    |                 |   | 384,685    | 
|Japan                              |  |                    | 424,175    |                 |   | 187,185    | 
|France                             |  |                    | 422,988    |                 |   | 386,812    | 
|Singapore                          |  |                    | 319,204    |                 |   | 162,399    | 
|United
 Kingdom                    |  |                    | 192,631    |                 |   | 182,006    | 
|Vietnam                            |  |                    | 164,603    |                 |   | 110,276    | 
|Hong Kong                          |  |                    | 159,715    |                 |   | 80,259     | 
|All other
 countries               |  |                    | 655,536    |                 |   | 1,430,345  | 
|Consolidated                       |  | $                  | 13,330,360 |                 | $ | 16,591,380 | 

Geographic net sales are allocated based on the location of the
customer. All other countries include net sales primarily to various countries
in Europe and in the Asian Pacific.

9

---



Table of Contents

|   |                                                                                                                                                                                                                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | For the three months ended March 31, 2009, two customers accounted
 for 16 percent and 13 percent of the Companys consolidated net sales,
 respectively. For the three months ended March 31, 2008, one customer
 accounted for 11 percent of the Companys consolidated net sales.                    
|   |                                                                                                                                                                                                                                                                                                         
|   | At March 31, 2009, three customers accounted for 12 percent, 11
 percent and 10 percent of the Companys consolidated accounts receivable,
 respectively. At December 31, 2008, two customers accounted for 11 percent
 and 10 percent of the Companys consolidated accounts receivable,
 respectively.
|   |                                                                                                                                                                                                                                                                                                         
|5. | Inventories                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                         
|   | Inventories consisted of the following at:                                                                                                                                                                                                                                                              

|                  |  |               |           |                 |   |                                   |  |       |           |  |   |           | 
|----------------- |  | ------------- | --------- | --------------- | - | --------------------------------- |  | ----- | --------- |  | - | --------- | 
|                  |  | Raw materials |           | Work-in process |   | Finished products
 and components |  | Total |          
|                  |  |               |           |                 |   |                                   |  |       |           |  |   |           | 
|March 31, 2009    |  |               |           |                 |   |                                   |  |       |           |  |   |           | 
|Domestic          |  | $             | 3,824,001 |                 | $ | 1,383,549                         |  | $     | 1,327,635 |  | $ | 6,535,185 | 
|Foreign           |  |               | 1,608,487 |                 |   | 359,811                           |  |       | 337,951   |  |   | 2,306,249 | 
|Total             |  | $             | 5,432,488 |                 | $ | 1,743,360                         |  | $     | 1,665,586 |  | $ | 8,841,434 | 
|                  |  |               |           |                 |   |                                   |  |       |           |  |   |           | 
|December 31, 2008 |  |               |           |                 |   |                                   |  |       |           |  |   |           | 
|Domestic          |  | $             | 3,709,213 |                 | $ | 1,644,408                         |  | $     | 1,281,771 |  | $ | 6,635,392 | 
|Foreign           |  |               | 1,609,392 |                 |   | 326,874                           |  |       | 280,370   |  |   | 2,216,636 | 
|Total             |  | $             | 5,318,605 |                 | $ | 1,971,282                         |  | $     | 1,562,141 |  | $ | 8,852,028 | 

|   |                                                    
|-- | ---------------------------------------------------
|6. | Short and Long Term Debt                           
|   |                                                    
|   | Short and
 long term debt is summarized as follows:

| |                                                  |  |                 |            |                    |   |            |  
| | ------------------------------------------------ |  | --------------- | ---------- | ------------------ | - | ---------- | -
| |                                                  |  | March 31,
 2009 |            | December 31,
 2008 |  
| |                                                  |  |                 |            |                    |   |            |  
| | Domestic
 Asset-Based Revolving Credit Facility  |  | $               | 3,000,000  |                    | $ | 3,000,000  |  
| | Foreign Overdraft
 and Letter of Credit Facility |  |                 | 587,500    |                    |   | 605,423    |  
| | Domestic
 Term Loan                              |  |                 | 2,615,625  |                    |   | 2,756,250  |  
| | Domestic
 Capital Equipment Leases               |  |                 | 1,279,211  |                    |   | 1,330,012  |  
| | Total Debt                                       |  |                 | 7,482,336  |                    |   | 7,691,685  |  
| | Less:
 Current maturities                        |  |                 | (1,574,110 | )                  |   | (1,503,762 | )
| | Total Long
 Term Debt                            |  | $               | 5,908,226  |                    | $ | 6,187,923  |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company and its subsidiaries, IntriCon, Inc. (formerly known as
 Resistance Technology, Inc.), RTI Electronics, Inc. and IntriCon Tibbetts
 Corporation, referred to as the borrowers, entered into a credit facility
 with LaSalle Bank, National Association (now Bank of America), referred to as
 the lender, on May 22, 2007. The credit facility provides for:                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                    
| | §                                                                                                                                                                                                                                                                                                                                                                                                                                                  | a $10,000,000 revolving
 credit facility, with a $200,000 subfacility for letters of credit. Under the
 revolving credit facility, the availability of funds depends on a borrowing
 base composed of stated percentages of our eligible trade receivables and
 eligible inventory, less a reserve.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                    
| | §                                                                                                                                                                                                                                                                                                                                                                                                                                                  | a $4,500,000 term loan, which
 was used to fund the Tibbetts acquisition.                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                    
| | Loans under the credit facility are secured by a security interest in
 substantially all of the assets of the borrowers including a pledge of the
 stock of the subsidiaries. All of the borrowers are jointly and severally
 liable for all borrowings under the credit facility.                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                    
| | As of March 31, 2009, the Company was in compliance with all
 financial covenants under the credit facility, as amended.                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                    
| | In June 2008, the Company completed a sale-leaseback of machinery and
 equipment with Bank of America. The transaction generated proceeds of
 $1,098,000, of which $1,013,000 was used to pay down the domestic term loan.
 The capital lease agreement expires in June 2014, requires monthly payments
 of $15,800 and had a present value of future minimum lease payments of
 $1,098,000 with an effective interest rate of 5.14% at inception.

10

---



Table of Contents

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | The Company also has entered into several other capital lease
 agreements to fund the acquisition of machinery and equipment. The total
 principal amount of all capital leases (including the sale-leaseback
 described above) was $1,661,000 with effective interest rates ranging from
 5.1% to 8.0%. These agreements range from 3 to 6 years. The outstanding
 balance under these capital lease agreements at March 31, 2009 and December
 31, 2008 was $1,279,000 and $1,330,000, respectively. The accumulated
 amortization on leased equipment was $325,000 and $257,000 at March 31, 2009
 and December 31, 2008, respectively. The amortization of capital leases is
 included in depreciation expense for 2009 and 2008.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|7. | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Income tax benefit for the three months ended March 31, 2009 was
 $34,073 compared to expense of $86,830 for the same period in 2008. The
 benefit for the three months ended March 31, 2009 was primarily due to
 benefits on foreign operating losses. The expense for 2008 was primarily due
 to foreign taxes on German and Singapore operations. The Company is in a net
 operating loss position for U.S. federal income tax purposes and,
 consequently, minimal federal benefit or expense from the domestic operations
 was recognized as the deferred tax asset has a full valuation allowance.                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The following was the (loss) income before income taxes for each
 jurisdiction that the Company has operations for the three months ended March
 31, 2009 and 2008:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

|                                  |  |                    |            |                |   |         |  
|--------------------------------- |  | ------------------ | ---------- | -------------- | - | ------- | -
|                                  |  | Three months ended |           
|                                  |  | March 31, 2009     |            | March 31, 2008 |  
|United States                     |  | $                  | (762,878   | )              | $ | (14,678 | )
|                                  |  |                    |            |                |   |         |  
|Singapore                         |  |                    | (220,393   | )              |   | 145,845 |  
|Germany                           |  |                    | (40,092    | )              |   | 105,479 |  
|(Loss) income before income taxes |  | $                  | (1,023,363 | )              | $ | 236,646 |  

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|8. | Stockholders Equity and Stock-based
 Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The Company applies the provisions of SFAS No. 123R Share-Based
 Payment, which establishes the accounting for stock-based awards.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The Company has a 1994 stock option plan, a 2001 stock option plan, a
 non-employee directors stock option plan and a 2006 equity incentive plan.
 New grants may not be made under the 1994, the 2001 and the non-employee
 directors stock option plans; however certain option grants under these
 plans remain exercisable as of March 31, 2009. The aggregate number of shares
 of common stock for which awards could be granted under the 2006 Equity
 Incentive Plan as of the date of adoption was 698,500 shares. Additionally,
 as outstanding options under the 2001 stock option plan and non-employee
 directors stock option plan expire, the shares of the Companys common stock
 subject to the expired options will become available for issuance under the
 2006 Equity Incentive Plan.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | Under the various plans, executives, employees and outside directors
 receive awards of options to purchase common stock. Under the 2006 equity
 incentive plan, the Company may also grant stock awards, stock appreciation
 rights, restricted stock units and other equity-based awards, although no
 such awards, other than awards under the programs discussed in the next two
 paragraphs, had been granted as of March 31, 2009. Under all awards, the terms
 are fixed on the grant date. Generally, the exercise price equals the market
 price of the Companys stock on the date of the grant. Options under the
 plans generally vest over three years, and have a maximum term of 10 years.                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | Additionally, the board has established the non-employee directors
 stock fee election program, referred to as the director program, as an award
 under the 2006 equity incentive plan. The director program gives each
 non-employee director the right under the 2006 equity incentive plan to elect
 to have some or all of his quarterly director fees paid in common shares
 rather than cash. There were 827 and 237 shares issued in lieu of cash for
 director fees under the director program for the three months ended March 31,
 2009 and 2008, respectively.                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

11

---



Table of Contents

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On July 23, 2008, the Compensation Committee of the Board of
 Directors approved the non-employee director and executive officer stock
 purchase program, referred to as the management purchase program, as an award
 under the 2006 Plan. The purpose of the management purchase program is to
 permit the Companys non-employee directors and executive officers to
 purchase shares of the Companys common stock directly from the Company. Pursuant to the management purchase program, as amended,
 participants may elect to purchase shares of common stock from the Company
 not exceeding an aggregate of $100,000 during any fiscal year. Participants
 may make such election one time during each twenty business day period
 following the public release of the Companys earnings announcement, referred
 to as a window period, and only if such participant is not in possession of
 material, non-public information concerning the Company, subject to the
 discretion of the Board to prohibit any transactions in common stock by
 directors and executive officers during a window period. There were no shares
 purchased under the management purchase program during the three months ended
 March 31, 2009 and 2008, respectively.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Stock option activity as of and during the three months ended March
 31, 2009 was as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

|                                                 |  |                  |         |                                    |   |                            |  |   |   | 
|------------------------------------------------ |  | ---------------- | ------- | ---------------------------------- | - | -------------------------- |  | - | - | 
|                                                 |  | Number of Shares |         | Weighted-
 average
 Exercise Price |   | Aggregate
 Intrinsic Value | 
|                                                 |  |                  |         |                                    |   |                            |  |   |   | 
|Outstanding at December 31, 2008                 |  |                  | 981,650 |                                    | $ | 5.93                       |  | $ |  | 
|                                                
|Options forfeited                                |  |                  | (7,000  | )                                  |   | 11.39                      |  |   |   | 
|Options granted                                  |  |                  | 16,000  |                                    |   | 4.00                       |  |   |   | 
|Options exercised                                |  |                  |        |                                    |   |                           |  |   |   | 
|                                                 |  |                  |         |                                    |   |                            |  |   |   | 
|Outstanding at March 31, 2009                    |  |                  | 990,650 |                                    | $ | 5.86                       |  | $ |  | 
|                                                 |  |                  |         |                                    |   |                            |  |   |   | 
|Exercisable at March 31, 2009                    |  |                  | 654,350 |                                    | $ | 4.37                       |  | $ |  | 
|                                                 |  |                  |         |                                    |   |                            |  |   |   | 
|Available for future grant at December 31,
 2008 |  |                  | 261,894 |                                    |   |                            |  |   |   | 
|                                                 |  |                  |         |                                    |   |                            |  |   |   | 
|Available for future grant at March 31,
 2009    |  |                  | 252,067 |                                    |   |                            |  |   |   | 
|                                                 |  |                  |         |                                    |   |                            |  |   |   | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The number of shares available for future grant at March 31, 2009
 does not include a total of up to 397,700 shares subject to options
 outstanding under the 2001 stock option plan and non-employee directors
 stock option plan as of March 31, 2009, which will become available for grant
 under the 2006 Equity Incentive Plan in the event of the expiration of such
 options.                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The fair value of each stock option granted is estimated on the date
 of grant using the Black-Scholes option-pricing model. The Black-Scholes
 option-pricing model was developed for use in estimating the fair value of
 traded options that have no vesting restrictions and are fully transferable.
 In addition, option-pricing models require the input of subjective
 assumptions, including the expected stock price volatility. Because the
 Companys options have characteristics different from those of traded options,
 in the opinion of management, the existing models do not necessarily provide
 a reliable single measure of the fair value of its options.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The Company calculates expected volatility for stock options and
 awards using both historical volatility as well as the average volatility of
 our peer competitors. Historical volatility is not strictly used due to the
 material changes in the Companys operations as a result of the sales of
 business segments that occurred in 2004 and 2005 (see Note 2 to the Companys
 consolidated financial statements included in the Companys Annual Report on
 From 10-K for the year ended December 31, 2008).                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The Company currently estimates a nine percent forfeiture rate for
 stock options, but will continue to review this estimate in future periods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The Company also has an Employee Stock Purchase Plan (the Purchase
 Plan). A maximum of 100,000 shares may be sold under the Purchase Plan.
 There were 9,740 shares purchased under the plan for the three months ended
 March 31, 2009 and a total of 43,953 shares purchased as of March 31, 2009.                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The risk-free rates for the expected terms of the stock options and
 awards and the Purchase Plan is based on the U.S. Treasury yield curve in
 effect at the time of grant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The weighted average remaining contractual life of options
 exercisable at March 31, 2009 was 5.5 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

12

---



Table of Contents

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | The Company recorded $137,454 and $128,351 of non-cash stock option
 expense related to SFAS No. 123(R) for the three months ended March 31, 2009
 and 2008, respectively. As of March 31, 2009, the Company has recorded
 cumulative non-cash stock option expense related to SFAS No. 123(R) of
 $1,157,333. As of March 31, 2009, there was $835,689 of total unrecognized
 compensation costs related to non-vested awards that are expected to be
 recognized over a weighted-average period of 1.9 years.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|9. | Income Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The following table presents a reconciliation between basic and
 diluted earnings per share:                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

| |                                                         |  |                    |           |                 |   |           | 
| | ------------------------------------------------------- |  | ------------------ | --------- | --------------- | - | --------- | 
| |                                                         |  | Three months ended |          
| |                                                         |  | March 31,
 2009    |           | March 31,
 2008 |  
| | Numerator:                                              |  |                    |           |                 |   |           | 
| | Net (loss)
 income                                      |  | $                  | (989,290  | )               | $ | 149,816   | 
| | Denominator:                                            |  |                    |           |                 |   |           | 
| | Basic 
 weighted shares outstanding                    |  |                    | 5,343,033 |                 |   | 5,303,083 | 
| | Weighted
 shares assumed upon exercise of stock options |  |                    |          |                 |   | 286,811   | 
| | Diluted 
 weighted shares outstanding                  |  |                    | 5,343,033 |                 |   | 5,589,894 | 
| |                                                         |  |                    |           |                 |   |           | 
| | Basic and diluted
 (loss) earnings per share            |  | $                  | (0.19     | )               | $ | 0.03      | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | The dilutive impact summarized above relates to the periods when the
 average market price of Company stock exceeded the exercise price of the
 potentially dilutive option securities granted. Earnings per common share was
 based on the weighted average number of common shares outstanding during the
 periods when computing the basic earnings per share. When dilutive, stock
 options are included as equivalents using the treasury stock market method
 when computing the diluted earnings per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Excluded from the computation of diluted earnings per share for the
 three months ended March 31, 2009 and 2008, were options to purchase
 approximately 990,650 and 218,500 common shares, respectively, with an
 average exercise price of $5.86 and $13.27, respectively, because the effect
 would have been anti-dilutive.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|10. | Derivative
 Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Derivative financial instruments are used by the Company in the
 management of its interest rate and foreign currency exposure. The Company
 does not hold or issue derivative financial instruments for trading purposes.
 When entered into, the Company formally designates the derivative financial
 instrument as a hedge of a specific underlying exposure if such criteria are
 met, and documents both the risk management objectives and strategies for
 undertaking the hedge. The Company formally assesses, both at inception and
 at least quarterly thereafter, whether the derivative financial instruments
 that are used in hedging transactions are effective at offsetting changes in
 either the fair value or cash flows of the related underlying exposure.
 Because of the high correlation between the derivative financial instrument
 and the underlying exposure being hedged, fluctuations in the value of the
 derivative financial instruments are generally offset by changes in the fair
 values or cash flows of the underlying exposures being hedged. Any
 ineffective portion of a derivative financial instruments change in fair value
 would be immediately recognized in earnings.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The Company uses interest rate swaps to manage its interest rate
 risk. The swaps are designated as cash flow hedges with the changes in fair
 value recorded in accumulated other comprehensive loss and as a derivative
 hedge asset or liability, as applicable. The swaps settle periodically in
 arrears with the related amounts for the current settlement period payable
 to, or receivable from, the counter-parties included in accrued liabilities
 or accounts receivable and recognized in earnings as an adjustment to
 interest expense from the underlying debt to which the swap is designated.
 During the three months ended March 31, 2009 and 2008, approximately $16,000
 and $1,000, respectively, of said adjustments were recorded to interest
 expense. During the three months ended March 31, 2009 and 2008,
 ineffectiveness from such hedges was $0.                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | At March 31, 2009 and December 31, 2008, the Company had a United
 States Dollar (USD) denominated interest rate swap outstanding which
 effectively fixed the interest rate on floating rate debt, exclusive of
 lender spreads, at 5.36% for a notional principal amount of $2,000,000
 through September 2010. The derivative net loss on this contract recorded in
 accumulated other comprehensive loss at March 31, 2009 and December 31, 2008 was $123,992 and $136,248, respectively. The accumulated other
 comprehensive loss at March 31, 2009 is expected to be reclassified into
 earnings over the next 18 months, the life of the agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

13

---



Table of Contents

|    |                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                      
|11. | Comprehensive
 Income                                                                                                                
|    |                                                                                                                                      
|    | The components of comprehensive income, as required to be reported by
 SFAS No. 130, Reporting Comprehensive Income, were as follows:

| |                                                         |  |                    |            |                 |   |         |  
| | ------------------------------------------------------- |  | ------------------ | ---------- | --------------- | - | ------- | -
| |                                                         |  | Three months ended |           
| |                                                         |  | March 31,
 2009    |            | March 31,
 2008 |  
| | Net (loss) income                                       |  | $                  | (989,290   | )               | $ | 149,816 |  
| | Change in fair value of
 interest rate swap             |  |                    | 12,256     |                 |   | (58,524 | )
| | (Loss) gain on foreign
 currency translation adjustment |  |                    | (26,468    | )               |   | 31,797  |  
| | Comprehensive income                                    |  | $                  | (1,003,502 | )               | $ | 123,089 |  

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|12. | Legal Proceedings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | We are a defendant along with a number of other parties in
 approximately 122 lawsuits as of December 31, 2008 alleging that plaintiffs have or may have contracted
 asbestos-related diseases as a result of exposure to asbestos products or
 equipment containing asbestos sold by one or more named defendants. Due to
 the noninformative nature of the complaints, we do not know whether any of
 the complaints state valid claims against us. Certain insurance carriers have
 informed us that the primary policies for the period August 1, 1970-1973,
 have been exhausted and that the carriers will no longer provide a defense
 under those policies. We have requested that the carriers substantiate this situation.
 We believe we have additional policies available for other years which have
 been ignored by the carriers. Because settlement payments are applied to all
 years a litigant was deemed to have been exposed to asbestos, we believe when
 settlement payments are applied to these additional policies, we will have
 availability under the years deemed exhausted. We do not believe that the
 asserted exhaustion of the primary insurance coverage for this period will
 have a material adverse effect on our financial condition, liquidity, or
 results of operations. Management believes that the number of insurance
 carriers involved in the defense of the suits and the significant number of
 policy years and policy limits, to which these insurance carriers are
 insuring us, make the ultimate disposition of these lawsuits not material to
 our consolidated financial position or results of operations.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Companys former wholly owned French subsidiary, Selas SAS, filed
 for insolvency in France and is being managed by a court appointed
 administrator. The Company may be subject to additional litigation or
 liabilities as a result of the French insolvency proceeding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | We are also involved in other lawsuits arising in the normal course
 of business. While it is not possible to predict with certainty the outcome
 of these matters, management is of the opinion that the disposition of these
 lawsuits and claims will not materially affect our consolidated financial
 position, liquidity or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|13. | Related-Party Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | One of the Companys subsidiaries leases office and factory space
 from a partnership consisting of three present or former officers of the
 subsidiary, including Mark Gorder, a member of the Companys Board of
 Directors and the President and Chief Executive Officer of the Company. The
 subsidiary is required to pay all real estate taxes and operating expenses.
 In the opinion of management, the terms of the lease agreement are comparable
 to those which could be obtained from unaffiliated third parties. The total
 base rent expense, real estate taxes and other charges incurred under the
 lease was approximately $119,000 and $120,000 for each of the three months
 ended March 31, 2009 and 2008, respectively. Annual lease commitments, which
 include base rent expense, real estate taxes and other charges, approximate
 $477,000 through October 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Company uses the law firm of Blank Rome LLP for legal services. A
 partner of that firm is the son-in-law of the Chairman of the Companys
 Board of Directors. For the three months ended March 31, 2009 and 2008, the
 Company paid that firm approximately $20,000 and $43,000, respectively, for
 legal services and costs. The Chairman of our Board of Directors is
 considered independent under applicable Nasdaq and SEC rules because (i) no
 payments were made to the Chairman or the partner directly in exchange for
 the services provided by the law firm and (ii) the amounts paid to the law
 firm did not exceed the thresholds contained in the Nasdaq standards. Furthermore, the aforementioned partner does not provide any legal
 services to the Company and is not involved in billing matters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

14

---



Table of Contents

|    |                                                                                 
|--- | --------------------------------------------------------------------------------
|    |                                                                                 
|14. | Statements of Cash
 Flows                                                       
|    |                                                                                 
|    | The following table provides supplemental disclosures of cash flow
 information:

| |                   |  |                    |        |                 |   |         | 
| | ----------------- |  | ------------------ | ------ | --------------- | - | ------- | 
| |                   |  | Three months ended |       
| |                   |  | March 31,
 2009    |        | March 31,
 2008 |  
|
| | Interest received |  | $                  | 439    |                 | $ | 11,525  | 
| | Interest paid     |  |                    | 79,921 |                 |   | 159,423 | 
| | Income taxes paid |  |                    | 75,784 |                 |   | 64,506  | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|15. | Investment in Equity Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The Company owns a 9% partnership interest in the Hearing Instrument
 Manufacturers Patent Partnership (HIMPP), and is a party to a license
 agreement that grants the Company access to over 45 US registered patents.
 The Company recorded $37,000 decrease in the carrying amount of the investment,
 reflecting amortization of the patents, other intangibles and the Companys
 portion of the partnerships operating results for both the three months
 ended March 31, 2009 and 2008, respectively.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The Companys subsidiary, IntriCon Tibbetts Corporation, owns a 50%
 interest in a joint venture with a Swiss company to market, design,
 manufacture, and sell audio coils to the hearing health industry. The Company
 has recorded a $50,000 decrease and a $59,000 increase in the carrying amount
 of the investment, reflecting the Companys portion of the joint ventures
 operating results for the three months ended March 31, 2009 and 2008,
 respectively.                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|16. | Revenue by Segment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The following tables set forth, for the periods indicated, net
 revenue by segment:                                                                                                                                                                                                                                                                                                                                                                                                                          

| |                                    |  |                    |            |                |   |            | 
| | ---------------------------------- |  | ------------------ | ---------- | -------------- | - | ---------- | 
| |                                    |  | Three Months Ended |           
| |                                    |  | March 31, 2009     |            | March 31, 2008 |  
| | Body-Worn
 Device Segment          |  |                    |            |                |   |            | 
| | Hearing
 Health                    |  | $                  | 4,411,000  |                | $ | 6,456,000  | 
| | Medical                            |  |                    | 5,285,000  |                |   | 4,908,000  | 
| | Professional
 Audio Communications |  |                    | 2,148,000  |                |   | 3,242,000  | 
| |                                    |  |                    |            |                |   |            | 
| | Electronic
 Products Segment       |  |                    |            |                |   |            | 
| | Electronics                        |  |                    | 1,486,000  |                |   | 1,985,000  | 
| | Total
 Revenue                     |  | $                  | 13,330,000 |                | $ | 16,591,000 | 

15

---



Table of Contents

ITEM 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations

Business Overview

Headquartered in Arden Hills, Minnesota, IntriCon Corporation (together
with its subsidiaries referred to as the Company, we, us or our) is an
international firm engaged in designing, developing, engineering and
manufacturing body-worn devices and electronic products. Currently, the Company
has two operating segments: its body worn device segment and electronics
products segment. The Company serves the body-worn device market by designing,
developing, engineering and manufacturing micro-miniature injection-molded
plastics, microelectronics, micro-mechanical assemblies and complete
assemblies, primarily for bio-telemetry devices, medical equipment, hearing
instruments, electronics, professional audio and telecommunications devices and
computers. In addition to its operations in Minnesota, the Company has
facilities in California, Maine, Singapore, and Germany.

Currently, the Company has two operating segments: its body worn device
segment and electronics products segment. Prior to 2008, the Companys
body-worn device and electronics products segments were combined in the
Companys precision miniature medical and electronics products segment. The
Company determined these segments no longer meet the criteria for aggregation.
The nature of the products and services has been deemed separately
identifiable, as the Company has further developed technologies and products
included in the body-worn device segment. Furthermore, as the underlying
products and technology have changed, the economic characteristics of each
business segment are not expected to be similar. Our electronics products
segment margin is subject to more variability due to material pricing and we
believe our future revenue growth and margin will be different for each segment
as a result of the proprietary technology included in our body-worn device
products.

Body-Worn Device Segment

Medical

In the medical market, the Company is focused on sales of multiple
biotelemetry devices from life-critical diagnostic monitoring devices to
drug-delivery systems. Using our nanoDSP and ultra-low power (ULP) nanoLink
technology, the Company manufactures microelectronics, micro-mechanical
assemblies, high-precision injection-molded plastic components and complete
bio-telemetry devices for emerging and leading medical device manufacturers.
Targeted customers include medical product manufacturers of portable and
lightweight battery powered devices, as well as a variety of sensors designed
to connect a patient to an electronic device.

The medical industry is faced with pressures to reduce the costs of
healthcare. IntriCon currently serves this market by offering medical
manufacturers the capabilities to design, develop and manufacture components
for medical devices that are easier to use, measure with greater accuracy and
provide more functions while reducing the costs to manufacture these devices.
IntriCon manufactures and supplies bubble sensors and flow restrictors that
monitor and control the flow of fluid in an intravenous infusion system.
IntriCon also manufactures a family of safety needle products for an original
equipment manufacturer (OEM) customer that utilizes IntriCons insert and
straight molding capabilities. These products are assembled using full
automation including built-in quality checks within the production lines. Other
examples include sensors used to detect pathologies in specific organs of the
body and monitoring devices to detect cardiac, respiratory functions, and blood
glucose levels. The early and accurate detection of pathologies allows for increased
likelihood for successful treatment of chronic diseases and cancers. Accurate
monitoring of multiple functions of the body, such as heart rate, breathing and
blood glucose levels, aids in generating more accurate diagnosis and treatments
for patients.

In addition, there has been an industry-wide trend toward further
miniaturization and ambulatory operation enabled by wireless connectivity,
which is also referred to as bio-telemetry. Through the further development of
our ULP BodyNet family, a series of wirelessly enabled products including our
new wireless nanoLink family, we believe the bio-telemetry offers a
significant future opportunity. Increasingly, the medical industry is looking
for wireless, low-power capabilities in their devices. We believe our strategic
partnership with AME will allow us to develop new bio-telemetry devices that
better connect patients and care givers, providing critical information and
feedback. Current examples of IntriCon biotelemetry products used by medical
device manufacturers include components found in wireless glucose sensor pumps
that introduce drugs into the bloodstream.

Hearing Health

IntriCon manufactures hybrid amplifiers and integrated circuit
components (hybrid amplifiers), along with faceplates for in-the-ear and
in-the-canal hearing instruments. IntriCon is a leading manufacturer and
supplier of microminiature electromechanical components to hearing instrument
manufacturers. These components consist of volume controls, microphones,
receivers, trimmer potentiometers and switches. Components are offered in a
variety of sizes, colors and capacities in order to accommodate a hearing
manufacturers individualized specifications.

16

---



Table of Contents

Hearing instruments, which fit behind or in a persons ear to amplify
and process sound for a hearing impaired person, generally are composed of four
basic parts and several supplemental components for control or fitting
purposes. The four basic parts are microphones, amplifier circuits, miniature
receivers/speakers and batteries, all of which IntriCon manufactures, with the
exception of the battery. IntriCons hybrid amplifiers are a type of amplifier
circuit. Supplemental components include volume controls, trimmer
potentiometers, which shape sound frequencies to respond to the particular
nature of a persons hearing loss, and switches used to turn the instrument on
and off and to go from telephone to normal speech modes. Faceplates and an ear
shell, molded to fit the users ear, often serve as housing for hearing
instruments. IntriCon manufactures its components on a short lead-time basis in
order to supply just-in-time delivery to its customers and, consequently,
order backlog amounts are not meaningful.

Using our ULP BodyNet family technology, specifically nanoDSP and our
new wireless nanoLink product family, IntriCon is building a new generation of
affordable, high-quality hearing aids and similar amplifier devices under
contracts for OEMs. Digital signal processing (DSP) devices have better
clarity, attractive pricing points and an improved ability to filter out
background noise. During 2008, we introduced Ethos, our new high-performance
adaptive DSP hearing instrument amplifier. In our view, Ethos advanced
capabilities are ideally suited for the hearing health market. We believe the
introduction of Ethos solidifies our position as a leader of high-performance
adaptive DSP hearing instrument amplifiers. Furthermore, we believe our
strategic alliance with Dynamic Hearing will allow us to develop new body-worn
applications and further expand both our hearing health and professional audio
product portfolio.

Overall, we believe the hearing health market holds significant
opportunities for the Company. In the United States, Europe and Japan, the
65-year-old-plus age demographic is the fastest growing segment of the
population, and many of those individuals could, at some point, benefit from a
hearing device that uses IntriCons proprietary technology.

While it harbors great potential, the hearing health market is
experiencing slowness due to macroeconomic conditions. In general, the U.S.
market does not provide insurance reimbursement for hearing aid purchases.
People can defer their hearing aid purchase. We believe the softness in the
market will continue into 2009. Reimbursement trends in Europe are more
favorable, with insurers and the governments covering more devices.

Professional Audio Communications

IntriCon entered the high-quality audio communication device market in
2001, and now has a line of miniature, professional audio headset products used
by customers focusing on homeland security and emergency response needs. The
line includes several communication devices that are extremely portable and perform
well in noisy or hazardous environments. These products are well suited for
applications in the fire, law enforcement, safety, aviation and military
markets. In addition, the Company has a line of miniature ear- and head-worn
devices used by performers and support staff in the music and stage performance
markets. Our May 2007 acquisition of Tibbetts Industries provided the Company
access to homeland security agencies in this market. We believe performance in
difficult listening environments and wireless operations will continue to
improve as these products increasingly include our proprietary nanoDSP,
wireless nanoLink and ULP nanoLink technology.

Electronics Products Segment

Our electronic products segment business is conducted by RTI
Electronics, Inc. (RTIE), a wholly owned subsidiary of the Company. RTIE
manufactures and sells thermistors and thermistor assemblies, which are solid
state devices that produce precise changes in electrical resistance as a
function of any change in absolute body temperature. RTIE sells through its
Surge-Gard product line, an inrush current limiting device used primarily in
computer power supplies. The balance of sales represents various industrial,
commercial and military sales for other thermistor, film capacitor and magnetic
products to domestic and international markets.

Forward-Looking and Cautionary Statements

Certain statements included in this Quarterly Report on Form 10-Q or
documents the Company files with the Securities and Exchange Commission, which
are not historical facts, or that include forward-looking terminology such as
may, will, believe, expect, should, optimistic or
continue or the
negative thereof or other variations thereof, are forward-looking statements
(as such term is defined in Section 21E of the Securities Exchange Act of 1934
and Section 27A of the Securities Act of 1933, and the regulations thereunder),
which are intended to be covered by the safe harbors created thereby. These
statements may include, but are not limited to statements in Managements
Discussion and Analysis of Financial Condition and Results of Operations and
Notes to the Companys Condensed Consolidated Financial Statements such as
net operating loss carryforwards, the ability to meet cash requirements for
operating needs, the ability to meet liquidity needs, assumptions used to
calculate future level of funding of employee benefit plans, the adequacy of
insurance coverage, the impact of new accounting pronouncements and litigation.

17

---



Table of Contents

Forward-looking statements also include, without limitation, statements
as to the Companys expected future results of operations and growth, the
Companys ability to meet working capital requirements, the Companys business
strategy, the expected increases in operating efficiencies, anticipated trends
in the Companys precision miniature medical and electronic products markets,
estimates of goodwill impairments and amortization expense of other intangible
assets, the effects of changes in accounting pronouncements, the effects of
litigation and the amount of insurance coverage, and statements as to trends or
the Companys or managements beliefs, expectations and opinions.

Forward-looking statements are subject to risks and uncertainties and
may be affected by various factors that may cause actual results to differ
materially from those in the forward-looking statements. In addition to the
factors discussed in this Quarterly Report on Form 10-Q, certain risks,
uncertainties and other factors can cause actual results and developments to be
materially different from those expressed or implied by such forward-looking
statements, including, without limitation, the following:

| |   |                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | § | the ability to successfully
 implement the Companys business and growth strategy;                                                                           
| | § | risks arising in connection with the insolvency of our former
 subsidiary, Selas SAS, and potential liabilities and actions arising in
 connection therewith;
| | § | the volume and timing of
 orders received by the Company;                                                                                                    
| | § | changes in estimated future cash flows;                                                                                                                      
| | § | ability to collect on our
 accounts receivable;                                                                                                              
| | § | foreign currency movements in markets the Company services;                                                                                                  
| | § | changes in the global
 economy and financial markets;                                                                                                        
| | § | weakening demand for the
 Companys products due to general economic conditions;                                                                             
| | § | changes in the mix of products sold;                                                                                                                         
| | § | ability to meet demand;                                                                                                                                      
| | § | changes in customer requirements;                                                                                                                            
| | § | timing and extent of
 research and development expenses;                                                                                                     
| | § | acceptance of the Companys products;                                                                                                                        
| | § | competitive pricing pressures;                                                                                                                               
| | § | pending and potential
 future litigation;                                                                                                                    
| | § | cost and availability of electronic components and commodities
 for the Companys products;                                                                  
| | § | ability to create and market products in a timely manner and
 develop products that are inexpensive to manufacture;                                          
| | § | ability to repay debt when it comes due;                                                                                                                     
| | § | the loss of one or more of our major customers;                                                                                                              
| | § | ability to identify and integrate acquisitions;                                                                                                              
| | § | effects of legislation;                                                                                                                                      
| | § | effects of foreign operations;                                                                                                                               
| | § | foreign currency risks;                                                                                                                                      
| | § | ability to recruit and retain engineering and technical
 personnel;                                                                                          
| | § | the costs and risks associated with research and development
 investments;                                                                                   
| | § | our ability and the ability of our customers to protect
 intellectual property; and                                                                          
| | § | loss of members of our senior management team.                                                                                                               

For a description of these and other risks, see Risk Factors in Part
I, Item 1A: Risk Factors in the Companys Annual Report on Form 10-K for the
year ended December 31, 2008 or in other filings the Company makes from time to
time with the Securities and Exchange Commission. The Company does not
undertake to update any forward-looking statement that may be made from time to
time by or on behalf of the Company.

Results of Operations

Sales, net

Consolidated net sales for the three months ended March 31, were as
follows (in thousands):

|                     |  |      |        |      |   |         |  |         |       |   |  |        |  
|-------------------- |  | ---- | ------ | ---- | - | ------- |  | ------- | ----- | - |  | ------ | -
|                     |  |      |        |      |   |         |  | Change  |      
|                     |  | 2009 |        | 2008 |   | Dollars |  | Percent |      
|                     |  |      |        |      |   |         |  |         |       |   |  |        |  
|Body-Worn
 Devices   |  | $    | 11,844 |      | $ | 14,606  |  | ($      | 2,762 | ) |  | (18.9% | )
|                     |  |      |        |      |   |         |  |         |       |   |  |        |  
|Electronic
 Products |  | $    | 1,486  |      | $ | 1,985   |  | ($      | 499   | ) |  | (25.1% | )

18

---



Table of Contents

Our net sales are comprised of four main markets: hearing health,
medical, professional audio device and electronics. Sales, net broken down by
market for the three months ended March 31, 2009 was as follows: medical 40%,
hearing health 33%, professional audio communications 16% and electronics 11%.
Sales, net for the three months ended March 31, 2009 were down 20 percent over
the same prior year period, as a result of the fluctuations described below.

For the three months ended March 31, 2009, we experienced an increase
of 8 percent in net sales in the medical equipment market as a direct result of
increased sales to existing OEM customers. Management believes there is an
industry-wide trend toward further miniaturization and ambulatory operation
enabled by wireless connectivity, referred to as bio-telemetry, which resulted
in further growth in our medical business. We have experienced solid growth in
our most advanced biotelemetry device, a continuous wireless glucose monitor,
which we manufacture for a major medical OEM. We are also working with our
strategic partner, AME, on proprietary biotelemetry technologies that will
enable us to develop new devices that connect patients and care givers,
providing critical information and feedback.

Net sales in our hearing health business for the three months ended
March 31, 2009 decreased 32 percent from the same period in 2008, primarily due
to lower demand from our customers in this market as people delayed hearing aid
purchases, compounded by the fact that the first quarter of our fiscal year is
typically the weakest. We believe the softness in the market will continue
through the first half of 2009, with customers cautiously beginning to
replenish inventory levels and reengaging projects during the second half of
the year. Despite the anticipated short-term softness, we believe our longer
term prospects in our hearing health business remain strong as we continue to
develop advanced technologies, such as our nanoDSP, which will enhance the
performance of hearing devices. In addition, we believe the market indicators
in the hearing health industry, including the aging world population, suggest
long-term industry growth.

Net sales to the professional audio device sector declined 34 percent
for the three month period ended March 31, 2009 compared to the same period in
2008, impacted by various customers in this market cautiously working through
their inventories and delaying projects due to current economic uncertainties
and lower demand for their products. In spite of this decline, we believe our
extensive portfolio of communication devices that are portable and perform well
in noisy or hazardous environments will provide for future long-term growth in
this market. These products are well suited for applications in fire, law
enforcement, safety, aviation and military markets.

Electronics net sales for the three months ended March 31, 2009
decreased 25 percent from 2008 primarily due to lower demand from our customers
in this market. Management has made efforts to reduce this segment cost
structure.

Gross margin

Gross margin for the three months ended March 31, was as follows (in
thousands):

|                     |  |         |       |                   |  |         |   |                   |       |         |  |         |   |    |       |   |  |        |  
|-------------------- |  | ------- | ----- | ----------------- |  | ------- | - | ----------------- | ----- | ------- |  | ------- | - | -- | ----- | - |  | ------ | -
|                     |  | 2009    |       | 2008              |  | Change  |  
|                     |  | Dollars |       | Percent
 of Sales |  | Dollars |   | Percent
 of Sales |       | Dollars |  | Percent |  
|                     |  |         |       |                   |  |         |   |                   |       |         |  |         |   |    |       |   |  |        |  
|Body-Worn
 Devices   |  | $       | 2,176 |                   |  | 18.4    | % | $                 | 3,489 |         |  | 23.9    | % | ($ | 1,313 | ) |  | (37.6% | )
|                     |  |         |       |                   |  |         |   |                   |       |         |  |         |   |    |       |   |  |        |  
|Electronic
 Products |  | $       | 200   |                   |  | 13.5    | % | $                 | 356   |         |  | 17.9    | % | ($ | 156   | ) |  | (43.8% | )

Gross margin as a percentage of sales decreased for the three months
ended March 31, 2009 compared to the prior year period for both operating
segments. The declines in gross margin primarily resulted from the lower
revenue levels described above combined with lower-margin product mix,
partially offset by the increased margin from our higher medical sales. We have
various activities underway to increase efficiency and improve our gross
margin, such as introducing Six Sigma lean manufacturing methods across various
medical and hearing health product lines, conservatively managing our business
and reducing expenses, and increasing the percentage of IntriCon proprietary
content in the devices we manufacture.

Selling, general and administrative expenses

Selling, general and administrative expenses (SG&A) for the three
months ended March 31 were as follows (in thousands):

19

---



Table of Contents

|                           |  |         |       |                              |  |         |   |                              |       |         |  |         |   |    |     |   |  |       |   
|-------------------------- |  | ------- | ----- | ---------------------------- |  | ------- | - | ---------------------------- | ----- | ------- |  | ------- | - | -- | --- | - |  | ----- | --
|                           |  | 2009    |       | 2008                         |  | Change  |  
|                           |  | Dollars |       | Percent 
 of Segment 
 Sales |  | Dollars |   | Percent 
 of Segment 
 Sales |       | Dollars |  | Percent |  
|                          
|Body-Worn Devices:         |  |         |       |                              |  |         |   |                              |       |         |  |         |   |    |     |   |  |       |   
|Selling                    |  | $       | 619   |                              |  | 5.2     | % | $                            | 817   |         |  | 5.6     | % | ($ | 198 | ) |  | (24.2 | %)
|General and Administrative |  |         | 1,378 |                              |  | 11.6    |   |                              | 1,423 |         |  | 9.7     |   |    | (55 | ) |  | (3.9  | %)
|Research and Development   |  |         | 881   |                              |  | 7.4     |   |                              | 788   |         |  | 5.4     |   |    | 93  |   |  | 11.8  | % 
|Electronics Products:      |  |         |       |                              |  |         |   |                              |       |         |  |         |   |    |     |   |  |       |   
|Selling                    |  | $       | 161   |                              |  | 10.8    | % | $                            | 179   |         |  | 9.0     | % | ($ | 18  | ) |  | (10.1 | %)
|General and Administrative |  |         | 203   |                              |  | 13.7    |   |                              | 229   |         |  | 11.5    |   |    | (26 | ) |  | (11.4 | %)
|Research and Development   |  |         |      |                              |  |        |   |                              |      |         |  |        |   |    |    |   |  |      |   

The decreased body-worn device selling expenses for the three months
ended March 31, 2009 as compared to the prior year period were driven by
decreases in royalties and commissions as a result of lower revenues, lower
salary and benefit expenses from lower headcount levels and decreased bad debt
expense. The decrease in body-worn device general and administrative expenses
were driven by cost control measures taken by the Company in conjunction with
the revenue decreases including lower salary and benefit expenses from reduced
headcount levels, partially offset by increases in professional and legal fees
compared to the prior year. The increased body-worn device research and
development expenses as compared to the prior year were due to our continued
emphasis on investing in research and development projects to develop new
products and technology to further enhance our product portfolio, including
expenses recognized from our partnership with Dynamic Hearing.

Electronics products SG&A expenses decreased for the three months
ended March 31, 2009 as compared to the prior year as a result of managements
efforts to reduce this segment cost structure in the face of declining
revenues.

Net
interest expense

Net interest expense for the three months ended March 31, 2009 was
$125,000 compared to $188,000 for the same period in 2008. The decrease in net
interest expense was due primarily to lower interest rates in effect on lower
principal levels of outstanding debt in 2009.

Equity
in earnings of partnerships

The equity in earnings of partnerships for the three months ended March
31, 2009 was ($87,000) compared to $22,000 for the same period in 2008.

The Company recorded a $37,000 decrease in the carrying amount of the
HIMPP investment, reflecting amortization of the patents, other intangibles and
the Companys portion of the partnerships operating results for both the three
months ended March 31, 2009 and 2008, respectively.

The Company recorded a $50,000 decrease and a $59,000 increase in the
carrying amount of IntriCon Tibbetts Corporations investment in joint venture,
reflecting the Companys portion of the joint ventures operating results for
the three months ended March 31, 2009 and 2008, respectively.

Other
income (expense), net

Other income (expense), net for the three months ended March 31, 2009,
was $54,000 compared to other income (expense), net of ($5,000) for the same
period in 2008. The change in other income (expense), net primarily related to
the changes in foreign currency exchange rates.

Income
taxes

Income tax benefit for the three months ended March 31, 2009, was
($34,000) compared to expense of $87,000 and for the same period in 2008. The
benefit recognized in 2009 was primarily due operating losses incurred on both
domestic and foreign operations.

20

---



Table of Contents

Liquidity and Capital Resources

As of March 31, 2009, we had approximately $0.3 million of cash on
hand. Sources of our cash for the three months ended March 31, 2009 have been
from our operations, as described below.

The Companys cash flows from operating, investing and financing
activities, as reflected in the statement of cash flows, are summarized as
follows (in thousands):

|                                                  |  |                    |      |                 |   |        |  
|------------------------------------------------- |  | ------------------ | ---- | --------------- | - | ------ | -
|                                                  |  | Three months Ended |     
|                                                  |  | March 31,
 2009    |      | March 31,
 2008 |  
|Cash provided (used) by:                          |  |                    |      |                 |   |        |  
|Operating activities                              |  | $                  | 435  |                 | $ | (1,334 | )
|Investing activities                              |  |                    | (159 | )               |   | (381   | )
|Financing activities                              |  |                    | (277 | )               |   | 1,692  |  
|Effect of exchange rate changes on cash           |  |                    | (5   | )               |   | 35     |  
|Increase (decrease) in cash and cash
 equivalents |  | $                  | (6   | )               | $ | 12     |  

The most significant items that contributed to the $0.4 million of cash
provided by operating activities were changes in operating assets and
liabilities of $0.7 million, depreciation of $0.6 million and net loss of
$(1.0) million. The change in operating assets and liabilities was primarily
due to decreases in accounts receivable, partially offset by decreases in
accrued expenses. The change in accounts receivable is due to lower revenue and
the timing of sales and customer payments. The change in accrued expenses is
primarily due to less accrued expense for salary and benefits.

Net cash used by investing of activities consisted of purchases of
property, plant and equipment of $0.4 million, partially offset by $0.2 million
of cash received from notes receivable.

Net cash used by financing activities of $0.3 million was comprised
primarily of net payments of debt of $0.2 million.

The Company had the following bank arrangements (in thousands):

|                                                    |  |                 |        |                    |   |        | 
|--------------------------------------------------- |  | --------------- | ------ | ------------------ | - | ------ | 
|                                                    |  | March 31,
 2009 |        | December 31,
 2008 |  
|                                                    |  |                 |        |                    |   |        | 
|Total borrowing capacity under existing
 facilities |  | $               | 12,268 |                    | $ | 13,243 | 
|                                                    |  |                 |        |                    |   |        | 
|Facility Borrowings:                                |  |                 |        |                    |   |        | 
|Domestic revolving credit facility                  |  |                 | 3,000  |                    |   | 3,000  | 
|Domestic term loan                                  |  |                 | 2,616  |                    |   | 2,756  | 
|Foreign overdraft and letter of credit
 facility    |  |                 | 588    |                    |   | 605    | 
|Domestic capital equipment leases                   |  |                 | 1,279  |                    |   | 1,330  | 
|Total borrowings and commitments                    |  |                 | 7,482  |                    |   | 7,691  | 
|Remaining availability under existing
 facilities   |  | $               | 4,786  |                    | $ | 5,552  | 

The
Company and its subsidiaries, IntriCon, Inc., RTI Electronics, Inc. and
IntriCon Tibbetts Corporation, referred to as the borrowers, entered into a
credit facility with LaSalle Bank, National Association (now Bank of America),
referred to as the lender, on May 22, 2007. The credit facility provides for:

| |   |                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | § | a $10,000,000 revolving credit facility, with a $200,000 subfacility
 for letters of credit. Under the revolving credit facility, the availability
 of funds depends on a borrowing base composed of stated percentages of our
 eligible trade receivables and eligible inventory, less a reserve.
| |   |                                                                                                                                                                                                                                                                                                   
| | § | a $4,500,000
 term loan, which was used to fund the Tibbetts acquisition.                                                                                                                                                                                                                         

Loans
under the credit facility are secured by a security interest in substantially
all of the assets of the borrowers including a pledge of the stock of the
subsidiaries. All of the borrowers are jointly and severally liable for all
borrowings under the new credit facility.

21

---



Table of Contents

Loans under the credit
facility bear interest, at the option of the Company, at:

| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the
 London InterBank Offered Rate (LIBOR) plus 1.90%, in the case of revolving
 line of credit loans, or LIBOR plus 2.15%, in the case of the term loan, or        
| |   |                                                                                                                                                                       
| |  | the
 base rate, which is the higher of (a) the rate publicly announced from time
 to time by the lender as its prime rate and (b) the Federal Funds Rate plus
 0.5%.

Interest
is payable monthly in arrears, except that interest on LIBOR based loans is
payable at the end of the one, two or three month interest periods applicable
to LIBOR based loans, or every three months in the case of LIBOR based loans
with a six month interest period.

Weighted
average interest on the domestic asset-based revolving credit facilities was
3.72% and 6.55% for the three months ended March 31, 2009 and 2008,
respectively.

The
credit facility will expire and all outstanding loans will become due and
payable on June 30, 2012. The term loan requires quarterly principal payments,
commencing on September 30, 2007, based on an increasing installment schedule,
with any balance due on June 30, 2012. The principal balance of the term loan
was $2,615,625 and $2,756,250 at March 31, 2009 and December 31, 2008,
respectively. In 2008, we used proceeds of $1,013,000 from the equipment
sale-leaseback described below to pay down the term loan.

The
outstanding balance of the revolving credit facility was $3,000,000 at March
31, 2009 and December 31, 2008, respectively. The total remaining availability
on the revolving credit facility was approximately $3,662,000 and $4,349,000 at
March 31, 2009 and December 31, 2008, respectively.

The
revolving facility carries a non-use fee equal to 0.25% per year of the unused
portion of the revolving line of credit facility, payable quarterly in arrears.

The
Company is subject to various covenants under the credit facility, including
financial covenants relating to tangible net worth, funded debt to earnings
before interest, taxes, depreciation and amortization, fixed charge coverage
ratio and capital expenditures. Under the credit facility, except as otherwise
permitted, the borrowers may not, among other things, incur or permit to exist
any indebtedness; grant or permit to exist any liens or security interests on
their assets or pledge the stock of any subsidiary; make investments; be a
party to any merger or consolidation, or purchase of all or substantially all
of the assets or equity of any other entity; sell, transfer, convey or lease
all or any substantial part of its assets or capital securities; sell or
assign, with or without recourse, any receivables; issue any capital
securities; make any distribution or dividend (other than stock dividends),
whether in cash or otherwise, to any of its equityholders; purchase or redeem
any of its equity interests or any warrants, options or other rights in respect
thereof; enter into any transaction with any of its affiliates or with any
director, officer or employee of any borrower; be a party to any unconditional
purchase obligations; cancel any claim or debt owing to it; enter into any
agreement inconsistent with the provisions of the credit facility or other
agreements and documents entered into in connection with the credit facility;
engage in any line of business other than the businesses engaged in on the date
of the credit facility and businesses reasonably related thereto; or permit its
charter, bylaws or other organizational documents to be amended or modified in
any way which could reasonably be expected to materially adversely affect the
interests of the lender. Effective as of September 30, 2007, the credit
facility was amended to change the tangible net worth covenant. Effective as of
June 30, 2008, the credit facility was amended to correct an error in the
amortization table set forth in the loan agreement. Effective as of December
31, 2008, the credit facility was amended to change the fixed charge coverage
covenant to exclude payments made in connection with the June 2008 sale
leaseback described below. As of March 31, 2009, the Company was in compliance
with all financial covenants under the credit facility, as amended. Based on
the results of operations for the past three months, the Company may need to
seek waivers or amendments to the financial covenants under the credit
facility. While management believes we will be able to comply with covenants,
or obtain appropriate waivers and amendments, in the future, no assurance can
be given that we will be able to do so.

Upon
the occurrence and during the continuance of an event of default (as defined in
the credit facility), the lender may, among other things: terminate its
commitments to the borrowers (including terminating or suspending its
obligation to make loans and advances); declare all outstanding loans, interest
and fees to be immediately due and payable; take possession of and sell any
pledged assets and other collateral; and exercise any and all rights and
remedies available to it under the Uniform Commercial Code or other applicable
law. In the event of the insolvency or bankruptcy of any borrower, all
commitments of the lender will automatically terminate and all outstanding
loans, interest and fees will be immediately due and payable. Events of default
include, among other things: failure to pay any amounts when due; material
misrepresentation; default in the performance of any covenant, condition or
agreement to be performed that is not cured within 20 days after notice from
the lender; default in the payment of other indebtedness or other obligation
with an outstanding principal balance of more than $50,000, or of any other
term, condition or covenant contained in the agreement under which such
obligation is created, the effect of which is to allow the other party to
accelerate such payment or to terminate the agreements; the insolvency or
bankruptcy of any
borrower; the entrance of any judgment against any borrower in excess of
$50,000, which is not fully covered by insurance; the occurrence of a change in
control (as defined in the credit facility); certain collateral impairments;
and a contribution failure with respect to any employee benefit plan that gives
rise to a lien under ERISA.

22

---



Table of Contents

In
June 2006, the Company completed a sale-leaseback of its Vadnais Heights
manufacturing facility. The transaction generated proceeds of $2,650,000, of
which $1,388,000 was used to repay the associated real estate loan and the
remainder to pay down our domestic revolver under the Companys prior credit
facility. The remaining gain on the sale of $798,110 is being recognized over
the initial 10-year lease term as the renewal options in the lease are not
assured and a penalty does not exist if we do not exercise the renewal options.

In
addition to its domestic credit facilities, the Companys wholly-owned
subsidiary, IntriCon, PTE LTD., entered into an international senior secured
credit agreement with Oversea-Chinese Banking Corporation Ltd. that provides
for approximately $1.8 million line of credit. Borrowings bear interest at a
rate of .75% to 2.5% over the lenders prevailing prime lending rate. Weighted
average interest on the international credit facilities was 5.92% and 5.41% for
the three months ended March 31, 2009 and 2008, respectively. The outstanding
balance was $588,000 and $605,000 at March 31, 2009 and December 31, 2008,
respectively. The total remaining availability on the international senior
secured credit agreement was approximately $1,123,000 and $1,203,000 at March
31, 2009 and December 31, 2008, respectively.

In
June 2008, the Company completed a sale-leaseback of machinery and equipment
with Bank of America. The transaction generated proceeds of $1,098,000,
of which $1,013,000 was used to pay down the domestic term loan. The capital
lease agreement expires in June 2014, requires monthly payments of $15,800 and
has a present value of future
minimum lease payments of $1,098,000 with an effective interest rate of 5.14%.
The remaining gain on the sale of $53,705 is being recognized over the initial
6-year lease term.

The
Company also has entered into several other capital lease agreements to fund
the acquisition of machinery and equipment. The total original principal
amount of all capital leases (including the sale-leaseback described above) was
$1,661,000 with effective interest rates ranging from 5.1% to 8.0%. These
agreements range from 3 to 6 years. The outstanding balance under these capital
lease agreements at March 31, 2009 and December 31, 2008 was $1,279,000 and
$1,330,000, respectively. The accumulated amortization on leased equipment was
$325,000 and $257,000 at March 31, 2009 and December 31, 2008, respectively.
The amortization of capital leases is included in depreciation expense for the
three months ended March 31, 2009 and 2008.

We believe that funds expected to be generated from operations, the
available borrowing capacity through our revolving credit loan facilities and
the control of capital spending will be sufficient to meet our anticipated cash
requirements for operating needs for at least the next 12 months. If, however,
we do not generate sufficient cash from operations, or if we incur additional
unanticipated liabilities, we may be required to seek additional financing or
sell equity or debt on terms which may not be as favorable as we could have
otherwise obtained. No assurance can be given that any refinancing, additional
borrowing or sale of equity or debt will be possible when needed or that we
will be able to negotiate acceptable terms. In addition, our access to capital
is affected by prevailing conditions in the financial and equity capital
markets, as well as its own financial condition. While management believes that
we will be able to meet our liquidity needs for at least the next 12 months, no
assurance can be given that we will be able to do so.

Recent Accounting Pronouncements

As discussed in note 2 to the Consolidated Condensed Financial
Statements, on December 4, 2007, the FASB issued SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements - an Amendment of ARB No. 51.
SFAS 160 establishes new accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. Specifically, this statement requires the recognition of a
noncontrolling interest (minority interest) as equity in the consolidated financial
statements and separate from the parents equity. The amount of net income
attributable to the noncontrolling interest will be included in consolidated
net income on the face of the income statement. SFAS No. 160 clarifies that
changes in a parents ownership interest in a subsidiary that do not result in
deconsolidation are equity transactions if the parent retains its controlling
financial interest. In addition, this statement requires that a parent
recognize a gain or loss in net income when a subsidiary is deconsolidated.
Such gain or loss will be measured using the fair value of the noncontrolling
equity investment on the deconsolidation date. SFAS No. 160 also includes
expanded disclosure requirements regarding the interests of the parent and its
noncontrolling interest. SFAS No. 160 is effective for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2008.
Earlier adoption is prohibited. The adoption of SFAS No. 160 did not have a
material effect on our results of operations or financial position.

23

---



Table of Contents

On December 4, 2007, the FASB issued SFAS No. 141 (Revised 2007),
Business Combinations. SFAS No. 141(R) will significantly change the
accounting for business combinations. Under SFAS No. 141(R), an acquiring
entity will be required to recognize all the assets acquired and liabilities
assumed in a transaction at the acquisition-date fair value with limited
exceptions. SFAS No. 141R will change the accounting treatment for certain
specific items, including:

| |                                                                                                                                                                                                                                                     | 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
| | §          Acquisition
 costs will be generally expensed as incurred;                                                                                                                                                                              
| |                                                                                                                                                                                                                                                     | 
| | §          Noncontrolling interests (formerly known as minority interests will
 be valued at fair value at the acquisition date;                                                                                                                 
| |                                                                                                                                                                                                                                                     | 
| | §          Acquired
 contingent liabilities will be recorded at fair value at the acquisition date
 and subsequently measured at either the higher of such amount or the amount
 determined under existing guidance for non-acquired contingencies;
| |                                                                                                                                                                                                                                                     | 
| | §          In-process
 research and development will be recorded at fair value as an indefinite-lived
 intangible asset at the acquisition date;                                                                                                    | 
| |                                                                                                                                                                                                                                                     | 
| | §          Restructuring costs associated with a business combination will be
 generally expensed subsequent to the acquisition date; and                                                                                                          
| |                                                                                                                                                                                                                                                     | 
| | §          Changes in deferred tax asset valuation allowances and income tax
 uncertainties after the acquisition date generally will affect income tax
 expense.                                                                                  

SFAS No. 141(R) also includes a substantial number of new disclosure
requirements. The statement applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning after December 15, 2008. Earlier adoption is
prohibited. This standard will change our accounting treatment for business
combinations on a prospective basis and was adopted by the Company in the first
quarter of 2009.

In May 2008, the FASB issued
SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS
No. 162 is intended to improve financial reporting by identifying a consistent
framework, or hierarchy, for selecting accounting principles to be used in
preparing financial statements that are presented in conformity with U.S.
generally accepted accounting principles (GAAP) for nongovernmental entities.
Prior to the issuance of SFAS No. 162, GAAP hierarchy was defined in the
American Institute of Certified Public Accountants (AICPA) Statement on
Auditing Standards No. 69 (SAS No. 69), The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles. SAS No. 69 has been
criticized because it is directed to the auditor rather than the entity. SFAS
No. 162 addresses these issues by establishing that the GAAP hierarchy should
be directed to entities because it is the entity (not its auditor) that is
responsible for selecting accounting principles for financial statements that
are presented in conformity with GAAP. SFAS No. 162 is effective 60 days
following the U.S. Securities and Exchange Commissions approval of the Public
Company Accounting Oversight Board Auditing amendments to AU Section 411, The
Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles. The Company does not expect SFAS 162 to have a material effect on
our results of operations or financial position.

Critical Accounting Policies

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expense during the reporting period.

Certain accounting estimates and assumptions are particularly sensitive
because their significance to the consolidated condensed financial statements
and the possibility that future events affecting them may differ markedly. The
accounting policies of the Company with significant estimates and assumptions
include the Companys revenue recognition, accounts receivable reserves,
inventory valuation, goodwill, long-lived assets, deferred taxes policies and
employee benefit obligations. These and other significant accounting policies
are described in and incorporated by reference from Managements Discussion
and Analysis of Financial Condition and Results of Operations, and Note 1 to
the financial statements contained in the Companys Annual Report on Form 10-K
for the year ended December 31, 2008.

24

---



Table of Contents

ITEM
3. Quantitative and Qualitative Disclosures About Market Risk

For information regarding the Companys exposure to certain market
risks, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk,
in the Companys Annual Report on Form 10-K for the year ended December 31,
2008. Other than as described below, there have been no material changes in the
Companys market risk exposures which have occurred since December 31, 2008.

ITEM
4T. Controls and Procedures

The Companys
management, with the participation of its chief executive officer and chief
financial officer, conducted an evaluation of the effectiveness of the
Companys disclosure controls and procedures, as defined in Exchange Act Rule
13a-15(e), as of March 31, 2009 (the Disclosure Controls Evaluation). Based
on the Disclosure Controls Evaluation, the Companys chief executive officer
and chief financial officer concluded that the Companys disclosure controls
and procedures were effective to provide a reasonable level of assurance that:
(i) information required to be disclosed by the Company in the reports the Company
files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commissions rules and forms and (ii) information required to be disclosed in
the reports the Company files or submits under Exchange Act is accumulated and
communicated to management, including the principal executive officer and
principal financial officer, to allow timely decisions regarding required
disclosure, all in accordance with Exchange Act Rule 13a-15(e).

There were no changes in the Companys internal control over financial
reporting, as defined in Exchange Act Rule 13a-15(f), during the quarter ended
March 31, 2009, that have materially affected, or are reasonably likely to
materially affect, the Companys internal control over financial reporting.

A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system must reflect
the fact that there are resource constraints, and the benefits of controls must
be considered relative to their costs. Because of the inherent limitations in
all control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within the Company have been
detected. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.

25

---



Table of Contents

PART II - OTHER INFORMATION

ITEM
1. Legal Proceedings

The information contained in note 12 to the Consolidated Condensed
Financial Statements in Part I of this quarterly report is incorporated by
reference herein.

ITEM
1A. Risk Factors

In addition to the other information set forth in this report, you
should carefully consider the factors discussed in Part I, Item 1A. Risk
Factors in our Annual Report on Form 10-K for the year ended December 31,
2008, which could materially affect the Companys business, financial condition
or future results. The risk factors in the Companys Annual Report on Form 10-K
have not materially changed. The risks described in our Annual Report on Form
10-K are not the only risks facing the Company. Additional risks and uncertainties
not currently known to us or that we currently deem to be immaterial also may
materially adversely affect our business, financial condition and/or operating
results.

ITEM
2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM
3. Defaults upon Senior Securities

None.

ITEM
4. Submission of Matters to a Vote of Security Holders

None.

ITEM
5. Other Information

None.

26

---



Table of Contents

ITEM
6. Exhibits

| |                 |                                                                                                                                                                                                                                                                              
| | --------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a)    Exhibits
| |                 |                                                                                                                                                                                                                                                                              
| | 10.1            | Annual
 Incentive Plan for Executives and Key Employees for Fiscal Year 2009
 (management contract, compensatory plan or arrangement). Confidential
 treatment requested for certain portions of this Exhibit, which portions are
 omitted and filed separately with the SEC.
| |                 |                                                                                                                                                                                                                                                                              
| | 31.1            | Certification
 of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley
 Act of 2002                                                                                                                                                                     
| |                 |                                                                                                                                                                                                                                                                              
| | 31.2            | Certification
 of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley
 Act of 2002                                                                                                                                                                     
| |                 |                                                                                                                                                                                                                                                                              
| | 32.1            | Certification
 of principal executive officer pursuant to U.S.C. Section 1350, as adopted
 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                         
| |                 |                                                                                                                                                                                                                                                                              
| | 32.2            | Certification
 of principal financial officer to U.S.C. Section 1350, as adopted pursuant to
 Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                  

27

---



Table of Contents

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.

| |                     
| | --------------------
| | INTRICON CORPORATION
| | (Registrant)        

|                    |                                        |                    
|------------------- | -------------------------------------- | -------------------
|Date: May 11,
 2009 | By:                                    | /s/ Mark S.
 Gorder
|                    | Mark S.
 Gorder                       
|                    | President
 and Chief Executive Officer
|                    | (principal
 executive officer)        
|                    |                                        |                    
|Date: May 11,
 2009 | By:                                    | /s/ Scott
 Longval 
|                    | Scott
 Longval                        
|                    | Chief
 Financial Officer and Treasurer
|                    | (principal
 financial officer)        

28

---



Table of Contents

EXHIBIT INDEX

| |      |                                                                                                                                                                                                                                                                              
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.1 | Annual
 Incentive Plan for Executives and Key Employees for Fiscal Year 2009
 (management contract, compensatory plan or arrangement). Confidential
 treatment requested for certain portions of this Exhibit, which portions are
 omitted and filed separately with the SEC.
| |      |                                                                                                                                                                                                                                                                              
| | 31.1 | Certification
 of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley
 Act of 2002                                                                                                                                                                     
| |      |                                                                                                                                                                                                                                                                              
| | 31.2 | Certification
 of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley
 Act of 2002                                                                                                                                                                     
| |      |                                                                                                                                                                                                                                                                              
| | 32.1 | Certification
 of principal executive officer pursuant to U.S.C. Section 1350, as adopted
 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                         
| |      |                                                                                                                                                                                                                                                                              
| | 32.2 | Certification
 of principal financial officer to U.S.C. Section 1350, as adopted pursuant to
 Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                  

29

---