United States Securities and Exchange Commission
Washington, DC 20549

FORM 10-Q

[ x ]
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act
of 1934
 
For the Quarterly Period Ended March 31,quarterly period ended June 30, 2013
 
[   ]
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act
of 1934
 
For the transition period from _________to ________.
 
Commission File Number 001-09014
 
ChyronChyronHego Corporation
(Exact name of registrant as specified in its charter)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
      Yes [x]     No [  ]

Indicate by checkmark 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).         [x] Yes        [  ] 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. (Check one):

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ]
(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 in Rule 12b-2 of the Exchange Act).     Yes [  ]     No [x]

The number of shares outstanding of the issuer's common stock, par value $.01 per share, on May 7,August 9, 2013 was 17,434,972.
30,110,068.

 
 
 

CHYRONCHYRONHEGO CORPORATION


INDEX

PART IFINANCIAL INFORMATIONPage
   
Item 1.Financial Statements 
   Consolidated Balance Sheets as of March 31,June 30, 2013 (unaudited) and 
 
    December 31, 2012
3
   
   Consolidated Statements of Operations (unaudited) for the Three and Six Months 
 
    Months ended March 31,June 30, 2013 and 2012 (unaudited)
4
   
   Consolidated Statements of Comprehensive Income (Loss) (unaudited)for the 
 
    for the    Three and Six Months ended March 31,June 30, 2013 and 2012
(unaudited)		5
   
   Consolidated Statements of Cash Flows (unaudited) for the ThreeSix Months 
 
    Months ended March 31,June 30, 2013 and 2012 (unaudited)
6
   
 
  Notes to Consolidated Financial Statements (unaudited)
7
   
Item 2.Management's Discussion and Analysis of Financial Condition 
 
  and Results of Operations
1720
   
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
2226
   
Item 4.
Controls and Procedures
2226
   
PART IIOTHER INFORMATION 
   
Item 1.
Legal Proceedings
2326
   
Item 1A.
Risk Factors
2327
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
3128
   
Item 3.
Defaults Upon Senior Securities
3128
   
Item 4.
Mine Safety Disclosures
3128
   
Item 5.
Other Information
3128
   
Item 6.
Exhibits
3229

2
 
2
 

PART I   FINANCIAL INFORMATION
Item 1.    Financial Statements
CHYRONCHYRONHEGO CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)

 Unaudited     Unaudited    
 March 31,  December 31,  June 30,  December 31, 
Assets 2013  2012  2013  2012 
Current assets:            
Cash and cash equivalents
 $2,309  $2,483  $2,189  $2,483 
Accounts receivable, net
  5,611   5,630   9,958   5,630 
Inventories, net
  2,097   2,285   2,686   2,285 
Prepaid expenses and other current assets   754   626   1,987   626 
Total current assets
  10,771   11,024   16,820   11,024 
                
Property and equipment, net
  1,256   1,347   3,364   1,347 
Intangible assets, net
  535   559   10,238   559 
Goodwill
  2,066   2,066   16,621   2,066 
Deferred tax asset
  253   - 
Other assets   115   119   191   119 
TOTAL ASSETS
 $14,743  $15,115  $47,487  $15,115 
   
Liabilities and Shareholders' EquityLiabilities and Shareholders' Equity Liabilities and Shareholders' Equity 
Current liabilities:                
Accounts payable and accrued expenses
 $3,448  $3,100  $8,977  $3,100 
Deferred revenue
  3,525   3,637   4,239   3,637 
Due to related parties
  669   - 
Current portion of pension liability
  372   278   377   278 
Current portion of term loan
  280   280 
Short-term debt
  1,269   280 
Capital lease obligations
  13   20   224   20 
Total current liabilities
  7,638   7,315   15,755   7,315 
                
Contingent consideration
  7,555   - 
Pension liability
  3,979   3,873   4,069   3,873 
Deferred revenue
  1,101   1,198   986   1,198 
Term Loan
  327   397 
Long-term debt
  575   397 
Other liabilities
  356   351   657   351 
Total liabilities
  13,401   13,134   29,597   13,134 
                
Commitments and contingencies                
                
Shareholders' equity:                
Preferred stock, par value $1.00, without designation                
Authorized - 1,000,000 shares, Issued - none                
Common stock, par value $.01                
Authorized - 150,000,000 shares                
Issued and outstanding - 17,419,622 at March 31, 2013        
Issued and outstanding - 30,094,464 at June 30, 2013        
and 17,135,239 at December 31, 2012
  174   171   301   171 
Additional paid-in capital
  84,834   84,539   103,103   84,539 
Accumulated deficit
  (81,321)  (80,404)  (83,406)  (80,404)
Accumulated other comprehensive loss
  (2,345)  (2,325)  (2,255)  (2,325)
Total ChyronHego Corporation shareholders' equity
  17,743   1,981 
Non controlling interests
  147   - 
Total shareholders' equity
  1,342   1,981   17,890   1,981 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
 $14,743  $15,115  $47,487  $15,115 


See Notes to Consolidated Financial Statements (unaudited)
3
 
3
 

CHYRONCHYRONHEGO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2013 AND 2012
(In thousands, except per share amounts)

(Unaudited)


  2013  2012 
       
Product revenues                                                                                                     $5,974  $5,802 
Service revenues                                                                                                      2,043   2,075 
Total revenues                                                                                                      8,017   7,877 
         
Cost of sales                                                                                                      2,295   2,335 
Gross profit                                                                                                      5,722   5,542 
         
Operating expenses:        
   Selling, general and administrative                                                                                                      4,751   4,685 
   Research and development                                                                                                      1,780   1,931 
         
Total operating expenses                                                                                                      6,531   6,616 
         
Operating loss                                                                                                      (809)  (1,074)
         
Interest expense                                                                                                      (14)  (5)
         
Other (loss) income, net                                                                                                      (83)  7 
         
Loss before income taxes                                                                                                      (906)  (1,072)
         
Income tax (expense) benefit                                                                                                      (11)  121 
         
Net loss                                                                                                     $(917) $(951)
         
Net loss per share - basic                                                                                                     $(0.05) $(0.06)
         
Net loss per share - diluted                                                                                                     $(0.05) $(0.06)
         
Weighted average shares outstanding:        
  Basic                                                                                                      17,362   16,807 
  Diluted                                                                                                      17,362   16,807 



  Three Months  Six Months 
  Ended June 30,  Ended June 30, 
  2013  2012  2013  2012 
             
Product revenues
 $6,744  $5,771  $12,718  $11,573 
Service revenues
  3,972   1,913   6,015   3,988 
Total revenues
  10,716   7,684   18,733   15,561 
                 
Cost of sales
  3,385   2,365   5,680   4,700 
Gross profit
  7,331   5,319   13,053   10,861 
                 
Operating expenses:                
   Selling, general and administrative
  6,836   4,479   11,587   9,164 
   Research and development
  2,345   1,929   4,125   3,860 
                 
Total operating expenses
  9,181   6,408   15,712   13,024 
                 
Operating loss
  (1,850)  (1,089)  (2,659)  (2,163)
                 
Interest expense, net
  (95)  (4)  (109)  (9)
                 
Other loss, net
  (39)  (13)  (122)  (6)
                 
Loss before taxes
  (1,984)  (1,106)  (2,890)  (2,178)
                 
Income tax (expense) benefit, net
  (93)  476   (104)  597 
                 
Net loss
  (2,077)  (630)  (2,994)  (1,581)
                 
Less: Net income attributable to                
 Non controlling interests
  8   -   8   - 
                 
Net loss attributable to ChyronHego                
 shareholders
 $(2,085) $(630) $(3,002) $(1,581)
                 
Net loss per share attributable to                
 ChyronHego shareholders- basic
 $(0.09) $(0.04) $(0.15) $(0.09)
                 
Net loss per share attributable to                
 ChyronHego shareholders- diluted
 $(0.09) $(0.04) $(0.15) $(0.09)
                 
Weighted average shares outstanding:                
  Basic
  22,989   16,898   20,191   16,852 
  Diluted
  22,989   16,898   20,191   16,852 


See Notes to Consolidated Financial Statements (unaudited)
4

 
4
 

CHYRONCHYRONHEGO CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED MARCH 31, 2013 AND 2012
(In thousands)

(Unaudited)





  2013  2012 
       
Net loss                                                                                   $(917) $(951)
         
Other comprehensive (loss) income:        
   Foreign currency translation adjustment                                                                                    (20)  10 
         
Comprehensive loss                                                                                   $(937) $(941)






  Three Months  Six Months 
  Ended June 30,  Ended June 30, 
  2013  2012  2013  2012 
             
Net loss
 $(2,077) $(630) $(2,994) $(1,581)
                 
Other comprehensive income (loss):                
                 
  Foreign currency translation adjustment
  90   (7)  70   3 
                 
Comprehensive loss
  (1,987)  (637)  (2,924)  (1,578)
                 
 Less: Comprehensive income attributable                
    to non controlling interests
  8   -   8   - 
                 
Comprehensive loss attributable to                
    ChyronHego Corporation
 $(1,995) $(637) $(2,932) $(1,578)
                 

















See Notes to Consolidated Financial Statements (unaudited)

5


 
5
 

CHYRONCHYRONHEGO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2013 AND 2012
(In thousands)
(Unaudited)


  2013  2012 
Cash Flows From Operating Activities      
Net loss
 $ (917) $(951)
Adjustments to reconcile net loss to net cash from        
 operating activities:        
   Depreciation and amortization
  187   211 
   Deferred tax asset allowance
  353     
   Deferred income tax benefit
  (353)  (133)
   Inventory provisions
      10 
   Share-based payment arrangements
  340   304 
   Shares issued for 401(k) match
  70   78 
   Other
  (130)  33 
Changes in operating assets and liabilities:        
   Accounts receivable
  19   349 
   Inventories
  188   (2)
   Prepaid expenses and other assets
  (128)  (48)
   Accounts payable and accrued expenses
  348   (903)
   Deferred revenue
  (209)  56 
   Other liabilities
  210   (316)
Net cash used in operating activities
  (22)  (1,312)
         
Cash Flows From Investing Activities        
Acquisitions of property and equipment
  (72)  (79)
Net cash used in investing activities
  (72)  (79)
         
Cash Flows From Financing Activities        
Payments on term loan                                                                                                      (70)  (81)
Payments on capital lease obligations
  (10)  (9)
Net cash used in financing activities
  (80)  (90)
         
Change in cash and cash equivalents
  (174)  (1,481)
Cash and cash equivalents at beginning of period
  2,483   4,216 
Cash and cash equivalents at end of period
 $2,309  $2,735 




  Six Months 
  Ended June 30, 
  2013  2012 
Cash Flows from Operating Activities      
Net loss
 $(2,994) $(1,581)
Adjustments to reconcile net loss to net cash from        
 operating activities:        
   Depreciation and amortization
  768   441 
   Deferred tax allowance
  372   - 
   Deferred income tax benefit
  (316)  (620)
   Inventory provisions
  -   10 
   Share-based payment arrangements
  2,384   479 
   Shares issued for 401(k) match
  128   153 
   Other
  55   (19)
Changes in operating assets and liabilities, net of acquisition:        
   Accounts receivable
  (1,631)  98 
   Inventories
  (401)  101 
   Prepaid expenses and other assets
  (69)  (99)
   Accounts payable and accrued expenses
  1,837   (28)
   Deferred revenue
  52   347 
   Other liabilities
  339   (265)
Net cash provided by (used in) operating activities
  524   (983)
         
Cash Flows from Investing Activities        
Acquisitions of property and equipment
  (714)  (323)
Purchase of business, net of cash acquired
  (28)  - 
Net cash used in investing activities
  (742)  (323)
         
Cash Flows from Financing Activities        
Proceeds from borrowings
  222   - 
Proceeds from exercise of stock options
  2   - 
Payments on capital lease obligations
  (102)  (19)
Repayments on debt
  (213)  (135)
Net cash used in financing activities
  (91)  (154)
         
Effect of exchange rate changes on cash and cash equivalents
  15   - 
         
Change in cash and cash equivalents
  (294)  (1,460)
Cash and cash equivalents at beginning of period
  2,483   4,216 
Cash and cash equivalents at end of period
 $2,189  $2,756 
         
Supplemental Cash Flow Information:        
  Common stock issued for acquisition
 $16,591   - 
  Contingent consideration for acquisition
 $7,500   - 




See Notes to Consolidated Financial Statements (unaudited)
6

 
6
 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



1.           BASIS OF PRESENTATION

Nature of Business

On May 22, 2013 Chyron Corporation ("Chyron") acquired the outstanding stock of Hego Aktiebolag ("Hego" or "Hego AB"), creating ChyronHego Corporation (the "Company" or "ChyronHego"). Hego is a global graphics services company based in Stockholm, Sweden that develops real-time graphics products for the broadcast and sports industries. The companies combined in a cash and stock-for-stock transaction and the Company will continue to trade on the NASDAQ under the symbol "CHYR." The combination of these two companies, which is referred to in these consolidated financial statements as the "Business Combination," forms a leading global provider of Graphics as a Service for on-airbroadcast graphics creation, playout and digital video applications including newsrooms, studios, sports broadcasting facilities, and corporate video environments. Chyron's graphics solutions include the Axis World Graphics online content creation software and order management system, on-air graphics systems, clip servers, channel branding, and graphics asset management solutions, all of which may be incorporated into the Company's BlueNet™ end-to-end graphics workflow.real-time data visualization.

General

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany amounts have been eliminated. The results of operations include the operating results of Hego since the completion of the Business Combination on May 22, 2013. See Note 8 of these consolidated financial statements.

In the opinion of management of Chyron Corporation (the "Company" or "Chyron"), the accompanyingCompany, the unaudited consolidated interim financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position of the Company as of March 31,June 30, 2013 and the consolidated results of its operations, its comprehensive lossincome (loss) and its cash flows for the periods ended March 31,June 30, 2013 and 2012. The results of operations for such interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2013. In addition, management is required to make estimates and assumptions that affect the amounts reported and related disclosures. Estimates made by management include inventory valuations, stock and bonus compensation, allowances for doubtful accounts, income taxes, pension assumptions, allocations of purchase price, contingent consideration, valuation of intangible assets and reserves for warranty and incurred but not reported health insurance claims. Estimates, by their nature, are based on judgment and available information. Also, during interim periods, certain costs and expenses are allocated among periods based on an estimate of time expired, benefit received, or other activity associated with the periods. Accordingly, actual results could differ from those estimates. The Company has not segregated its cost of sales between costs of products and costs of services as it is not practicable to segregate such costs. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. For further information, refer to the audited consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012. The December 31, 2012 figures included herein were derived from such audited consolidated financial statements.
7

 
7
 

Recent Accounting Pronouncements

In July 2012, the FASB issued amendments to the indefinite-lived intangible asset impairment guidance which provides an option for companies to use a qualitative approach to test indefinite-lived intangible assets for impairment if certain conditions are met. The amendments are effective for annual and interim indefinite-lived intangible asset impairment tests performed for fiscal years beginning after September 15, 2012. The implementation of the amended accounting guidance has not had a material impact on the Company's consolidated financial position or results of operations.

In February 2013, the FASB issued amendments to disclosure requirements for presentation of comprehensive income. The standard requires presentation (either in a single note or parenthetically on the face of the financial statements) of the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line items affected by the reclassification. If a component is not required to be reclassified to net income in its entirety, a cross reference to the related footnote for additional information will be required. The amendments are effective prospectively for reporting periods beginning after December 15, 2012. The implementation of the amended accounting guidance has not had a material impact on the Company's consolidated financial position or results of operations.
 
In February 2013, the FASB issued new accounting guidance clarifying the accounting for obligations resulting from joint and several liability arrangements for which the total amount under the arrangement is fixed at the reporting date. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2013. The implementation of the new accounting guidance is not expected to have a material impact on the Company's consolidated financial position or results of operations.

In March 2013, the FASB issued amendments to address the accounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. The amendments are effective prospectively for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2013 (early adoption is permitted). The implementation of the amended accounting guidance is not expected to have a material impact on the Company's consolidated financial position or results of operations.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed based onby dividing net income (loss) by the weighted average number of shares of common sharesstock outstanding. Diluted earnings (loss) per share is based oncomputed by dividing net income (loss) by the sum of the weighted averageweighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potential dilutive shares of common stock been issued. The dilutive effect of stock options and restricted stock units are reflected in diluted net income (loss) per share by applying the treasury stock method.

The Company recorded net losses for the three and six months ended June 30, 2013 and 2012. Potential common shares outstanding andare anti-dilutive in periods in which the Company records a net loss because they would reduce the respective period's net loss per share. Anti-dilutive potential common stock equivalents. Potentially dilutive shares are excluded from the computationcalculation of diluted earnings per share. As a result, net diluted loss per share when their effect is anti-dilutive. was equal to basic net loss per share in all periods presented.


8

Shares excluded from the calculationused to calculate net loss per share are as follows (in thousands):

8


 Three Months
 Ended March 31,
 20132012
Weighted average shares which are not included in the  
  calculation of diluted earnings (loss) per share because  
  their impact is anti-dilutive:  
       Stock options3,0033,174
       Restricted stock units   120   556
 3,1233,730
 Three Months Six Months
 Ended June 30, Ended June 30,
 20132012 20132012
Basic weighted average shares outstanding22,98916,898 20,19116,852
   Effect of dilutive stock options-- --
   Effect of dilutive restricted stock units          -          -           -          -
Diluted weighted average shares outstanding22,98916,898 20,19116,852
      
Weighted average shares which are not included     
  in the calculation of diluted earnings (loss)     
  per share because their impact is anti-dilutive:     
     Stock options3,3402,738 3,1722,684
     Restricted stock units         -    186       60    190
  3,340 2,924  3,232 2,874

2.           LONG-TERM INCENTIVE PLANS

Pursuant to the 2008 Long-term Incentive Plan (the "Plan"), the Company may grant stock options (non-qualified or incentive), stock appreciation rights, restricted stock, restricted stock units and other share-based awards to employees, directors and other persons who serve the Company. The Plan is overseen by the Compensation Committee of the Board of Directors, which approves the timing and circumstances under which share-based awards may be granted. At March 31,June 30, 2013 there were 0.53.5 million shares available to be granted under the Plan.Plan, which includes 3.0 million shares that were approved for issuance under the Plan by the Company's stockholders in May 2013. The Company issues new shares to satisfy the exercise or release of share-based awards. Under the provisions of Accounting Standards Codification Topic 718 Stock Compensation, all share-based payments are required to be recognized in the statement of operations based on their fair values at the date of grant.

The fair value of each option award is estimated using a Black-Scholes option valuation model. Expected volatility is based on the historical volatility of the price of the Company's stock. The risk-free interest rate is based on U.S. Treasury issues with a term equal to the expected life of the option. The Company uses historical data to estimate expected dividend yield, expected life and forfeiture rates. Options generally have a life of 10 years and have either time-based or performance-based vesting features. Time-based awards generally vest over a three year period, while the performance-based awards vest upon the achievement of specific performance targets. At March 31, 2013, thereThere were 0.9 millionno options outstanding that will vest upongranted during the achievement of certain financial conditions for 2013 or will expire if the performance criteria are not met. No expense was recognized for these awards. If in the future it is probable that these awards will be earned, the Company will commence recording an expense for them.three months ended June 30, 2013. The fair values of the options granted during the three months ended March 31,June 30, 2012 and the six months ended June 30, 2013 and 2012, were estimated based on the following weighted average assumptions:

  Three Months 
  Ended March 31, 
  2013  2012 
Expected volatility  76.23%  69.82%
Risk-free interest rate  1.06%  1.48%
Expected dividend yield  0.00%  0.00%
Expected life (in years)  6.0   6.0 
Estimated fair value per option granted $0.87  $1.01 
9
 
9
 


  Three Months  Six Months 
  Ended June 30,  Ended June 30, 
  2012  2013  2012 
Expected volatility  68.49%  76.23%  69.44%
Risk-free interest rate  0.94%  1.06%  1.32%
Expected dividend yield  0.00%  0.00%  0.00%
Expected life (in years)  6.0   6.0   6.0 
Estimated fair value per option granted $0.85  $0.87  $0.97 

The following table presents a summary of the Company's stock option activity for the threesix months ended March 31,June 30, 2013:

 Number of
 Options
Outstanding at January 1, 20134,294,273 
  Granted60,000 
  Exercised   (50,000)(52,428)
  Forfeited and cancelled  (98,411)(112,918)
Outstanding at March 31,June 30, 20134,205,8624,188,927 

The Company also grants restricted stock units, or RSUs, that entitle the holder to a share of Company common stock. The fair value of an RSU is equal to the market value of a share of common stock on the date of grant. All RSUs that are currently outstanding have time-based vesting features over a one to three year period.

The following table presents a summary of the Company's RSU activity for the threesix months ended March 31,June 30, 2013:

 Shares
Nonvested at January 1, 2013343,161 
Granted329,164 
Vested and settled in shares(168,995) (672,325)
Nonvested at March 31,June 30, 2013              503,330- 

The anticipated consummationOn May 22, 2013 the Business Combination of the business combination withChyron and Hego, Aktiebolag as discussed in Note 8 to these Consolidated Financial Statements, will constituteconstituted a change in control under the Company's long-term incentive plans. As a result, at the closing of the Business Combination, all outstanding equity awards will becomebecame immediately exercisable and fully vested, without regard to any time and/or performance vesting conditions. As a result, upon the anticipated closing of the transaction in the second quarter of 2013, the Company estimates it will recordrecorded a charge of approximately $1.3 million, representing the unamortized expense related to the vesting of such equity awards. The estimated expense is subject

On May 2, 2013 the Company implemented a restructuring plan to reduce operating costs that resulted in the reduction of its workforce by 20 employees. All affected employees were provided with an adjustment in the terms of their stock options and/or RSUs that were outstanding on their termination date. Subject to a numberproperly executed release by the affected employees, the stock option and RSU awards were amended to permit those awards to vest at their termination date regardless of assumptionsperformance conditions if any in the original award, and actual results may differthe expiration date for exercise of the stock options was extended through the end of the original
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term of the stock option, usually ten years from date of grant, rather than expiring ninety days after the employee's termination date as stated in the original awards. As a result, the Company recorded a charge of approximately $0.4 million associated with the modifications of these estimates.awards.

In addition, each year the Company adopts a Management Incentive Compensation Plan (the "Incentive Plan") that entitles recipients to a combination of cash and equity awards based on achievement of certain performance and service criteria in the fiscal years for which the Incentive Plan is adopted. During the three and six months ended March 31,June 30, 2013 and 2012 the Company recorded an expense of $136 thousand$0.3 million and $73 thousand,$0.5 million, respectively, associated with the equity portion of the awards under these Plans.Plans of which 65% is payable in common stock. During the six months ended June 30, 2012 no expense was recorded.

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The Company amortizes share-based compensation expense over the vesting period on a straight line basis. The impact on the Company's results of operations of recording share-based compensation expense is as follows (in thousands):

 Three Months  Three Months  Six Months 
 Ended March 31,  Ended June 30,  Ended June 30, 
 2013  2012  2013  2012  2013  2012 
Cost of sales $17  $19  $11  $19  $28  $38 
Research and development  87   96   67   69   154   165 
Selling, general and administrative  236   189   1,966   87   2,202   276 
 $340  $304  $2,044  $175  $2,384  $479 

3.           INVENTORIES

Inventories, net are comprised of the following (in thousands):

 March 31,  December 31,  June 30,  December 31, 
 2013  2012  2013  2012 
Finished goods $265  $465  $241  $465 
Work-in-progress  407   468   487   468 
Raw material  1,425   1,352   1,958   1,352 
 $2,097  $2,285  $2,686  $2,285 


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4.           LONG-TERM DEBT

4.           Long-term debt consists of the following (in thousands):

  June 30,  December 31, 
  2013  2012 
Revolving credit facilities - Sweden $824  $- 
Term loans - Europe  419   - 
Term loan - US  537   677 
Other  64   - 
   1,844   677 
Less: portion due within one year  (1,269)  (280)
  $575  $397 

CREDIT FACILITYRevolving credit facilities - Sweden

As a result of the Business Combination, the Company has revolving credit facilities in Sweden that total $1.15 million of which $0.824 million is outstanding at June 30, 2013. The revolving credit facilities have expiration dates of December 31, 2013 and automatically renew for twelve month periods, unless notified by the lender ninety days prior to expiration. The interest rate on these revolving credit facilities is 5.95%. The revolving credit agreements are collateralized by the assets of certain Swedish subsidiaries of the Company.

Term loans - Europe

As a result of the Business Combination, the Company also has three term loans related to its European operations that total $0.42 million. Two of the term loans require principal payments totaling $10 thousand per month and bear interest at rates that range between 7.45% and 7.75% and will mature in 2014 and 2015. The third term loan, which has an outstanding balance of $0.2 million, bears interest that is payable quarterly at 15%, requires no principal payments and will be due on December 31, 2014.

Credit facility and term loan - US

In March 2013, the Company entered into a seventh loan modification agreement and amended its loan and security agreement (the "Revised Credit Facility") with Silicon Valley Bank ("SVB"). Under this Revised Credit Facility, the expiration date of the facility remained at August 12, 2013 and the revolving line of credit (the "Revolving Line") was reduced from $3.0 million to $2.0 million. Available borrowings under the Revolving Line was changed from 80% of eligible accounts receivable to 80% of eligible accounts receivable less the amount of principal outstanding under the term loan that forms part of the Revised Credit Facility, as described below. The Revolving Line continues to bear interest at a floating annual rate equal to SVB's prime rate ("Prime") +1.75%. The Company also has a term loan with SVB, that was unchanged under the Revised Credit Facility, whereby advances were available to be drawn through December 31, 2012 in minimum amounts of $0.25 million.

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At March 31,June 30, 2013, available borrowings under the Revolving Line were approximately $1.4$2 million but no borrowings were outstanding. During the fourth quarter of 2012, the Company took two advances of $0.35 million each from the term loan and the balance outstanding at March 31,June 30, 2013 was $0.6$0.5 million. The term loan bears interest at Prime +2.25% (which was 6.25% at March 31,June 30, 2013) and principal and interest are being repaid over thirty months. Interest expense related

On August 5, 2013 the Company entered into a loan modification and waiver agreement with Silicon Valley Bank ("SVB") whereby the expiration date of the Revised Credit Facility has been extended to October 12, 2013 with the term loan was $10 thousand forintention that the three months ended March 31, 2013.Company and SVB will enter into a new credit facility prior to that date.
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Pursuant to the Revised Credit Facility, the financial covenants were modified. The Company is required to maintain financial covenants based on an adjusted quick ratio ("AQR") of at least 1.2 to 1.0, measured at each calendar month-end, and the minimum tangible net worth covenant was replaced by a maximum EBITDA loss/profitability covenant (tested at quarter end) effective with the first quarter of 2013. Additionally, if the Company's AQR falls below 1.5x at any month-end during the remaining term of the facility, then any borrowings under the Revolving Line will be repaid by SVB applying collections from the Company's SVB collateral account (for receipts by wire) and SVB lockbox account (for receipts by check) to reduce the revolving loan balance on a daily basis, until such time as the month-end AQR is again 1.5x or greater. If the AQR at month-end is 1.5x or greater, the Company will maintain a static loan balance and all collections will be deposited into the Company's operating account. TheDue to the Business Combination with Hego, which was not anticipated when the covenant requirements were established, the Company was in compliance with itsfailed to meet the financial covenants as of Marchat May 31, 2013.2013 and June 30, 2013, and obtained waivers from SVB with respect to those financial covenants. As is usual and customary in such lending agreements, the agreements also contain certain non-financial requirements, such as required periodic reporting to the bank and various representations and warranties. The lending agreement also restricts the Company's ability to pay dividends without the bank's consent.

The Revised Credit facilityFacility is collateralized by the Company's assets, except for (i) its intellectual property rights which are subject to a negative pledge arrangement with the bank, and (ii) any equipment whose purchase is financed by any other lender or lessor, solely to the extent the security agreement with such lender or lessor prohibits junior liens on such equipment, and only until the lien held by such lender or lessor is terminated or released with respect to such equipment.

5.           BENEFIT PLANS

The net periodic benefit cost relating to the Company's U.S. Pension Plan is as follows (in thousands):

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 Three Months  Three Months  Six Months 
 Ended March 31,  Ended June 30,  Ended June 30, 
 2013  2012  2013  2012   2013  2012 
Service cost $146  $130  $135  $130  $281  $260 
Interest cost  90   88   98   88   188   176 
Expected return on plan assets  (100)  (87)  (98)  (87)  (198)  (174)
Amortization loss  66   41 
Amortization of net loss  57   41   123   82 
Amortization of prior service cost  (2)  (2)  (2)  (2)  (4)  (4)
 $200  $170  $190  $170  $390  $340 

The Company's policy is to fund the minimum contributions required under the Employee Retirement Income Security Act (ERISA) and, subject to cash flow levels, the Company may choose to make a discretionary contribution to its pension plan to reduce the unfunded liability. In the firstsecond quarter of 2013 the Company was notmade a required to make any contributionscontribution of $0.1 million to its pension plan. However,plan and, based on current assumptions, the Company expects to make required contributions of $0.37$0.4 million in the next twelve months.

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The Company has adopted a 401(k) Plan exclusively for the benefit of participants and their beneficiaries. All U.S. employees of the Company are eligible to participate in the 401(k) Plan. The Company may make discretionary matching contributions of the compensation contributed by the participant. The Company has the option of making the matching contributions in cash or through shares of Company common stock. During the threesix months ended March 31,June 30, 2013 and 2012, the Company issued 97139 thousand and 64110 thousand shares of common stock in connection with the Company match for the Company's 401(k) Plan in lieu of an aggregate cash match of $70$128 thousand and $78$153 thousand, respectively.

Substantially all employees of the Company's foreign subsidiaries receive pension coverage, at least to the extent required, through plans that are governed by local statutory requirements. Contributions to these plans are typically based on specified percentages of the employees' salaries.

6.           PRODUCT WARRANTY

The Company provides product warranties for its various products, typically for one year. Liabilities for the estimated future costs of repair or replacement are established and charged to cost of sales at the time the sale is recognized. The Company established its reserve based on historical data, taking into consideration specific product information. The following table sets forth the movement in the warranty reserve (in thousands):

 Three Months  Three Months  Six Months 
 Ended March 31,  Ended June 30,  Ended June 30, 
 2013  2012  2013  2012  2013  2012 
Balance at beginning of period $50  $50  $55  $50  $50  $50 
Provisions  29   34   41   25   70   59 
Warranty services provided  (24)  (34)
Warranty services provided, net  (31)  (25)  (55)  (59)
 $55  $50  $65  $50  $65  $50 


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7.           INCOME TAXES

The components of deferred income taxes are as follows (in thousands):

 March 31,  December 31,  June 30,  December 31, 
 2013  2012  2013  2012 
Deferred tax assets:            
Net operating loss carryforwards $14,716  $14,491  $14,743  $14,491 
Inventory  1,769   1,769   1,771   1,769 
Other liabilities  3,155   3,055   3,365   3,055 
Fixed assets  424   440   409   440 
Other temporary differences  633   589   681   589 
  20,697   20,344   20,969   20,344 
Deferred tax valuation allowance  (20,697)  (20,344)  (20,716)  (20,344)
 $-  $-  $253  $- 

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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In accordance with accounting standards the Company has not recorded a deferred tax asset of approximately $1.0 million related to the net operating losses that resulted from the exercise of disqualifying stock options. If the Company is able to utilize this benefit in the future it would result in a credit to additional paid in capital.

Accounting standards require that the Company continually assess the likelihood that its deferred taxes will be realizable. All available evidence, both positive and negative, must be considered in determining whether it is more likely than not that the deferred tax assets will be realized. In making such assessments, significant weight is given to evidence that can be objectively verified. A company's current or previous losses are given more weight than its future outlook. As of March 31,June 30, 2013 and December 31, 2012, using that standard, the Company concluded that a full valuation allowance was required for the majority of its deferred tax assets. The Company will continue to assess the likelihood that its deferred tax assets will be realizable, and its valuation allowance will be adjusted accordingly, which could materially impact its financial position and results of operations in future periods.

At March 31,June 30, 2013, the Company had approximately $44 million in U.S. Federal net operating loss carryforwards ("NOLs") expiring between 2018 and 2032. The Company files U.S. federal income tax returns as well as income tax returns in various states and one foreign jurisdiction.jurisdictions. It may be subject to examination by the Internal Revenue Service ("IRS") for calendar years 2009 through 2012 under the normal statute of limitations. Additionally, any net operating losses that were generated in prior years and utilized in these years may also be subject to examination by the IRS. Generally, for state tax purposes, the Company's 2008 through 2012 tax years remain open for examination by the tax authorities under a four year statute of limitations, however, certain states may keep their review period open for six to ten years.


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The components of the provision for income tax (expense) benefit for the periods ended are as follows (in thousands):

 Three Months  Three Months  Six Months 
 Ended March 31,  Ended June 30,  Ended June 30, 
 2013  2012  2013  2012  2013  2012 
Current:                  
State and foreign $(11) $(12) $(37) $(11) $(48) $(23)
                        
Deferred:                        
State  10   9   -   22   10   31 
Federal  343   124   (4)  465   339   589 
  353   133 
Foreign  (33)  -   (33)  - 
          (37)  487   316   620 
Valuation allowance  (353)  -   (19)  -   (372)  - 
        
Income tax (expense) benefit $(11) $121 
Income tax (expense) benefit, net $(93) $476  $(104) $597 

The difference between the Company's effective income tax rate and the federal statutory rate is primarily due to the transaction costs associated with the Hego business combination that will not be deductible for tax purposes and the amount of expense associated with the Company's share-based payment arrangements and the portion thereof that will give rise to tax deductions. Furthermore, share-based payments may result in tax deductions that do not result in a tax benefit in the accompanying financial statements because it will not result in the reduction of income taxes payable, due to the existence of net operating loss carryforwards.
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8.           BUSINESS COMBINATION - PENDING ACQUISITION

On March 9,May 22, 2013, Chyron and Hego completed the Company entered intoBusiness Combination which was structured as a share purchase transaction, pursuant to the terms of a stock purchase agreement (the "Stock Purchase Agreement") with Hego Aktiebolag ("Hego") to acquirewhereby a wholly-owned subsidiary of Chyron acquired all of the issued and outstanding shares of Hego. Pursuant to the terms of the Stock Purchase Agreement, Chyron issued 12,199,431 shares of Chyron's common stock to the former Hego is a global graphics services company based in Stockholm, Sweden that develops real-time graphics products and tools for the broadcast and sports industries.

If consummated, the transaction will take the form of a stock transaction whereby Chyron will issue astockholders. The number of shares issued was equal to 40% of Chyronthe total of (i) the issued and outstanding shares of Chyron's common stock which will represent 40%as of its aggregateMay 10, 2013, (ii) the shares of Chyron's common stock outstanding, including certainissuable upon the exercise of all outstanding options afterand restricted stock units that had an exercise price of less than or equal to $1.25 per share as of May 10, 2013, and (iii) the shares issued at the closing, in exchange for all of Hego's outstanding capital stock. Uponwhich are collectively referred to as the achievement of"Outstanding Closing Shares."  In addition, upon Hego achieving certain revenue milestones during the fiscal years 2013, 2014 and 2015, Hego's shareholders will also be entitled to receivethe Company may issue additional shares, of Chyron common stockwhich are referred to as the "Earn-Out Shares" to the former Hego stockholders, such that the total numberaggregate amount of shares of Chyronthe Company's common stock issued in the transaction iswould equal up to 18,299,147 shares, or 50% of the aggregate shares of Chyron common stock outstanding, including certain outstanding options, aftertotal Outstanding Closing Shares and Earn-Out Shares. The Company and Hego entered into the closing.

The transaction is subjectBusiness Combination to customary closing conditions, including the approval by Chyron's shareholders, and is expected to closecreate a market leading company in the second quarterfields of 2013. Chyron's board of directors unanimously approved the transactionTV graphics, data visualization and Chyron shareholders representing 40% of Chyron's outstanding common stock have committed to vote in favor of the transaction.


9.           CONTINGENCIES

production services for 'Live' and on line news and sports production. The Company is subjectintends to litigationbroaden its range of sophisticated products and other claims that ariseservices offerings to grow in the ordinary course of business. While the ultimate result of the Company's outstanding legal matter described under "Legal Proceedings" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012 cannot presently be determined, the Company does not expect that the ultimate disposition will have a material adverse effect on its results of operations or financial condition. However, legal matters are inherently unpredictable and subject to significant uncertainties, some of which are beyond the Company's control. As such, there can be no assurance that the final outcome will not have a material adverse effect upon the Company's financial condition or results of operations.international markets.
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16
 

The total purchase price of $24.6 million is comprised of 12.2 million shares of Chyron common stock (the Closing Shares) valued at $16.6 million, contingent consideration of shares of Chyron common stock (the Earn-Out Shares) valued at an estimated $7.5 million and $0.5 million in cash and other consideration. The $7.5 million represents the value of the Earn-Out Shares based on a probability-based model measuring the likelihood of achieving certain revenue milestones as detailed below, and has been recorded as a liability in the balance sheet. In connection with FASB ASC 805, the fair value of any contingent consideration is established at the date of the Business Combination and included in the total purchase price at fair value. The contingent consideration is then adjusted to the then current fair value as an increase or decrease to earnings in each reporting period which could have a material impact on the Company's financial position or results of operations. As of June 30, 2013 the Company recorded a charge of $55 thousand in order to adjust the contingent consideration to $7.555 million, its current fair value in the level 3 category. Based on the revenue milestones, additional shares could be issued as follows:

Revenue milestonesAdditional shares
$15.5 million in 20132,772,598
$16.0 million in 20141,584,342
$16.5 million in 20151,742,776
   Total6,099,716
Or, alternatively, if $33.0
 million for 2013 and 2014
 combined6,099,716

The following table summarizes the estimated allocation of the purchase price which is preliminary and subject to adjustment following the completion of the valuation process (in thousands):

Net fair value of assets acquired $107 
Intangible assets  9,930 
Goodwill  14,555 
  $24,592 

The Company believes that the goodwill resulting from the Business Combination reflects the unique proprietary image and player tracking technology that strengthens our product and services offerings internationally and provides access to new and existing customers. The Company believes that this preliminary estimate of goodwill will not be deductible for tax purposes.

The components and estimated useful lives of intangible assets acquired as of June 30, 2013 are stated below. Amortization is provided on a straight line method, or in the case of customer relationships, on an accelerated method, over the following estimated useful lives (dollars in thousands):

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     Estimated 
     useful life 
Definite-lived intangibles:      
  Customer relationships $6,400   10 
  Proprietary technology  800   15 
  Other intangibles  830   15 
         
Indefinite-lived intangibles:        
  Tradename  1,900   - 
  $9,930     

In connection with the Business Combination, the Company incurred $0.3 million and $1.0 million in transaction costs in the three and six months ended June 30, 2013, respectively.

Below are the unaudited proforma results of operations for the six months ended June 30, 2013 and 2012 as if the Company had merged with Hego on January 1, 2012. Such proforma results are not necessarily indicative of the annual results of operations that would have been achieved if the Business Combination occurred on the date assumed, nor are they necessarily indicative of future consolidated results of operations (in thousands except per share data):

  June 30, 
  2013  2012 
Net sales $24,607  $23,310 
Net loss  (4,453)  (2,050)
Net loss per share - basic and diluted $(0.15) $(0.07)

In future periods, the combined business may incur charges to operations to reflect costs associated with integrating the two businesses that the Company cannot reasonably estimate at this time.

9.DUE TO RELATED PARTIES

The balance due to related parties represents amounts that are due to certain former shareholders or employees of Hego AB that are now shareholders or employees of the Company. The balance resulted from loans to Hego AB, and dividends declared but not paid by Hego AB, prior to its merger with Chyron. Interest is accrued on the outstanding balance at the rate of 5.95%.

10.RESTRUCTURING

On May 2, 2013, the Company's Board of Directors approved a restructuring plan to reduce operating costs. As a result, the Company reduced the size of its workforce by 20 positions and recorded a charge of $0.6 million in severance pay and benefits expense. As of June 30, 2013 the remaining liability was approximately $0.3 million and the Company expects that this will be paid in the third quarter of 2013. Also in the quarter ended June 30, 2013 the Company incurred a charge of $0.4 million associated with modifications of equity awards for the affected employees that were outstanding on their termination date.

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11.           SEGMENT AND GEOGRAPHIC INFORMATION

The Company operates and evaluates its business as one reporting unit.

Revenues by geography are based on the country in which the end user customer resides and are detailed as follows (in thousands):

 Three Months  Three Months  Six Months 
 Ended March 31,  Ended June 30,  Ended June 30, 
 2013  2012  2013  2012  2013  2012 
North America $5,253  $5,672  $6,499  $5,148  $11,752  $10,820 
Europe, Middle East and Africa (EMEA)  1,212   1,001   3,660   808   4,872   1,809 
Latin America  591   772   374   710   965   1,482 
Asia  961   432   183   1,018   1,144   1,450 
 $8,017  $7,877  $10,716  $7,684  $18,733  $15,561 

11.           SUBSEQUENT EVENTPrior to the Business Combination with Hego, the Company operated as one reporting unit. As a result of the Business Combination the Company will be organized, managed and internally reported as two segments. Because the Company will not evaluate performance based upon return on assets at the operating segment level, assets are not tracked internally by segment, and therefore, segment asset information is not presented at this time. In addition, due to the preliminary status of the purchase price allocation, goodwill has not been allocated to reporting segments.

On May 2, 2013, the Company's Board of Directors approved a restructuring plan to reduce operating costs while maintaining its focus on strategic initiatives. The Company reduced the size of its workforce by 20 positions. The reductions were essentially completed prior to the filing of this Form 10-Q and the Company expects to incur restructuring charges of approximately $0.95 million in the second quarter in connection with this plan. The restructuring charges consist of approximately $0.6 million in severance pay and benefits expense and approximately $0.35 million in charges associated with modifications of equity awards outstanding on their termination date. These estimated costs are subject to a number of assumptions and actual results may differ from these estimates.Operating segment data is as follows (in thousands):

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  Three Months Ended  Six Months Ended 
  June 30, 2013  June 30, 2013 
Revenues:      
  Hego $2,307  $2,307 
  Chyron  8,409   16,426 
  $10,716  $18,733 
         
Operating income (loss):        
  Hego $240  $240 
  Chyron  799 �� 1,346 
  Unallocated corporate expense  (2,889)  (4,245)
  $(1,850) $(2,659)


 
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Item 2.              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q, including, without limitation, Management's Discussion and Analysis of Financial Condition and Results of Operations, contains "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We intend that the forward-looking statements be covered by the safe harbor for forward-looking statements in the Exchange Act. All statements, other than statements of historical fact, that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. These forward-looking statements are usually accompanied by words such as "believe," "anticipate," "plan," "seek," "expect," "intend" and similar expressions.

Forward-looking statements necessarily involve risks and uncertainties, and our actual results could differ materially from those anticipated in the forward looking statements due to a number of factors, including, but not limited to: current and future economic conditions that may adversely affect our business and customers; our revenues and profitability may fluctuate from period to period and therefore may fail to meet expectations, which could have a material adverse effect on our business, financial condition and results of operations; our ability to maintain adequate levels of working capital; the impact of the pending merger with Hego; our ability to successfully maintain the level of operating costs; our ability to obtain financing for our future needs should there be a need; our ability to incentivize and retain our current senior management team and continue to attract and retain qualified scientific, technical and business personnel; our ability to expand our Axis online graphics creation solution or to develop other new products and services; our ability to generate sales and profits from our Axis online graphics services, workflow and asset management solutions; our ability to integrate the business of Chyron and Hego; our ability to grow sales and profits from our Hego products and services; our ability to develop new Hego products and services; rapid technological changes and new technologies that could render certain of our products and services to be obsolete; competitors with significantly greater financial resources; new product and service introductions by competitors; challenges associated with expansion into new markets; and other factors set forth in Part I, Item 1A, entitled "Risk Factors," of our Annual Report on Form 10-K for the year ended December 31, 2012.2012 (the "2012 Form 10-K"), as well as any updates or modifications to those risk factors filed from time to time in our Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. Those factors as well as other cautionary statements made in this Quarterly Report on Form 10-Q, should be read and understood as being applicable to all related forward-looking statements wherever they appear herein. The forward-looking statements contained in this Quarterly Report on Form 10-Q represent our judgment as of the date of this report.hereof. We encourage you to read those descriptions carefully. We caution you not to place undue reliance on the forward-looking statements contained in this report. These statements, like all statements in this report, speak only as of the date of this report (unless an earlier date is indicated) and we undertake no obligation to update or revise the statements except as required by law. Such forward-looking statements are not guarantees of future performance and actual results will likely differ, perhaps materially, from those suggested by such forward-looking statements. In this report, "Chyron,
20
"ChyronHego," the "Company," "we," "us," and "our" refer to Chyron Corporation.ChyronHego Corporation and "Hego" refers to Hego Aktiebolag.
17

Overview

We are a leading providerOn May 22, 2013 we acquired the outstanding stock of on-air and digital video applications for newsrooms, studios, sports broadcasting facilities and corporate video environments. We anticipate that our industry will consolidate over the next several years in response to the rapid technology changes currently impacting the broadcast space. There are pockets of strong growth that remain and that we must address, and we believe the best way to do this quickly is through alliances, partnerships and acquisitions. This was the strategic thinking behind our pending merger with Hego AB, that we announced on March 11, 2013.creating ChyronHego Corporation. Hego brings very strong sports products and service offerings that address the needs of both sports broadcasters and sports leagues and rights holders. There are significant budgets available in the sports TV space for those companies who offer an improved viewer experience. Following completion ofNow that the transaction has been consummated, we believe that we will be positioned to benefit from these kinds of capital expenditures. The Chyron and Hego product lines are complementary with very little overlap. Hego's solutions and services predominantly address the needs of live sports production, while Chyron has recently been more focused on graphics solutions for live and near-live news production workflows. We anticipatebelieve that the mergerbusiness combination of Chyron and Hego will bring together two pioneering companies to create a global leader in broadcast graphics creation, playout and real-time data visualization.

The results of operations include the operating results of Hego since completion of the business combination on May 22, 2013.

Results of Operations for the Three and Six Months Ended March 31,June 30, 2013 and 2012

Net sales. Revenues for the quarter ended March 31,June 30, 2013 were $8.0$10.7 million, an increase of $0.1$3.0 million, or 2%39%, from the $7.9$7.7 million reported in the quarter ended March 31,June 30, 2012. Of these amounts, North American revenues were $5.2$6.5 million in the quarter ended March 31,June 30, 2013 and $5.7$5.1 million in the quarter ended March 31,June 30, 2012. Revenues derived from international regions were $2.8$4.2 million in the quarter ended March 31,June 30, 2013 as compared to $2.2$2.6 million in the quarter ended March 31,June 30, 2012.

Revenues for the six months ended June 30, 2013 were $18.7 million, an increase of $3.1 million, or 20%, from the $15.6 million in the six months ended June 30, 2012. Revenues derived from North American customers were $11.7 million in the six month period ended June 30, 2013 as compared to $10.8 million in the six month period ended June 30, 2012. Revenues derived from international regions were $7.0 million in the six months ended June 30, 2013 as compared to $4.8 million in the six month period ended June 30, 2012.

Revenues by type, for the three and six month periods ended March 31 are as follows (dollars in thousands):

 
Three Months Ended
June 30,
  
Six Months Ended
June 30,
 
    % of     % of     % of     % of     % of     % of 
 2013  Total  2012  Total  2013  Total  2012  Total  2013  Total  2012  Total 
Product $5,974   75% $5,802   74% $6,744   63% $5,771   75% $12,718   68% $11,573   74%
Services  2,043   25%  2,075   26%  3,972   37%  1,913   25%  6,015   32%  3,988   26%
 $8,017      $7,877      $10,716      $7,684      $18,733      $15,561     


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We experienced a slightan increase in our product revenue stream in both the three and six month periods ended June 30, 2013 as a result of an improvementcustomer purchases for the upcoming winter Olympics in Sochi, Russia and incremental product sales of $0.5 million from our market share in Asia and a major program upgrade in our European market. These improvements were somewhat offset by declines experienced in North America, where the market remains price competitive and the demand has been weak, and in Latin America.business combination with Hego.

Our services revenues declined slightlyincreased in all periods primarily from the first quarterincremental contribution of 2013 compared to 2012. This is primarily attributable to lower revenues from training and other professional$1.8 million of Hego services offset by increased salessince the date of software and hardware maintenance contracts for our broadcast graphics products.the business combination.

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Gross profit.  Gross margins for the quarters ended March 31,June 30, 2013 and 2012 were 71%68% and 70%69%, respectively. The increasedecrease in the gross margin percentage of 1% is primarily attributable to product mix. As services become a greater component of revenues we expect our margins to decline because our products carry a higher gross margin than our services. Gross margins for each of the six month periods ended June 30, 2013 and 2012 were 70%. Absent thisthe effect of product mix, we have been able to obtain reasonable and consistent pricing for our materials.

Selling, general and administrative expenses. Selling, general and administrative expenses are as follows (in thousands):

 Three Months  Three Months  Six Months 
 Ended March 31,  Ended June 30,  Ended June 30, 
 2013  2012  2013  2012  2013  2012 
Sales and marketing $2,879  $3,526  $3,272  $3,474  $6,152  $7,000 
General and administrative  1,872   1,159   3,564   1,005   5,435   2,164 
 $4,751  $4,685  $6,836  $4,479  $11,587  $9,164 

The decrease in sales and marketing expenses in the first quarter ofthree and six month periods ended June 30, 2013, as compared to the same periodperiods in 2012, is primarily the result of lower personnel costs and the related direct costs. During the second half of 2012, we reduced costs in this area by redeploying our resources to growth markets and eliminating positions in non growth areas that resulted in savings realized during the first half of 2013. These savings were slightly offset by the severance costs of $0.3 million in connection with the May restructuring. Hego sales and marketing costs included in the first quarter of 2013.three and six month periods in 2013 were approximately $0.4 million.

The increase in general and administrative ("G&A") expenses in the first quarter ofthree and six months ended June 30, 2013 is a result of approximately $0.7Hego transaction-related costs and $1.7 million of acquisition-relatedexpense associated with our share based arrangements. In connection with the business combination, we incurred $0.3 million and $1.0 million in transaction costs associatedin the three and six months ended June 30, 2013, respectively. Also as a result of the business combination, all outstanding equity awards became immediately exercisable and fully vested which resulted in a charge of $1.3 million representing the unamortized expense of such awards. In addition, as a result of the Company's downsizing on May 2, 2013, affected employees were provided with an adjustment in the pending acquisitionterms of their stock options and awards that were outstanding on their termination date. As a result, we recorded a $0.4 million charge related to the modification of these awards. Hego AB.G&A expenses for the three and six month periods in 2013 were approximately $0.3 million.

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Research and development expenses. Research and development ("R&D") expenses were $1.8$2.3 million in the quarter ended March 31,June 30, 2013 compared to $1.9 million in the quarter ended March 31,June 30, 2012. The decrease in R&D spending in this period has resulted from a slight shiftexpenses were $4.1 million and $3.9 million in the mixsix month periods ended June 30, 2013 and 2012, respectively. The increases in all periods in 2013, as compared to the respective prior periods, is due primarily to the incremental costs of expenses$0.4 million of the Hego transaction, severance costs of $0.3 million in connection with the May restructuring, offset by other expense decreases as ongoing projects are funded, but are offset as other projects are completed.

Interest expense. Interest expense increased slightly in the first quarter ofthree and six months ended June 30, 2013 as compared to the first quarter ofsame periods in 2012. WeThis is due to the advances that we took two advanceson the U.S. term loan in the fourth quarter of 2012 and the addition of interest expenses associated with the additional long-term debt that resultedwe assumed from Hego in a higher outstanding balance on our term loan with SVB.the business combination.

Other (loss) income,loss, net.  The components of other (loss) income,loss, net are as follows (in thousands):

 Three Months  Three Months  Six Months 
 Ended March 31,  Ended June 30,  Ended June 30, 
 2013  2012  2013  2012  2013  2012 
Foreign exchange transaction (loss) gain $(82) $7 
Foreign exchange transaction gain (loss) $3  $(13) $(78) $(6)
Mark to market contingent consideration  (55)  -   (55)  - 
Other  (1)  -   13   -   11   - 
 $(83) $7  $(39) $(13) $(122) $(6)

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We continue to be exposed to foreign currency and exchange risk in the normal course of business due to our revenues that are negotiated in British Pounds Sterling.international transactions. However, we believe that it is not material to our near-term financial position or results of operations. This exposure will possibly increase in the future due to the Business Combination, as a result of which a larger percentage of the Company's business is expected to be transacted in foreign currencies.

Income tax benefit (expense) benefit,, net. In the first quarter ofthree months ended June 30, 2013 we recorded an expense of $0.01 million and in the first quarter of 2012, we recorded an income tax expense of $0.1 million and a benefit of $0.5 million, respectively. In the six months ended June 30, 2013 and 2012 we recorded an expense of $0.1 million. Asmillion and a benefit of December 31, 2012$0.6 million, respectively. The difference between our effective income tax rate and March 31, 2013, the Company determined that a full valuation allowance was required for its deferred tax assets and will continuefederal statutory rate is primarily due to assess the likelihood that its deferred tax assets will be realizable. Consequently, in the first quarter of 2013, the tax benefit that would betransaction costs associated with the Hego business combination that will not be deductible for tax purposes and the amount of expense associated with our share-based payment arrangements and the portion thereof that will give rise to tax deductions. Furthermore, share-based payments may result in tax deductions that do not result in a tax benefit in the accompanying financial statements because it will not result in the reduction of income taxes payable, due to the existence of net operating loss was also fully reserved at this time resulting in a net zero deferred tax amount. The minor expense recorded in the first quarter of 2013 is attributable to state and foreign tax provisions.carryforwards.


Subsequent Event.  On May 2, 2013, the Company's Board of Directors approved a restructuring plan to reduce operating costs while maintaining its focus on strategic initiatives. The Company reduced the size of its workforce by 20 positions. The reductions were essentially completed prior to the filing of this Form 10-Q and the Company expects to incur restructuring charges of approximately $0.95 million in the second quarter in connection with this plan. The restructuring charges consist of approximately $0.6 million in severance pay and benefits expense and approximately $0.35 million in charges associated with certain modifications of equity awards outstanding on their termination date. These estimated costs are subject to a number of assumptions and actual results may differ from these estimates.
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Liquidity and Capital Resources

At March 31,June 30, 2013, we had cash and cash equivalents on hand of $2.3$2.2 million and working capital of $3.1$1.1 million. In the first threesix months of 2013 our cash from operations was used primarily to fund acquisitions of property and equipment of $0.07$0.7 million and to make required principal payments on our term loandebt and capital leases of $0.07$0.3 million, offset by new borrowings of $0.2 million.

During the firstsecond quarter of 2013 there were nowe made a required contributions forcontribution of $0.1 million to our pension plan based on current assumptions. However,and we expect to make contributions of $0.37$0.4 million over the next twelve months as required under ERISA. Our pension plan assets were valued at $5.4$5.5 million and $5.3 million at March 31,June 30, 2013 and December 31, 2012, respectively. Our investment strategy has been consistent in recent years and we believe that the pension plan's assets are more than adequate to meet pension plan obligations for the next twelve months.

In March 2013, the Companywe entered into a loan modification agreement and amended itsour loan and security agreement (the "Revised Credit Facility") with Silicon Valley Bank ("SVB"). Under this Revised Credit Facility, the expiration date of the facility remained at August 12, 2013 and the revolving line of credit (the "Revolving Line") was reduced from $3.0 million to $2.0 million. Available borrowings under the Revolving Line was changed from 80% of eligible accounts receivable to 80% of eligible accounts receivable less the amount of principal outstanding under the term loan that forms part of the Revised Credit Facility, as described below. The Revolving Line continues to bear interest at a floating annual rate equal to SVB's prime rate ("Prime") +1.75%. The CompanyWe also hashave a term loan with SVB, that was unchanged
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under the Revised Credit Facility, whereby advances were available to be drawn through December 31, 2012 in minimum amounts of $0.25 million.

At March 31,June 30, 2013, available borrowings under the Revolving Line were approximately $1.4$2.0 million but no borrowings were outstanding. During the fourth quarter of 2012, the Company took two advances of $0.35 million each from the term loan and the balance outstanding at March 31,June 30, 2013 was $0.6$0.5 million. The term loan bears interest at Prime +2.25% (which was 6.25% at March 31,June 30, 2013) and principal and interest are being repaid over thirty months.

 On August 5, 2013 we entered into a loan modification and waiver agreement with Silicon Valley Bank ("SVB") whereby the expiration date of the Revised Credit Facility has been extended to October 12, 2013 with the intention that we will enter into a new credit facility with SVB prior to that date.

Pursuant to the Revised Credit Facility, the financial covenants were modified. We are required to maintain financial covenants based on an adjusted quick ratio ("AQR") of at least 1.2 to 1.0, measured at each calendar month-end, and the minimum tangible net worth covenant was replaced by a maximum EBITDA loss/profitability covenant (tested at quarter end) effective with the first quarter of 2013. Additionally, if the Company'sour AQR falls below 1.5x at any month-end during the remaining term of the facility, then any borrowings under the Revolving Line will be repaid by SVB applying collections from the Company'sour SVB collateral account (for receipts by wire) and SVB lockbox account (for receipts by check) to reduce the revolving loan balance on a daily basis, until such time as the month-end AQR is again 1.5x or greater. If the AQR at month-end is 1.5x
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or greater, the Companywe will maintain a static loan balance and all collections will be deposited into the Company'sour operating account. The CompanyDue to the business combination with Hego, which was in compliance with itsnot anticipated when the covenant requirements were established, we failed to meet the financial covenants as of Marchat May 31, 2013.2013 and June 30, 2013 and obtained waivers from SVB. As is usual and customary in such lending agreements, the agreements also contain certain non-financial requirements, such as required periodic reporting to the bank and various representations and warranties. The lending agreement also restricts our ability to pay dividends without the bank's consent.

We also have revolving credit facilities associated with our European operations that total $1.15 million of which $0.824 million is outstanding at June 30, 2013. The revolving credit facilities have expiration dates of December 31, 2013 and automatically renew for twelve month periods unless notified by the lender ninety days prior to expiration. In addition, we have three outstanding term loans in Europe that total $0.4 million at June 30, 2013. Two of the term loans require principal payments that total $10 thousand per month and the third term loan, which has an outstanding balance of $0.2 million, requires no principal payments and will be due December 31, 2014.

Our long-term success will depend on our ability to achieve and sustain profitable operating results and our ability to raise additional capital on acceptable terms should such additional capital be required. In the event that we are unable to achieve expected goals of profitability or raise sufficient additional capital, if needed, we may have to scale back or eliminate certain parts of our operations.

WeBased on our plan for combining the operating activities of both Chyron and Hego, and provided that we are able to achieve our planned results of operations and retain the availability under our credit facilities, we believe that cash on hand, net cash to be generated in the business, and availability of funding under our Credit Facility,credit facilities, will be sufficient to meet our cash needsrequirements for at least the next twelve months if we are able to achieve our planned results of operations and retain the availability of credit under our Credit Facility.months.

If these sources of funds are not sufficient, we may need to reduce, delay or terminate our existing or planned products and services. We may also need to raise additional funds through one or more capital financings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances and licensing arrangements with third parties, we may have to
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relinquish valuable rights to our technologies or products, or grant licenses on terms that are not favorable to us.

There can be no assurance that additional funds will be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to delay, limit, reduce or terminate development activities for one or more of our products or services; or delay, limit, reduce or terminate our sales and marketing capabilities or other activities that may be necessary to commercialize one or more of our products or services.


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ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
                  MARKET RISK

The information called for by this itemItem is omitted in reliance upon Item 305(e) of Regulation S-K.

ITEM 4.   CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) of the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal  financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure, particularly during the period in which this report was being prepared.

On May 22, 2013 the Company completed the Hego business combination for a purchase price of $24.6 million represented substantially by goodwill and identifiable intangible assets. Hego's operations contributed approximately $2.3 million in revenues to our consolidated financial results for the three months ended June 30, 2013. We continue to evaluate the internal control over financial reporting of the acquired business. As permitted by SEC Staff interpretive guidance for newly acquired businesses, the internal control over financial reporting of Hego was excluded from a formal evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2013 but we will include an assessment within one year from the date of the business combination.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting, identified in connection with the evaluation of such internal control, that occurred during our most recent completed quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.   OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

There have been no material changes to our legal proceedings as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2012.


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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 Annual2012 Form 10-K and Part II, Item 1A in our Quarterly Report on Form 10-K10-Q for the yearquarter ended DecemberMarch 31, 2012,2013 (the "2013 First Quarter Form 10-Q"), which could materially affect our business, financial condition or results of operations. The risks described in our Annual Report on2012 Form 10-K, 2013 First Quarter Form 10-Q and this Quarterly Report on Form 10-Q are not the only risks that we face. In addition, 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 results of operations. OtherThere have been no material changes to the risk factors described in our 2012 Form 10-K and 2013 First Quarter Form 10-Q, other than the addition of the following risk factors, there have been no material changes in or additions tofactor, which replaces and supersedes the corresponding risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2012.

Risks Related to the Proposed Transaction with Hego Aktiebolag, or Hego

We will issue a large number of shares of common stock in connection with our proposed transaction with Hego, which we refer to as the Share Purchase, which will result in substantial dilution to our existing stockholders. Our stockholders may not realize a benefit from the Share Purchase commensurate with the ownership dilution they will experience in connection with the Share Purchase.

The common stock consideration to be issued by us in our transaction with Hego consists of unregistered shares. Based on our outstanding capital stock at March 15, 2013, we anticipate that we will issue approximately 12,202,514 shares of our common stock upon the initial closing, which will represent 41.1% of our voting shares following the issuance. The actual amount of shares to be issued at the closing of the Share Purchase, or the Closing Shares, will equal 40.0% of the sum of (i) our issued and outstanding common stock as of the date that is ten (10) calendar days prior to the closing of the Share Purchase, or the Closing, (ii) the shares of our common stock that are issuable upon the exercise of all outstanding options and restricted stock units to purchase our common stock that have an exercise price at or below $1.25 as of the date that is ten (10) calendar days prior to the Closing, and (iii) the contemplated shares to be issued at the Closing, which we collectively refer to as the Outstanding Closing Shares. In addition, upon achieving certain revenue milestones, we may issue additional shares, or the Earn-Out Shares, such that the aggregate amount of Shares issuedfactor in the Share Purchase equals 50.0% of the sum of the Outstanding Closing Shares and the Earn-Out Shares. Based on our outstanding capital stock on March 15, 2013 we anticipate that we could issue up to 6,101,257 Earn-Out Shares. Our issuance of the Share Purchase Shares will result in substantial dilution of our existing stockholders’ ownership interests. Our issuance of the Share Purchase Shares may also have an adverse impact on our net income per share in fiscal periods that include (or follow) the Closing.
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If we are unable to realize the strategic and financial benefits currently anticipated from the Share Purchase, our stockholders will have experienced substantial dilution of their ownership interest without receiving commensurate benefit.

The actual value of the consideration we will pay to the Hego shareholders may exceed the value allocated to it at the time we entered into the Stock Purchase Agreement with Hego on March 9, 2013.

Under the Stock Purchase Agreement, other than shares to potentially be issued as a result of the achievement of revenue milestones, the number of shares of common stock we will issue as consideration at the Closing is fixed, and there will be no adjustment for changes in the market price of our common stock. Neither we nor the Hego shareholders are permitted to “walk away” from the Share Purchase nor are we permitted to re-solicit the vote of our stockholders solely because of changes in the market price of our common stock between the signing of the Stock Purchase Agreement and the Closing. Our common stock has historically experienced significant volatility. Stock price changes may result from a variety of factors that are beyond our control, including changes in our business, operations and prospects, regulatory considerations and general market and economic conditions. The value of the shares we issue to acquire Hego may be significantly higher at the Closing than when we entered into the Stock Purchase Agreement.

If the conditions to the Closing of the Share Purchase are not met, the Share Purchase will not occur, which could adversely impact the market price of our common stock as well as our business, financial condition and results of operations.

Specified conditions must be satisfied or waived before the Share Purchase can be completed, including, without limitation, obtaining the requisite approval of our stockholders with respect to our proposed issuance of common stock in the Share Purchase. We cannot assure you that each of these conditions will be satisfied.  If the conditions are not satisfied or waived in a timely manner and the Share Purchase is delayed, we may lose some or all of the intended or perceived benefits of the transaction which could cause our stock price to decline and harm our business. If the transaction is not completed for any reason, our stock price may decline to the extent that the current market price reflects a market assumption that the Share Purchase will be completed.

In addition, we will be required to pay our costs related to the transaction even if the Share Purchase is not completed, such as amounts payable to legal and financial advisors and independent accountants, and such costs are significant. All of these costs will be incurred whether or not the transaction is completed.

Although we expect that the transaction of Hego will result in benefits to us, we may not realize those benefits because of integration difficulties.

Integrating the operations of Hego successfully or otherwise realizing any of the anticipated benefits of the transaction with Hego, including anticipated cost savings and additional revenue opportunities, involves a number of challenges. The failure to meet these
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integration challenges could seriously harm our results of operations and the market price of our common stock may decline as a result.

Realizing the benefits of the transaction will depend in part on the integration of information technology, operations, personnel and sales forces. These integration activities are complex and time-consuming and we may encounter unexpected difficulties or incur unexpected costs, including:

·  our inability to achieve the cost savings and operating synergies anticipated in the transaction, which would prevent us from achieving the positive earnings gains expected as a result of the transaction;
·  diversion of management attention from ongoing business concerns to integration matters;
·  difficulties in consolidating and rationalizing information technology platforms and administrative infrastructures;
·  complexities in managing a significantly larger company than before the completion of the transaction;
·  complexities associated with managing the combined businesses and consolidating multiple physical locations where management may determine consolidation is desirable;
·  difficulties in the assimilation of Hego employees and the integration of two business cultures;
·  challenges in combining product offerings and sales and marketing activities;
·  challenges in demonstrating to our customers and to customers of Hego that the transaction will not result in adverse changes in customer service standards or business focus; and
·  possible cash flow interruption or loss of revenue as a result of change of ownership transitional matters.

We may not successfully integrate the operations of the businesses of Hego in a timely manner, and we may not realize the anticipated net reductions in costs and expenses and other benefits and synergies of the transaction of Hego to the extent, or in the timeframe, anticipated. In addition to the integration risks discussed above, our ability to realize these net reductions in costs and expenses and other benefits and synergies could be adversely impacted by practical or legal constraints on our ability to combine operations. As a non-public, non-U.S. company, Hego has not had to comply with the requirements of the Sarbanes-Oxley Act of 2002 for internal control and other procedures. Bringing Hego’s systems into compliance with those requirements may cause us to incur substantial additional expense. In addition, the integration process may cause an interruption of, or loss of momentum in, the activities of our business after completion of the transaction. If our management is not able to effectively manage the integration process, or if any significant business activities are interrupted as a result of the integration process, our business could suffer and our results of operations and financial condition may be harmed.
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Failure to complete the Share Purchase could negatively impact our stock price and our future business and financial results.

Although we have agreed to solicit proxies from our stockholders to obtain stockholder approval of the proposal to issue shares of our common stock, there is no assurance that the Share Purchase will be approved. If the Share Purchase is not approved, and as a result the Share Purchase is not completed:

·  the price of our common stock may decline;
·  we will not realize our expected benefits of the Share Purchase; and
·  the costs incurred by us, and certain costs incurred by the Hego shareholders, related to the Share Purchase, such as certain accounting and legal fees, must be paid by us even if the Share Purchase is not completed.
The Share Purchase may be completed even though material adverse changes may result from the announcement of the Share Purchase, industry-wide changes and other causes.

In general, either party can refuse to complete the Share Purchase if there is a material adverse change affecting the other party between March 9, 2013, the date of the Stock Purchase Agreement, and the Closing. However, certain types of changes do not permit either party to refuse to complete the Share Purchase, even if such change would have a material adverse effect on us or Hego, including:

·  general economic or business conditions or acts of war or terrorism, in each case, that do not disproportionately affect the applicable party and its subsidiaries, taken as a whole;
·  factors affecting the digital and broadcast graphics industry in general which do not disproportionately affect either party or its subsidiaries; or
·  any change in accounting principles generally accepted in the United States or applicable laws.
If adverse changes occur but we and the Hego shareholders still complete the Share Purchase, our stock price may suffer.

The market price of our common stock may decline as a result of the Share Purchase.

The market price of our common stock may decline as a result of the Share Purchase for a number of reasons including if:

·  we do not achieve the perceived benefits of the Share Purchase as rapidly or to the extent anticipated by financial or industry analysts;
·  the effect of the Share Purchase on our business and prospects is not consistent with the expectations of financial or industry analysts; or
·  investors react negatively to the effect on our business and prospects from the Share Purchase.
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Subject to certain limitations, the Hego shareholders may sell our common stock beginning 15 months following the Closing of the Share Purchase, which could cause our stock price to decline.

The shares of our common stock that the Hego shareholders will receive following the completion of the Share Purchase are restricted, but the Hego shareholders may sell the shares of our common stock following the Share Purchase under certain circumstances. The Hego shareholders will be subject to certain restrictions on their ability to transfer their shares of our common stock, including, among other things, a fifteen (15) month prohibition on the transfer of the shares of our common stock issued to the Hego shareholders in connection with the Share Purchase (other than transfers to certain permitted transferees). We have agreed to register for resale the Share Purchase Shares that are restricted from sale under the Securities Act. The sale of a substantial number of our shares by the Hego shareholders or our other stockholders within a short period of time could cause our stock price to decline, make it more difficult for us to raise funds through future offerings of our common stock or acquire other businesses using our common stock as consideration.

The fairness opinion obtained by Chyron from its financial advisor will not reflect changes in circumstances between signing the Stock Purchase Agreement and the completion of the Share Purchase.

We have not obtained and will not obtain an updated opinion regarding the fairness of the consideration to be paid by us pursuant to the Share Purchase from Morpheus Capital Advisors LLC, our financial advisor, which we refer to as Morpheus Capital. Morpheus Capital’s opinion speaks only as of its date and does not address the fairness of the consideration to be paid by us pursuant to the Share Purchase, from a financial point of view, at the time the Share Purchase is completed. Changes in the operations and prospects of Chyron or Hego, general market and economic conditions and other factors that may be beyond the control of Chyron and Hego, and on which the fairness opinion was based, may alter the value of Chyron or Hego or the prices of shares of our common stock by the time the Share Purchase is completed.

Risks Related to the Combined Business Following the Share Purchase

The future profitability, growth and success of our combined business will depend on our ability to achieve further product cost reductions by our combined operations.

The future profitability and growth of our combined business depends upon our ability to achieve further product cost reductions by our combined operations, including improved operating and manufacturing efficiencies and marketing and research and development synergies. If product cost reductions are not achieved on a timely basis, the future profitability of our combined business will be delayed and may not be delivered.
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The announcement and pendency of the Share Purchase may cause disruptions in the business of Hego, which could have an adverse effect on its business, financial condition or results of operations and, post-closing, our business, financial condition or results of operations.

The announcement and pendency of the transaction could cause disruptions in the business of Hego. Specifically:

These disruptions could be exacerbated by a delay in the completion of the Share Purchase or termination of the Stock Purchase Agreement and could have an adverse effect on the business, financial condition or results of operations of Hego prior to the completion of the transaction and on us if the transaction is completed.

We expect to increase the level of our insurance coverage following the completion of the proposed Share Purchase; however, future claims could exceed our applicable insurance coverage.

The combined companies will continue to maintain insurance for property and general liability, directors’ and officers’ liability, products liability, workers compensation and other coverage in amounts and on terms deemed adequate by management based on our expectations for future claims. Although we may increase the level of our insurance coverage, particularly our directors’ and officers’ liability insurance, following the completion of the Share Purchase, future claims could exceed our applicable insurance coverage, or in some instances our coverage may not cover the applicable claims.

Significant costs are expected to be associated with the proposed Share Purchase.

We estimate that Chyron and Hego will incur direct transaction costs of approximately $0.85 million and $0.99 million, respectively, in connection with the proposed Share Purchase. In addition, the combined business may incur charges to operations that we cannot currently reasonably estimate in the quarter in which the Share Purchase is completed or the following quarters to reflect costs associated with integrating the two businesses. There can be no assurance that the combined business will not incur additional charges relating to the transaction in subsequent periods, which could have a material adverse effect on our cash flows, results of operations and financial position.

The success of the combined business will depend on the services of each of our senior executives as well as certain key research and development, engineering, sales and marketing personnel, the loss of whom could negatively affect the combined business.

Our success has always depended upon the skills, experience and efforts of our senior executives and other key personnel, including our research and development executives and managers. Following the completion of the Share Purchase, this will be even more important as we work to integrate our businesses. For both us and Hego, much of our expertise is concentrated in relatively few employees, the loss of whom for any reason could negatively affect our business. The failure of key employees to remain with the combined business could be harmful to the success of the combined business. Competition for our highly skilled employees is intense
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and we cannot prevent the future resignation of any employee. Most of the combined business’s employees have or will have agreements which impose obligations that may prevent a former employee from working for a competitor for a period of time; however, these clauses may not be enforceable, or may be enforceable only in part.

The combined business will continue to require significant capital to build the business, and financing may not be available to us on reasonable terms, if at all.

The combined business will continue to require significant working capital for operations and marketing and research and development activities as well as the expansion and integration of our operations. If our existing resources are insufficient to satisfy our liquidity requirements, we may need to sell additional equity securities. Any sale of additional equity securities may result in additional dilution to our stockholders, and we cannot be certain that we will be able to obtain additional public or private financing in amounts, or on terms, acceptable to us, or at all.

Our executive officers and directors, together with their affiliates and related persons, own a large percentage of our voting common stock and could limit new stockholders’ influence on corporate decisions or could delay or prevent a change in corporate control.

Our current directors and executive officers and their affiliates will own, in the aggregate, approximately 24.3% of our outstanding shares of common stock (not including options or other convertible securities) assuming the issuance of approximately 12,202,514 shares of our common stock to acquire indirectly all of the issued and outstanding shares of Hego, based on our outstanding capital stock at March 15, 2013. The interests of this group of stockholders may not always coincide with our corporate interests or the interests of other stockholders, and they may act in a manner with which you may not agree or that may not be in the best interests of other stockholders. This concentration of ownership may have the effect of:

·  delaying, deferring or preventing, or alternatively, accelerating or causing, a change in control of our company;
·  entrenching our management and/or Board of Directors;
·  impeding a merger, consolidation, takeover or other business combination involving our company; or
·  discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company.
Hego conducts a significant amount of its sales activity outside of the United States, which subjects it to additional business risks and may adversely affect the combined business’s results of operations and financial condition due to increased costs.

During the year ended December 31, 2012, Hego derived approximately $13.8 million, or 93.1% of its net sales, from sales of its products and services outside of the United States. The combined business intends to continue to pursue growth opportunities in sales internationally, which could expose it to additional risks associated with international sales and operations that we do not currently face. Hego’s international operations are, and the combined business’s
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international operations will continue to be, subject to a number of risks and potential costs, including:

·  unexpected changes in foreign regulatory requirements;
·  differing local product preferences and product requirements;
·  diminished protection of intellectual property in some countries outside of the United States;
·  differing payment cycles;
·  trade protection measures and import or export licensing requirements;
·  difficulty in staffing, training and managing foreign operations;
·  differing legal regulations and labor relations;
·  potentially negative consequences from changes in tax laws (including potentially taxes payable on earnings of foreign subsidiaries upon repatriation); and
·  political and economic instability.

In addition, Hego is subject to risks arising from currency exchange rate fluctuations, which could increase the combined business’s costs and may adversely affect its results of operations. The U.S. dollar value of Hego’s foreign-generated revenues varies with currency exchange rate fluctuations. The majority of Hego’s foreign-generated revenues were generated in Europe. Significant increases in the value of the U.S. dollar relative to foreign currencies could have a material adverse effect on the combined business’s results of operations.

Any of these factors may, individually or as a group, have a material adverse effect on the combined business’s financial condition, results of operations and cash flows.First Quarter Form 10-Q:

Risks Related to Our Common Stock

If we fail to continue to meet all applicable NASDAQ Global Market requirements and Thethe NASDAQ Stock Market determines to delist our common stock, the delisting could adversely affect the market liquidity of our common stock, impair the value of your investment, and harm our business.

Our common stock is currently listed on the NASDAQ Global Market. In order to maintain that listing, we must satisfy minimum financial and other requirements. On March 12, 2013, we received a letter, which we refer to as the "Notice," from The Nasdaq Stock Market or "NASDAQ," notifying us that we were no longer in compliance with the minimum stockholders' equity requirement for continued listing on the NASDAQ Global Market. NASDAQ Listing Rule 5450(b)(1)(A) requires companies listed on the NASDAQ Global Market to maintain a minimum of $10,000,000 in stockholders' equity. As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, filed on March 8, 2013, our stockholders' equity as of December 31, 2012 did not meet this requirement.

In order to maintain the listing of our common stock on the NASDAQ Global Market, we were required to submit by April 26, 2013 to NASDAQ a plan to regain compliance with this continued listing requirement. On April 22, 2013, we submitted our plan to regain compliance with the NASDAQ Listing Rules.Rules and NASDAQ will decide whethergranted us an extension to acceptprovide evidence of compliance.

On May 22, 2013, we held our plan2013 annual meeting and our stockholders approved our business combination with Hego. Based upon a valuation performed by an independent valuation services firm that we retained, we recorded the acquisition at a value of approximately $24.6 million. As a result of this transaction, and taking into account our results of operations through our second quarter ended June 30, 2013, our shareholders' equity was approximately $17.9 million at June 30, 2013, and is therefore in excess of the NASDAQ Global Market's stockholders' equity requirement. On August 8, 2013, we advised NASDAQ, via a filing on Form 8-K, of our belief that we are now in compliance with this requirement. On August 9, 2013, the Company received a letter from NASDAQ notifying it that as a result of the information contained in the Form 8-K, NASDAQ has determined that the Company complies with the continued listing requirement for shareholders' equity, subject to regainthe Company
 
 
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compliance with its listing requirements, considering criteria such as the likelihood that the plan will result in compliance with NASDAQ's continued listing criteria, our past compliance history, the reasons for our current non-compliance, other corporate events that may occur within the review period, our overall financial condition, and our public disclosures. If the plan is accepted, NASDAQ may grant us an extension of up to 180 calendar days from the date of the Notice for us to provideproviding evidence of compliance.its compliance upon filing this quarterly report on Form 10-Q for the quarter ended June 30, 2013.

If NASDAQ does not accept our plan, we may apply to transfer the listing of our common stock to the NASDAQ Capital Market (which has a lower stockholders' equity requirement for continued listing) if we satisfy all of the criteria for initial listing on the NASDAQ Capital Market. If we do not transfer our common stock to the NASDAQ Capital Market, NASDAQ will notify us that our common stock is subject to delisting. At that time, we may appeal the delisting determination to a NASDAQ Hearings Panel.

While we intend to continue to engage in efforts to regain compliance, and thus maintain our listing, there can be no assurance that we will be able to regain compliance during the applicable time periods set forth above.compliance. If we fail to continue to meet all applicable NASDAQ Global Market requirements in the future and NASDAQ determines to delist our common stock, the delisting could substantially decrease trading in our common stock and adversely affect the market liquidity of our common stock; adversely affect our ability to obtain financing on acceptable terms, if at all, for the continuation of our operations; and harm our business. Additionally, the market price of our common stock may decline further and stockholders may lose some or all of their investment.

ITEM 2.                UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
                 OF PROCEEDS

None.

ITEM 3.                DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.                MINE SAFETY DISCLOSURES

None.

ITEM 5.                OTHER INFORMATION

None.

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ITEM 6.   EXHIBITS

(a)  Exhibits:

Exhibit No.
Description of Exhibit
 
2.13.1
Stock Purchase Agreement by and among, Chyron Corporation, Chyron Holdings, Inc., Chyron AB, Hego Aktiebolag, Westhill Group AB (corp. reg. no. 556583-5948) asRestated Certificate of Incorporation filed with the stockholder representativeState of the Hego stockholders, and the stockholders of Hego Aktiebolag, dated as of March 9, 2013New York on December 27, 1991 (previously filed as Exhibit 2.13(a) to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1991 (File No. 000-05110) and incorporated herein by reference).
3.2
Certificate of Amendment of the Restated Certificate of Incorporation filed with the State of New York on February 7, 1997 (previously filed as Exhibit 3(c) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (File No. 001-09014) and incorporated herein by reference).
3.3
Certificate of Amendment of the Restated Certificate of Incorporation filed with the State of New York on September 19, 2007 (previously filed as Exhibit 3(i) to the Registrant's Current Report on Form 8-K filed with the Commission on March 12, 2013September 24, 2007 (File No. 001-09014)000-05110) and incorporated herein by reference.)reference).
 
3.13.4
Amended andCertificate of Amendment of the Restated By-LawsCertificate of Chyron Corporation, as amendedIncorporation filed with the State of New York on May 22, 2013 (previously filed as Exhibit 3.1 to the Registrant's current reportCurrent Report on Form 8-K filed with the Commission on March 12,May 29, 2013 (File No. 001-09014) and incorporated herein by reference).
 
10.110.1**
2013 Management Incentive Compensation Plan (previously filedEmployment Agreement between ChyronHego Corporation and Johan Apel, dated as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on January 15, 2013 (File No. 001-9014) and incorporated herein by reference).
of May 23, 2013.*
10.2*#*SeventhEmployment Agreement between ChyronHego Corporation and Kevin Prince, dated as of May 23, 2013.*
10.3**Employment Agreement between ChyronHego Corporation and Soren Kjellin, dated as of May 23, 2013.*
10.4**Eighth Loan Modification Agreement between Silicon Valley Bank and ChyronChyronHego Corporation, dated March 1,August 5, 2013.
31.1**
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
31.2**
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 

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32.1**Certification of Principal Executive Officer pursuant to 18 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 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101**

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 101*
Interactive Data Files formatted in XBRL (Extensible Business Reporting Language) from (a) our Consolidated Balance Sheets as of March 31,June 30, 2013 (unaudited) and December 31, 2012, (b) our Consolidated Statements of Operations for the Three and Six Months ended March 31,June 30, 2013 and 2012 (unaudited), (c) our Consolidated Statements of Comprehensive (Loss) for the Three and Six Months ended March 31,June 30, 2013 and 2012 (unaudited), (d) our Consolidated Statements of Cash Flows for the Three and Six Months ended March 31,June 30, 2013 and 2012 (unaudited) and (e) the Notes to such Consolidated Financial Statements (unaudited).**
*
 
    *Management contract or compensatory plan or arrangement.
  **Filed herewith.
*filed herewith
**Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
 
 #  Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission as part of an application for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.


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SIGNATURES

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


  CHYRONCHYRONHEGO CORPORATION
  (Registrant)
   
May 13,August 14, 2013 /s/ Michael Wellesley-Wesley
(Date) Michael Wellesley-Wesley
  President and     Chief Executive Officer
      (Principal Executive Officer)
May 13,
August 14, 2013 /s/ Jerry Kieliszak
(Date) Jerry Kieliszak
       Senior Vice President and Chief Financial Officer and Sr. Vice President
    (Principal Financial Officer)

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