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. The forward-looking information is based on various factors and was derived using numerous assumptions. 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; 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; 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, 2011. 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 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," the "Company," "we," "us," and "our" refer to Chyron Corporation.

Overview

We currently exist in a worldwide TV market that continues to be persistently price competitive, and where customer demand for purchases of new graphics systems, products and services remains subdued. While our customers are experiencing some degree of recovery in their advertising revenues, they continue to emphasize cost containment and this is reflected in their capital spending.

The overall economic recovery is still tenuous, and our professional media customers continue to face fiscal challenges. These customers are in the process of transforming their businesses to address new opportunities and threats. To help our customers transition their business models we have developed workflow solutions for them that we believe will bring cost advantages over traditional processes. These solutions are designed to help our media clients do more with less. By leveraging our Cloud-based technologies to deliver low-cost, scalable, collaborative applications and services, we aim to help our customers transform their high fixed-cost business models to lower, variable and more flexible cost models. We have no intention of diminishing our product business. Rather, we are finding that adoption of our service offerings results in new product and systems sales and vice versa.

Comparison of the Three and Six Months Ended June 30, 2012 and 2011

Net Sales. Revenues for the quarter ended June 30, 2012 were $7.7 million, a decrease of $1.7 million, or 19%, from the $9.4 million reported in the quarter ended June 30, 2011. Of these amounts, North American revenues were $5.2 million in the quarter ended June 30, 2012 and $7.1 million in the quarter ended June 30, 2011. Revenues derived from other international regions were $2.5 million in the quarter ended June 30, 2012 as compared to $2.3 million in the quarter ended June 30, 2011.

Revenues for the six months ended June 30, 2012 were $15.6 million, a decrease of $0.4 million, or 3%, from the $16.0 million in the six months ended June 30, 2011. Revenues derived from North American customers were $10.8 million in the six month period ended June 30, 2012 as compared to $12.1 million in the six month period ended June 30, 2011. Revenues derived from other international regions were $4.7 million in the six months ended June 30, 2012 as compared to $3.9 million in the six month period ended June 30, 2011.

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

                                Three Months                                      Six Months
                               Ended June 30,                                   Ended June 30,
                              % of                    % of                     % of                     % of
                  2012        Total       2011        Total        2012        Total        2011        Total
      Product    $ 5,771          75 %   $ 7,429          79 %   $ 11,573          74 %   $ 12,464          78 %
      Services     1,913          25 %     2,001          21 %      3,988          26 %      3,546          22 %
                 $ 7,684                 $ 9,430                 $ 15,561                 $ 16,010

We have experienced a slowdown in our product revenue stream as a result of delays in spending as broadcasters emphasize cost control and reschedule their capital expenditures. This decline was experienced in North America and more markedly in Europe where the economy has stalled. This was offset by improvements in our Asian and Latin American markets from several major program upgrades.

While our services revenue was fairly flat in the second quarter of 2012 as compared to 2011, our year to date services revenues in 2012 have grown 12% over the same period in the prior year. This growth is attributable to increased sales of software and hardware maintenance contracts for our broadcast graphics products and increases in revenue from Axis.

Gross Profit. Gross margins for the quarters ended June 30, 2012 and 2011 were 69% and 70%, respectively. Gross margins for each of the six month periods ended June 30, 2012 and 2011 were 70%. Overall, we have been able to obtain reasonable pricing for our materials and have been able to manage our overhead costs to achieve a consistent cost structure.

Selling, General and Administrative Expenses. Selling, general and administrative ("SG&A) expenses are as follows (in thousands):

                                Three Months             Six Months
                               Ended June 30,          Ended June 30,
                              2012        2011        2012        2011
Sales and marketing          $ 3,474     $ 3,193     $ 7,000     $ 5,875
General and administrative     1,005       1,490       2,164       2,682
                             $ 4,479     $ 4,683     $ 9,164     $ 8,557

The increase in spending in sales and marketing expenses in all periods is due to additional compensation and related direct costs of increasing our senior sales, marketing and support staff. As planned, we made strategic hires in key sales positions and expanded our sales and marketing efforts overseas. In addition, key positions were filled in professional services as we increase our emphasis on services that complement our products business.

The general and administrative expenses for the three and six month periods in 2011 include higher legal and lawsuit settlement costs of approximately $0.3 million relating to a lawsuit that was settled in 2011. In addition, the three and six month periods in 2011 include recruiting and executive search costs of $0.1 million and compensation related costs of $0.1 million for an executive position that was vacated. Since these costs did not recur in 2012, we experienced a decline in all periods presented. We expect that SG&A expenses will not increase for the remainder of 2012 as we focus on cost control.

Research and Development Expenses. Research and development ("R&D") expenses were $1.9 million and $1.6 million in the quarters ended June 30, 2012 and 2011, respectively. R&D expenses were $3.9 million and $3.3 million in the six month periods ended June 30, 2012 and 2011, respectively. The majority of the increase in R&D spending in all periods presented has resulted from our focus on integrating Axis with our graphics products and systems and future product introductions.

Interest expense. Interest expense declined slightly in the three and six month periods ended June 30, 2012 as compared to the comparable periods in 2011, as we continued to make monthly principal payments on our term loan and the outstanding principal balance was reduced. We made the final payment on this term loan in May 2012.

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

                                              Three Months              Six Months
                                             Ended June 30,           Ended June 30,
                                            2012          2011         2012        2011
Foreign exchange transaction (loss)gain   $     (13 )     $   -     $    (6 )     $  34

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. However, we believe that it is not material to our near-term financial position or results of operations.

Income tax benefit (expense), net. In the second quarter of 2012 and 2011, we recorded an income tax benefit of $0.5 million and an expense of $0.1 million, respectively. In the six months ended June 30, 2012 and 2011 we recorded a benefit of $0.6 million and $0.3 million, respectively. The difference between our effective income tax rate and the federal statutory rate is primarily due to 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 carryforwards.

Liquidity and Capital Resources

At June 30, 2012, we had cash and cash equivalents on hand of $2.8 million and working capital of $6.2 million. In the first six months of 2012 we used approximately $1.0 million in cash for operations primarily due to the net loss that was incurred.

Also, during the six month period ended June 30, 2012, we made contributions to our pension plan totaling $0.6 million, including a $0.39 million contribution in order to exceed an 80% funding level, measured at January 1, 2012. Based on current assumptions, we expect to make contributions to our pension plan of $0.5 million over the next twelve months as required under ERISA. Our pension plan assets were valued at $4.9 million and $4.1 million at June 30, 2012 and December 31, 2011, respectively. Our investment strategy remains the same and we believe that the pension plan's assets are more than adequate to meet pension plan obligations for the next twelve months.

During the remainder of 2012, we plan to expend approximately $0.8 million to make improvements to our existing U.S. based Axis co-location facility, and for another disaster recovery and backup co-location for our Axis services that will be funded from a term loan that we intend to enter into with our U.S. bank.

We have a credit facility with a U.S. bank which expires on December 29, 2012. The credit facility provides for a $1.5 million revolving line of credit ("revolver"), with an advance rate of up to 80% of eligible accounts receivable. At June 30, 2012 available borrowings were approximately $1.5 million based on this formula but no borrowings were outstanding under the revolver. Pursuant to the credit agreement, we are required to maintain financial covenants based on an adjusted quick ratio of at least 1.2 to 1.0, measured at month-end, and minimum tangible net worth of $18.5 million, increased by 60% of the sum of the gross proceeds received by us from any sale of our equity or incurrence of subordinated debt and any positive quarterly net income earned, measured at quarter-end (both as defined in the credit facility). 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 have been and currently are in compliance with all debt covenants under the credit facility.

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.

We believe that cash on hand, net cash to be generated in the business, and availability of funding under our credit facilities, will be sufficient to meet our cash needs 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 lending agreement.

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 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.