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SECURITIES & EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q

(Mark One)

|    |  |                                                                                        
|--- |  | ---------------------------------------------------------------------------------------
|[X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003

or

|     |  |                                                                                         
|---- |  | ----------------------------------------------------------------------------------------
|[  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the transition period from           
  to

Commission File No. 1-106

LYNCH CORPORATION




(Exact name of Registrant as specified in its charter)


|                                                       |  |                    
|------------------------------------------------------ |  | -------------------
|Indiana                                                |  | 38-1799862         
|                                                      
|(State or other jurisdiction of                        |  | I.R.S. Employer    
|incorporation or organization)                         |  | Identification No.)
|                                                       |  |                    
|50 Kennedy Plaza, Suite 1250, Providence, Rhode Island |  | 02903              
|                                                      
|(Address of principal executive offices)               |  | (Zip Code)         

(401) 453-2007




Registrants telephone number, including area code


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

Yes [X]   No [  ]

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

Yes [  ]   No
[X]

Indicate the number of shares outstanding of each of the Registrants classes
of Common Stock, as of the latest practical date.

|                              |  |                           
|----------------------------- |  | --------------------------
|Class                         |  | Outstanding at May 1, 2003
|                              |  |                           
|Common Stock, $0.01 par value |  | 1,497,883                 



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TABLE OF CONTENTS



|                                                 |                                                                                                |                                                      |  |  |  |  |  | 
|------------------------------------------------ | ---------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|Part 1 - FINANCIAL INFORMATION -                
|                                                 | Item 1 - Financial Statements                                                                 
|                                                 |                                                                                                | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                                                 |                                                                                                | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|                                                 |                                                                                                | CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS      
|                                                 |                                                                                                | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                                                 | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|                                                 | Item 3. Quantitative and Qualitative Disclosure About Market Risk                             
|                                                 | Item 4. Controls and Procedures                                                               
|PART II. OTHER INFORMATION                      
|                                                 | Item 1. Legal Proceedings                                                                     
|                                                 | Item 4. Submission of Matters to a Vote of Security Holders                                   
|                                                 | Item 6. Exhibits and Reports on Form 8-K                                                      
|SIGNATURES                                      
|EXHIBIT INDEX                                   
|EX-99.1 Sarbanes-Oxley Section 906 Certification



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INDEX

LYNCH CORPORATION AND SUBSIDIARIES

|                                                                                              |                                                       |                                           
|--------------------------------------------------------------------------------------------- | ----------------------------------------------------- | ------------------------------------------
|PART I. FINANCIAL INFORMATION                                                                
|Item 1. Financial Statements (Unaudited)                                                     
|                                                                                              | Condensed Consolidated Balance Sheets:               
|                                                                                              | -                                                     | March 31, 2003                            
|                                                                                              | -                                                     | December 31, 2002                         
|                                                                                              | Condensed Consolidated Statements of Operations:     
|                                                                                              | -                                                     | Three months ended March 31, 2003 and 2002
|                                                                                              | Condensed Consolidated Statements of Cash Flows:     
|                                                                                              | -                                                     | Three months ended March 31, 2003 and 2002
|                                                                                              | Notes to Condensed Consolidated Financial Statements:
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|Item 3. Quantitative and Qualitative Disclosure About Market Risk                            
|Item 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION                                                                   
|Item 1. Legal Proceedings                                                                    
|Item 4. Submission of Matters to a Vote of Security Holders                                  
|Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                                                                   

2



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Part 1 - FINANCIAL INFORMATION





Item 1 - Financial Statements




LYNCH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)

|                                       |              |                                                                                                                     |        |             |        |              |        |        |        |  
|-------------------------------------- | ------------ | ------------------------------------------------------------------------------------------------------------------- | ------ | ----------- | ------ | ------------ | ------ | ------ | ------ | -
|                                       |              |                                                                                                                     |        | March 31,   |        | December 31,
|                                       |              |                                                                                                                     |        | 2003        |        | 2002        
|                                       |              |                                                                                                                     |        | (unaudited) |        | (A)         
|                                       |              |                                                                                                                     |        |             |        |             
|ASSETS                                 |              |                                                                                                                     |        |             |        |              |        |       
|CURRENT ASSETS                         |              |                                                                                                                     |        |             |        |              |        |       
|                                       |              | Cash and cash equivalents                                                                                           |        | $           | 6,720  |              |        | $      | 5,986  |  
|                                       |              | Restricted cash (Note D)                                                                                            |        |             | 1,125  |              |        |        | 1,125  |  
|                                       |              | Investments  Marketable Securities (Note E)                                                                        |        |             | 836    |              |        |        | 861    |  
|                                       |              | Trade accounts receivables, less allowances of $91 and $91, respectively                                            |        |             | 3,195  |              |        |        | 3,524  |  
|                                       |              | Inventories (Note F)                                                                                                |        |             | 6,010  |              |        |        | 5,624  |  
|                                       |              | Recoverable income taxes                                                                                            |        |             | 532    |              |        |        | 532    |  
|                                       |              | Deferred income taxes                                                                                               |        |             | 207    |              |        |        | 207    |  
|                                       |              | Prepaid expenses                                                                                                    |        |             | 259    |              |        |        | 324    |  
|                                       |              |                                                                                                                     |        |             |        |              |        |        |        |  
|                                       |              | TOTAL CURRENT ASSETS                                                                                                |        |             | 18,884 |              |        |        | 18,183 |  
|                                      
|PROPERTY, PLANT AND EQUIPMENT          |              |                                                                                                                     |        |             |        |              |        |       
|                                       |              | Land                                                                                                                |        |             | 291    |              |        |        | 291    |  
|                                       |              | Buildings and improvements                                                                                          |        |             | 4,198  |              |        |        | 4,198  |  
|                                       |              | Machinery and equipment                                                                                             |        |             | 11,874 |              |        |        | 11,841 |  
|                                       |              |                                                                                                                     |        |             |        |              |        |        |        |  
|                                       |              |                                                                                                                     | 16,363 |             |        |              | 16,330 |       
|                                       |              | Less: accumulated depreciation                                                                                      |        |             | 11,747 |              |        |        | 11,504 |  
|                                       |              |                                                                                                                     |        |             |        |              |        |        |        |  
|                                       |              |                                                                                                                     | 4,616  |             |        |              | 4,826  |       
|OTHER ASSETS                           |              |                                                                                                                     | 368    |             |        |              | 421    |       
|                                       |              |                                                                                                                     |        |             |        |              |        |        |        |  
|                                       | TOTAL ASSETS |                                                                                                                     | $      | 23,868      |        |              | $      | 23,430 |       
|                                       |              |                                                                                                                     |        |             |        |              |        |        |        |  
|LIABILITIES AND SHAREHOLDERS EQUITY   |              |                                                                                                                     |        |             |        |              |        |       
|CURRENT LIABILITIES:                   |              |                                                                                                                     |        |             |        |              |        |       
|                                       |              | Notes payable to banks (Note G)                                                                                     |        | $           | 2,352  |              |        | $      | 2,228  |  
|                                       |              | Trade accounts payable                                                                                              |        |             | 1,262  |              |        |        | 927    |  
|                                       |              | Accrued warranty expense (Note H)                                                                                   |        |             | 1,423  |              |        |        | 1,595  |  
|                                       |              | Accrued compensation expense                                                                                        |        |             | 1,034  |              |        |        | 921    |  
|                                       |              | Accrued income taxes                                                                                                |        |             | 697    |              |        |        | 1,053  |  
|                                       |              | Accrued professional fees                                                                                           |        |             | 218    |              |        |        | 327    |  
|                                       |              | Accrued commissions                                                                                                 |        |             | 171    |              |        |        | 214    |  
|                                       |              | Margin liability on marketable securities                                                                           |        |             | 251    |              |        |        | 251    |  
|                                       |              | Other accrued expenses                                                                                              |        |             | 340    |              |        |        | 659    |  
|                                       |              | Customer advances                                                                                                   |        |             | 2,668  |              |        |        | 1,147  |  
|                                       |              | Current maturities of long-term debt (Note G)                                                                       |        |             | 840    |              |        |        | 832    |  
|                                       |              |                                                                                                                     |        |             |        |              |        |        |        |  
|                                       |              | TOTAL CURRENT LIABILITIES                                                                                           |        |             | 11,256 |              |        |        | 10,154 |  
|                                      
|LONG-TERM DEBT (Note G)                |              |                                                                                                                     | 1,325  |             |        |              | 1,089  |       
|OTHER LONG TERM LIABILITIES            |              |                                                                                                                     | 1,116  |             |        |              | 1,253  |       
|                                       |              |                                                                                                                     |        |             |        |              |        |        |        |  
|                                       |              | TOTAL LIABILITIES                                                                                                   |        |             | 13,697 |              |        |        | 12,496 |  
|                                      
|COMMITMENTS AND CONTINGENCIES (Note L) |              |                                                                                                                     |        |             |        |              |        |       
|                                      
|SHAREHOLDERS EQUITY                   |              |                                                                                                                     |        |             |        |              |        |       
|                                       |              | Common stock, $0.01 par value - 10,000,000 shares authorized; 1,513,191 shares issued;
1,497,883 shares outstanding |        |             | 15     |              |        |        | 15     |  
|                                       |              | Additional paid-in capital                                                                                          |        |             | 15,645 |              |        |        | 15,645 |  
|                                       |              | Accumulated deficit                                                                                                 |        |             | (5,308 | )            |        |        | (4,570 | )
|                                       |              | Accumulated other comprehensive Income (Note J)                                                                     |        |             | 277    |              |        |        | 302    |  
|                                       |              | Treasury stock of 15,308 shares at cost                                                                             |        |             | (458   | )            |        |        | (458   | )
|                                       |              |                                                                                                                     |        |             |        |              |        |        |        |  
|                                       |              | TOTAL SHAREHOLDERS EQUITY                                                                                          |        |             | 10,171 |              |        |        | 10,934 |  
|                                       |              |                                                                                                                     |        |             |        |              |        |        |        |  
|                                       |              | TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                                                          |        | $           | 23,868 |              |        | $      | 23,430 |  
|                                       |              |                                                                                                                     |        |             |        |              |        |        |        |  



|(A) |  | The Balance Sheet at December 31, 2002 has been derived from the audited
financial statements at that date, but does not include all of the
information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See accompanying notes

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PART I  FINANCIAL INFORMATION

Item 1 - Financial Statements




LYNCH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except share amounts)

|                                     |                             |   |                      |       |      |   |           |       |  
|------------------------------------ | --------------------------- | - | -------------------- | ----- | ---- | - | --------- | ----- | -
|                                     |                             |   | Three Months Ended  
|                                     |                             |   | March 31 (unaudited)
|                                     |                             |   |                     
|                                     |                             |   | 2003                 |       | 2002
|                                     |                             |   |                      |       |     
|SALES AND REVENUES                   |                             | $ | 4,744                |       |      | $ | 7,003     |      
|Cost and expenses:                   |                             |   |                      |       |      |   |           |      
|                                     | Manufacturing cost of sales |   |                      | 3,951 |      |   |           | 4,854 |  
|                                     | Selling and administrative  |   |                      | 1,833 |      |   |           | 2,549 |  
|                                     |                             |   |                      |       |      |   |           |      
|OPERATING LOSS                       |                             |   | (1,040               | )     |      |   | (400      | )    
|Other income (expense):              |                             |   |                      |       |      |   |           |      
|                                     | Investment Income           |   |                      | 22    |      |   |           | 39    |  
|                                     | Interest expense            |   |                      | (69   | )    |   |           | (40   | )
|                                     |                             |   |                      |       |      |   |           |      
|                                     |                             |   | (47                  | )     |      |   | (1        | )    
|                                     |                             |   |                      |       |      |   |           |      
|LOSS BEFORE INCOME TAXES             |                             |   | (1,087               | )     |      |   | (401      | )    
|Benefit from income taxes            |                             |   | 349                  |       |      |   | 109       |      
|                                     |                             |   |                      |       |      |   |           |      
|NET LOSS                             |                             | $ | (738                 | )     |      | $ | (292      | )    
|                                     |                             |   |                      |       |      |   |           |      
|Weighted average shares outstanding. |                             |   | 1,497,900            |       |      |   | 1,497,900 |      
|                                     |                             |   |                      |       |      |   |           |      
|BASIC AND DILUTED LOSS PER SHARE:    |                             | $ | (0.49                | )     |      | $ | (0.19     | )    
|                                     |                             |   |                      |       |      |   |           |      

See accompanying notes

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PART I  FINANCIAL INFORMATION

ITEM 1  Financial Statements




LYNCH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)

|                                                                                          |                                          |   |                       |      |      |   |        |        |  
|----------------------------------------------------------------------------------------- | ---------------------------------------- | - | --------------------- | ---- | ---- | - | ------ | ------ | -
|                                                                                          |                                          |   | Three Months Ended   
|                                                                                          |                                          |   | March 31, (unaudited)
|                                                                                          |                                          |   |                      
|                                                                                          |                                          |   | 2003                  |      | 2002
|                                                                                          |                                          |   |                       |      |     
|OPERATING ACTIVITIES                                                                      |                                          |   |                       |      |      |   |        |       
|Net loss                                                                                  |                                          | $ | (738                  | )    |      | $ | (292   | )     
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |                                          |   |                       |      |      |   |        |       
|Restricted operating cash                                                                 |                                          |   |                      |      |      |   | (240   | )     
|Depreciation                                                                              |                                          |   | 243                   |      |      |   | 259    |       
|Amortization of definite-lived intangible assets                                          |                                          |   | 53                    |      |      |   | 50     |       
|Changes in operating assets and liabilities:                                              |                                          |   |                       |      |      |   |        |       
|                                                                                          | Receivables                              |   |                       | 329  |      |   |        | 1,086  |  
|                                                                                          | Inventories                              |   |                       | (386 | )    |   |        | (401   | )
|                                                                                          | Accounts payable and accrued liabilities |   |                       | 970  |      |   |        | (1,991 | )
|                                                                                          | Other assets/liabilities                 |   |                       | (72  | )    |   |        | (110   | )
|                                                                                          |                                          |   |                       |      |      |   |        |       
|Net cash provided by (used in) operating activities                                       |                                          |   | 399                   |      |      |   | (1,639 | )     
|                                                                                          |                                          |   |                       |      |      |   |        |       
|INVESTING ACTIVITIES                                                                      |                                          |   |                       |      |      |   |        |       
|Capital expenditures                                                                      |                                          |   | (33                   | )    |      |   | (36    | )     
|Purchase of marketable securities                                                         |                                          |   |                      |      |      |   | (260   | )     
|                                                                                          |                                          |   |                       |      |      |   |        |       
|Cash used in investing activities                                                         |                                          |   | (33                   | )    |      |   | (296   | )     
|                                                                                          |                                          |   |                       |      |      |   |        |       
|FINANCING ACTIVITIES                                                                      |                                          |   |                       |      |      |   |        |       
|Net borrowings of notes payable                                                           |                                          |   | 124                   |      |      |   | 245    |       
|Repayment of long-term debt                                                               |                                          |   | (52                   | )    |      |   | (245   | )     
|Proceeds from long-term debt                                                              |                                          |   | 296                   |      |      |   |       |       
|                                                                                          |                                          |   |                       |      |      |   |        |       
|Cash provided by financing activities                                                     |                                          |   | 368                   |      |      |   |       |       
|                                                                                          |                                          |   |                       |      |      |   |        |       
|Increase (decrease) in cash and cash equivalents                                          |                                          |   | 734                   |      |      |   | (1,935 | )     
|Cash and cash equivalents at beginning of period                                          |                                          |   | 5,986                 |      |      |   | 4,247  |       
|                                                                                          |                                          |   |                       |      |      |   |        |       
|Cash and cash equivalents at end of period                                                |                                          | $ | 6,720                 |      |      | $ | 2,312  |       
|                                                                                          |                                          |   |                       |      |      |   |        |       

See accompanying notes

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



|A. |  | Subsidiaries of the Registrant
|-- |  | ------------------------------

As of March 31, 2003, the Subsidiaries of the Registrant are as follows:

|                    |                                         |                         |       |                |       |  
|------------------- | --------------------------------------- | ----------------------- | ----- | -------------- | ----- | -
|                    |                                         |                         |       | Owned By Lynch
|                    |                                         |                         |       |               
|Lynch Systems, Inc. |                                         |                         | 100.0 | %             
|                    | Lynch International Holding Corporation |                         |       | 100.0          | %    
|                    | Lynch-AMAV LLC                          |                         |       | 100.0          | %    
|                    | M-tron Industries, Inc.                 |                         |       | 100.0          | %    
|                    |                                         | M-tron Industries, Ltd. |       |                | 100.0 | %



|B. |  | Basis of Presentation
|-- |  | ---------------------

The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three month
period ended March 31, 2003 are not necessarily indicative of the results that
may be expected for the year ended December 31, 2003.

The balance sheet at December 31, 2002 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.

On September 23, 2002, Lynch disposed of its remaining interest in
Spinnaker Industries, Inc. (Spinnaker) for nominal consideration and
completed the deconsolidation that commenced on September 30, 2001. The
financial statements for the periods ending March 31, 2002; December 31, 2002;
and March 31, 2003 therefore exclude Spinnaker. The net result of the
deconsolidation was the recording of a non-cash gain of $19.4 million in the
third quarter of 2002 and $27.4 million in the third quarter of 2001.

For further information, refer to the consolidated financial statements
and footnotes thereto included in the Registrant Company and Subsidiaries
annual report on Form 10-K for the year ended December 31, 2002.



|C. |  | Adoption of Accounting Pronouncements
|-- |  | -------------------------------------

In November 2002, the FASB issued Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Indebtedness of Others.

The Company presently guarantees (unsecured) the SunTrust Bank loans of
its subsidiary, Lynch Systems, and has guaranteed a Letter of Credit issued to
the First National Bank of Omaha on behalf of its subsidiary, M-tron
Industries, Inc. These guarantees are subject to FIN 45s disclosure
requirement only. As of March 31, 2003, there were no obligations to SunTrust
Bank. As of March 31, 2003, the $1,000,000 Letter of Credit issued by Fleet
Bank to The First National Bank of Omaha was secured by a $1,125,000 deposit in
a Fleet Bank Treasury Fixed Income Fund.

There are no other financial, performance, indirect guarantees or
indemnification agreements.

In July 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 146, Accounting for Costs
Associated with Exit or Disposal Activities (SFAS 146), which addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring). The
provisions of SFAS 146 are effective for exit or disposal activities that are
initiated after December 31, 2002; the Company does not have any exit or
disposal activities underway.

On December 31, 2002, the FASB issued Statement of Financial Accounting
Standards No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure (SFAS 148), which amends the

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disclosure provisions of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation (SFAS 123) and APBN opinion No. 28, Interim
Financial Reporting (APB 28). See Note I to the Consolidated Financial
Statements  Earnings Per Share and Stockholders Equity.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51 (FIN 46). FIN
46 clarifies the application of Accounting Research Bulletin No. 51,
Consolidated Financial Statements, to certain entities in which equity
investors do not have the characteristics of a controlling financial interest
or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other
parties. The Company does not have any variable interest entities.



|D. |  | Restricted Cash
|-- |  | ---------------

At both March 31, 2003 and December 31, 2002, the Company had $1.1 million of
Restricted Cash that secures a Letter of Credit issued by Fleet Bank to the
First National Bank of Omaha as collateral for its M-tron subsidiarys loans.



|E. |  | Investments
|-- |  | -----------

The following is a summary of marketable securities held by the Company
(in Thousands):

|                  |  |      |     |       |  |            |     |            |  |           |   |  |  |   |     | 
|----------------- |  | ---- | --- | ----- |  | ---------- | --- | ---------- |  | --------- | - |  |  | - | --- | 
|                  |  |      |     |       |  | Gross      |     | Gross      |  | Estimated
|                  |  |      |     |       |  | Unrealized |     | Unrealized |  | Fair     
|Equity Securities |  | Cost |     | Gains |  | Losses     |     | Value     
|                  |  |      |     |       |  |            |     |           
|March 31, 2003    |  | $    | 557 |       |  | $          | 279 |            |  |           |  |  |  | $ | 836 | 
|December 31, 2002 |  | $    | 557 |       |  | $          | 304 |            |  |           |  |  |  | $ | 861 | 

The Company has a margin liability against this investment of $251,000 at
both March 31, 2003 and December 31, 2002 which must be settled upon the
disposition of the related securities whose fair value is based on quoted
market prices. The Company has designated these investments as available for
sale pursuant to Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities.



|F. |  | Inventories
|-- |  | -----------

Inventories are stated at the lower of cost or market value. At March 31,
2003, inventories were valued by two methods: last-in, first-out
(LIFO)  64%,
and first-in, first-out (FIFO)  36%. At December 31, 2002, inventories were
valued by the same two methods: LIFO  63%, and
FIFO  37%.

|                |                   |   |                |       |              |   |       |       | 
|--------------- | ----------------- | - | -------------- | ----- | ------------ | - | ----- | ----- | 
|                |                   |   | March 31,      |       | December 31,
|                |                   |   | 2003           |       | 2002        
|                |                   |   |                |       |             
|                |                   |   | (In Thousands)
|Raw materials   |                   | $ | 1,626          |       |              | $ | 1,436 |      
|Work in process |                   |   | 2,470          |       |              |   | 2,376 |      
|Finished goods  |                   |   | 1,914          |       |              |   | 1,812 |      
|                |                   |   |                |       |              |   |       |      
|                | Total Inventories |   | $              | 6,010 |              |   | $     | 5,624 | 
|                |                   |   |                |       |              |   |       |      

Current costs exceed LIFO value of inventories by $1,230,000 and
$1,212,000 at March 31, 2003 and December 31, 2002 respectively.



|G. |  | Indebtedness
|-- |  | ------------

Lynch Systems, Inc. and M-tron Industries, Inc. maintain their own credit
facilities. The Lynch Systems facility includes an unsecured parent Company
guarantee. M-trons revolving credit agreement is supported by a $1.0 million
Letter of Credit that is secured by a $1.1 million deposit in a Fleet Bank
Treasury Fixed Income Fund (see Note D - Restricted Cash).

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In general, the credit facilities are secured by property, plant and
equipment, inventory, receivables and common stock of certain subsidiaries and
contain certain covenants restricting distributions to the Company.

Notes payable to banks and long-term debt consists of:

|                                                                                                          |  |                |       |              |  |   |       |  
|--------------------------------------------------------------------------------------------------------- |  | -------------- | ----- | ------------ |  | - | ----- | -
|                                                                                                          |  | March 31,      |       | December 31,
|                                                                                                          |  |                |       |             
|                                                                                                          |  | 2003           |       | 2002        
|                                                                                                          |  |                |       |             
|                                                                                                          |  | (In Thousands)
|Notes payable:                                                                                            |  |                |       |              |  |   |       |  
|M-tron bank revolving loan at variable interest rates (4.5% at March 31, 2003), due May 2003.             |  | $              | 2,352 |              |  | $ | 2,228 |  
|Lynch Systems bank revolving loan at variable interest rates, due June, 2003                              |  |                |      |              |  |   |      |  
|                                                                                                          |  |                |       |              |  |   |       |  
|                                                                                                          |  | $              | 2,352 |              |  | $ | 2,228 |  
|                                                                                                          |  |                |       |              |  |   |       |  
|Long-term debt:                                                                                           |  |                |       |              |  |   |       |  
|M-tron commercial bank term loan at variable interest rates (5.0% at March 31, 2003), due
September, 2004 |  | $              | 959   |              |  | $ | 1,001 |  
|Yankton Area Progressive Growth loan at 0.0% interest, due April 2005                                     |  |                | 250   |              |  |   | 250   |  
|South Dakota Board of Economic Development at a fixed rate of 3%, due December, 2007                      |  |                | 293   |              |  |   | 0     |  
|Yankton Areawide Business Council loan at a fixed interest rate of 5.5%, due November 2007                |  |                | 97    |              |  |   | 98    |  
|Lynch Systems term loan at a fixed interest rate of 8.0%, due August 2003                                 |  |                | 566   |              |  |   | 572   |  
|                                                                                                          |  |                |       |              |  |   |       |  
|                                                                                                          |  |                | 2,165 |              |  |   | 1,921 |  
|Current maturities                                                                                        |  |                | (840  | )            |  |   | (832  | )
|                                                                                                          |  |                |       |              |  |   |       |  
|                                                                                                          |  | $              | 1,325 |              |  | $ | 1,089 |  
|                                                                                                          |  |                |       |              |  |   |       |  



|H. |  | Long-Term Contracts and Warranty Expense
|-- |  | ----------------------------------------

Lynch Systems, a 100% wholly owned subsidiary of the Company, is engaged
in the manufacture and marketing of glass-forming machines and specialized
manufacturing machines. Certain sales contracts require an advance payment
(usually 30% of the contract price) which is accounted for as a customer
advance. The contractual sales prices are paid either (i) as the manufacturing
process reaches specified levels of completion or (ii) based on the shipment
date. Guarantees by letter of credit from a qualifying financial institution
are required for most sales contracts. Because of the specialized nature of
these machines and the period of time needed to complete production and
shipping, Lynch Systems accounts for these contracts using the
percentage-of-completion accounting method as costs are incurred compared to
total estimated project costs (cost to cost basis). At March 31, 2003 and
December 31, 2002, unbilled accounts receivable (included in accounts
receivable) were $1.2 million and $0.7 million, respectively.

Lynch Systems provides a full warranty to world-wide customers who acquire
machines. The warranty covers both parts and labor and normally covers a
period of one year or thirteen months. Based upon experience, the warranty
accrual is based upon three to five percent of the selling price of the
machine. The Company periodically assesses the adequacy of the reserve and
adjusts the amounts as necessary.

|                                                                                            |  |   |       |  
|------------------------------------------------------------------------------------------- |  | - | ----- | -
|Balance, December 31, 2002                                                                  |  | $ | 1,595 |  
|Warranties issued during the period                                                         |  |   | 41    |  
|Settlements made during the period                                                          |  |   | (213  | )
|Changes in liabilities for pre-existing warranties during the period, including
expirations |  |   |      |  
|                                                                                            |  |   |       |  
|Balance, March 31,
2003                                                                     |  | $ | 1,423 |  
|                                                                                            |  |   |       |  

I.     Earnings Per Share and Stockholders Equity

The Companys basic and diluted earnings per share are equivalent as the
options issued in May 2002 to purchase 228,000 shares of the Companys common
stock were anti-dilutive throughout 2002 and the first quarter of 2003.

On December 10, 2001, the Board of Directors approved, subject to
shareholder approval at the May 2002 Annual Meeting, the 2001 Equity Incentive
Plan and the issuance of up to 300,000 options to purchase shares of Company
common stock to certain employees of the Company, of which 228,000 options were
granted (subject to shareholder approval) at $17.50 per share on December 10,
2001. Although the grants were approved by the shareholders on May 2, 2002,
the shares are not considered issued until exercised or in the money, neither
event having transpired to-date. 200,000 of these options are fully vested,
with the remaining options vesting quarterly over the next seven quarters.

The Company has a stock-based employee compensation plan. The Company
accounts for the plan under the recognition and measurement principles of
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations. No stock-based employee compensation
cost is reflected in net

8



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##### Table of Contents



income, as all options granted under those plans had an exercise price equal to
or above the market value of the underlying common stock on the date of grant.
The Company provides pro forma disclosures of the compensation expense
determined under the fair value provisions of Financial Accounting Standards
Board Statement No. 123, Accounting for Stock-Based Compensation as follows:

|                                                                                                                                           |  |                    |       |      |  |   |       |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------ | ----- | ---- |  | - | ----- | -
|                                                                                                                                           |  | Three Months Ended
|                                                                                                                                           |  | March 31,         
|                                                                                                                                           |  |                   
|                                                                                                                                           |  | 2003               |       | 2002
|                                                                                                                                           |  |                    |       |     
|Net loss as reported                                                                                                                       |  | $                  | (738  | )    |  | $ | (292  | )
|Deduct: Total stock based employee compensation expense determined
under fair value based method for all awards, net of related tax
effect |  |                    | 39    |      |  |   |      |  
|                                                                                                                                           |  |                    |       |      |  |   |       |  
|Pro forma net loss                                                                                                                         |  | $                  | (777  | )    |  | $ | (292  | )
|                                                                                                                                           |  |                    |       |      |  |   |       |  
|Basic and diluted loss per share:                                                                                                          |  |                    |       |      |  |   |       |  
|As reported                                                                                                                                |  | $                  | (0.49 | )    |  | $ | (0.19 | )
|Pro forma                                                                                                                                  |  | $                  | (0.52 | )    |  | $ | (0.19 | )

The net loss as reported in each period did not include any stock-based
compensation.

The weighted average fair value of options granted in 2002 is $17.50.



|J. |  | Accumulated Other Comprehensive Income (Loss)
|-- |  | ---------------------------------------------

Total comprehensive loss was $763,000 and $260,000 for the three months
ended 3/31/03 and 3/31/02 respectively, including other comprehensive loss of
$25,000 in the first quarter of 2003 resulting from losses on available for
sale securities as opposed to other comprehensive income of $32,000 in the
first quarter of 2002 resulting from gains on available for sale securities.



|K. |  | Segment Information
|-- |  | -------------------

The Company has two reportable business segments. The first segment is
Lynch Systems glass manufacturing equipment business. Frequency control
devices (quartz crystals and oscillators) manufactured and sold by M-tron is
the other segment. Both businesses are located domestically.

EBITDA (after corporate allocation) is equal to operating profit before
interest, taxes, depreciation, and amortization. EBITDA is presented because
it is a widely accepted financial indicator of value and ability to incur and
service debt.  EBITDA is a key measure that is used by Lynch's management to
evaluate and manage its operating businesses.  EBITDA is not a substitute for
operating income or cash flows from operating activities in accordance with
generally accepted accounting
principles.

Operating loss is equal to revenues less operating expenses, excluding
investment income, interest expense and income taxes. The Company allocates a
negligible portion of its general corporate expenses to its operating segments.

|                                    |                               |  |                    |       |      |  |   |       |  
|----------------------------------- | ----------------------------- |  | ------------------ | ----- | ---- |  | - | ----- | -
|                                    |                               |  | Three Months Ended
|                                    |                               |  | March 31          
|                                    |                               |  |                   
|                                    |                               |  | 2003               |       | 2002
|                                    |                               |  |                    |       |     
|                                    |                               |  | (In Thousands)    
|                                    |                               |  |                   
|Revenues                            |                               |  |                    |       |      |  |   |      
|                                    | Glass manufacturing equipment |  | $                  | 1,483 |      |  | $ | 4,315 |  
|                                    | Frequency control devices     |  |                    | 3,261 |      |  |   | 2,688 |  
|                                    |                               |  |                    |       |      |  |   |       |  
|                                    | Consolidated Total            |  | $                  | 4,744 |      |  | $ | 7,003 |  
|                                    |                               |  |                    |       |      |  |   |       |  
|EBITDA (after corporate allocation) |                               |  |                    |       |      |  |   |      
|                                    | Glass manufacturing equipment |  | $                  | (427  | )    |  | $ | 821   |  
|                                    | Frequency control devices     |  |                    | 30    |      |  |   | (635  | )
|                                    |                               |  |                    |       |      |  |   |       |  
|                                    | Total manufacturing           |  |                    | (397  | )    |  |   | 186   |  
|                                    | Corporate expenses, net       |  |                    | (347  | )    |  |   | (277  | )
|                                    |                               |  |                    |       |      |  |   |       |  
|                                    | Consolidated Total            |  | $                  | (744  | )    |  | $ | (91   | )
|                                    |                               |  |                    |       |      |  |   |       |  

9



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|                                                      |                                |   |                    |        |      |   |      |        |  
|----------------------------------------------------- | ------------------------------ | - | ------------------ | ------ | ---- | - | ---- | ------ | -
|                                                      |                                |   | Three Months Ended
|                                                      |                                |   | March 31          
|                                                      |                                |   |                   
|                                                      |                                |   | 2003               |        | 2002
|                                                      |                                |   |                    |        |     
|                                                      |                                |   | (In Thousands)    
|                                                      |                                |   |                   
|Operating Profit (Loss)                               |                                |   |                    |        |      |   |      |       
|                                                      | Glass manufacturing equipment  |   | $                  | (483   | )    |   | $    | 726    |  
|                                                      | Frequency control devices      |   |                    | (223   | )    |   |      | (799   | )
|                                                      |                                |   |                    |        |      |   |      |        |  
|                                                      | Total manufacturing            |   |                    | (706   | )    |   |      | (73    | )
|                                                      | Unallocated Corporate expenses |   |                    | (334   | )    |   |      | (327   | )
|                                                      |                                |   |                    |        |      |   |      |        |  
|                                                      | Consolidated Total             |   | $                  | (1,040 | )    |   | $    | (400   | )
|                                                      |                                |   |                    |        |      |   |      |        |  
|Depreciation and Amortization                         |                                |   |                    |        |      |   |      |       
|                                                      | Glass manufacturing equipment  |   | $                  | 118    |      |   | $    | 120    |  
|                                                      | Frequency control devices      |   |                    | 178    |      |   |      | 189    |  
|                                                      |                                |   |                    |        |      |   |      |        |  
|                                                      | Consolidated Total             |   | $                  | 296    |      |   | $    | 309    |  
|                                                      |                                |   |                    |        |      |   |      |        |  
|Capital Expenditures                                  |                                |   |                    |        |      |   |      |       
|                                                      | Glass manufacturing equipment  |   | $                  | 28     |      |   | $    | 9      |  
|                                                      | Frequency control devices      |   |                    | 5      |      |   |      | 27     |  
|                                                      |                                |   |                    |        |      |   |      |        |  
|                                                      | Consolidated Total             |   | $                  | 33     |      |   | $    | 36     |  
|                                                      |                                |   |                    |        |      |   |      |        |  
|Total Assets                                          |                                |   |                    |        |      |   |      |       
|                                                      | Glass manufacturing equipment  |   | $                  | 12,423 |      |   | $    | 21,238 |  
|                                                      | Frequency control devices      |   |                    | 8,222  |      |   |      | 7,598  |  
|                                                      | General Corporate              |   |                    | 3,223  |      |   |      | 1,268  |  
|                                                      |                                |   |                    |        |      |   |      |        |  
|                                                      | Consolidated Total             |   | $                  | 23,868 |      |   | $    | 30,104 |  
|                                                      |                                |   |                    |        |      |   |      |        |  
|Total operating loss of reporting segments            |                                | $ | (1,040             | )      |      | $ | (400 | )     
|Other profit or loss:                                 |                                |   |                    |        |      |   |      |       
|                                                      | Investment income              |   |                    | 22     |      |   |      | 39     |  
|                                                      | Interest expense               |   |                    | (69    | )    |   |      | (40    | )
|                                                      |                                |   |                    |        |      |   |      |        |  
|                                                      | Loss before income taxes       |   | $                  | (1,087 | )    |   | $    | (401   | )
|                                                      |                                |   |                    |        |      |   |      |        |  
|Reconciliation of EBITDA (after corporate allocation) |                                |   |                    |        |      |   |      |       
|                                                      | Net loss                       |   | $                  | (738   | )    |   | $    | (292   | )
|                                                      | Benefit from income taxes      |   |                    | (349   | )    |   |      | (109   | )
|                                                      | Interest expense               |   |                    | 69     |      |   |      | 40     |  
|                                                      | Investment income              |   |                    | (22    | )    |   |      | (39    | )
|                                                      |                                |   |                    |        |      |   |      |        |  
|                                                      | Operating loss/EBIT            |   |                    | (1,040 | )    |   |      | (400   | )
|                                                      | Depreciation and amortization  |   |                    | 296    |      |   |      | 309    |  
|                                                      |                                |   |                    |        |      |   |      |        |  
|                                                      | EBITDA                         |   | $                  | (744   | )    |   | $    | (91    | )
|                                                      |                                |   |                    |        |      |   |      |        |  



|L. |  | Commitments and Contingencies
|-- |  | -----------------------------

In the normal course of business, subsidiaries of the Registrant are
defendants in certain product liability, worker claims and other litigation in
which the amounts being sought may exceed insurance coverage levels. The
resolution of these matters is not expected to have a material adverse effect
on the Companys financial condition or operations. In addition, Registrant
and/or one or more of its subsidiaries are parties to the following additional
legal proceedings:



|1. |  | In re Spinnaker Coating, Inc., Debtor/PACE Local I-1069 v. Spinnaker
Coating, Inc., and Lynch Corporation, U.S. Bankruptcy Court, District of
Maine, Chapter 11, Adv. Pro. No. 02-2007; and PACE Local 1-1069 v.
Spinnaker Industries, Inc., Spinnaker Coating, Inc., and Spinnaker
Coating-Maine, Inc., Cumberland County Superior Court, CV-2001-00352:
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

There has been no change in the status of this lawsuit as last reported in
Registrants Form 10-K for its fiscal year ended December 31, 2002.

10



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##### Table of Contents





|2. |  | Qui Tam Lawsuit
|-- |  | ---------------

There has been no change in the status of this lawsuit as last reported in
Registrants Form 10-K for its fiscal year ended December 31, 2002.



|3. |  | Spinnaker Chapter 11 Reorganization Proceeding
|-- |  | ----------------------------------------------

The Spinnaker Chapter 11 reorganization was concluded on April 10, 2003 by
order of the United States Bankruptcy Court confirming the joint plan of
liquidation. The findings of fact are not reported herein because, on
September 23, 2002, Lynch disposed of its entire remaining interest in
Spinnaker and no longer has any economic interest in or affiliation with
Spinnaker.




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

Results of Operations

First Quarter 2003 Compared to First Quarter 2002

Sales and Revenues/Gross Margin

Revenues for the first quarter of 2003 decreased by $2.3 million from
first quarter 2002 to $4.7 million due mainly to the low beginning backlog and
the timing of deliveries for orders booked by Lynch Systems in February and
March of 2003.

First quarter 2003 gross margin as a percent of revenues of 16.7% was
14.0% below the first quarter of 2002 due mainly to the low level of sales.

Revenues at M-tron increased by $0.6 million, or 21.3%, to $3.3 million
for the first quarter of 2003 due partly to the acquisition of Champion
Technologies, Inc. (Champion). On October 18, 2002, M-tron acquired certain
assets of an industry competitor, Champion Technologies, Inc., from U.S. Bank
in a transaction accounted for as a purchase. Champions product line includes
crystals, clock oscillators, specialized crystal oscillators, and timing
solutions.

Lynch Systems revenues for the first quarter of 2003 declined by $2.8
million from the corresponding 2002 period to $1.5 million due mainly to
depressed bookings for glass press machines throughout 2002. However, order
backlog of $8.7 million at March 31, 2003 represented an improvement of $4.8
million since December 31, 2002 and was virtually equal to the backlog last
March.

M-trons gross margin as a percentage of net sales for the three month
period of 2003 was up 12.1% to 20.0% from the same period of 2002. The sales
improvement of 21.3% in the quarter more than offset the costs incurred in
manufacturing the more sophisticated Champion parts..

Lynch Systems gross margin as a percentage of net sales for the three
month period of 2003 declined 35.3% to 9.6% from the same period of 2002. This
reduction was the result of the 65.6% sales decline in the first quarter that
included a major drop-off in higher margin repair parts business.

Operating Loss

Operating loss for the first quarter 2003 was $1.0 million compared to the
first quarter 2002 operating loss of $0.4 million, representing an unfavorable
variance of $0.6 million on $2.3 million less revenue.

For the first quarter of 2003, M-tron had an operating loss of $0.2
million, an improvement of $0.6 million over the $0.8 million loss in the first
quarter of 2002 due mainly to the improved sales volume mentioned above and
better product mix.

For the 2003 first quarter, Lynch Systems had an operating loss of $0.5
million compared to an operating profit of $0.7 million in the first quarter of
2002. Although Lynch Systems operating costs were reduced by $0.6 million from
the first quarter of 2002, the company could not compensate for the 66 percent
volume decline and poor product mix.

11



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##### Table of Contents



For the first quarter of 2003, Lynchs corporate headquarters incurred
unallocated expenses of $0.3 million, the same as the first quarter of 2002.

Other Income (Expense), Net

Investment income decreased $17,000 for the three months ended March 31,
2003 due to lower investment rates and lower average cash balances.

Interest expense of $69,000 for the first quarter 2003 was $29,000 higher
than the first quarter of 2002 due to Letter of Credit fees and higher average
borrowings to fund losses and finance the Champion acquisition.

Tax Benefit

The income tax benefit includes federal, as well as state, local, and
foreign taxes. The first quarter 2003 net tax benefit of $349,000 is the
result of operating losses incurred which are expected to be realized during
the remainder of the year.

Net Loss

Net loss for the first quarter of 2003 was $0.7 million compared to a net
loss of $0.3 million in the quarter ending March 31, 2002. The $0.4 million
additional loss is primarily due to the 14.0% reduction in gross profit caused
by 32.2% less volume that could not be offset by the $0.7 million reduction in
selling and administration expenses. Fully diluted first quarter 2003 loss per
share was $0.49 compared to a loss of $0.19 per share in the first quarter
2002.

Backlog/New Orders

Total backlog of manufactured products at March 31, 2003 was $11.3
million, a $5.0 million improvement over the backlog at December 31, 2002, and
$0.3 million more than the backlog at March 31, 2002.

M-trons backlog improved by $0.8 million since last March, due mainly to
the acquisition of Champion Technology, Inc. in October, 2002.

Lynch Systems backlog has improved by $4.8 million since December 31 as a
result of two significant orders for glass press machines. First quarter 2003
orders of $5.4 million exceeded first quarter 2002 bookings by $3.9 million;
Lynch Systems continues to submit a large number of quotes, predominantly to
tableware manufacturers, and should sustain its recent momentum.

Financial Condition

At March 31, 2003, the Company has current assets of $18.9 million and
current liabilities of $11.3 million. Working capital was therefore $7.6
million as compared to $8.0 million at December 31, 2002 and $9.4 million at
March 31, 2002. The ratio of current assets to current liabilities was 1.68 to
1.00 at March 31, 2003; 1.79 to 1.00 at December 31, 2002; and 1.62 to 1.00
ratio at March 31, 2002.

Cash provided by operating activities was approximately $0.4 million in
the first quarter 2003 compared to cash used of approximately $1.6 million in
the first quarter of 2002. The year over year favorable change in operating
cash flow of $2.0 million was mainly the result of $2.2 million difference in
cash provided in working capital. Capital expenditures were $33,000 in first
quarter 2003 compared to $36,000 in the period ending March 31, 2002.

Total debt of $4.5 million at March 31, 2003 was $0.4 million greater than
the amount outstanding at December 31, 2002 and $1.2 million more than the debt
at March 31, 2002. The year over year increase in debt is primarily due to
increases in M-trons loans to finance operating losses and acquire Champion
in October 2002. Debt outstanding at March 31, 2003 included $1.2 million of
fixed rate debt at an average interest rate of 4.9%, and $3.3 million of
variable rate debt at a March 31, 2003 average interest rate of 4.6%.

Restrictions on dividends under the M-tron loan with First National Bank
of Omaha disallow distributions to the parent company without consent of the
bank. Lynch Systems, under its loan with Sun Trust Bank, may pay a cash
dividend to the parent company equal to 50% of LSs net income for the prior
fiscal year. Under the M-tron

12



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##### Table of Contents



loan agreement, advances to the parent company
are disallowed without the prior written consent of the lending bank. Under
its loan agreement, LS may pay an annual management fee to the parent company
in an amount not to
exceed $250,000. In addition, LS may reimburse the parent company for expenses
and taxes paid by the parent on behalf of LS.

At March 31, 2003, the Companys total cash, cash equivalents and
investments in marketable securities total $8.7 million (including $1.1 million
of restricted cash). In addition, the Company had a consolidated total $2.1
million borrowing capacity under M-trons and LSs revolving line of credit.
Therefore, gross cash and securities and availability under the revolving
credit loans total $10.8 million and exceed the outstanding debt of $4.5
million by $6.3 million. In the near term, the Company expects to receive a
$0.5 million cash tax benefit through carry-backs for prior periods operating
losses. The Company presently does not guarantee M-trons bank debt. The
parent company has provided an unsecured guarantee of Lynch Systems debt to Sun
Trust Bank.

Lynch Systems is finalizing negotiations to renew its SunTrust Bank loan
that matures on May 31, 2003. This incumbent lender has committed to provide
up to a $7 million line-of-credit which can be used entirely for stand-by
Letters of Credit or up to $2 million for domestic revolving credit within the
credit line. The present Lynch Systems loan includes an unsecured parent
company guarantee. At March 31, 2003, there were outstanding Letters of Credit
of $1.6 million and no borrowings under the working capital line.

M-trons lending bank, First National Bank of Omaha, has agreed to renew
the revolving credit loan which expired on April 30, 2003. The lender will
renew the loan under the following conditions:



| | (a) |  | The Company subordinates its $200,000 loan to M-tron to the
bank;                                                                                                                                                                                                                                                                                                                                        
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | In return for the banks reducing the minimum net worth and
subordinated debt limit from $3.1 million to $2.9 million, the
Company funds any shortfall with an equity or subordinated debt cash
infusion within 45 days of the quarter end. (Since M-trons
subordinated debt and equity total $2,991,000 as of March 31, 2003,
no additional cash infusion would be required under these renewal
terms.)
|
| |     |  | In addition, the Companys present $1.0 million Letter of Credit
for the benefit of the bank can be reduced to $500,000 when M-tron
is profitable for 5 of 6 consecutive months and the cumulative
after tax profit equals or exceeds $500,000. The remaining
$500,000 Letter of Credit will be released when the earning
parameters are met for a second time.                                          

The aforementioned conditions have no yet been finalized, but all steps
leading to the renewal are in process and will be completed by mid-May.

The Company does not at present have credit facilities at the parent
company level. The Company believes that existing cash and cash equivalents,
cash generated from operations and available borrowings under its subsidiaries
lines of credit will be sufficient to meet its on-going working capital and
capital expenditure requirements for the foreseeable future.

Adoption of Accounting Pronouncements

In November 2002, the FASB issued Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Indebtedness of Others.

The Company presently guarantees (unsecured) the SunTrust Bank loans of
its subsidiary, Lynch Systems, and has guaranteed a Letter of Credit issued to
the First National Bank of Omaha on behalf of its subsidiary, M-tron
Industries, Inc. These guarantees are subject to FIN 45s disclosure
requirement only. As of March 31, 2003, there were no obligations to the
SunTrust Bank. As of March 31, 2003, the $1,000,000 Letter of Credit issued by
Fleet Bank to The First National Bank of Omaha was secured by a $1,125,000
deposit in a Fleet Bank Treasury Fixed Income Fund.

There are no other financial, performance, indirect guarantees or
indemnification agreements.

In July 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 146, Accounting for Costs
Associated with Exit or Disposal Activities (SFAS 146), which addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring). The
provisions of SFAS 146
13Table of Contentsare effective for exit or disposal activities that are
initiated after December 31, 2002; the Company does not have any exit or
disposal activities underway.On December 31, 2002, the FASB issued Statement of Financial Accounting
Standards No. 148, Accounting for Stock-Based Compensation - Transition and
Disclosure (SFAS 148), which amends the disclosure provisions of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS
123) and APBN opinion No. 28, Interim Financial Reporting (APB 28). See
Note I to the Consolidated Financial Statements - Earnings Per Share and
Stockholders Equity.In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51 (FIN 46). FIN
46 clarifies the application of Accounting Research Bulletin No. 51,
Consolidated Financial Statements, to certain entities in which equity
investors do not have the characteristics of a controlling financial interest
or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other
parties. The Company does not have any variable interest entities.Market RiskThe Company is exposed to market risk relating to changes in the general
level of U.S. interest rates. Changes in interest rates affect the amounts of
interest earned on the Companys cash equivalents and short-term investments
(approximately $7.8 million at March 31, 2003). The Company generally finances
the debt portion of the acquisition of long-term assets with fixed rate,
long-term debt. The Company generally maintains the majority of its debt in
nature by borrowing on a fixed long-term basis. The Company does not use
derivative financial instruments for trading or speculative purposes.
Management does not foresee any significant changes in the strategies used to
manage interest rate risk in the near future, although the strategies may be
reevaluated as market conditions dictate. There has been no significant change
in market risk since March 31, 2003.At March 31, 2003, approximately $3.3 million of the Companys debt bears
interest at variable rates. Accordingly, the Companys earnings and cash
flows are only slightly affected by changes in interest rates. Assuming the
current level of borrowings for variable rate debt, and assuming a two
percentage point increase in the 2003 average interest rate under these
borrowings, it is estimated that the Companys interest expense would change by
less than $0.1 million.Risk FactorsCertain subsidiaries and business segments of the Company sell to
industries that are subject to cyclical economic changes. Any downturns in the
economic environment would have a financial impact on the Company and its
consolidated subsidiaries and may cause the reported financial information
herein not to be indicative of future operating results, financial condition or
cash flows.Future activities and operating results may be adversely affected by
fluctuating demand for capital goods such as large glass presses, delay in the
recovery of demand for components used by telecommunications infrastructure
manufacturers, disruption of foreign economies and the inability to renew or
obtain new financing for expiring loans.Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments, and
trade accounts receivable.The Company maintains cash and cash equivalents and short-term investments
with various financial institutions. These financial institutions are located
throughout the country and the Companys policy is designed to limit exposure
to any one institution. The Company performs periodic evaluations of the
relative credit standing of those financial institutions that are considered in
the Companys investment strategy. Other than certain accounts receivable, the
Company does not require collateral on these financial instruments. In
relation to export sales, the Company requires letters of credit supporting a
significant portion of the sales price prior to production to limit exposure to
credit risk. The Company maintains an allowance for doubtful accounts at a
level that management believes is sufficient to cover potential credit losses.Forward Looking InformationIncluded in this Management Discussion and Analysis of Financial Condition
and Results of Operations are certain forward looking financial and other
information, including without limitation matters relating to Risks.14Table of ContentsIt
should be recognized that such information are projections, estimates or
forecasts based on various assumptions, including without limitation, meeting
its assumptions regarding expected operating performance and other matters
specifically set forth, as well as the expected performance of the economy as
it impacts the Companys businesses, government and regulatory actions and
approvals, and tax consequences, and the risk factors and cautionary statements
set forth in reports filed by the Company with the Securities and Exchange
Commission. As a result, such information is subject to uncertainties, risks
and inaccuracies, which could be material.The Registrant makes available, free of charge, its annual report on Form
10-K, Quarterly Reports on Form 10-Q, and current reports, if any, on Form 8-K.The Registrant also makes this information available on its website, whos
internet address is www.lynchcorp.com.
Item 3. Quantitative and Qualitative Disclosure About Market RiskSee Market Risk under Item 2 above.
Item 4. Controls and ProceduresWithin the 90-day period prior to the filing of this report, Lynch
management, including the Chief Executive Officer and Chief Financial Officer,
conducted an evaluation of the effectiveness of the design and operation of the
Companys disclosure controls and procedures as defined in Exchange Act Rule
13a-13(c). Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Companys disclosure controls and
procedures were effective as of the date of that evaluation. There have been
no significant changes in internal controls, or in other factors that could
significantly affect internal controls, subsequent to the date the Chief
Executive Officer and Chief Financial Officer completed their evaluation.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings1.
    
    In re Spinnaker Coating, Inc., Debtor/PACE Local I-1069 v. Spinnaker
Coating, Inc., and Lynch Corporation, U.S. Bankruptcy Court, District of
Maine, Chapter 11, Adv. Pro. No. 02-2007; and PACE Local 1-1069 v.
Spinnaker Industries, Inc., Spinnaker Coating, Inc., and Spinnaker
Coating-Maine, Inc., Cumberland County Superior Court, CV-2001-00352:There has been no change in the status of this lawsuit as last reported in
Registrants Form 10-K for its fiscal year ended December 31, 2002.2.
    
    Qui Tam LawsuitThere has been no change in the status of this lawsuit as last reported in
Registrants Form 10-K for its fiscal year ended December 31, 2002.3.
    
    Spinnaker Chapter 11 Reorganization ProceedingThe Spinnaker Chapter 11 reorganization was concluded on April 10, 2003 by
order of the United States Bankruptcy Court confirming the joint plan of
liquidation. The findings of fact are not reported herein because, on
September 23, 2002, Lynch disposed of its entire remaining interest in
Spinnaker and no longer has any economic interest in or affiliation with
Spinnaker.
Item 4. Submission of Matters to a Vote of Security HoldersAt the Annual Meeting of Stockholders of the Registrant held on May 1, 2003:The following persons were elected as Directors with the following votes:

|                 |  |           |           |                |  |  |       | 
|---------------- |  | --------- | --------- | -------------- |  |  | ----- | 
|Name             |  | Votes For |           | Votes Withheld
|                 |  |           |           |               
|Val Cerutti      |  |           | 1,367,293 |                |  |  | 2,825 | 
|Marc J. Gabelli  |  |           | 1,366,769 |                |  |  | 3,349 | 
|Mario J. Gabelli |  |           | 1,363,559 |                |  |  | 6,559 | 

15



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##### Table of Contents



|                     |  |           |           |                |  |  |        | 
|-------------------- |  | --------- | --------- | -------------- |  |  | ------ | 
|Name                 |  | Votes For |           | Votes Withheld
|                     |  |           |           |               
|Avrum Gray           |  |           | 1,367,293 |                |  |  | 2,825  | 
|Raymond H. Keller    |  |           | 1,363,574 |                |  |  | 6,544  | 
|Richard E. McGrail   |  |           | 1,363,469 |                |  |  | 6,649  | 
|Ralph R. Papitto     |  |           | 1,359,969 |                |  |  | 10,149 | 
|Anthony R. Pustorino |  |           | 1,367,188 |                |  |  | 2,930  | 




Item 6. Exhibits and Reports on Form 8-K



| | (a) |  | Exhibits filed herewith:            
| | --- |  | ------------------------------------
|
| |     |  | 99.1  
    Section 906 Certification
|
| | (b) |  | Reports on Form 8-K:                



| | 1. |  | Registrants press
release announcing its results of operations for
the fourth quarter and fiscal year ending December
31, 2002 was filed with a Form 8-K on March 27,
2003.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Section 906
Certifications accompanying Registrants 10-K for
its fiscal year ended December 31, 2002 were filed
with a Form 8-K on March 27, 2003.                         




SIGNATURES

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

|            |  |                        
|----------- |  | -----------------------
|            |  | LYNCH CORPORATION      
|            |  | (Registrant)           
|            |  |                        
|            |  | By:                    
|            |  |                        
|May 7, 2003 |  | /s/ RAYMOND H. KELLER  
|            |  |                        
|            |  | RAYMOND H. KELLER      
|            |  | Chief Financial Officer

16



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##### Table of Contents



CERTIFICATIONS

I, Ralph R. Papitto, certify that:



| |                                                                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.     I have reviewed this quarterly report on Form 10-Q of Lynch
Corporation.                                                                                                                                                                                                                                                      
|
| | 2.     Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the
period covered by this quarterly report.
|
| | 3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operation and cash
flows of the Registrant as of, and for, the periods presented in this
quarterly report.                    
|
| | 4.     The Registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14), for the Registrant and
have:                                                                                                        



| | (a) |  | Designed such disclosure controls and procedures to ensure
that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Evaluated the effectiveness of the Registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | (c) |  | Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



| |                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5.     The Registrants other certifying officer and I have disclosed, based
on our most recent evaluation, to the Registrants auditors and the audit
committee of Registrants board of directors (or persons performing the
equivalent function);



| | (a) |  | All significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrants
ability to record, process, summarize and report financial data and
have identified for the Registrants auditors any material
weaknesses in internal controls; and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Any fraud, whether or not material, that involves management
or other employees who have a significant role in the Registrants
internal controls; and                                                                                                                                        

6.     The Registrants other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls, subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.

|                  |  |                                     
|----------------- |  | ------------------------------------
|Date: May 7, 2003 |  | /s/ RALPH R. PAPITTO                
|                  |  |                                     
|                  |  | RALPH R. PAPITTO                    
|                  |  | Chairman and Chief Executive Officer

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##### Table of Contents



CERTIFICATIONS

I, Raymond H. Keller, certify that:

1.          I have reviewed this quarterly report on Form 10-Q of Lynch
Corporation.

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

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

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



| | (a) |  | Designed such disclosure controls and procedures to ensure
that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Evaluated the effectiveness of the Registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | (c) |  | Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

1.   The Registrants other certifying officer and I have disclosed, based on our
most recent evaluation, to the Registrants auditors and the audit committee of
Registrants board of directors (or persons performing the equivalent
function);



| | (a) |  | All significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrants
ability to record, process, summarize and report financial data and
have identified for the Registrants auditors any material
weaknesses in internal controls; and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Any fraud, whether or not material, that involves management
or other employees who have a significant role in the Registrants
internal controls; and                                                                                                                                        

6.   The Registrants other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls, subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.

|                  |  |  |  |                               
|----------------- |  |  |  | ------------------------------
|Date: May 7, 2003 |  |  |  | /s/ RAYMOND H. KELLER         
|                  |  |  |  |                               
|                  |  |  |  | RAYMOND H. KELLER             
|                  |  |  |  | VP and Chief Financial Officer

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##### Table of Contents






EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                         
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                         
|No.     |  | Description                                                                                                                                                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                                                         
|99.1    |  | Certification of Registrants Chief Executive Officer and Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(incorporated by reference to Exhibit 99(a) to Registrants Form
8-K dated March 27, 2003. 



| |  | Filed herewith.
|-- |  | ---------------

The Exhibits listed above have been filed separately with the Securities
and Exchange Commission in conjunction with this Quarterly Report on Form 10-Q
or have been incorporated by reference into this Quarterly Report on Form 10-Q.
Lynch Corporation will furnish to each of its shareholders a copy of any such
Exhibit for a fee equal to Lynch Corporations cost in furnishing such Exhibit.
Requests should be addressed to the Office of the Secretary, Lynch
Corporation, 50 Kennedy Plaza, Suite 1250, Providence, RI 02903.

19