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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
June 30, 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
incorporation or organization) |  | I.R.S. Employer
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 August 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                                                                                    
|EX-10(dd) Second Amend to Restated Loan                                                       
|Ex-10(ee) Amendment & Waiver to Credit Agreement                                              
|Ex-10(ff) Term Loan Promissory Note                                                           
|Ex-10.(gg) Second Amend to Deed Agreement                                                     
|Ex-31.1 Section 302 Certification of CEO                                                      
|Ex-31.2 Section 302 Certification of CFO                                                      
|Ex-32 Section 906 Certification of CEO and CFO                                                
|Ex-99.1 Audit Committee Charter                                                               



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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)

|                                       |              |                                                                                                                     |        |             |        |              |        |        |        |  
|-------------------------------------- | ------------ | ------------------------------------------------------------------------------------------------------------------- | ------ | ----------- | ------ | ------------ | ------ | ------ | ------ | -
|                                       |              |                                                                                                                     |        | June 30,    |        | December 31,
|                                       |              |                                                                                                                     |        | 2003        |        | 2002        
|                                       |              |                                                                                                                     |        | (unaudited) |        | (A)         
|                                       |              |                                                                                                                     |        |             |        |             
|ASSETS                                 |              |                                                                                                                     |        |             |        |              |        |       
|CURRENT ASSETS                         |              |                                                                                                                     |        |             |        |              |        |       
|                                       |              | Cash and cash equivalents                                                                                           |        | $           | 5,417  |              |        | $      | 5,986  |  
|                                       |              | Restricted cash (Note D)                                                                                            |        |             | 1,125  |              |        |        | 1,125  |  
|                                       |              | Investments  Marketable Securities (Note E)                                                                        |        |             | 983    |              |        |        | 861    |  
|                                       |              | Trade accounts receivables, less allowances of $98 and $91, respectively                                            |        |             | 2,784  |              |        |        | 2,820  |  
|                                       |              | Unbillable accounts receivable (Note H)                                                                             |        |             | 1,456  |              |        |        | 704    |  
|                                       |              | Inventories (Note F)                                                                                                |        |             | 6,755  |              |        |        | 5,624  |  
|                                       |              | Recoverable income taxes                                                                                            |        |             | 532    |              |        |        | 532    |  
|                                       |              | Deferred income taxes                                                                                               |        |             | 207    |              |        |        | 207    |  
|                                       |              | Prepaid expenses                                                                                                    |        |             | 283    |              |        |        | 324    |  
|                                       |              |                                                                                                                     |        |             |        |              |        |       
|                                       |              | TOTAL CURRENT ASSETS                                                                                                |        |             | 19,542 |              |        |        | 18,183 |  
|                                      
|PROPERTY, PLANT AND EQUIPMENT          |              |                                                                                                                     |        |             |        |              |        |       
|                                       |              | Land                                                                                                                |        |             | 291    |              |        |        | 291    |  
|                                       |              | Buildings and improvements                                                                                          |        |             | 4,198  |              |        |        | 4,198  |  
|                                       |              | Machinery and equipment                                                                                             |        |             | 11,949 |              |        |        | 11,841 |  
|                                       |              |                                                                                                                     |        |             |        |              |        |       
|                                       |              |                                                                                                                     | 16,438 |             |        |              | 16,330 |       
|                                       |              | Less: accumulated depreciation                                                                                      |        |             | 11,987 |              |        |        | 11,504 |  
|                                       |              |                                                                                                                     |        |             |        |              |        |       
|                                       |              |                                                                                                                     | 4,451  |             |        |              | 4,826  |       
|OTHER ASSETS                           |              |                                                                                                                     | 287    |             |        |              | 421    |       
|                                       |              |                                                                                                                     |        |             |        |              |        |       
|                                       | TOTAL ASSETS |                                                                                                                     | $      | 24,280      |        |              | $      | 23,430 |       
|                                       |              |                                                                                                                     |        |             |        |              |        |       
|LIABILITIES AND SHAREHOLDERS EQUITY   |              |                                                                                                                     |        |             |        |              |        |       
|CURRENT LIABILITIES:                   |              |                                                                                                                     |        |             |        |              |        |       
|                                       |              | Notes payable to banks (Note G)                                                                                     |        | $           | 2,605  |              |        | $      | 2,228  |  
|                                       |              | Trade accounts payable                                                                                              |        |             | 1,411  |              |        |        | 927    |  
|                                       |              | Accrued warranty expense (Note H)                                                                                   |        |             | 1,387  |              |        |        | 1,595  |  
|                                       |              | Accrued compensation expense                                                                                        |        |             | 1,031  |              |        |        | 921    |  
|                                       |              | Accrued income taxes                                                                                                |        |             | 671    |              |        |        | 1,053  |  
|                                       |              | Accrued professional fees                                                                                           |        |             | 214    |              |        |        | 327    |  
|                                       |              | Accrued commissions                                                                                                 |        |             | 177    |              |        |        | 214    |  
|                                       |              | Margin liability on marketable securities                                                                           |        |             | 223    |              |        |        | 251    |  
|                                       |              | Other accrued expenses                                                                                              |        |             | 418    |              |        |        | 659    |  
|                                       |              | Customer advances                                                                                                   |        |             | 2,901  |              |        |        | 1,147  |  
|                                       |              | Current maturities of long-term debt (Note G)                                                                       |        |             | 385    |              |        |        | 832    |  
|                                       |              |                                                                                                                     |        |             |        |              |        |       
|                                       |              | TOTAL CURRENT LIABILITIES                                                                                           |        |             | 11,423 |              |        |        | 10,154 |  
|                                      
|LONG-TERM DEBT (Note G)                |              |                                                                                                                     | 1,723  |             |        |              | 1,089  |       
|OTHER LONG TERM LIABILITIES            |              |                                                                                                                     | 1,103  |             |        |              | 1,253  |       
|                                       |              |                                                                                                                     |        |             |        |              |        |       
|                                       |              | TOTAL LIABILITIES                                                                                                   |        |             | 14,249 |              |        |        | 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                                                                                                 |        |             | (5,481 | )            |        |        | (4,570 | )
|                                       |              | Accumulated other comprehensive Income (Note J)                                                                     |        |             | 310    |              |        |        | 302    |  
|                                       |              | Treasury stock of 15,308 shares at cost                                                                             |        |             | (458   | )            |        |        | (458   | )
|                                       |              |                                                                                                                     |        |             |        |              |        |       
|                                       |              | TOTAL SHAREHOLDERS EQUITY                                                                                          |        |             | 10,031 |              |        |        | 10,934 |  
|                                       |              |                                                                                                                     |        |             |        |              |        |       
|                                       |              | TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                                                          |        | $           | 24,280 |              |        | $      | 23,430 |  
|                                       |              |                                                                                                                     |        |             |        |              |        |       



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|(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  |       | Six Months Ended   
|                                    |                             |   | June 30 (unaudited) |       | June 30 (unaudited)
|                                    |                             |   |                     |       |                    
|                                    |                             |   | 2003                |       | 2002                |   | 2003      |       | 2002
|                                    |                             |   |                     |       |                     |   |           |       |     
|SALES AND REVENUES                  |                             | $ | 6,714               |       |                     | $ | 9,691     |       |      | $ | 11,458    |       |   | $ | 16,694    |       
|                                   
|Cost and expenses:                  |                             |   |                     |       |                     |   |           |       |      |   |           |       |   |   |           |       
|                                    | Manufacturing cost of sales |   |                     | 4,982 |                     |   |           | 6,871 |      |   |           | 8,933 |   |   |           | 11,725 |  
|                                    | Selling and administrative  |   |                     | 2,010 |                     |   |           | 3,013 |      |   |           | 3,843 |   |   |           | 5,562  |  
|                                    |                             |   |                     |       |                     |   |           |       |      |   |           |       |   |   |           |       
|                                   
|OPERATING LOSS                      |                             |   | (278                | )     |                     |   | (193      | )     |      |   | (1,318    | )     |   |   | (593      | )     
|                                   
|Other income (expense):             |                             |   |                     |       |                     |   |           |       |      |   |           |       |   |   |           |       
|                                    | Investment Income           |   |                     | 155   |                     |   |           | 24    |      |   |           | 177   |   |   |           | 63     |  
|                                    | Interest expense            |   |                     | (93   | )                   |   |           | (52   | )    |   |           | (162  | ) |   |           | (92    | )
|                                    |                             |   |                     |       |                     |   |           |       |      |   |           |       |   |   |           |       
|                                    |                             |   | 62                  |       |                     |   | (28       | )     |      |   | 15        |       |   |   | (29       | )     
|                                    |                             |   |                     |       |                     |   |           |       |      |   |           |       |   |   |           |        |  
|                                   
|LOSS BEFORE INCOME TAXES            |                             |   | (216                | )     |                     |   | (221      | )     |      |   | (1,303    | )     |   |   | (622      | )     
|                                   
|Benefit from income taxes           |                             |   | 43                  |       |                     |   | 113       |       |      |   | 392       |       |   |   | 222       |       
|                                    |                             |   |                     |       |                     |   |           |       |      |   |           |       |   |   |           |        |  
|NET LOSS                            |                             | $ | (173                | )     |                     | $ | (108      | )     |      | $ | (911      | )     |   | $ | (400      | )     
|                                    |                             |   |                     |       |                     |   |           |       |      |   |           |       |   |   |           |       
|Weighted average shares outstanding |                             |   | 1,497,900           |       |                     |   | 1,497,900 |       |      |   | 1,497,900 |       |   |   | 1,497,900 |       
|                                    |                             |   |                     |       |                     |   |           |       |      |   |           |       |   |   |           |       
|BASIC AND DILUTED LOSS PER SHARE:   |                             | $ | (0.12               | )     |                     | $ | (0.07     | )     |      | $ | (0.61     | )     |   | $ | (0.27     | )     
|                                    |                             |   |                     |       |                     |   |           |       |      |   |           |       |   |   |           |       

See accompanying notes

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PART I  FINANCIAL INFORMATION

ITEM
1  Financial Statements




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

|                                                                                          |                                          |   |                      |        |      |   |       |        |  
|----------------------------------------------------------------------------------------- | ---------------------------------------- | - | -------------------- | ------ | ---- | - | ----- | ------ | -
|                                                                                          |                                          |   | Six Months Ended    
|                                                                                          |                                          |   | June 30, (unaudited)
|                                                                                          |                                          |   |                     
|                                                                                          |                                          |   | 2003                 |        | 2002
|                                                                                          |                                          |   |                      |        |     
|OPERATING ACTIVITIES                                                                      |                                          |   |                      |        |      |   |       |       
|Net loss                                                                                  |                                          | $ | (911                 | )      |      | $ | (400  | )     
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |                                          |   |                      |        |      |   |       |       
|Restricted operating cash                                                                 |                                          |   |                     |        |      |   | 4,703 |       
|Depreciation                                                                              |                                          |   | 483                  |        |      |   | 518   |       
|Amortization of definite-lived intangible assets                                          |                                          |   | 134                  |        |      |   | 101   |       
|Gain realized on sale of marketable securities                                            |                                          |   | (134                 | )      |      |   |      |       
|Changes in operating assets and liabilities:                                              |                                          |   |                      |        |      |   |       |       
|                                                                                          | Receivables                              |   |                      | (716   | )    |   |       | 1,266  |  
|                                                                                          | Inventories                              |   |                      | (1,131 | )    |   |       | 270    |  
|                                                                                          | Accounts payable and accrued liabilities |   |                      | 1,363  |      |   |       | (1,064 | )
|                                                                                          | Other assets/liabilities                 |   |                      | (109   | )    |   |       | 181    |  
|                                                                                          |                                          |   |                      |        |      |   |       |       
|Net cash provided by (used in) operating activities                                       |                                          |   | (1,021               | )      |      |   | 5,575 |       
|                                                                                          |                                          |   |                      |        |      |   |       |       
|INVESTING ACTIVITIES                                                                      |                                          |   |                      |        |      |   |       |       
|Acquisition of minority interest                                                          |                                          |   |                     |        |      |   | (220  | )     
|Capital expenditures                                                                      |                                          |   | (108                 | )      |      |   | (142  | )     
|Proceeds from sale of marketable securities                                               |                                          |   | 252                  |        |      |   |      |       
|Purchase of marketable securities                                                         |                                          |   | (113                 | )      |      |   | (262  | )     
|Payment on margin liability on marketable securities                                      |                                          |   | (143                 | )      |      |   |      |       
|                                                                                          |                                          |   |                      |        |      |   |       |       
|Cash used in investing activities                                                         |                                          |   | (112                 | )      |      |   | (624  | )     
|                                                                                          |                                          |   |                      |        |      |   |       |       
|FINANCING ACTIVITIES                                                                      |                                          |   |                      |        |      |   |       |       
|Net borrowings of notes payable                                                           |                                          |   | 377                  |        |      |   | 248   |       
|Repayment of long-term debt                                                               |                                          |   | (109                 | )      |      |   | (293  | )     
|Proceeds from long-term debt                                                              |                                          |   | 296                  |        |      |   |      |       
|                                                                                          |                                          |   |                      |        |      |   |       |       
|Cash provided by (used in) financing activities                                           |                                          |   | 564                  |        |      |   | (45   | )     
|                                                                                          |                                          |   |                      |        |      |   |       |       
|Increase (decrease) in cash and cash equivalents                                          |                                          |   | (569                 | )      |      |   | 4,906 |       
|Cash and cash equivalents at beginning of period                                          |                                          |   | 5,986                |        |      |   | 4,247 |       
|                                                                                          |                                          |   |                      |        |      |   |       |       
|Cash and cash equivalents at end of period                                                |                                          | $ | 5,417                |        |      | $ | 9,153 |       
|                                                                                          |                                          |   |                      |        |      |   |       |       

See accompanying notes

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A.     Subsidiaries of the Registrant

Lynch Corporation dissolved its 100 percent owned, inactive subsidiaries, Lynch
International Holding Corporation and Lynch-AMAV in Delaware, their State of
incorporation on March 31, 2003.

As of June 30, 2003, the Subsidiaries of the Registrant are as follows:

|                        |  |                |       |  
|----------------------- |  | -------------- | ----- | -
|                        |  | Owned By Lynch
|                        |  |               
|Lynch Systems, Inc.     |  |                | 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
and six month period ended June 30, 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. As a
result, the financial statements for the periods ending June 30, 2002, December
31, 2002, and June 30, 2003 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 June 30, 2003, there were no obligations to SunTrust
Bank. As of June 30, 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

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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 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 interests in variable interest
entities.

D.     Restricted Cash

At both June 30, 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     
|                  |  |      |     |       |  |            |     |           
|June 30, 2003     |  | $    | 671 |       |  | $          | 312 |            |  |           |  |  |  | $ | 983 | 
|                 
|December 31, 2002 |  | $    | 557 |       |  | $          | 304 |            |  |           |  |  |  | $ | 861 | 

The Company has a margin liability against this investment of $223,000 at
June 30, 2003 and of $251,000 at 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 June 30,
2003, inventories were valued by two methods: last-in, first-out (LIFO) 59%,
and first-in, first-out (FIFO) 41%. At December 31, 2002, inventories were
valued by the same two methods: LIFO  63%, and FIFO -37%.

|                |                   |   |                |       |              |   |       |       | 
|--------------- | ----------------- | - | -------------- | ----- | ------------ | - | ----- | ----- | 
|                |                   |   | June 30,       |       | December 31,
|                |                   |   | 2003           |       | 2002        
|                |                   |   |                |       |             
|                |                   |   | (In Thousands)
|Raw materials   |                   | $ | 1,879          |       |              | $ | 1,436 |      
|Work in process |                   |   | 3,265          |       |              |   | 2,376 |      
|Finished goods  |                   |   | 1,611          |       |              |   | 1,812 |      
|                |                   |   |                |       |              |   |       |      
|                | Total Inventories |   | $              | 6,755 |              |   | $     | 5,624 | 
|                |                   |   |                |       |              |   |       |      

Current costs exceed LIFO value of inventories by $1,202,000 and
$1,212,000 at June 30, 2003 and December 31, 2002 respectively.

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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).

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:

|                                                                                                         |                                                                                     |   |                |       |              |   |       |       | 
|-------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | - | -------------- | ----- | ------------ | - | ----- | ----- | 
|                                                                                                         |                                                                                     |   | June 30,       |       | December 31,
|                                                                                                         |                                                                                     |   |                |       |             
|                                                                                                         |                                                                                     |   | 2003           |       | 2002        
|                                                                                                         |                                                                                     |   |                |       |             
|                                                                                                         |                                                                                     |   | (In Thousands)
|Notes payable:                                                                                           |                                                                                     |   |                |       |              |   |       |      
|M-tron bank revolving loan at variable interest rates (4.75% at June 30, 2003), due May 2004             |                                                                                     | $ | 2,605          |       |              | $ | 2,228 |      
|Lynch Systems bank revolving loan at variable interest rates, due June, 2004                             |                                                                                     |   |               |       |              |   |      |      
|                                                                                                         |                                                                                     |   |                |       |              |   |       |      
|                                                                                                         |                                                                                     | $ | 2,605          |       |              | $ | 2,228 |      
|                                                                                                         |                                                                                     |   |                |       |              |   |       |      
|Long-term debt:                                                                                          |                                                                                     |   |                |       |              |   |       |      
|M-tron commercial bank term loan at variable interest rates (4.5% at June 30, 2003), due
September, 2004 |                                                                                     | $ | 916            |       |              | $ | 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                |                                                                                     |   | 290            |       |              |   |      |      
|Yankton Areawide Business Council loan at a fixed interest rate of 5.5%, due November 2007               |                                                                                     |   | 95             |       |              |   | 98    |      
|Lynch Systems term loan at a fixed interest rate of 8.0%, due August 2003                                |                                                                                     |   | 557            |       |              |   | 572   |      
|                                                                                                         |                                                                                     |   |                |       |              |   |       |      
|                                                                                                         | (see Subsequent Events footnote regarding refinancing this Lynch Systems Term Loan) |   |                | 2,108 |              |   |       | 1,921 | 
|                                                                                                        
|Current maturities                                                                                       |                                                                                     |   | (385           | )     |              |   | (832  | )    
|                                                                                                         |                                                                                     |   |                |       |              |   |       |      
|                                                                                                         |                                                                                     | $ | 1,723          |       |              | $ | 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 June 30, 2003 and
December 31, 2002, unbilled accounts receivable were $1.5 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                                                         |  |   | 118   |  
|Settlements made during the period                                                          |  |   | (326  | )
|Changes in liabilities for pre-existing warranties during the period, including
expirations |  |   |      |  
|                                                                                            |  |   |       |  
|Balance, June 30, 2003                                                                      |  | $ | 1,387 |  
|                                                                                            |  |   |       |  

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 throughout the first half 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

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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. 204,000 of these options are fully vested,
with the remaining options vesting quarterly over the next six 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 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 |       | Six Months Ended
|                                                                                                                                           |  | June 30,           |       | June 30,        
|                                                                                                                                           |  |                    |       |                 
|                                                                                                                                           |  | 2003               |       | 2002             |  | 2003 |        | 2002
|                                                                                                                                           |  |                    |       |                  |  |      |        |     
|Net loss as reported                                                                                                                       |  | $                  | (173  | )                |  | $    | (108   | )    |  | $ | (911  | ) |  | $ | (400   | )
|                                                                                                                                          
|Deduct: Total stock based
employee compensation expense
determined under fair value based
method for all awards, net of
related tax effect |  |                    | (38   | )                |  |      | (1,182 | )    |  |   | (77   | ) |  |   | (1,182 | )
|                                                                                                                                           |  |                    |       |                  |  |      |        |      |  |   |       |   |  |   |        |  
|Pro forma net loss                                                                                                                         |  | $                  | (211  | )                |  | $    | (1,292 | )    |  | $ | (988  | ) |  | $ | (1,582 | )
|                                                                                                                                           |  |                    |       |                  |  |      |        |      |  |   |       |   |  |   |        |  
|Basic and diluted loss per share:                                                                                                          |  |                    |       |                  |  |      |        |      |  |   |       |   |  |   |        |  
|As reported                                                                                                                                |  | $                  | (0.12 | )                |  | $    | (0.07  | )    |  | $ | (0.61 | ) |  | $ | (0.27  | )
|Pro forma                                                                                                                                  |  | $                  | (0.14 | )                |  | $    | (0.86  | )    |  | $ | (0.66 | ) |  | $ | (1.06  | )

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 $140,000 in the three months ended June 30,
2003, as opposed to a total comprehensive loss of $22,000 in the second quarter
of 2002. Other comprehensive income, resulting from gains on available for
sale securities, included in the total comprehensive loss was $33,000 in the
second quarter of 2003 and $86,000 in the quarter ending June 30, 2002.

Total comprehensive loss was $903,000 and $282,000 for the six months
ended 6/30/03 and 6/30/02 respectively, including other comprehensive income of
$8,000 in the first half of 2003 and other comprehensive income of $118,000 in
the first half 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.

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.

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|                                           |                                       |                                           |                                               |       |                    |       |                  |       |       |       |        |        |       |       |      |        |       |        | 
|------------------------------------------ | ------------------------------------- | ----------------------------------------- | --------------------------------------------- | ----- | ------------------ | ----- | ---------------- | ----- | ----- | ----- | ------ | ------ | ----- | ----- | ---- | ------ | ----- | ------ | 
|                                           |                                       |                                           |                                               |       | THREE MONTHS ENDED |       | SIX MONTHS ENDED
|                                           |                                       |                                           |                                               |       | JUNE 30,           |       | JUNE 30         
|                                           |                                       |                                           |                                               |       |                    |       |                 
|                                           |                                       |                                           |                                               |       | 2003               |       | 2002             |       | 2003  |       | 2002  
|                                           |                                       |                                           |                                               |       |                    |       |                  |       |       |       |       
|                                           |                                       |                                           |                                               |       | (In Thousands)     |       | (In Thousands)  
|                                           |                                       |                                           |                                               |       |                    |       |                 
|Revenues                                   |                                       |                                           |                                               |       |                    |       |                  |       |       |       |        |        |       |       |      |       
|                                           |                                       | Glass manufacturing equipment  USA       |                                               | $     | 2,077              |       |                  | $     | 380   |       |        | $      | 2,693 |       |      | $      | 770   |       
|                                          
|                                           |                                       | Glass manufacturing equipment  Europe    |                                               |       | 386                |       |                  |       | 4,803 |       |        |        | 797   |       |      |        | 5,876 |       
|                                           |                                       | Glass manufacturing equipment  Far East  |                                               |       | 657                |       |                  |       | 1,543 |       |        |        | 1,065 |       |      |        | 4,317 |       
|                                           |                                       | Glass manufacturing equipment  Canada    |                                               |       |                   |       |                  |       | 3     |       |        |        | 4     |       |      |        | 3     |       
|                                           |                                       | Glass manufacturing equipment  All Other |                                               |       | 62                 |       |                  |       | 5     |       |        |        | 106   |       |      |        | 83    |       
|                                           |                                       |                                           |                                               |       |                    |       |                  |       |       |       |        |        |       |       |      |       
|                                           |                                       |                                           | Total Glass manufacturing equipment  Foreign |       |                    | 1,105 |                  |       |       | 6,354 |        |        |       | 1,972 |      |        |       | 10,279 | 
|                                          
|                                           |                                       |                                           | Total Glass manufacturing equipment           |       |                    | 3,182 |                  |       |       | 6,734 |        |        |       | 4,665 |      |        |       | 11,049 | 
|                                          
|                                           | Frequency control devices  USA       |                                           |                                               | 1,753 |                    |       |                  | 1,715 |       |       |        | 3,267  |       |       |      | 2,960  |      
|                                          
|                                           | Frequency control devices  Europe    |                                           |                                               | 337   |                    |       |                  | 145   |       |       |        | 647    |       |       |      | 266    |      
|                                           | Frequency control devices  Far East  |                                           |                                               | 885   |                    |       |                  | 549   |       |       |        | 1,548  |       |       |      | 1,033  |      
|                                           | Frequency control devices  Canada    |                                           |                                               | 398   |                    |       |                  | 351   |       |       |        | 681    |       |       |      | 1,044  |      
|                                           | Frequency control devices  All Other |                                           |                                               | 159   |                    |       |                  | 197   |       |       |        | 650    |       |       |      | 342    |      
|                                           |                                       |                                           |                                               |       |                    |       |                  |       |       |       |        |        |       |       |      |       
|                                           |                                       |                                           | Total Frequency control devices  Foreign     |       |                    | 1,779 |                  |       |       | 1,242 |        |        |       | 3,526 |      |        |       | 2,685  | 
|                                          
|                                           |                                       |                                           | Total Frequency control devices               |       |                    | 3,532 |                  |       |       | 2,957 |        |        |       | 6,793 |      |        |       | 5,645  | 
|                                           |                                       |                                           |                                               |       |                    |       |                  |       |       |       |        |        |       |       |      |       
|                                           | Consolidated Total                    |                                           | $                                             | 6,714 |                    |       | $                | 9,691 |       |       | $      | 11,458 |       |       | $    | 16,694 |      
|                                           |                                       |                                           |                                               |       |                    |       |                  |       |       |       |        |        |       |       |      |       
|Operating
Profit (Loss)                    |                                       |                                           |                                               |       |                    |       |                  |       |       |       |        |        |       |       |      |       
|                                           | Glass manufacturing equipment         |                                           | $                                             | 146   |                    |       | $                | 854   |       |       | $      | (337   | )     |       | $    | 1,580  |      
|                                           | Frequency control devices             |                                           |                                               | (6    | )                  |       |                  | (700  | )     |       |        | (229   | )     |       |      | (1,499 | )    
|                                           |                                       |                                           |                                               |       |                    |       |                  |       |       |       |        |        |       |       |      |       
|                                           |                                       |                                           | Total manufacturing                           |       |                    | 140   |                  |       |       | 154   |        |        |       | (566  | )    |        |       | 81     | 
|                                          
|                                           | Unallocated Corporate expenses        |                                           |                                               | (418  | )                  |       |                  | (347  | )     |       |        | (752   | )     |       |      | (674   | )    
|                                           |                                       |                                           |                                               |       |                    |       |                  |       |       |       |        |        |       |       |      |       
|                                           | Consolidated Total                    |                                           | $                                             | (278  | )                  |       | $                | (193  | )     |       | $      | (1,318 | )     |       | $    | (593   | )    
|                                           |                                       |                                           |                                               |       |                    |       |                  |       |       |       |        |        |       |       |      |       
|Capital
Expenditures                       |                                       |                                           |                                               |       |                    |       |                  |       |       |       |        |        |       |       |      |       
|                                           | Glass manufacturing equipment         |                                           | $                                             | 28    |                    |       | $                | 32    |       |       | $      | 56     |       |       | $    | 41     |      
|                                           | Frequency control devices             |                                           |                                               | 47    |                    |       |                  | 74    |       |       |        | 52     |       |       |      | 101    |      
|                                           |                                       |                                           |                                               |       |                    |       |                  |       |       |       |        |        |       |       |      |       
|                                           | Consolidated Total                    |                                           | $                                             | 75    |                    |       | $                | 106   |       |       | $      | 108    |       |       | $    | 142    |      
|                                           |                                       |                                           |                                               |       |                    |       |                  |       |       |       |        |        |       |       |      |       
|Total
Assets                               |                                       |                                           |                                               |       |                    |       |                  |       |       |       |        |        |       |       |      |       
|                                           | Glass manufacturing equipment         |                                           |                                               |       |                    |       |                  |       |       |       | $      | 12,481 |       |       | $    | 22,181 |      
|                                           | Frequency control devices             |                                           |                                               |       |                    |       |                  |       |       |       |        | 8,383  |       |       |      | 7,233  |      
|                                           | General Corporate                     |                                           |                                               |       |                    |       |                  |       |       |       |        | 3,416  |       |       |      | 1,477  |      
|                                           |                                       |                                           |                                               |       |                    |       |                  |       |       |       |        |        |       |       |      |       
|                                           | Consolidated Total                    |                                           |                                               |       |                    |       |                  |       |       |       | $      | 24,280 |       |       | $    | 30,891 |      
|                                           |                                       |                                           |                                               |       |                    |       |                  |       |       |       |        |        |       |       |      |       
|Total operating loss of reporting segments |                                       | $                                         | (278                                          | )     |                    | $     | (193             | )     |       | $     | (1,318 | )      |       | $     | (593 | )     
|                                          
|Other profit or loss:                      |                                       |                                           |                                               |       |                    |       |                  |       |       |       |        |        |       |       |      |       
|                                           | Investment income                     |                                           |                                               | 155   |                    |       |                  | 24    |       |       |        | 177    |       |       |      | 63     |      
|                                           | Interest expense                      |                                           |                                               | (93   | )                  |       |                  | (52   | )     |       |        | (162   | )     |       |      | (92    | )    
|                                           |                                       |                                           |                                               |       |                    |       |                  |       |       |       |        |        |       |       |      |       
|                                           | Loss before income taxes              |                                           | $                                             | (216  | )                  |       | $                | (221  | )     |       | $      | (1,303 | )     |       | $    | (622   | )    
|                                           |                                       |                                           |                                               |       |                    |       |                  |       |       |       |        |        |       |       |      |       

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

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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:

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 Registrants consolidated 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 1-1069 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

On or about June 26, 2001, in anticipation of the July 15, 2001 closure of
Spinnakers Westbrook, Maine facility, Plaintiff PACE Local 1-1069 (PACE)
filed a three count complaint in Cumberland County Superior Court,
CV-2001-00352 naming the following defendants: Spinnaker Industries, Inc.,
Spinnaker Coating, Inc., and Spinnaker Coating-Maine, Inc. (collectively, the
Spinnaker Entities) and Lynch. The complaint alleged that under Maines
Severance Pay Act both the Spinnaker Entities and Lynch would be liable to pay
approximately $1,166,000 severance pay under Maines Severance Pay Act in
connection with the plant closure. The Defendants filed a notice of removal,
thereby creating United States District Court Civil Action case was remanded
to state court. The Spinnaker Entities also filed a separate complaint
challenging the constitutionality of the Maine Severance Pay Act, United States
District Court Civil Action No. 01-232 which later was dismissed by stipulation
of the Spinnaker Entities. PACE also filed three separate Motions for Ex-Parte
Attachment against the Spinnaker Entities and Lynch. PACE filed the First
Motion for Attachment with its original Complaint. PACE sought to attach
$1,166,483.44, an amount large enough to cover the claims of all PACEs members
seeking severance. The Court denied that Motion as being premature. PACE then
filed a Second Motion against the Spinnaker Entities and Lynch for an
attachment large enough to cover the claims of eight individual employees
seeking severance pay in the amount of $120,736.27. On August 20, 2001, the
Court granted that Motion in the amount of $118,500. On April 4, 2002, PACE
subsequently recorded this attachment through UCC-1 filings with the Maine
Secretary of State against Lynch Manufacturing and Lynch Corporation. PACE
filed a Third Motion for Ex-Parte Attachment on August 29, 2001. This Motion
sought an attachment large enough to cover the severance pay claimed by the
remaining PACE members, $1,048,003. The Court denied this Motion but permitted
PACE the opportunity to obtain an attachment after all defendants had an
opportunity to respond and after hearing.

Before any further action was taken with respect to PACEs Third Motion
for Attachment, the Spinnaker Defendants filed for relief under Chapter 11 of
the Bankruptcy Code. Following a series of filings in the United States
District Court for the District of Maine and the United States Bankruptcy Court
for the District of Maine which, like United States District Court Case No.
01-236, later were dismissed by the parties with prejudice and without costs,
PACEs case continues to proceed against Lynch in Cumberland County Superior
Court in Maine on the issue of whether Lynch has liability to PACEs members
under the Maine Severance Pay Act.

On September 30, 2002, PACE requested a ruling from the Superior Court on
its Third Motion for Attachment. On October 21, 2002, Lynch filed a Motion for
Summary Judgment which incorporated its prior objection to any attachment. PACE
filed an Opposition to Lynchs Motion for Summary Judgment,which included a
request for summary judgment in its favor, and a Motion for Leave to Further
Amend the Complaint on November 12, 2002. Lynch thereafter filed a Reply
Memorandum in Support of its Motion for Summary Judgment on November 26, 2002
and an opposition to PACEs Motion for Leave to Further Amend the Complaint on
December 3, 2002. On December 31, 2002, the Superior Court held a hearing on
all pending Motions. The Superior Court requested that arguments focus on
Lynchs Motion for Summary Judgment since the granting of that Motion would
render PACEs Third Motion for Attachment and Motion to Further Amend the
Complaint moot.

On July 28, 2003, the Superior Court issued an Order deciding both Lynchs
and PACEs Motions for Summary Judgment. The Court denied Lynchs Motion for
Summary Judgment, finding that there remained a disputed issue of material fact
regarding one of Lynchs primary defenses. The Court granted partial summary
judgment in favor of PACE to the extent that the Court found Lynch was an
employer subject to potential liability under Maines Severance Pay Act. The
Court held, however, that PACE must still prove its entitlement to

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severance
pay under the Act. In a separate ruling also issued on July 28, 2003, the
Court denied PACEs Third Motion for Attachment.

Lynch believes that, in addition to other defenses, it is not subject to
the Maine Severance Pay Act, as now in effect. Management does not believe that
the resolution of this case will have a material adverse effect on the
Registrants consolidated financial condition and operations.

The Company does not believe that it has any other contingent liabilities
related to Spinnaker.

2. Qui Tam Lawsuit

There has been no material 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 and joint plan of liquidation 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.

M.     Reclassifications

Certain amounts in the 2002 financial statements and segment information
(Note K) have been eliminated or reclassified to conform to the 2003
presentation. These deletions and reclassifications are immaterial to the
consolidated financial statements and segment information taken as a whole.




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

Critical Accounting Policies

The Company has identified the accounting policies listed below that we
believe are most critical to our financial condition and results of operations,
and that require managements most difficult, subjective and complex judgements
in estimating the effect of inherent uncertainties. This section should be
read in conjunction with Note 1 to the consolidated financial statements,
included in the Companys Annual Report on Form 10K for the year ended
December 31, 2002, which includes other significant accounting policies.

Accounts Receivable

Accounts receivable on a consolidated basis consist principally of amounts
due from both domestic and foreign customers. Credit is extended based on an
evaluation of the customers financial condition and collateral is not
generally required except at Lynch Systems. The Company considers
concentrations of credit risk to be minimal due to the Companys diverse
customer base. 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. Certain subsidiaries and business segments
have credit sales to industries that are subject to cyclical economic changes.
The Company maintains an allowance for doubtful accounts at a level that
management believes is sufficient to cover potential credit losses.

We maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our clients to make required payments. We base
our estimates on our historical collection experience, current trends, credit
policy and relationship of our accounts receivable and revenues. In determining
these estimates, we examine historical write-offs of our receivables and review
each clients account to identify any specific customer collection issues. If
the financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payment, additional allowances may be
required. Our failure to estimate accurately the losses for doubtful accounts
and ensure that payments are received on a timely basis could have a material
adverse effect on our business, financial condition, and results of operations.

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Inventory
Valuation

Inventories are stated at the lower of cost or market value. Inventories
valued using the last-in, first-out (LIFO) method comprised approximately 63%
and 58% of consolidated inventories at December 31, 2002 and 2001,
respectively. The balance of inventories at December 31, 2002 and 2001 are
valued using the first-in-first-out (FIFO) method. If actual market conditions
are more or less favorable than those projected by management, including the
demand for our products, changes in technology, internal labor costs and the
costs of materials, adjustments may be required.

Revenue Recognition and Accounting
for Long-Term Contracts

Revenues, with the exception of certain long-term contracts discussed
below, are recognized upon shipment when title passes. Shipping costs are
included in manufacturing cost of sales.

Lynch Systems, a 100% 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).

The percentage of completion method is used since reasonably dependable
estimates of the revenues and costs applicable to various stages of a contract
can be made, based on historical experience and milestones set in the contract.
These estimates include current customer contract specifications, related
engineering requirements and the achievement of project milestones. Financial
management maintains contact with project managers to discuss the status of the
projects and, for fixed-price engagements, financial management is updated on
the budgeted costs and required resources to complete the project. These
budgets are then used to calculate revenue recognition and to estimate the
anticipated income or loss on the project. In the past, we have occasionally
been required to commit unanticipated additional resources to complete
projects, which have resulted in lower than anticipated profitability or losses
on those contracts. Favorable changes in estimates result in additional profit
recognition, while unfavorable changes in estimates result in the reversal of
previously recognized earnings to the extent of the error of the estimate. We
may experience similar situations in the future. Provisions for estimated
losses on contracts are made during the period in which such losses become
probably and can be reasonably estimated. To date, such losses have not been
significant.

Warranty Expense

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. Estimates used in determining the adequacy of the
reserve include the number and nature of product failures and the level of
returns of product, the cost of internal labor to address these warranty issues
and the costs of materials in repairing or replacing inventory covered under
our warranty programs. Should these estimates change, our original estimates
of warranty could increase or decrease.

Results of Operations

Second Quarter 2003 and Six Months 2003 Compared to 2002

Sales and Revenues/Gross Margin

Revenues for the second quarter of 2003 decreased by $3.0 million from
second quarter 2002 to $6.7 million due mainly to the low beginning backlog and
the timing of deliveries for orders booked by Lynch Systems in February, March
and April of 2003.

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Six months 2003 sales of $11.5 million were $5.2 million less than the
$16.7 million revenue recorded in the first six months of 2002 due mainly to
the delivery schedules for glass press machines sold by Lynch Systems.

Second quarter 2003 gross margin as a percent of sales was 25.8% or 3.3
points less than the 29.1% gross margin achieved in the second quarter of 2002
due to the 31% volume reduction.

Six month 2003 gross margin as a percent of revenues of 22.0% was 7.8%
below the first half of 2002 due mainly to the low level of sales.

Revenues at M-tron increased by $0.6 million, or 19.4%, to $3.5 million
for the second quarter of 2003 and by $1.1 million to $6.8 million for the six
month period ending June 2003 due primarily 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.

Lynch Systems second quarter 2003 revenue of $3.2 million was $3.6
million, or 53%, below the same period of 2002. Lynch Systems revenues for
the first six months of 2003 declined by $6.4 million from the corresponding
2002 period to $4.7 million due mainly to depressed bookings for glass press
machines throughout 2002. However, order backlog of $10.0 million at June 30,
2003 represented an improvement of $6.0 million since December 31, 2002 and was
$5.9 million, or 144% above last June.

M-trons gross margin as a percentage of net sales for the second quarter
of 2003 improved over the same period of 2002 by 13.1% to 24.3%. M-trons
gross margin of 22.2% for the six month period ending June 30, 2003 represented
a 12.6% improvement over the 9.6% gross margin achieved in the first half of
2002. The sales improvement in the second quarter and six month period ending
June 30, 2003 of 19.4% and 20.3% respectively 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 second
quarter of 2003 declined 9.6% to 27.4% compared to the same period of 2002.
Lynch Systems gross margin of 21.8% for the six month period ending June, 2003
was 18.2% below the first half 2002 gross margin of 40.0 percent. These
reductions were the result of a 52.7% sales decline in the second quarter and
57.8% less volume in the first half.

Operating Loss

Operating loss for the second quarter 2003 was $0.3 million compared to
the second quarter 2002 operating loss of $0.2 million, representing an
unfavorable variance of $0.1 million on $3.0 million less revenue.

Six months 2003 operating loss of $1.3 million was $0.7 million above the
first half 2002 loss of $0.6 million due to $5.2 million less revenue.
For the second quarter of 2003, M-tron had an operating loss of $6,000, an
improvement of $694,000 over the $700,000 million loss in the second quarter of
2002. M-trons six month 2003 operating loss of $229,000 represented a major
improvement of $1,270,000 when compared to M-trons $1,499,000 operating loss
in the six month period ending June 30, 2002. The second quarter and
year-to-date improvements were due mainly to the additional sales mentioned
above and better product mix.

For the 2003 second quarter, Lynch Systems had an operating profit of
$146,000 compared to an operating profit of $854,000 in the second quarter of
2002. Lynch Systems first half 2003 operating loss of $337,000 was $1,917,000
unfavorable to the six month 2002 operating profit of $1,580,000. Although
Lynch Systems second quarter and six months 2003 operating costs were reduced
by $0.6 million and $1.2 million respectively from 2002, the company could not
compensate for the volume decline mentioned above and poor product mix.

Lynchs corporate headquarters incurred unallocated expenses of $418,000
in the second quarter of 2003, bringing the six months 2003 headquarters
expense to $752,000. The second quarter and six month 2003 headquarters
expenses exceeded the prior year by $71,000 and $78,000 respectively due to
accrued professional fees.

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Other Income (Expense), Net

Second quarter and first half 2003 investment income were $131,000 and
$114,000 respectively more than last year due to realized gains of $134,000 on
the sale of marketable securities in the second quarter of 2003.

Second quarter interest expense of $93,000 exceeded 2002 by $41,000 due to
Letter of Credit fees and higher average borrowing to fund losses and to
finance the Champion acquisition.

Interest expense of $162,000 for the first six months of 2003 was $70,000
higher than the $92,000 incurred in the first half of 2002 due to Letter of
Credit fees and higher average borrowing to fund losses and to finance the
Champion acquisition.

Tax Benefit

The income tax benefit includes federal, as well as state, local, and
foreign taxes. The second quarter 2003 and six months 2003 net tax benefit of
$43,000 and $392,000 respectively are the result of operating losses incurred
which are expected to be realized during the remainder of the year. Should
third quarter 2003 income fail to materialize, it may be necessary for the
Company to reverse all or part of the tax benefit recorded through June 2003.

Net Loss

Net loss for the second quarter of 2003 was $0.2 million compared to a net
loss of $0.1 million in the quarter ending June 30, 2002. Six month 2003 net
loss of $0.9 million was unfavorable to the $0.4 million net loss in the first
six months of 2002 by $0.5 million. The $0.1 million additional loss in the
second quarter is primarily due to the $1.1 million reduction in gross profit
caused by less volume that was almost offset by the $1.0 million reduction in
selling and administration expenses. As a result, fully diluted second
quarter 2003 loss per share was $0.12 compared to a loss of $0.07 per share in
the second quarter 2002.

First half 2003 fully diluted loss per share of $0.61 was $0.34 per share
worse than the $0.27 per share loss in the first half of 2002 due mainly to
lower sales of $5.2 million; the resultant $2.4 million reduction in 2003 gross
profit could not be fully offset by the $1.7 reduction in selling and
administration expenses.

Backlog/New Orders

Total
backlog of manufactured products at June 30, 2003 was $12.5 million,
a $6.3 million improvement over the backlog at December 31,
2002, and $6.4 million more than the backlog at June 30, 2002.

M-trons backlog improved by $0.5 million since last June, due mainly to
the acquisition of Champion Technology, Inc. in October, 2002.

Lynch
Systems backlog has improved by $6.0 million since December 31,2002
as a result of three significant orders for glass press machines. First half
2003 bookings of $11.3 million exceeded first half 2002 orders by $8.5 million;
Lynch Systems continues to submit a large number of quotes, predominantly to
tableware manufacturers.

Financial Condition

At June 30, 2003, the Company has current assets of $19.5 million and
current liabilities of $11.4 million. Working capital was therefore $8.1
million as compared to $8.0 million at December 31, 2002 and $9.6 million at
June 30, 2002. The ratio of current assets to current liabilities was 1.71 to
1.00 at June 30, 2003; 1.79 to 1.00 at December 31, 2002; and 1.61 to 1.00
ratio at June 30, 2002.

Cash used in operating activities was approximately $1.0 million in the
first half of 2003 compared to cash provided of approximately $5.6 million in
the first half of 2002. The year over year unfavorable change in operating
cash flow of $6.6 million was mainly the result of (a) $0.5 million additional
net loss, (b) $1.2 million more cash used in operating assets, and (c) $4.7
million of restricted cash that was released for use in operations in the
second quarter of 2002. Capital expenditures were $108,000 in first half of
2003 compared to $142,000 in the period ending June 30, 2002.

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Total debt of $4.7 million at June 30, 2003 was $0.6 million greater than
the amount outstanding at December 31, 2002 and $1.7 million more than the debt
at June 30, 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 June 30, 2003 included $1.2 million of
fixed rate debt at an average interest rate of 4.9%, and $3.5 million of
variable rate debt at a June 30, 2003 average interest rate of 4.7%.

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, subject to the minimum net worth covenant in the loan agreement.
Under the M-tron 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 June 30, 2003, the Companys total cash, cash equivalents and
investments in marketable securities total $7.5 million (including $1.1 million
of restricted cash). In addition, the Company had a consolidated borrowing
capacity of $4.8 million under M-trons and LSs revolving line of credit.
Therefore, gross cash and securities and availability under the revolving
credit loans total $12.3 million and exceed the combined outstanding debt and
margin liability on securities of $4.9 million by $7.4 million. In addition,
pursuant to the Companys June 16, 2003 filing, Lynch received a $532,319 cash
refund on July 24, 2003 through carry-backs for prior periods operating losses.

On May 30, 2003, Lynch Systems renewed its SunTrust Bank loan with a
maturity date of May 29, 2004. This long-time lender has provided 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. This loan,
as well as the previous loan, includes an unsecured parent company guarantee.
At June 30, 2003, there were outstanding Letters of Credit of $2.2 million and
no borrowings under the working capital line.

On April 30, 2003, M-trons long-time lending bank, First National Bank of
Omaha, has renewed the revolving credit loan that now matures on April 30,
2004. The renewed loan includes the following conditions:



| | (a) |  | Effective May 20, 3002, the Company subordinates its October
3, 2002, $200,000 loan to M-tron to the bank, bringing the
subordinated total to $700,000;                                                                                                                                                                                                                                   
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | The bank reduces the minimum net worth and subordinated debt
limit from $3.1 million to $2.9 million. In return, the Company has
committed to fund 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 $2,961,000 as of June 30, 2003,
no additional cash infusion is currently required.
|
| |     |  | In addition, the Companys outstanding Letter of Credit in the
amount of $1.0 million 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 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.

See Subsequent Events regarding the August 4, 2003 refinancing of the
Lynch Systems First Port City Bank Loan.

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.

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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 June 30, 2003, there were no parent company
obligations to the SunTrust Bank. As of June 30, 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 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 Risk

The Company is exposed to market risk relating to changes in the general
level of U.S. interest rates. Changes in interest rates affect the amount of
interest earned on the Companys cash equivalents and short-term investments
(approximately $6.5 million at June 30, 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 June 30, 2003.

At June 30, 2003, approximately $3.5 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 Factors

Certain 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, and disruption of foreign economies.

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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.

Subsequent Events

On August 4, 2003, Lynch Systems refinanced its loan with First Port City
Bank by entering into a new term loan agreement with its lead bank, SunTrust.
The new loan is in the amount of $498,000 and is secured by a lien on Lynch
Systems real estate (SunTrust Bank previously had a subordinated position on
the real estate). The new loan has a 10-year term with interest at 5.5%.
Principal payments will be $4,150 per month for 120 months commencing August
2003.

The loan proceeds will be used to retire the First Port City loan that is
due in its entirety on August 5, 2003 in the amount of $554,000.

Forward Looking Information

Included 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. It
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 Risk

See Market Risk under Item 2 above.




Item 4. Controls and Procedures

The Chief Executive Officer and Chief Financial Officer have concluded
that the Companys disclosure controls and procedures were effective as of the
end of the period covered by this report based on the evaluation of these
controls and procedures required by Exchange Act Rule 13a-15.

There have been no changes in the Registrants internal control over
financial reporting that occurred during the Registrants last fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the
Registrants internal control over financial reporting.

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PART II. OTHER INFORMATION




Item 1. 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:

On or about June 26, 2001, in anticipation of the July 15, 2001 closure of
Spinnakers Westbrook, Maine facility, Plaintiff PACE Local 1-1069 (PACE)
filed a three count complaint in Cumberland County Superior Court,
CV-2001-00352 naming the following defendants: Spinnaker Industries, Inc.,
Spinnaker Coating, Inc., and Spinnaker Coating-Maine, Inc. (collectively, the
Spinnaker Entities) and Lynch. The complaint alleged that under Maines
Severance Pay Act both the Spinnaker Entities and Lynch would be liable to pay
approximately $1,166,000 severance pay under Maines Severance Pay Act in
connection with the plant closure. The Defendants filed a notice of removal,
thereby creating United States District Court Civil Action case was remanded
to state court. The Spinnaker Entities also filed a separate complaint
challenging the constitutionality of the Maine Severance Pay Act, United States
District Court Civil Action No. 01-232 which later was dismissed by stipulation
of the Spinnaker Entities. PACE also filed three separate Motions for Ex-Parte
Attachment against the Spinnaker Entities and Lynch. PACE filed the First
Motion for Attachment with its original Complaint. PACE sought to attach
$1,166,483.44, an amount large enough to cover the claims of all PACEs members
seeking severance. The Court denied that Motion as being premature. PACE then
filed a Second Motion against the Spinnaker Entities and Lynch for an
attachment large enough to cover the claims of eight individual employees
seeking severance pay in the amount of $120,736.27. On August 20, 2001, the
Court granted that Motion in the amount of $118,500. On April 4, 2002, PACE
subsequently recorded this attachment through UCC-1 filings with the Maine
Secretary of State against Lynch Manufacturing and Lynch Corporation. PACE
filed a Third Motion for Ex-Parte Attachment on August 29, 2001. This Motion
sought an attachment large enough to cover the severance pay claimed by the
remaining PACE members, $1,048,003. The Court denied this Motion but permitted
PACE the opportunity to obtain an attachment after all defendants had an
opportunity to respond and after hearing.

Before any further action was taken with respect to PACEs Third Motion
for Attachment, the Spinnaker Defendants filed for relief under Chapter 11 of
the Bankruptcy Code. Following a series of filings in the United States
District Court for the District of Maine and the United States Bankruptcy Court
for the District of Maine which, like United States District Court Case No.
01-236, later were dismissed by the parties with prejudice and without costs,
PACEs case continues to proceed against Lynch in Cumberland County Superior
Court in Maine on the issue of whether Lynch has liability to PACEs members
under the Maine Severance Pay Act.

On September 30, 2002, PACE requested a ruling from the Superior Court on
its Third Motion for Attachment. On October 21, 2002, Lynch filed a Motion for
Summary Judgment which incorporated its prior objection to any attachment. PACE
filed an Opposition to Lynchs Motion for Summary Judgment,which included a
request for summary judgment in its favor, and a Motion for Leave to Further
Amend the Complaint on November 12, 2002. Lynch thereafter filed a Reply
Memorandum in Support of its Motion for Summary Judgment on November 26, 2002
and an opposition to PACEs Motion for Leave to Further Amend the Complaint on
December 3, 2002. On December 31, 2002, the Superior Court held a hearing on
all pending Motions. The Superior Court requested that arguments focus on
Lynchs Motion for Summary Judgment since the granting of that Motion would
render PACEs Third Motion for Attachment and Motion to Further Amend the
Complaint moot.

On July 28, 2003, the Superior Court issued an Order deciding both Lynchs
and PACEs Motions for Summary Judgment. The Court denied Lynchs Motion for
Summary Judgment, finding that there remained a disputed issue of material fact
regarding one of Lynchs primary defenses. The Court granted partial summary
judgment in favor of PACE to the extent that the Court found Lynch was an
employer subject to potential liability under Maines Severance Pay Act. The
Court held, however, that PACE must still prove its entitlement to severance
pay under the Act. In a separate ruling also issued on July 28, 2003, the
Court denied PACEs Third Motion for Attachment.

Lynch believes that, in addition to other defenses, it is not subject to
the Maine Severance Pay Act, as now in effect. Management does not believe that
the resolution of this case will have a material adverse effect on the
Registrants consolidated financial condition and operations.

The Company does not believe that it has any other contingent liabilities
related to Spinnaker.

2. Qui Tam Lawsuit

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

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3.     Spinnaker Chapter 11 Reorganization Proceeding

The Spinnaker Chapter 11 reorganization and joint plan of liquidation 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 Holders

At 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  | 
|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:
|    | 10(dd)                   | Second Amendment to Restated Loan and Security Agreement
dated April 30, 2003 between M-tron Industries, Inc. and First
National Bank of Omaha      
|    | 10(ee)                   | First Amendment and Waiver to Amended and Restated Credit Agreement
between Lynch Systems, Inc. and SunTrust Bank dated May 30,
2003                
|    | 10(ff)                   | Term Loan Promissary Note between Lynch Systems, Inc. and SunTrust Bank
dated August 4, 2003                                                        
|    | 10(gg)                   | Second
Amendment to Security Deed and Agreement dated August 4, 2003 between Lynch Systems, Inc. and SunTrust Bank.                                 
|    | 31                       | Certifications of Registrants principal
executive and principal
chief financial officer required by
Exchange Act Rule 13a-14(a)                    
|    | 32                       | Section 1350 Certifications of Registrants
principal executive
and principal financial officers required
by Exchange Act Rule 13a-14(b)           
|    | 99.1                     | Amended and Restated Audit Committee Charter                                                                                                        
|(b) | Reports on Form 8-K:    
|    | 1.                       | Registrants press release announcing its results
of operations for the first quarter ending March 31, 2003 was
filed with a Form 8-K on May 7, 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)                                
|               
|August 14, 2003 |  | By: |  | /s/ RAYMOND H. KELLERRaymond H. Keller
Chief Financial Officer

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##### Table of Contents



EXHIBIT INDEX

|        |  |                                                                                                                                                   
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                   
|No.     |  | Description                                                                                                                                       
|        |  |                                                                                                                                                   
|10(dd)  |  | Second Amendment to Restated Loan and Security Agreement dated April 30, 2003
between M-tron Industries, Inc. and First National Bank of Omaha. 
|10(ee)  |  | First Amendment and Waiver to Amended and Restated Credit Agreement between Lynch Systems, Inc.
and SunTrust Bank dated May 30, 2003.           
|10(ff)  |  | Term Loan Promissory Note between Lynch Systems, Inc. and SunTrust Bank dated August 4, 2003.                                                   
|10(gg)  |  | Second
Amendment to Security Deed and Agreement dated August 4, 2003
between Lynch Systems, Inc. and SunTrust Bank.                             
|31      |  | Certifications of Registrants principal executive and principal financial officers
required by Exchange Act Rule 13a-14(a).                    
|32      |  | Section 1350 Certifications of Registrants principal executive and principal
financial officers required by Exchange Act Rule 13a-14(b).       
|99.1    |  | Amended and Restated Audit Committee Charter.                                                                                                   



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| |  |  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.
Upon request, Lynch Corporation will furnish to each of its shareholders a
copy of any such Exhibit. Requests should be addressed to the Office of the
Secretary, Lynch Corporation, 50 Kennedy Plaza, Suite 1250, Providence, RI
02903.

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